Crumbling Pillars of Global Capitalist Political Economy - Reflections from Eric Aarons

 

In the following reflections, former Australian communist leader Eric Aarons considers the moral and practical shortcomings of capitalist political economy and its attendant Ideology; including the Ideology underpinning 'Austrian Economics' and the thought of Friedrich Hayek.

                                             

by Eric Aarons

The pillars of a building, a narrative, a culture or theoretical edifice are those parts of the whole  that keep the other parts  in their designated places. The many books Friedrich Hayek wrote outlining his economic, social and philosophic  views , of and for humanity, eventually prevailed over other theories and became dominant.  I therefore  re-examine  its  major beliefs and assertions –  the pillars – that sustain the capitalist system he championed, and which are daily crumbling before our eyes.

The first pillar is money

Hayek asserts that: ‘Most people are still reluctant to accept the fact that it should be the disdained ‘cash nexus’ which holds the Great Society together, [and] that the great ideal of the unity of mankind should in the last resort depend on [it]’. (LLL,2, 112)’

Money is of course essential in a commodity-based society; but are its possession and use uniformly  equitable and honest?  Why could Oxfam, unchallenged, reveal that: ‘Almost half of the world’s wealth is now owned by just one percent of the population [and] the bottom half of the world’s population owns the same as the richest 85 people in the world?’ (Jan. 2014).

Moreover, compared with earlier stages of the capitalist system, honesty today is very much wanting. For examples of top-organised fraud, recall the laundering of billions of dollars of Mexican drug money by HSBC (Hong Kong and Shanghai Banking Corporation), and the Libor scandal.

Libor referred to the internationally used and trusted benchmark, the ‘ London Inter-bank Offered Rate’ set daily by experts.  On a  day when  the person in charge was an employee of Barclays Bank which was suffering survival difficulties  in the developing  Great Financial Crisis, he skewed the benchmark  rate to favour his bank over others.  Though big fines were imposed, the practice spread worldwide, and even years later new instances of benchmark  corruption keep cropping up, while  new scams are continually invented.

To believe that ‘cash’ in these circumstances can unify rather than divide humanity is among the greatest of follies, especially considering the next pillar which is rotten from the start. 

In essence this means creating more and bigger capitalist organisations which, with globalisation, today embody the worldwide domination of possessors of ever larger slabs of capital,  and general wealth.

What else can this lead to but the conditions reported by Oxfam, that signify the increased concentration of wealth in the form of capital , which has reached a stage where capital is such a large proportion of the total wealth created, that governments cannot now provide, as they formerly did,  services, such as health and higher education, let alone the sums needed to ease the burdens of the disabled, or the facilities for learning, and character development,  now socially essential.

 It is called austerity.

Giving to those who already have

This is a second pillar of the existing capitalist system, stated by Hayek in these words: ‘… ‘such a system gives to those who already have. But this is its merit rather than its defect, because it is this feature which makes it worth-while for everybody to direct his efforts not only towards immediate results but also to the future increase of his capacity of rendering services to others. It is the possibility of acquisition for the purpose of improving the capacity for future acquisition which engenders a continual overall process in which we do not at every moment have to start from scratch, but can begin with equipment which is the result of past efforts in order to make as large as possible the earnings from the means we control.’ (LLL vol. 2, pp.123-4)

Who is it that does the giving?  Consumers of course and waged employees. But here we are talking about economic theory which purports to show that economic processes involving markets are objective because individuals, as such, and by and large, cannot alter what the larger forces of the markets have proclaimed. This is not fully true due to monopolies and cartels – especially in these days of globalisation, where the stated aims of many multinational corporations are to make these forms of economic plunder almost routine, as illustrated in the oil and gas areas today.

Even in Hayek’s much smaller scale he had put the case just as pertinently: ‘We (capitalists) can decide whether the material reward others are prepared to pay for our services makes it worthwhile to render them.’ (The Moral element in Free Enterprise, pages 229 – 236 of Studies in Philosophy, Politics and Economics, 1966)

Who is it that does the giving? The consumer and the waged employee of course. But here we are talking about economic theory which contends and purports to show that economic processes involving markets are objective because individuals, or groups of them, cannot alter what the larger forces of the markets  have proclaimed. This is not fully true because of monopolies and cartels – especially in these days of globalisation, where the stated aims of many multinational corporations are to make these forms of economic plunder almost routine.

