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The End of Capitalism As We Know It
Peter Kellow writes
Something is happening in the world economy that has not happened before within historical memory. It concerns the future of nation states of the world – all of them.
Current orthodox economics tells us that the economic activity of the state must always be kept to a minimum. The contribution of the state to the economic activity (GDP) should be as low as possible because private economic activity is “productive” and state economic activity is “unproductive”.
At present in the Kingdom the percentage of state activity is just over 50% - this in spite of 30 years of “rolling back the state” under successive Neo-Liberal governments from Thatcher to Blair to Cameron.
We can argue about the percentage of state economic activity but one thing is certain: without it the capitalist system could not survive. One of the greatest myths perpetrated by politicians in the west is that it was capitalism that “defeated” communism in the late 1980’s. The truth is that it was the mixed economy that defeated communism. Capitalism on its own would not last five minutes.
But there is another unspoken way in which state activity is essential to capitalism. You won’t hear this from orthodox economists and commentators for they do not understand the way that money creation distorts the operation of the “free” economy. And they do not understand why the creation of vast amounts of new money is necessary to the functioning of capitalism under the current economic model. This is primarily because the classical economic theory which, in spite of undergoing development in the twentieth century, remains largely intact with its fundamental flaws preserved. And the most basic flaw in orthodoxy economic theory is that it refuses to see the economy as a dynamic changing system. It attempts to understand what is happening as if the whole economy were static and subject to simple mathematical equations
The key to constructing a dynamic realist economic model is to understand the working of money creation, debt and interest payments and how these interact with the real economy. The money supply is the amount of money there is in the economy at any one time. The way this is measured is open to question but it includes not just notes and coins but all money deposited in bank accounts and all debts owed to banks. The money deposited is only a small fraction of the debts owed to the bank due to the “fractional reserve” system.
When a debt is paid off, there is some dispute (depending who you read) as to whether the created money associated with it is destroyed again but what is certain is that the aggregate amount of debt in the world, and in pretty well all industrialized countries, is increasing.
Ellen Brown writes “According to Margrit Kennedy, a German researcher who has studied this issue extensively, interest now composes 40% of the cost of everything we buy. We don’t see it on the sales slips, but interest is exacted at every stage of production.”
Debt upon debt is piling up. The constant creation of new debt is just one of the dynamic forces in the economy.
But what is now changing the world economy is not private debt. It is not even the corporate debt of companies. What is now at issue is the debt of countries – sovereign debt. This is currently most visible in the unfolding car crash that is the euro crisis. Each week it seems a new country is added to the list of Eurozone countries that cannot pay their debts. As we know this started in Greece, which we were constantly told was a pipsqueak of an economy on the European stage. It then moved on the Spain, Italy, and the other “PIIGS” then to France and horror of horrors, even the solid-as-a-rock economy of Germany may now be broke. Well, it does owe nearly 2 trillion euros and so it is maybe not so surprising.
Meanwhile, that the USA is insolvent is old news and, as for the Kingdom, there are few left who really believe that at the end of the Coalition’s term of office the national debt will be reduced by a single pound. In fact there is little doubt that in spite of all the misery and strife that the austerity measures are creating we will be more in debt at that time.
There are two orthodox economic responses to this. The Keynesians who say we should borrow yet more money from the banks to stimulate government spending and the Neo Liberals who say it is all the fault of big government. The Neo Liberal view holds sway in the Kingdom as everything is cut and the profligacy of New Labour blamed for our problems.
Apart from this, we are told that there is absolutely nothing fundamentally wrong with the way we run the economy. Just keep taking the medicine, tweak the regulations a bit, wrap the knuckles of those greedy bankers and after that just carry on as usual. In this it is pretty sure that anyone from the badly paid unskilled classes right up to upper middle professional and managerial classes will lose heavily, but, that’s too bad, the laws of economics cannot be changed.
