Thursday, 23 October 2008

ECONOMY: KEYNESIANISM NOW TRUMPETED


"EVERY DAY this week there will be a picture of misery for the UK economy" said Citigroup economist Michael Saunders at the start of last week. The grim pictures are in the form of rising unemployment, falling retail sales, reduced business confidence, falling house prices, and many other symptoms of recession. Over 60,000 homeowners a month are now falling into negative equity.

Stock market share values recovered partially, after nosediving due to fear of a complete financial meltdown. But following the huge bank bail outs, which were designed to prevent a 'worst case' scenario, economic forecasts remain bleak and there is a general realisation that the recession could be long and severe.

U-turn has come after U-turn. First came bank nationalisations by the leading proponents of neo-liberalism. Now these same privatisers and worshippers of the market are singing the praises of Keynesian measures - the spending of public money on services, infrastructure etc to try to stimulate the economy.

Gordon Brown, chancellor Alistair Darling, and new business secretary Peter Mandelson, are chorusing that future expenditure on schools, hospitals and large infrastructure projects should be brought forward. Darling even went so far as to say: "Much of what Keynes wrote still makes sense. You will see us switching our spending priorities to areas that make a difference".

Their expediently-adopted guru, John Maynard Keynes, advocated increased state borrowing in times of recession, to pump-prime the economy. But while feeling compelled to accept the need for this, it is extremely problematic for the government to implement, as the national debt is escalating. It has gone up to around 50% of national income following the latest bank bail outs, and is estimated by the Centre for Policy Studies to be 103% of GDP if all the public sector pension liabilities, Private Finance Initiative contracts and Northern Rock liabilities are included.

This record debt level was built up during a long period of economic growth, because successive governments cut taxes for big business and the rich, and spent huge sums on weapons and wars. Going into a severe recession with such a debt level is a massive burden. Even without decisions in favour of additional spending, the state debt will increase as a result of lower tax receipts and higher unemployment benefits. So, at present, rather than promising new money, the government is trying to limit itself to 'bringing forward' future spending. This is being combined with some insufficient special measures, like funding more Housing Association housing and buying thousands of newly built houses for councils to rent out.

Also, the increased spending on some types of public services and needs is likely to be combined with cuts in others. The treasury has already clawed back over £5 billion of unspent NHS funding, to spend in other areas, and the NHS management board is presently waiting for further funding cuts and raids.

Nevertheless, such is the seriousness of the overall economic crisis and prognosis, that further Keynesian type measures are likely - some of which could be new departures compared to those taken in the past, and could be much further reaching than those announced so far. But the resulting increase in the public debt ultimately has to paid for, either through increased taxes on big business and the rich, or increased taxes on working class and middle class people, or through the government printing more money - which would fuel inflation.

The Socialist calls for a massive programme of public works, to satisfy people's needs for housing, schools etc, and to provide jobs. But this should not be paid for by ordinary people suffering increased taxes or price rises. The capitalist class however would howl with rage at being asked to pay through their taxes and would take measures to avoid this; which shows the need for the major companies to be taken out of their hands, and placed in public ownership.

Keynes also advocated lowering interest rates during a recession, and this is now the expected direction. Larry Elliot commented in the Guardian: "Although inflation currently stands at 5.2%, it is going to fall like a stone over the coming months... the impact of this on monetary policy is obvious. Rates will be cut, and cut aggressively, in an attempt to shock the economy back into life". But 'attempt' is the right word, as low interest rates are no panacea - they are only useful if the banks actually pass the lower rates on to borrowers and if people feel in a position to borrow money.

Greed and blame

THE EFFECTS of the uncontrolled speculation that has been carried out by finance industry chiefs, backed up by most of the leading western politicians, is being brought down on the heads of many millions of people. A thin layer of super wealthy 'investors' on the globe have enriched themselves hugely, not through any useful development of production or society, but through financial gimmicks involving fictitious capital.

Gordon Brown and David Cameron not so long ago were singing the praises of these parasites who have contributed greatly to the misery now being inflicted on ordinary people. Brown worshipped their "unique innovative skills", their "ingenuity and aspiration" and the "invaluable contribution...to the prosperity of Britain". Cameron declared: "Our hugely sophisticated financial markets match funds with ideas better than ever before".

Last year, Barclays president, Bob Diamond, received total pay and bonuses totalling a staggering £36 million. Since the onset of the banking crisis, the top bankers and chief executives of most of the major companies are continuing to pay themselves indefensible salaries and bonuses; this year alone, the pay of FTSE 100 chief executives has gone up by 11.5% on average.

Ordinary working-class and middle-class people are furious about the greed and catastrophic management of the leading financiers. A FT/Harris poll found that most people are blaming the bankers for the economic crisis. But substantial minorities - as high as 30% in Germany - are blaming the failure of capitalism itself. They are right to do so. The bankers have indulged in huge excesses, making the credit crunch much worse than it would otherwise have been. But capitalism is a system that will always have cycles of boom and slump, as Karl Marx explained over 150 years ago. He also explained that it is a class based system that develops its own gravediggers - the working class - who have the common interest and potential power to build a socialist alternative.