Even on a smaller scale Hayek, addressing capitalist organisations in 1961, put their moral case just as pertinently: ‘We (capitalists) can decide whether the material reward others are prepared to pay for our services makes it worthwhile to render them.’ (The Moral element in Free Enterprise, pages 229 – 236 of Studies in Philosophy, Politics and Economics, 1966)

Compare this with his contention that market processes are impersonal  (The Constitution of Liberty, page 45).

Neo-Liberalism claims that human beings are (basically) rule-following animals

This is a claim without substance, and differs from every serious account of human nature that I have read. For instance, I recently reviewed a very useful and interesting book  (The Sixth Extinction, by Elizabeth Kolbert) which had a brief description of the human race:

‘The members of the species are not particularly swift or strong or fertile. They are, however, singularly resourceful. Gradually they push into regions with different climates, different predators and different prey. None of the usual constraints of habitat or geography seem to check them. They cross rivers, plateaus, mountain ranges. In coastal regions, they gather shellfish; further inland they hunt mammals. Everywhere they settle they adapt and innovate. On reaching Europe they encounter creatures very much like themselves, but stockier and probably heavier, who have been living on the continent longer. They interbreed with these creatures and then, by one means or another, kill them off.

The current system is beyond human control

In Hayek’s theory this is because capitalism is not a system formed by humans, but an entity that spontaneously formed itself. This is so singular (so idiosyncratic) a view that, unless grasped, it renders much of his early writing in The Constitution of Liberty and Law, Legislation and Liberty almost illogical. At least I found it so.

Conclusion: The pillars of the present system are crumbling; It is rickety (liable to break or fail) as Thomas Piketty so  thoroughly exposed.

 It requires major restructuring .

Rethinking Marx, the market and Hayek

Above: David McKnight

In this article David McKnight takes another look at Eric Aarons's analysis of the work and belief systems of Karl Marx and Friedrich Hayek;  McKnight was a long-time member of the Communist Party of Australia; but more recently has promoted an agenda which - in is own words - attempts to venture 'Beyond Right and Left'.   This article will also be published at a dedicated website on 'Hayek versus Marx'; and an earlier review - written by the blog publisher Tristan Ewins - can also be found here:

See:  http://hayekversusmarx.blogspot.com/2011/07/responding-to-eric-aarons-hayek-versus.html

By David McKnight*

 Most people who reach 90 years of age would be enjoying their retirement, perhaps reminiscing, probably relaxing. Instead, veteran political activist Eric Aarons has spent the last five years researching the conservative philosopher and economist Friedrich Hayek and re-reading Karl Marx. While Marx is familiar to many people, Hayek is less well known. Yet Hayek’s ideas have provided the intellectual foundation for the neo-liberal Right which has been so globally influential for the last 30 years. In Australia Hayek’s influence is now better known thanks to Kevin Rudd’s various essays attacking neo-liberalism. Occasionally, Hayek is discussed and defended in the columns of The Australian.

Eric Aarons’ reason for researching these two towering figures has been to produce a substantial book Hayek vs Marx which not only explores their work but also suggests  vital theoretical tools to deal with today’s challenges. The central challenge facing the world, he argues, is climate change but this is merely the earliest manifestation of a profound crisis of sustainability for a planet with seven billion people  and growing.

His book, produced by a major British publisher, appears at an auspicious time. The free market and the dogma of deregulation have been discredited, and in the mass media  there has been talk of ‘the crisis of capitalism’ and references to Marx. As a consequence  of the global financial crisis many hope that the radical decline of the left will now go into reverse. Eric Aarons doesn’t comment on such hopes but it is clear that he thinks that a profound theoretical re-thinking is necessary rather than any movement ‘back to Marx’.

In some ways the book’s title is misleading. The framework of ‘Hayek versus Marx’ suggests that the author (and readers) will fall on one side or the other. In Eric Aarons’ view, both thinkers have deep flaws in their theories as well as valuable insights. The great strength of Hayek was to explain why market mechanisms have virtues which are indispensable in a complex economy and society. He saw markets as a device for the rapid sending of information via prices through a network. On this level, compared to alternatives such as a central planning, they are useful and flexible devices for signaling to producers what their buyers wanted and in what quantity. On this insight Hayek erected a vast intellectual system in which all other social, moral and cultural values had to be subordinated or discarded in favour the market and its central value: freedom.

Marx’s great strength was something about which Marx himself said little but which imbued all his writing. Marx’s ethical values lead him to see the extraordinary injustices that flowed from inequalities of wealth and the 19^th century system of industry. Yet these values are buried within his work and instead Marx tried to erect a scientific theory of social development and to discover the laws of history.