What this analysis leaves out is any critique of the way in which money is created. Let’s continue this from the point of view of the state borrowing, for this is where the current crisis of capitalism is being played out. At present when the state needs money it goes to the “markets” to raise the money. That is, it borrows the money from “private” sources. States then find that a year later they still cannot balance the books and so like any debt-junkie they borrow more and so it goes on in a vicious spiral. Finally the debt is so large that it becomes impossible for the state to ever repay the “creditors”. It can no longer even pay the interest on its debts. That is where we are for some states and the others are getting there.
What always seems odd is that, in all the reports of the debts that states owe, no one ever talks very specifically about the creditors. They are hidden behind the anonymous sounding the "markets". Although it is a pretty fundamental law that where there is a debtor there must also be a corresponding creditor. Furthermore, as the debts increase to ever more stratospheric proportions there is never any question of the money not being available to lend to the governments. Yes, recently we have been hearing of reluctance to lend but never of the capacity to lend. The money can always be found.
But we are now talking of many trillions of dollars. Who on earth has all this money? And where did they keep it and lend it to before the governments found they needed it? The answer is that the private speculative banking creates this money in response to state demand.
This is the system has operated for the most part of the twentieth century. But we have now reached an impasse because the nations can no longer service their debts to private banks. And the banks are refusing to lend more. The usual reason given for the bank’s refusal is that they are worried they won’t get paid back.
The real reason is that they are worried that they won’t get bailed out. Banks in France and Germany happily snapped up Greek debt a few years ago not because they believed that Greece would repay the debt – they aren’t that stupid. They did so in the knowledge (so they thought) that they would be bailed out when, repeat when, the Greek debt when belly-up. What has changed the game now is that governments are saying they won’t do the bail out – at least not in full like they did in 2008. They won't because they can't.
We see the leaders of states, whether of Germany or France, USA or the Kingdom, and now even China, trying to wrestle with this problem. Commentators in the press and on television are not short of advice as to what should have been done, or not done, a few years ago, although none of these clever people, ever point to where and when they gave such advice at the time.
But the reality is that there is no fix within the orthodox economic model. This is why this piece is titled as it is. Capitalism cannot survive in its current form where the private speculative banks create the money and governments borrow it to balance their books. We have to move to the new economic model whereby it is the government that creates the money. This new money will be interest free and so will avoid the accumulation of massive amounts of debt in the economy.
Thirty years ago debt was an issue with private citizens. Then it moved to companies and many firms went bust as a result. Then debt problems shifted to the rock solid banks who, in spite of their massively privileged position of being able to create money, were overtaken by unimaginable venality and themselves went bust - only to be saved by governments. In the last transfer of debt, it has now gone to governments. But there is a big problem. There is nowhere else to pass the parcel. Governments are left holding debts that they can never ever repay.
This story has a further horrifying sequel. Meanwhile a lot of the cash that was created in the times of boom and booming debt is still out there and so the power again returns to the banks who can use this money to play the debt markets. They are right now pursuing a strategy of (1) targeting countries, then (2) shorting the pants off them with heavy speculation (3) watching their currencies fail and then (4) profiting from the distress. Having wrecked the already struggling economies of weak countries they will then turn on the stronger ones. As Bengt Saelensminde, writing in the investment magazine Money Week, pointed out recently Britain’s time will come. Against the power of those controlling trillions of dollars we will have no defence.
This is the endgame of the current model of capitalism. If we do not change it, those who control the global walls of money will ruin us all as they accumulate more and more wealth turning from nation to nation in a worldwide turkey shoot. They will reduce all but the superrich (and maybe the Chinese, who wisely have a different model) to impoverishment and debt slavery.
But we do not have to go there. The global plutocracy depends on compliant and ignorant electorates to enact this strategy. The people are not fools. They will not let it happen. They must not let it happen.
We are constantly told that we, the people, cannot understand economics. All the exchanges in the press and television are conducted within the terms of the current economic model. Which is why they just always go around in circles- usually mystifying readers and viewers.