Socialist Party of England and Wales (CWI BRITAIN)
23/10/2008

1 comment:

TJ said...

Indonesia is one of the world's richest countries
in terms of natural resources.

God has blessed Indonesia with gold, uranium, copper, oil, timber, beaches, seas and other wealth. The land is fertile with abundant rain. Stick a twig into the ground and it grows into a tree.

Yet Indonesians sleep in the streets.

Food is expensive. The average Indonesian eats some rice, tempe, tauhu and may be some vegetables for breakfast, lunch and dinner everyday.

An average Nasi Padang meal for four persons in a single star Indonesian restaurant can cost RM60(160,000 Rupiah). This is way beyond the income of the average Joko or Sinta in Indonesia.

Why is this so ? The answer is because the ruling elites in Indonesia do not care about the people. They have pillaged the country.

They craft policies that only serve to keep the elites in power and wealthly. The same thing is happening in M'sia.

There are also millions of Indonesians who go to school and university but do not learn skills that can help them survive in the real world. They are very poor in European languages like English or Dutch. All their education is in Indonesian. So they cannot keep up with the latest developments and technologies. They cannot compete. They remain poor.

The children of the elites are sent overseas for their education. An average Indonesian university graduate cannot bring world class skills to his employers. He or she therefore earns a pittance. This is happening in Malaysia.

Bumiputera university graduates only strike it rich if they get Government jobs where they earn a good salary with a pension. In the private sector they may not get a job or earn only a pittance. The system stunts growth. If Malaysia were to become a 1st World Nation, everyone has to learn to fish together and eat together.

That is why 100,000 graduates remain unemployed in Malaysia, partly because the economy sucks and partly because the system is not proactively adjusting to absorb a higher level educated workforce, as we grow to the next level


In Malaysia, just like in Indonesia, food is getting very expensive. But the wages and salaries of the people, especially the Malays, is not keeping up with the increase in prices. Instead of developing the competitive ability of the people, the Government has been using the failed NEP to provide subsidies and dish out money on a plate.

Everything is subsidised, even cooking oil, flour, rice, sugar, fuel, etc.

The Government has been providing these subsidies so that the people will keep voting for the ruling party. So it has never been to the Government's advantage to make the Malays independent. A Malay who is independent of the Government may not vote for the BN. It is therefore better to keep feeding with subsidies.. So, for the past 50 years, everything has been subsidised.

But now with 27million people in the country of which more than half are Malays, subsidies are getting more expensive. There is also much much more thievery and wastage by the elites in Malaysia.

But there is no bottomless 'well' full of money.

Everything has its limits.

The money will soon run out. Without the subsidies for cooking oil, sugar, flour and petrol, how are the people, especially the Malays, going to survive ? Already university graduates cannot find jobs or compete in the private sector. What happens when the oil money runs out ? What happens when (not if, but when) the Government cannot simply spend billions of oil money to sustain its voting base any longer? That is when we may see people sleeping in the streets, just like in Indonesia. If that happens this country will go up in flames. We will all be consumed.

In Indonesia, the Government has not mobilised its hundreds of millions of people (over
250 million Indonesians) with the competitive skills to grow enough food for themselves. Hence food is expensive. They do not even have simple survival skills like coming to work on time, organising themselves to do simple tasks, maintaining good hygiene and cleanliness and so on. They are poorly read and not informed about many things that are going on around the world. Their Government has failed in all these aspects. Hence the average Indonesian remains poor.

The same thing has happened in Malaysia. Our young people, especially the Malays, do not possess basic survival skills. We are not talking about competitive skills but just basic survival skills. The Government is not serious about giving them useful competitive skills either.

The Mat Rempits are being glorified by the politicians as saviours of the nation (Mat Cemerlang). Correction. they are drug users, gang rapists, snatch thieves and street fighters.

When an efficient Policewoman called Nooriyah Anvar was appointed Chief of Traffic Police she went after the Mat Rempits with a vengeance. Does anyone remember her ? She confiscated their bikes on the spot. But soon the Mat Rempits called their political muscle and Nooriyah Anvar was kicked out. To date she holds the record of being the shortest serving Traffic Police Chief in Malaysia. She has been replaced by Senior Asst Comm (II) Datuk Hamza Taib.

So the Government is not serious about improving the position of the Malays.

It serves the Barisan Nasional Government to keep the Malays down and out. Then the Malays can go to the Government for crumbs. This way the ruling elites get to keep the whole loaf to themselves. Go and visit Indonesia. This is what is happening over there. It is happening over here too.
Does Malaysia have a problem ? yes the Malays are not happy, the Chinese are not happy and the Indians are not happy.

They spoke out at the March 2008 polls and hope things will change for the better, now they have some oppositions who promised change.

The Malays are being duped by their corrupted leaders by using the religion, the Chinese and Indians are being marginalised by the ruling elites.

Let us all Malaysians wake up and fight the corrupt system for the benefit of everyone. Let us all unite and stand together and change the system for once and for all.

We are not Malays, Chinese or Indians, we are Malaysians.


Malaysians May End Up Sleeping in the Street

[If u care, please repost this on your blog.]