"The natural counterpart to a free market economy is a politics of insecurity. If 'capitalism' means 'the free market,' then no view is more deluded than that the future lies with 'democratic capitalism.'" ( False Dawn: the delusions of global capitalism)
John Gray, a professor at the LSE, and an erstwhile supporter of the New Right, has given us a damning indictment of late twentieth century capitalism.
"False Dawn" takes us on a world tour of the social devastation being left in capitalism's wake. Fascinating for its factual and statistical data alone, it is perhaps Gray's conclusions which make the deepest impression. The free market he argues will cause disaster, war, ethnic conflict, environmental destruction and impoverish millions. Yet throughout a lucid and empirically remarkable work, Gray offers no hope, proposes no reform and predicts the gloomiest of futures. In essence he argues that the global market economy is fatally flawed and incapable of reform.
Capitalism, through its combat organisations the IMF and the World Bank is trying to impose the anglo-saxon, deregulated model on every country east and west, with potentially catastrophic consequences. Gray concludes that this "is a Utopia that can never be realised; its pursuit has already produced social dislocation and economic and political instability on a large scale...A breakdown of the present global economic regime could well result from current policies."
Powerful stuff, and deeply pessimistic. Reviews in the Financial Times, the Sunday Telegraph, and Sunday Times, have all denounced Gray as overly gloomy, even out of touch with reality. In truth, their nervous response illustrates their own fears for the future.
In relation to Britain, he describes the destruction of those organisations which provide workers with some protection against the ravages of capitalism, "the role of trade unions as intermediary institutions standing between workers and the market had to be altered and weakened...Partly as a result of these policies there was an explosive increase in part-time and contract work. The bourgeois institution of the career or vocation ceased to be a viable option for an increasing number of workers. Many low-skill workers earned less than the minimum needed to support a family. The diseases of poverty - TB, rickets and others - returned."
This is far removed from the usual nonsense about the 'golden 1980s'. Admittedly in this description of Thatcher's Britain, Gray isn't telling us anything we don't already know, and haven't personally experienced. His conclusions however are more profound. "The innermost contradiction of the free market is that it works to weaken the traditional social institutions on which it has depended in the past - the family is a key example....By 1991 there was one divorce for every two marriages in Britain - the highest divorce rate of any EU country, and comparable only with that in the United States."
Leon Trotsky once commented that no social system could maintain itself for long purely on the basis of military power, a social cement of culture, tradition, routine, religion and so on are needed to hold society together. Now, Gray concludes, "Free markets are the most potent solvents of tradition at work in the world today...The society they engender is antinomian and proletarian."
Not just the family, he argues but "the class culture of deference and respectability which had been indispensable to the free market have been largely swept away."
Moreover "the nation state was held to be supremely important. National culture was claimed to be vital to social order. Yet neo-liberal economic policies prised open the British economy to world markets as never before."
Even more clearly than in Britain the consequences of neo-liberalism as implemented in New Zealand are "instructive and ominous."
"The New Zealand experiment" Gray writes, "is the free market project in laboratory conditions." The same policies of privatisation, deregulation, attacks on the unions and on welfare benefits resulted in the "creation of an underclass in a country that didn't have one before...New Zealand has experienced an astonishing growth in economic inequalities of all kinds...more than in any other western country."
From an analysis overflowing with facts and figures Gray concludes that "In New Zealand, the theories of the American New Right achieved a rare and curious feat - self refutation by their practical application."
In advanced, 'social democratic' countries like Britain and New Zealand the consequences of neo liberalism have been devastating - but they begin to pale when Gray turns to their imposition on Mexico, where economic inequality has been widening "in what had long been one of the world's most unequal societies. Two-thirds of all income is distributed to 30 per cent of the population...The lowest 30 per cent of the Mexican population receives only 8 per cent of national income. The minimum wage in 1993 was less than half of what it was in 1975."
In a most welcome denunciation of one of capitalism's most obnoxious lies Gray adds, " 'Trickle down' theories of prosperity are implausible enough in advanced countries such as the United States and Britain. They are Borgesian fictions in Mexico."
Many of the passages in False Dawn dealing with globalisation will be strikingly familiar to anyone who has read the Communist Manifesto. The basis of today's global market is to be found in the laying of submarine intercontinental telegraph cables and steamships over 100 years ago. Changes in the world market since have been enormous, but primarily in quantity of trade, rather than something qualitatively brand new.
The expansion of the market has been accompanied by an immense polarisation of wealth and a monopolisation of capital. "Multinationals now account for about a third of world output, and two-thirds of world trade. Most significantly around a quarter of world trade occurs within multinational corporations."
This partly explains why the continued expansion of trade no longer acts as an engine of growth for the economy, with trade and competition spurring on investment, when so much of that trade is taking place effectively within different branches of the same company.
