Neoliberalism is living on borrowed time, friends.

Neoliberalism insists that the creation of a free market, which means the elimination of all attempts by states to restrain the market, will ultimately benefit all countries. A fundamental axiom of conventional economics is that the market acts as a regulator. Whether and how it does so applies mainly to the prices, production, and sale of commodities. The use of the surplus, however, has no such clear relation to the market’s regulatory mechanism. This has become increasingly evident as the stagnation tendency has persisted. As opportunities for investment in production of goods and services slowed down, despite the opportunities offered by the new technology, more and more of the surplus was devoted to a vast expansion of finance.

As capital’s expansion through imperialism and colonialism began to run out of new people and places to drain the value from, it turned largely to the creation and accumulation of debt as the rates of growth, wages and demand all became stagnant. The following shows the increasingly large portion of Gross National Product that the finance-capital debt has constituted since 1950.

We can clearly see the sudden climb in the early 1980s with sweeping introductions of neoliberal policies. With capitalism’s (and neoliberalism’s) failure to stimulate increasing growth this house of cards built from obscene levels of debt made it possible to hide the throes of capitalist crises by using it to boost demand despite decades of wage stagnation. The internal contradictions of capitalism are always intensifying, and the only thing keeping it from crumbling onto the shaky foundation of that debt is further globalization.

Aided by information technology, financial markets became increasingly international. Globalization became the order of the day as capital searched every recess of the globe for profit opportunities. The ruling ideology celebrated the speed-up of globalization claiming that a rising tide raises all ships—even more so for the underdeveloped countries if the latter would adopt the free market ideology of the core countries. The result—hardly what was promised—has been plummeting growth rates in most cases.

For those whose vision of the future is confined within those boundaries acceptable to capitalism, all of this will no doubt be viewed as an utterly gloomy picture. Globalization under neoliberal regimes has meant in many ways the globalization of stagnation tendencies and financial crisis. The capitalist world economy is confronted everywhere with unused productive capacity and mountains of debt. Nor is there any obvious solution to these problems within the context of the system. To top it all off, the social fallout of this latest phase of crisis has yet to emerge.

Yet it is upon such social fallout that all those whose vision of the future is not confined to capitalism pin their hopes—the opening up of alternative paths through struggle. We do not know what the future will bring, nor how many struggles will be needed to reach the aim of a society ruled by the people and designed to meet the needs of populations throughout the world. We can, however, be assured of two things: that this aim will never be achieved without militant class struggle, and that an equitable, sustainable capitalist world economy is not part of the future of humanity.

Quotes from “The New Face of Capitalism: Slow Growth, Excess Capital and a Mountain of Debt” Paul M. Sweezy, John Bellamy Foster, Robert W. McChesney, & Harry Magdoff (Monthly Review)

This is one thing I’ve been wanting to write something about, because I have a pretty strong intuition that it might be relevant, but turning that intuition into a satisfactory wall of text is not trivial so here’s just the component parts:

  • each currency is inherently distortive in its own way; there is no pure medium of exchange of perfect emptiness
  • thus, the usage of whatever currency has winners and losers compared to other possible alternatives
  • if governments regulate currency and try to make people use a specific one they are introducing “artificial” distortion to the markets (compared to what the outcomes would be if currencies themselves were subject to less involuntary metamarkets instead)
  • controlling the currency can be immensely profitable, and people will thus spend resources and effort to control currency to enrichen themselves (if you doubt this, l2 public choice theory)
  • the degree to which a currency can screw people over (for the sake of illustration, let’s call it the ECBCoin which benefits a set of people known as D-Bankers) is roughly equivalent to how difficult switching to a different currency would be
  • thus if the government enforces ECBCoin so that switching to AltCurrency would be an inconvenience equivalent to $2000 a year for the average person, ECBCoin is able to maintain a transfer of wealth that hurts the average person by $1500 a year and enrichens D-Bankers by $1000 a year compared to how AltCurrency would work
  • if the government’s power depends heavily on its currency, it will have an incentive to increase the inconvenience of using AltCurrency, or try to regulate AltCurrency to serve D-Bankers just as much as ECBCoin
  • rich people are inherently more capable of switching to different currencies, thus state-enforced currency will inevitably tend to screw over the poor way more than the rich
  • nowadays information problems and transaction costs with private-as-in-privacy currencies are less than they used to be, thanks to commtech, and having an actually functioning market in competitive currencies that doesn’t get monopolized as easily is more possible than it used to be in eg. the 19th century; and having organizations that help their members handle the competitive currencies in a way which profits them is possible (imagine trade unions and mutual aid societies dispensing financial advice etc.)
  • thus, competitive currency would allow all people to preferably use the forms of currency that benefit them, on the whole benefiting currencies that are mutually beneficial over currencies that enrichen third parties
  • governments should not be tied to specific currencies but instead have taxes etc. that are able to accommodate competitive private currencies
  • such capitalism harm reduction, even though it probably would help people who aren’t D-Bankers quite a lot, won’t happen on its own because D-Bankers have disproportionate influence in the state

When we last talked of this, I was reminded of something and I’m not sure if I remembered to mention it, so now we do it on tumblr:

A large part of the price of purchasing a unit of a state currency is this: It is the currency you pay your taxes in.

Consider a currency that is ridiculously without inherent value, e.g. Venezuelan bolívar. You could maybe give me Venezuelan bolívar but I wouldn’t buy it at any price – it purchases no goods near me, it is difficult to trade away and the only companies I could invest in with it are in a country that nationalizes companies.

But if I ran a store in Venezuela – even if I was allowed to trade only in e.g. USD, I would still go out and buy bolívar because I need them to pay taxes, and a demand for bolívar means they have a value to me, even if it is only the value that I need them to avoid going to jail.

In conclusion: You’re completely right, state currency distorts the value of currency.

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