The flaws in Marx’s world view were not simply wrong predictions but go deeply to his methodology.  Marx argued in Capital that history changed according to ‘natural laws’ and tendencies which worked ‘with iron necessity towards inevitable results’. On this basis he predicted the immiserisation of the working class. The labour theory of value and his concept of the falling rate of profit have also been shown to simply be wrong, according to Eric Aarons.

Hayek’s methodology is also flawed. Hayek posited the existence of sets of rules which, if followed by societies, enabled them to flourish. As Eric Aarons points out Hayek never simply and clearly identified these rules but they tend to be those commercially based rules which allow markets to function with little restraint. Interference to shape the spontaneous evolution of markets thus becomes the philosophical equivalent of sacrilegious acts ‘against nature’.

Hayek’s proof of this idea was to assert that it was analogous to Darwinian evolution through natural selection. One of the consequences of this approach is that if society has ‘evolved’ then it becomes meaningless to talk about whether that social order is just or unjust; it simply is. Hence one of Hayek’s pet hates -- the notion of ‘social justice’.  But as Aarons says this is pure assertion and not backed by any factual evidence.

As his introduction suggests, this book represents the latest stage of a personal quest that began in the early 1970s when Eric Aarons realized that the theoretical apparatus inherited from Marx and Lenin was inadequate and flawed. His conclusions about these flaws are remarkable considering that he was a leading figure for decades in the Communist Party of Australia. Today his commitment is to rethinking a social philosophy in which traditional Left concerns find a place within a framework dominated by the political need to forestall an impending ecological crisis.  

Like a number of other contemporary thinkers Eric Aarons also sees the need to discuss questions such as: what does it mean to be human, and is there a human nature.  These take us back to the long time span before capitalism, indeed back to the evolution of humans from more ape-like creatures. And then to varieties of human society from the hunter gatherer society to agricultural and to modern industrial society.  Like the philosopher Peter Singer, Eric Aarons rejects the widespread Marxist view that no human nature exists and that humans behavior, needs and outlook are entirely formed  by their social and cultural circumstances. Such assumptions, apart from being factually wrong, he argues, fed the mistaken belief that a perfect economic system could lead to a perfect society.

The central assumption of the book is that relevant and useful theories arise from the problems posed by the objective circumstances. That expresses it rather formally. But what it means is that just as Marx responded to the objective circumstances of cataclysmic changes wrought by industrial capitalism, so we must now develop new theories in the face of the slow but relentless crisis developing around climate and sustainability. This is not to ignore the enormous concentration of wealth and the social power it brings but to acknowledge that the struggle for social equality will take place within a framework dictated by the ecological crisis.

The scope of the book is sometimes frustratingly limited. As Eric Aarons says, neither Marx nor Hayek had a developed notion of politics and both minimised its importance. Democracy was barely mentioned by either of them.  This is something which will strike even adherents as surprising even staggering. Yet to understand the implications of this absence in their theories requires deeper discussion of what occurred when Marxists and neo-liberals actually gained government. Also useful would have been references to the debate on the strengths and flaws of Marx’s ideas that emerged when the Left revived in the 1970s and 80s. A whole generation of Left intellectuals revived Marxism but then abandoned it in favour of other radical analyses of oppression, racism and sexism. Addressing this experience may have gained significant readers for the book.

The book takes up a number of themes which Eric Aarons has explored in recent years. One of the centrality of values and morality as the foundation of a progressive world view. The significance of this is that it implies that a comprehensive ‘theory of everything’ is not the foundation. Trying to ground a radical analysis in yet another creative revision of Marxism is a road to nowhere. That may sound obvious but all over the world such attempts are being made and most are not even creative re-thinkings of Marxism but rather the re-affirmation of eternal truths said to be found in orthodox Marxism.

Eric Aaron’s own view that so far, no ‘internally coherent and viable alterative to capitalist society’ has yet been found. He believes that the single most important step ‘is for every society to reverse the priority capitalism gives to individual material betterment and gain and give that priority instead to social needs’. 

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David McKnight works at the Arts Faculty at the University of New South Wales. He is the author of Beyond Right and Left: New Politics and the Culture War. He can be reached on d.mcknight@unsw.edu.au

Hayek vs. Marx and today’s challenges

Routledge, London and New York, 2009.

above:  Eric Aarons's 'Hayek versus Marx'