Well, excuse me, but some of us do understand economics – much better than all the so-called financial experts and Nobel Laureates trotted out in the media. They look at the problem through the lens of a defunct economic model. We see exactly what is going on with our new model.
Capitalism can survive. But not in its present form. As I have argued many times before in these Newsletters we have to institute a new model where the government creates the money.
The people in the Occupy movements are on the right track. But they need to find a way articulate their views.
In the coming months the Republican Party will be taking the message of renewal through a new economic model to the people. We will soon be putting up candidates to fight by-elections and raising our profile enormously. As well as fighting for republicanism to replace our mediaeval constitution, economic reform will be a primary and urgent goal.
These are turbulent times. No less than the balance of power between the superrich and the rest of us is at stake.
Fifty years ago Bob Dylan had this message for decision makers.
Don't stand in the doorway
Don't block up the hall
For he that gets hurt
Will be he who has stalled
There's a battle outside ragin'.
It'll soon shake your windows
And rattle your walls
For the times they are a-changin'
It is even more relevant today.
Remembrance of Things Lost
Three comments from Members were received on this article in the last newsletter
From Member Richard O'Connor
The article you have written makes a good point.
The boastfulness of politicians and nations has yet to stop to see the big picture of the true face of conflict.
A lot of us want a permanent peace.
The question is, is that even realistic....?
From Steering Committee Member Peter Shearmer
Like many others I marked the 1 minute of silence to some extent in memory of a grandfather I never met.
I feel uncomfortable about the British Legion (having collected several thousand pounds for them) there seems to be an element of nationalism and the sweeping away of the establishment errors and partial causes of both world wars.
I would prefer us to share the sorrow and the guilt globally, and to recognise the sadness and folly of all losses including allies and former enemies.
We see stage managed events with the establishment in full swing and the Union Jack in high profile. It is part glorification of war as well as valid remembrance.
We should however support the good work of the Legion
I think we should make changes and look more to the present.
Also the church seems to stage manage the horror of war into a blessed act of sacrifice instead of a monumental politico-social cock up. Where is Blessed are the peace makers for theirs is the kingdom of heaven. Love your enemy etc, but then I am only an atheist and perhaps I do not understand.
Lives may not be sacred but institutionalising a warrior cast is wrong, basically all killing is human error and trade co-operation or education are better peace makers than bullets.
Perhaps new ceremonies could take a different profile?
From Member Richard Middle
I want to express my opinion about poppies. It is deeply worrying that a
kind of poppy fascism has developed, in recent years. Yet again, Jon Snow
has been criticised for not wearing one on TV and, yet again, he has
(rightly) told his critics to bog off.
The foundation stone of our new party is individualism: that's true
individualism as opposed to the greedy egoism of Thatcherites, which
purported to be individualism. Individualism was also the ideological
basis of the French Revolution and the antithesis of Nazism. Didn't
Goebbels say that the Nazis wanted to erase 14th July 1789 from history
I have no problem at all with the relatives and friends of service
personnel, who were killed while on duty, laying poppies on their graves
or at war memorials. Such actions have deep and personal meaning.
However, forcing the entire population to wear bits of red paper and black
plastic in public, through social and media pressure, and to observe two
minutes' silence (regardless of anyone's nationality or political views)
in the workplace is wrong.
It has nothing to do with the remembrance of loved ones and smacks of the
conformity that was required in a 1930s dictatorship or a medieval
monarchy. Of course, a medieval monarchy is what the UK is. As Robert Fisk
and others have pointed out, there wasn't much point in our grandparents
and great-grandparents fighting wars "in defence of freedom", if the
(almost literally) bloody symbol, which commemorates those who died in
such wars, becomes an excuse for a form of authoritarianism.
What will be next? Will cinemas reintroduce "The Queen" at the end of each
evening show? Will patrons [an apt word, reminiscent of the 1940s] be
forced to stand, like latter-day Captain Mainwarings, until the anthem has
finished? My Goodness, the DUP will be pleased. In Dad's Army, no one
other than the prim-and-proper bank manager could give a hoot about the
National Anthem. That's the sort of healthy contempt for the Establishment
and hallowed institutions that we need to see in Britain: without it, we
will never have a Republic. Mainwaring, a lone figure standing to
attention, was knocked down in the stampede of people, who were trying to
reach the exit.
