Free Markets are learning the lesson that there is No "Free Lunch"


Alan Greenspan, Larry Summers, Hank Paulson and the rest of the free market rabble have all admitted the defeat of the Free Market ideology: Greenspan said in 2008: " I found a flaw in the model I perceived is the critical functioning structure that defines How the world works"

The determined Free Marketeers cling to their failed ideology nonetheless for this is all they have....this was the bread and butter they grew up on.....There are no alternatives the text books tell them, and so they continue to scrap around in the vain hope that somewhere in the free market dialect, a bone will be exposed which miraculously will save their ideology from the shame and ignominy of defeat.

Ivor Vegter one of those die hard "capitalist writers" makes a succinct point when he points out that there were those who told the world that the capitalist economy was bound to fail. He credits Ludwig von Misses (1929) with this great insight. God Forbid that a capitalist should ever mention the name of Karl Marx, who of course as far back as 1867 published Das Kapital, in which he correctly, predicted the Boom and Bust Cycles we are all too familiar with today.

Ludwig von Misses correctly ascribes the Boom and Bust Cycles to in part Monetary policy but his analysis is shallow and lacks the overarching intellectual vigour of the all encompassing work of Marx.

Marx goes to great lengths to not only correctly identify the monetary fallacy of the system but goes even further to enquire about the fundamental building blocks of the system that inevitable leads to a Boom and Bust cycle.

The answer for most free marketeers must be found in the muddle and obfuscation of the markets and the "complicated" workings of the systems that drive the markets. For Marx the answer was in the surplus value of labour.

Marx pointed out that the one common element shared by commodities is that they are products of labour.

Adam Smith, David Ricardo and many other classical economists have all proposed similar labour theories of value. Smith began his wealth of nations with this assertion: “The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life..." But Marx goes further, just as commodities have a dual character, possessing both use value and exchange value, so labour itself has a twofold nature. Use value is created by "concrete" or "useful" Labour, defined by Marx as "productive activity of a definite kind carried on with a definite aim", whereas exchange value derives from abstract or “undifferentiated" labour, which is measured purely in terms of its duration. And there is an inherent tension between the two.

A tailor may for example strive to make the hardest wearing coat, but if it is too hard wearing then the purchaser would never need to return to buy a replacement coat. The need to create use value thus finds itself in conflict with the need to continue to create exchange value.

So the question arises: If value in a commodity is created by labourers why do they not obtain full value for their labour? Adam Smith wrote in The Wealth of Nations: In that original state of things, which precedes both the appropriation of land and the accumulation of stock, the whole produce of labour belongs to the labourer. He has neither master nor land lord to share with him"

And so slowly the edifice of the Capitalist system is laid bare. We would not do justice to the entire argument here....Marx Laboured over Das Kapital for half his lifetime and even then did not finish. An immense labour of love.

In one of the most critical points for this purpose, Marx goes on to point out that Capitalist system creates the conditions for its own demise:

"The real barrier of capitalist production is capital itself. If the preservation of capitals value rests on expropriating and pauperising the mass of the people, it will always come into conflict with capitals simultaneous drive towards an unlimited and unconditional extension of productivity. The last cause of all real crises always remains the poverty and restricted consumption of the masses"

So in short, while von Misses correctly points to the monetary driver of the crises, he fails to point at the base cause of the efforts to seek continued growth.
Because the capitalist system is requires constant growth to feed the greed, it seeks ways, such as the pauperisation of labour and the printing of money to feed this growth, but in so doing it prepares the ground for its own demise.

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