World financial crisis - where to from here?

To begin with, the legacy of the Keynesian “golden age” is associated with a period characterised by a rising wage share of the economy for labour, full employment and an expansion of the social wage. Powerful elements of the economic elite, however, could be accused of preferring the disciplinary effects of a maintaining a “reserve army of labour”. And among this elite, there are those who view the social wage as “crowding out” private sector investment.

Indeed, the Keynesian project may well have found its “historical moment” has come once again. But a full and sustainable return to an effective social democratic settlement will require ongoing mobilisation by the forces of social reform.

Rarely is any significant progressive social reform gained without demand “from below”.

Briefly: growth of the finance sector - decoupled from “the real economy”

Financial markets need to be restructured to relate to the real economy, and provide for real human need.

Ramas Vasudevan notes in Dollars and Sense that “The profits of the financial sector” (in the US) grew from “14 per cent of total corporate profits in 1981” to “nearly 50 per cent” in 2001-02.

The finance sector, here, is increasingly decoupled from the “real economy”. Investment decisions, many leading to job losses, are made to maximise share value: not in pursuit of human need. Instead “players” in the finance markets pursue short term return, often through speculation.

And importantly, because of the dominance of financial markets, “renters” - as Vasudevan refers to them - have become the dominant socio-economic force.

The massive relocation of power, here, provides the economic elite with the leverage they need to apply constant pressure to reforge policy in its favour.

In Australia we need only look at the preference for Public Private Partnerships: dubious finance methods that channel money from the public purse to the socio-economic elite.

While these developments cannot simply be “undone”, development of public pension funds or “Meidner style” wage earner funds could provide a strong measure of democratic input. Providing a new national public bank; fully regulated and providing financial services to vulnerable Australians “at or below cost”, could also aid in warding away collusion and instability over the long term.

The aim must be to democratise the sector; minimise risk exposure for the economically vulnerable; set higher prudential standards in the loan market; harness capital for human need; and make it socially accountable.

Is Marxism relevant?

Even assuming a renaissance in Keynesian ideas, most associate Marxism with an unbearable connotation of oppression. It is an unfair assumption, though, which ignores the instance of Marxists, and those who draw eclectically from Marx, who also wed their analysis with ideas of the liberal and democratic Left.