The claim that "sacrifice" is being marked is also false. How many people
actually visit the widows or children of soldiers, who were killed in
Afghanistan? How many try to raise money to buy disabled soldiers
wheelchairs, specially adapted vehicles or medical devices that they might
need or to pay for nursing care?
[Some charities are doing sterling work but, unlike the RBL and the MoD,
they don't need to create a quasi-religion to do so. Remember that the RBL
was a government-sponsored takeover of the three troublesome, independent
ex-servicemen's leagues, in the early 1920s. Couldn't have the chaps,
who'd been in the trenches, getting politically active, now, could we? The
RBL has been a sycophantic poodle of an organisation, ever since.]
The Establishment seems to think that it need do nothing more than stop
the traffic in Whitehall, and stage an event, which is equal parts
Coronation street party, fancy-dress parade, macabre musical and 18th
Century country dance.
"Must git the missage acrawse to the oiks thit it's business as usual,
hair in Bleetie. Britennyaw rules the waves. Gawd save the Queen etc etc."
All the lying, double-dealing, bribery, scheming, idiocy and greed is
forgotten. No serviceman ever died in vain. The wars were fought on behalf
of the people, not Big Business or politicians. They kept us free. Without
them, we would be speaking German. No, it's a disgraceful sham.
Clear out the "servants" of the state, who are ultimately responsible for
the killing! Tear the poppies from lapels! Let the victims of war (the
maimed servicemen, their loved ones and relatives of the dead) be the
centre of attention (and not only once a year, at a parade). Let's create
a proper Garden of Remembrance in one of the parks; well away from the
government offices, in which wars are planned; a place of quiet reflection
and peace. What we do not want is thousands of people in berets, marching
along to oompah bands, like some geriatric, Latin-American revolutionary
[The participation of politicians, many of whom have had blood on their
hands in the past, is a perfect illustration of why we mustn't combine the
roles of the (political) Head of Government and (politically neutral) Head
of State in one office. A directly elected Head of Government is perfectly
fine. The United States is even worse: there have been plenty of
occasions, when White House criminals were able to envelop themselves in
the dignity and power of the Presidency.]
The British Government's treatment of former soldiers, sailors and airmen
has, in the main, been appalling and its track record stretches back to
the Napoleonic era. It is yet another example of the
"all-fur-coat-and-no-knickers" thinking, for which the institutions of the
British state are infamous.
Appearances are everything. Going to the Cenotaph is just another
engagement in the London social calendar, like Trooping the Colour or
Wimbledon. It doesn't matter that servicemen are left to fend for
themselves; that they find it very hard to re-enter the labour market;
that their lives are difficult, physically and socially; that they are, in
many cases, effectively abandoned by the state, which was keen to use them
and put their lives at risk, only a few months or years before.
As long as the top brass, the clockwork politicians and the Royal Family
figurines are wheeled out and filmed by the BBC (while some presenter, who
sounds as if he's about to throw himself off Westminster Bridge, describes
the scene), everything will seem to be all right. It is nonsense; a
pantomime; an empty propaganda exercise. I wonder if anyone recalls the
"Emergency Film", which was shown on "The Day, Today", after John Major
had been caught on camera, punching the Queen? Remembrance Day is the
I firmly believe that, as people predicted forty years ago, Remembrance
Sunday and poppies would have become irrelevant to most people by now, had
it not been for
(i) the gross incompetence of the MoD (which failed to supply the
equipment soldiers needed and is partly to blame for the high number of
fatalities in recent conflicts, although no one will ever be held to
(ii) the serious psychological flaws of Blair, Straw, Campbell and other
assorted warmongers, without whom there would have been no involvement in
Iraq or Afghanistan; and
(iii) a tidal wave of racism, xenophobia and Islamophobia, which has swept
over England in the last five or six years.