With investment in production no longer a profitable option, much of the wealth we generate for capitalism finds its way into gaming houses like Wall Street and the City of London.
As Gray explains "transactions in foreign exchange markets have now reached the astonishing sum of around $1.2 trillion a day - over fifty times the level of world trade. Around 95 per cent of these transactions are speculative in nature". This is the limit of capitalism's creativity - variations on the roulette wheel.
While Gray dismisses socialist solutions out of hand, and derides the notion of a peaceful and stable continuation of the free market, he is no less damning in his refutation of reformism, and the so-called social-market economy.
The old social-democratic model of peaceful reform and 'gentle capitalism' is dead and cannot be resurrected. Anyone who attempts to stave off crisis by Keynesian methods of borrowing and public spending will be punished in the world marketplace. Governments are forced back into a pre-Keynesian policy of deflationary expenditure cuts, with this difference, that today the "mechanism of the Gold Standard has been replaced by the house rules of a casino."
In so doing global markets "have made the central policies of European social democracy unworkable. By so doing they have made today's mass unemployment a problem without a simple solution."
Once you accept the market, you have to play by it's rules, and today those rules allow little room for manoeuvre. "No western government today has a credible successor to the policies which secured western society against mass unemployment in the Keynesian era...The social democratic objective of full employment cannot now be achieved by social democratic policies."
How it can be achieved we are not to learn here. Most likely Gray believes it cannot.
32 pages of False Dawn are devoted to an astonishing analysis of the United States. Gray takes the right wing demagogy of Newt Gingrich and the religious fundamentalism of Pat Buchanan to task along with the new mysticism pervading American society which reflects the growing mood of insecurity and despair.
The bulk of his venom however is concentrated again on the social consequences of US economic policy, which he argues has created "levels of economic inequality unknown since the 1920s and far in excess of those found in any other advanced industrial society today."
Gray notes that current US policy is "a game plan for a cultural civil war...In the United States, as elsewhere, free markets evoke powerful social and political counter-movements. The chronic economic risk that they impose on the majority of the population is fertile ground for populist politicians."
The America we get a glimpse of here is a million miles removed from the land of apple pie we get daily rammed down our throats on television. "It is a society in which anxiety pervades the majority."
The myth of the working class being integrated into the middle class has been thrown into reverse, with the middle layers "experiencing economic difficulties similar to those which confront workers who have lost the protective support of welfare provisions and labour unions."
The family is breaking down, crime is rampant, and unemployment is far worse than official statistics would suggest. "One survey suggests that around 10 per cent of the workforce (about 13.5 million people) is underemployed...all estimates of America's employment record must take into account America's incarceration rates: over a million people who would be seeking work if American penal policies resembled those of any other western country are behind bars in the US."
The polarisation of American society is indeed without precedent. The US, Gray contends, is using a "policy of mass imprisonment as a surrogate for the controls of communities which unregulated market forces have weakened or destroyed. At the same time affluent Americans are withdrawing in ever larger numbers from cohabitation with their fellow citizens into gated proprietary communities. Some 28 million Americans - over 10 per cent of the population now live in privately guarded buildings or housing developments...By the start of 1997 around one in fifty adult American males was behind bars."
Page after page details mounting violent crime and social devastation, the American dream has become a living nightmare for millions living in "a country riven by class conflicts, fundamentalist movements and low intensity race wars. Political solutions to these ills presuppose reform of the free market. It is doubtful whether such reform is a real political possibility in America today."
Finally what prescription are we offered for all of these ills? "A regime of global governance is needed in which world markets are managed so as to promote the cohesion of societies and the integrity of states. Only a framework of global regulation - of currencies, capital movements, trade and environmental conservation - can enable the creativity of the world economy to be harnessed in the service of human needs." A worthy goal, but capitalisms prime mover is not need but greed, not society but profit. Gray concedes that his scheme of global regulation is utopian. Consequently he believes "a deepening international anarchy is the human prospect." False Dawn has no happy ending. This vision of the future must keep its author awake at night. Marxism is superior to capitalism not only in its understanding of the nature of society and the laws which govern it, but also in its undying optimism. Not a false dawn, but an unshakeable faith in the working class, in our ability to transform society, in our vision of a socialist future.
Gray believes that "the age of globalisation will be remembered as another turn in the history of human servitude."
We agree, but it is also one page nearer the end of the book. False Dawn, in spite of its errors, can provide socialists with a source of inspiration, that the sun is setting not rising on capitalism. Perhaps we should send a copy to the Labour leaders who seem to be about the only people left with any confidence in the future of the global free market.
False Dawn: the delusions of global capitalism By John GrayPublished by Granta £17.99