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Monday, January 20, 2014

Investors Don't Want a Market, They Want Capitalism

Posted by on Mon, Jan 20, 2014 at 8:41 AM

When Edward Miliband, the current the leader of the Labour Party in Britain, recently announced that his goal is to make markets and banks more competitive, investors were not pleased but spooked. Why? The answer is in this neat post on Stumbling and Mumbling.

Ed Miliband's promise to introduce more competition into banking has faced some intelligent criticism. But it also raises some fundamental tradeoffs we face in thinking about states and markets. These are:

1. Shareholder value vs a vibrant market. Jonathan points out that the fall in bank shares after Miliband's speech is just what we'd expect to see as investors anticipate lower monopoly profits. This highlights the fact that a truly healthy market is not good for shareholders, simply because it means that profits are low and risky. If you want to see a well-functioning market, look at the fruit and veg traders on Leicester market. None of them goes home in a Bentley. For this reason, any attempt to introduce genuine competition will be resisted by fierce lobbying.

My form of Marxism does not emphasize the conflict between the classes more than that between the state and the market. Capitalism does not arise from the latter but the former. Here I agree with this line of Manuel De Landa's thinking: capitalism is anti-market. But unlike De Landa, I see in this fact, which is backed by the research of the Annales School, the opportunity to combine Marxism not so much with anarchism but the insights of Karl Polayni, who is mentioned in the post on Stumbling and Mumbling...
Anti-statism vs pro-markets. Miliband's call for state action to increase competition isn't as paradoxical as it seems. It's consistent with Polanyi's claim that the emergence of a market economy requires all sorts of state interventions. Insofar as this is the case, supporters of a free market economy cannot be anti-statist.

Marxism is above all a critique of capitalism, and capitalism is above all an economic system imposed and supported by the state. Anyone who studies the history of the American suburbs will not find the market at work, but the state. Therefore, the explanatory power of Marxism would be greatly improved if it separated the state from the market.


Comments (5) RSS

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Capitalism is indeed imposed and supported by the state, but the opposite is also true. Capitalists need the legal structure and security apparatus that the state provides to protect their property. The state needs the vast resources and economic innovation provided by capitalists. When you try to have a state w/o capitalism you get the Soviet Union, and we all know how that turned out.
Posted by Ken Mehlman on January 20, 2014 at 9:31 AM · Report this
Backyard Bombardier 2
@1: You are aware that there are points along the political and economic spectra that fall somewhere between unfettered free market capitalism and Soviet-style state socialism, aren't you?
Posted by Backyard Bombardier on January 20, 2014 at 9:52 AM · Report this
I look forward to the WA State Workers Airplane Factory investing in a building, machinery, and worker training to put together prototype planes for FAA certification and marketing. Surely we have the political will to make a 10 year investment in such an ambitious program because Socialism!
Posted by ChefJoe on January 20, 2014 at 11:41 AM · Report this
Original Andrew 4
What we have in the US isn't democratic capitalism. We're living in a kleptocracy.
Posted by Original Andrew on January 20, 2014 at 12:45 PM · Report this
keshmeshi 5

So what happens when the capitalists refuse to give some of their resources to the state?
Posted by keshmeshi on January 20, 2014 at 3:38 PM · Report this

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