The fanaticism of the Daily Mail, Daily Express, the BBC and so on reflect
the prevailing atmosphere: we have no choice. Everyone is expected to wear
As most of the Republican Party's members are English, they
will probably not agree. All this has crept up on them rather suddenly.
England remains, in the imaginations of many, a land of cricket, tea
shops, quaint villages, charming medieval churches and jolly but
deferential working men in flat caps.
To others, it conjures up images of large country pubs, where satellite TV
coverage of Premiership football matches can be watched and steak and
kidney puddings, Sunday roasts and lager consumed; a land of huge DIY
stores and out-of-town supermarkets; of motorway service stations and
trips to the seaside. It all seems so normal. The country, which stood up
to Nazism, surely couldn't be incubating any nasty, little Nazi
tendencies, itself. The idea is ridiculous!
But is it? I am not English and I know the symptoms of ultra-nationalism,
when I see them. The attitudes, which are being displayed, are alarmingly
similar to those of "loyalists" and "unionists" in Northern Ireland, whose
cartoon, exaggerated "Britishness" is, for the most part, completely fake.
Such is the level of mass hysteria, though, that most of them can't see
it. It's an attempt to hide the fact that they are really driven by fear
and hatred- of everything Irish, Gaelic and Catholic.
To be fair to unionists, Catholic-nationalism in Ireland has almost been a
mirror image. With few exceptions, Irish "republicans" are so because they
hate everything British and Protestant. The Queen is the "Chief Brit" and
the "Chief Prod". It is all tribal madness, which was a result of twice
making religion the basis of national identity on the Emerald Isle; first
under Cromwell and then (after a quick burst of "The Enlightenment" in the
18th Century) again in the early Nineteenth Century, when (a) geography
meant that Protestants were generally doing better, economically, out of
the Union with Great Britain and when (b) the rising political confidence
and power of the Catholic majority, which more or less decided that
attendance at mass would be the main prerequisite for being Irish in
future, destroyed the self-confidence and liberalism of many Protestants.
[Sorry to rubbish a big name in British republicanism, there, but you've
got to admit old Ollie was a bit of a religious nutter; not to mention a
total hypocrite, who betrayed the genuine republicanism of the New Model
Army and even considered becoming King. Unfortunately, Lord Acton hadn't
been invented yet, as Sellar and Yeatman might have said. On the other
hand, Cromwell has been blamed unfairly for the massacres in Ireland and,
in any case, at the time, most of those, who were killed, would have been
seen as English. History has made them Irish because they were Catholic.
Cromwell didn't treat Ulster-Scots Presbyterians much better, when they,
along with the Scottish Government, switched sides in the Civil War(s).
The town, sorry "city", of Lisburn, where the British Army's Northern
Ireland HQ is situated, is called Lis-BURN (as in "Flames, hot, ouch!")
for a reason. It's old name was Lisnagarvey.]
We have witnessed a perturbing (and terribly un-English) development.
Thousands of people feel they have to appear on the streets, all wearing
the same symbol; all standing in silence. It is creepy. Despite the total
irrelevance of the Church of England in modern Britain [We'll leave the St
Paul's Holiday Camp to one side.] and the acceptance that England is
really an agnostic country, poppy wearing automata are compelled to take
part in acts of collective worship. No one is allowed to question or
criticise any of this (although I noticed a short blog on the Daily
Telegraph web site, reassuring me that the paper hasn't been taken over
completely by former Daily Mail employees).
It was wrong of "Gotter-cameron" and "HRH The Duke of Cambridge" [Which
title is sillier- my Wagnerian pun or the real, Royal one?] to interfere
in the affairs of an international sporting body. Neither had any mandate
to do so. Private organisations must be free to set their own rules,
without being bullied by the Government. If wearing a poppy is truly about
"commemorating OUR tragedy", then why should footballers have worn a
symbol at an international event? Does a poppy mean anything to people on
the Continent? I suppose the Germans might say it means that the English
are still obsessed with the war (and how true that is).
