Bulent Gokay's talk was on the meaning and consequences of austerity policies implemented by the British and other Western governments as a response to 2007-08 global financial crisis and economic downturn.  Bulent first explained the conditions emerged as a result of the global crisis, and on what justificantion austerity policies were presented by neoliberal governments as the only effective method to deal with the situation.

The 2008 global financial crisis and economic downturn caused major anxiety. The US and other economies in the West were entrapped in a sovereign debt crisis.  Despite all that talk of recovery, or so-called signs of recovery, there is very few evidence of real recovery.  A second crisis seems likely, and austerity has emerged as the standard response.  This is very serious global systemic crisis.  There have only been three such crises in capitalist economic system in the last 150 years: 1873-93, 1929-42, and 2008- onwards.  It has been eight years since the collapse of Lehman Brothers. Austerity and budget consolidation are the touchstones of economic policy responses everywhere.  Conservative government here still repeats the crushing statement that ‘there’s no money left, because Labour spent it all’.  This is the success of neoliberal propaganda:  we have been conditioned to believe that we have been wasteful and it is time to get control of our expenditure, balance our books and pay down our debt.  David Cameron and George Osborne tell us, after and after again, that they have taken the ‘country back from the brink of bankruptcy’.  We were told that if the country didn’t rein in its expenditure, the debt collectors would be knocking on the door of the Treasury demanding payment, or threatening bankruptcy if it didn’t pay up.  A simplistic picture, but would resonate with many people’s personal experience these days.  That’s why it is an effective propaganda.  That’s why it’s working.  Austerity has monopolised the political and social agendas.  It has been presented as an absolute necessity.  Deficit reduction is being required, with no other alternative possible.  

It is so frustrating to see a considerable number of trade union and Labour Party figures agree with this simplistic story.  They seem to have forgotten how Gordon Brown successfully steered the UK economy through the 2008 global financial crisis, by introducing bank recapitalisation and financial stimulus.  Even the IMF had accepted that Gordon Brown’s policies worked better than other places in the developed West.  By May 2010, the UK economy seemed relatively to be in fairly good shape.
Since then, however, the 2010-15 coalition government, and the 2015- Tory government plummeted UK economy into crisis.  George Osborne’s policies, such as tax cuts for rich people, cuts in public spending, and austerity imposed on poor people, caused the worst recession for a hundred years.   Widespread acceptance of the notion that public spending somehow caused the crisis prepared the ground for Osborne’s austerity programme.  As a political and ideological strategy, austerity has so far proved fairly effective and found widespread support from all sides of the political spectrum.  As a strategy for economic recovery, however, austerity has failed miserably, if the intention was to create conditions for recovery.  In simple words, what those pro-austerity policies claimed that by cutting public spending they would be getting debt under control, costs would be reduced, and companies would invest, consumers would spend more and economies would recover.  In reality, cuts in government spending shrink demand in the economy.  As demand shrinks, firms sell less.  As a result, they cut wages and make redundancies.  All this leads that demand falls still further.  Why do so many governments of the major capitalist economies persist in policies to reduce public sector spending, raise taxes for working people at a time when their economies are in recession?  Are they really mad? 

In the second part of his talk, Bulent explained the real, hidden, reasons for such austerity policies.  The main purpose of austerity has nothing to do taking economy out of the crisis or creating conditions for a healthy economy, but in simple terms austerity is considered necessary to restore high levels of profitability for the capitalists.   The most important aspects of austerity are not really the control of government spending but the accompanying ‘supply-side’ reforms that aim to ‘liberalise labour markets’ with job cuts, and reduce wages, lower pensions.  All these aim to lower the cost of labour and drive up the rate of surplus value (profits to wages ratio).  And this not a recent pattern. Since the 1970s, capitalism internationally has sought to increase its share of the value created by increasing its exploitation of the workers.  Real wages have declined globally and workers everywhere are forced to work for longer hours and more intensely.  In 1981, the average worker in the UK worked 69,000 hours over his/ her lifetime; in 2008 this figure was over 82,000 hours.
In the final part of his talk, Bulent explained this, the real meaning of austerity, by going back to Marx and introduce what Marx called the most important law of modern political economy:  Law of the Tendency of the Rate of Profit to Fall.   Marx explained the reasons for, and the outcome of, austerity policies more than a century ago when he was explaining rate of profit.  As a capitalist system, the current global economy rests upon the search for profit and accumulation of capital.  What stimulates healthy economic activity, investment, is however not just the absolute level of profits, but the rate of profit.  Rate of profit is the ratio of profits to investment.  Marx and many other observers of capitalism consider the rate of profit as one of the most important indicators of the health of the economic system.  The rate of profit is an essential indicator that determines as well as exposes conditions of accumulation, in other words, the health of a particular economic body. When the rate of profit is high, capitalism is relatively prosperous, business investment is high, unemployment is low, and the living standards of workers generally rise.  When the rate of profit is low, on the other hand, investment is low or non-existent, unemployment is high and living standards decline.  In chapter 13 of Capital vol.3, Marx explains the rate of profit and identifies the Law of the Tendency of the Rate of Profit to Fall as the most important law of modern political economy.  Marx’s argument is as follows: the organic composition of capital (mass of machinery) rises over time, and as a result, the surplus producing component of investment, which is living labour as opposed to the dead labour represented by machines, decreases as a proportion of total investment.  In other words, each worker gradually operates a larger section of machinery. Since the real, surplus producing part of the investment is living labour, the rate of profit declines as a result.  In other words, capitalists require low wages in the production process, and high prices in the market where they sell their products.  But if they pay low wages to workers, the wage-earners (the majority of the people in the market) wouldn’t be able to pay for the products. This is the essential contradiction of the capitalist system, and the basis of the law of the tendency of the rate of profit to fall.

 

Emar Seminar 3, YouTube link:

https://youtu.be/8yZUk8sGnME