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Greenspan versus Marx

A lot of people on the free market right have a simplistic two-word explanation for why the world economy is currently close to the edge of a frighteningly steep cliff: Alan Greenspan.

Throw those Marxist and Keynesian textbooks out the window, people. We are where we are because the former chairman of the Federal Reserve responded to the dot com crash with a cheap money policy that fed the real estate bubble that triggered the credit crunch.

One of his predecessors in that office remarked that the job of a central banker is to take away the punch bowl before the party gets going. The charge is that Greenspan topped it up with a healthy slug of Havana Club Añejo 7 Años. Or more likely, nasty capitalist Bacardi, I guess.

It is gratifying to see the bastards blaming one of their own. Greenspan’s credentials on the other side of the spectrum to mine were once regarded impressive indeed. As a young man, he was a close friend of no lesser a rightwing pin-up gal than Ayn Rand.

Greenspan pops up in the Financial Times this morning, with a thinkpiece defence of capitalism that centres on an argument lefties have heard many times before.

Compare post-1945 East Germany with post-1945 West Germany, and see which did better. Look at how China has been doing since it turned to the market. Whatever you think about capitalism, it has delivered a tenfold increase in real GDP per capita over the last two centuries.

Marx would have absolutely agreed. None of his writings – or at least, none that I have read – anywhere disputes the impressive dynamism that capitalism displayed in his time. What is at issue in volumes two and three of Capital is whether that dynamism can be sustained indefinitely as capitalism ages.

Nor did every Marxist defend the Deutsche Demokratische Republik when it was up and running, of course. A substantial minority of us were well aware of its failings, both economic and political.

So what is the difference between the left and the right on these issues? In short, the right regards capitalism as humanity’s final form of economic organisation.

Occasional downturns are simply a comparatively minor price to pay for a secular upwards trend towards ever greater prosperity for ever greater numbers of people. Even now, for the likes of Greenspan, nothing is wrong with capitalism that more capitalism cannot fix.

The left will instead point to the increasing frequency of recessions since the 1970s, declining rates of growth and even declining rates of profit, permanent mass unemployment, rising inequality and the exploitation of labour power as reasons to demur.

For us, the only real surprise is that these tendencies have been in abeyance for the last three decades. Actually existing capitalism is a long way away from the Platonic form that the erstwhile Fed boss seemingly regards as the norm.

The best polemicists from both camps have been arguing this one out for several generations. The years ahead may well show which side was right all along.

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