Worse still is the mindlessness of it all. Lest we forget [Ho ho], this is
a country, where a large percentage of schoolchildren thought that Harold
Wilson had led Britain, during the Second World War; where educational
standards are generally low, compared with those in other large economies.
I think we can be fairly sure that a large number of those, who wear
poppies, don't know anything about their meaning or history. How many
people are really remembering anything? They are just going with the flow
and the tide is sweeping them far to the right.
It is worth noting that there was a sudden surge in interest in "Poppy
Day", after the "7/7" bombs in 2005 and, more particularly, after some
anti-war and Islamist groups protested during military parades, which were
themselves a defensive reaction to open criticism of the Forces for taking
part in an illegal, unjust and ill-advised war in Iraq. This shouldn't
necessarily be the sort of country, where people protest against the Army
but it must surely be the sort, where they have the right to do so.
However, it is hard to know whether the protests were genuine. Perhaps the
Islamists were using the sort of tactic, which the "physical force" [i.e.
psychotic] tradition within Irish nationalism has often used: provoke a
reaction and then make capital out of being the victim. It was Patrick
Pearse's stated aim and it- eventually- worked well in 1916 [even though,
at the time of the Easter Rising, the majority of people in Dublin
despised or ridiculed the rebels]. It worked well in 1982, when the
Provisional IRA stalled the negotiating process, in which the Church acted
as a broker, and deliberately allowed hunger strikers to die, purely for
the electoral advantage of its "political" wing. Why shouldn't a milder
version work in the modern era?
Most of the protesters were British Citzens, the theoretical equals of the
white soldiers and flag-waving spectators around them. But they weren't
really equal because they weren't white. We all know that, even if some of
us can't admit it. Parliaments and constitutions can change the law and
protect human rights, to some extent. They can't always change people's
A reaction against such protests; desperate attempt to create an
artificial Britishness (to supplant the real version that's terminally
ill) is snowballing out of control. What we're really seeing is the
further rise of English nationalism, which can't yet reveal its true
The crucial questions are these.
1. Would we be wearing poppies, if we'd lost the First World War?
Well, perhaps we would but they might be white, instead of red. Would we
make such a fuss about commemorating the dead, if it were blindingly
obvious that they all died in vain? [I believe that those, who fell in the
First World War, did die in vain but very few people in this country are
able to think about this issue for themselves. Their opinions come, in
neat packages, from their parents, friends, teachers, the media and so
If we had been dufferated by the Germans in WW1 [and it's not as if we
could beat them without American help], would we still be going through
the motions, more than ninety years after the Whitehall farce started? I
2. Do those countries, which we defeated, perform the same collective
There are some quiet commemorations but there is nothing on the same
scale; nothing loud and showy; nothing even slightly triumphalist or
And, in that difference, we see what Remembrance Sunday is all about- for
the British state. It is about justifying everything it ever did. "All's
well that ends well.", say the Whitehall-approved historians and the
Poppies and Remembrance Sunday have come to represent many things, which
liberal-individualists and republicans-of-principle oppose. However, the
fundamental problem is that they are manifestations of an exclusive,
ethno-religious, intolerant nationalism; whereas we believe in the
opposite, an inclusive, territorial, liberal nationalism.
PS Two of my Great Grandfathers served in the trenches. One was in the
36th Division's Machine Gun Company and was decorated for bravery. After
being buried alive, when a shell hit his post, he managing to dig himself
out, reassemble one of the machine guns and keep up covering fire. The
other was a Military Policeman, who was the victim of a gas attack and
suffered from respiratory disease for the rest of his life. [The other two
were in reserved occupations, both in engineering.] In the Second World
War, one grandfather was a policeman during the Blitz and the other was
twice mentioned in dispatches and served in Norway and then in North
Africa and Italy with the Royal Artillery (joining the Anglo-American
Control Commission, after Monte Cassino).
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