Capitalism as a Matter of Faith and Twisted Logic

Larry Summers has contributed to a new Financial Times series on Capitalism in Crisis. It merits a read, as an example of tortured reasoning.

Summers is the consummate insider neo liberal Democratic economist. A  leading academic,  he was chief economist of the World Bank, acolyte and then successor to Robert Rubin as the US Secretary to the Treasury under Clinton, a key member of the Obama economic team until late 2010, and a former President of Harvard. Along the way he has angered environmentalists, feminists, progressive Democrats, and the faculty of Harvard who ousted him in a vote of non confidence.

This strange piece argues that the current travails of capitalism “can be addressed with proper fiscal and monetary policies” and that calls for fundamental reform of the system are off base.

He argues that problems of high unemployment and rising inequality are “real and profound” but that there is “no obvious solution at hand.”  Apparently structural unemployment and the rise of the top 1% have nothing to do with the operations of market capitalism. “The roots of the problem lie deep within the evolution of technology.”

Similarly, while he states that “citizens of the industrial world who believe they live in progressive societies are right to wonder why increasingly affluent societies need to roll back levels of social protection”, this is inevitable because public services are just inherently more costly than market services because of higher relative labour costs.

In short, we face a future of high unemployment, rising inequality and deep cuts to social programs. But that’s not because of market capitalism. So  “a radical change of direction … is somewhat beside the point.”

No wonder the guy commands such high speaking fees.

2 comments

  • I’m not in a hurry to chase down the source document. Shake my head that he and Greenspan and their ilk continue to have an audience. Our capacity for denial is quite breathtaking.

  • I have to say Andrew, I think you are stretching it a bit by saying twisted logic. I have been reading lots over the holidays, and think about markets and where they have been in terms of degrees of regulation. Lets start with the fact that much of the globe has been forced into neo-liberalism and the quest for self regulating markets. In many of some of the major issues, capital over the past many years have enjoyed degrees of regulation that I would consider about as free as they have been in decades. From, banking and finance, oil, other commodities like gold, food, housing, wages, etc. In almost every area it has not been logic on any level, twisted or otherwise that has guided actions- just the belief that profits will be maximized with self regulation- which means ultimately regulated by capital- as someone actually has to make the rules (i.e. the 1% are left to make up the rules.) HAve a read from this insider on the oil industry- if dysfunction does not hit you over the head many times in this article, then one must be wearing a large hockey helmet.(thanks to Yves at Naked Capitalism, what a great blog she has!!!)

    http://www.nakedcapitalism.com/2012/01/chris-cook-naked-oil.html

    You can read similar such narratives from other insiders on some of the other industries, and even though I am a statistics guy, there is one thing that Pat Armstrong did teach me well, the personal is the political, and the stories do matter. Amazing reading the insider reports on banking, the food sector, the hoarding with many other commodities, dollars and forex, not a one seems to follow any logic. And that does not even consider the massive free rider position that capital has for so long taken with the environment.

    Not even the most prized- profit maximizing, at least in terms of sustainable profits. And in dramatic Polanyi like fashion each river that flows through these markets becomes defiled as more and more toxins flow in from the capitalistic com-modification process to a point that the very essence of function is usurped by the dysfunctional morass of confusion and chaos.

    Truly Andrew, you go too far in even advancing twisted logic to the inner workings capital in these late stages of what could be its long slow death.

    And to look at the leadership that sits upon the horizon of the right in the USA,and currently in power in several countries, they have the austerity eyes of the economic Apocalypse latent within their visions. Utterly blind destruction!

    We need more than an occupy movement.

    And here we go with the final slaughter of Canadian manufacturing- 50% wage cuts! Wow, you would have thought these branch plants would have at least tried the decertification process first, nope just for the throat. Unphracking real, Canadian labour is in for a real nasty reality check- public sector attack and now a seeming private sector flanking tactic.

    Somehow, hopefully history does kick into place and we get an Occupy Wallstreet times 10 movement coming. Winter does douse such flames, potentially it will be a fiery spring.

    Happy new year to all the bloggers and lurkers at the PEF. I think is my 4th year relegated to the comments as a lasting lurker. Oh well maybe someday the bull pen will be needed.

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