US Republican president Richard Nixon, also facing rising unemployment domestically ahead of the 1972 election, began to consider severing the dollar’s link to gold. Devaluing would help to resolve the crisis. The gold standard had become a fetter on growth since the amount of gold foreign banks could convert their dollars into was finite. It needed to be done away with to tackle the structural limitations that inflation imposed on state deficit spending. The alternative was to raise rates and spark a depression.

On 15 August 1973, Nixon effectively ended Bretton Woods by announcing that the US would no longer convert dollars to gold at a fixed value and no longer pay debt in gold, only dollars. The ceiling on both the number of dollars the Federal Reserve (the US central bank) could print and the debt it could issue was removed. The US dollar and reserve currency was now no longer backed by a hard asset as a storehouse of value. Debt became the main tool for supporting increased investment and consumption.

The end of the gold standard triggered a stampede for the dollar, which started to devalue as inflation surged. From the end of WWII through to 1971, it took between 10 and 15 barrels of oil to purchase one ounce of gold; rising to 34 by mid-1973.[6]

As the value of oil fell, members of the Organisation of Petroleum Exporting Countries (OPEC) cut output in order to raise prices. The US encouraged the hikes as petrodollars flowed into Wall Street, financing US deficits. At the time of Nixon’s gold standard announcement, the price of oil stood at less than $3 per barrel, continually rising to $30 long into the 1980s. While the price of oil stayed within its historical range relative to gold, it was a massive shock to the global economy. By the end of 1974, the main stock indexes of the G7 countries fell in real terms by 43%. The US market did not recover its losses until 1993.

Nixon was replaced by the Democrat Jimmy Carter, whose administration went on the offensive against inflation, making borrowing more expensive by hiking interest rates to 11 and then 21.5%. This brutal monetary policy – also partially a reflection of a fall in the demand for debt amid rising bankruptcies – pushed inflation down from 13.5% in 1981 to 3.2% two years later. Unemployment shot up.

In Britain, where the aggregate rate of profit fell by 3% between 1960 and 1970,[7] inflation hit 25% in 1975. A large-scale sell-off of the overvalued pound began as investors anticipated another devaluation. Britain was forced to take on a record-breaking loan from the IMF,[8] which

demanded heavy cuts in public expenditure and the budget deficit to keep inflation down as a precondition. The Labour government’s relatively strong left-wing eventually acceded to a 20% cut to the deficit, as refusing the loan would have been followed by a further disastrous run on the pound. The Keynesian cadaver only needed finishing off. The Labour Party began a war on benefits, wages, and unions, to be finished by Margaret Thatcher’s Tories through a combination of police brutality and bribes (shares in reprivatized assets and below-market prices for the purchase of social housing).[9]

In the US, there were 39 work stoppages by government employees between 1962 and 1981, but none after Ronald Reagan fired 13,000 striking air traffic controllers.

When Thatcher won the 1979 general election, nationalized industries represented 10% of the economy and 14% of capital investment. By 1990, when she was ousted from office, the former figure had fallen to under 2%.[10] Riding a relatively strong period of accumulation, the Labour government of 1997-2010 continued the privatization drive but did increase public spending somewhat, only to start reversing such measures as the global financial crisis struck in 2008.

Obsolete

Everything that unfolded tallies with Marxist theory. In the long run, even the mild temporary redistribution in wealth through taxation served to centralize property into fewer hands, since such expense helped to bankrupt poorer capitalists. At a certain point, the threat of bankruptcy hit a critical mass, and the remaining capitalists collectively had no option but to push taxes and borrowing back down.

The public infrastructure built or restructured by the state did not create new value until it was later privatized. It also removed the burden of putting such costs on the capitalist class at a time when the latter could not afford the such investment. Through innovation, efficiency drives, and decommodified production, state enterprise cheapened means of production bought by the remaining capitalists, who still made up the vast majority of all ownership. The key industries were more productive by the time capital was compelled by overaccumulation to reprivatize them in order to expand commodity production.

Keynesianism did exactly what Keynes set out to achieve: to save capitalism from itself via a restructure so that it was able to embark on the next, evermore demanding round of accumulation.

Today, the capitalist state is already drowning in record levels of debt and running out of social assets to privatize and commodify. It increasingly drives down the last remnants of social spending so that it can be redirected to shareholders desperately trying to stave off insolvency. Quantitative leaps in computing and automated production are bringing about profound qualitative leaps, rapidly driving down the costs of production and the outlay on wages but accelerating the concentration of monopoly ownership and overaccumulation as human labor becomes a relatively vanishingly small part of the productive process. Capitalists offset this problem by cutting production to raise prices, redistributing value upwards and thus making life increasingly unaffordable as the labor participation rate tends to trend downwards to new lows.

The pursuit of a Keynesian alternative is even more of a dead end than in the past, for there can be no ‘reindustrialization’ of the workforce. Keynesian nationalization, in any conditions, would accelerate the automation revolution. The reality is that accumulation itself – the accumulation of production – increasingly demands no ‘mixed economy’ but the public ownership of all production. That is what the working class must be convinced to turn to this time. It is Keynes who is obsolete.

[1] See “Marx’s Capital – ‘scientifically erroneous and without application to the modern world’?” by Michael Roberts.

[2] Ibid.

[3] Paul Mattick, Economics, Politics and the Age of Inflation, “Chapter Six: The Great Depression and the New Deal”, Marxists.org, 1977. All further Mattick quotes from the same source.

[4] Kimberly Amadeo, ?New Deal summary, programs, policies, and its success?, TheBalance.com, 25 February 2015.

[5] Varoufakis, The Global Minotaur, p. 90.

[6] Ibid, p. 90.

[7] David Yaffe and Paul Bullock, “Inflation, the Crisis and the Post-war Boom”, Revolutionary Communist No 3/4 (November 1979), 12.

[8] “Sterling devalued and the IMF loan”, nationalarchives.gov.uk.

[9] The number of shareholders ballooned from three million to between 12 million and 15 million. In the privatisation of BT in 1984, up to 10% of shares were reserved for employees and 96% of employees bought shares. ?Privatising the UK?s nationalised industries in the1980s?, Centre for Public Impact [online], 11 April 2016. [10] Ibid.

The end of the gold standard triggered a stampede for the dollar, which started to devalue as inflation surged. From the end of WWII through to 1971, it took between 10 and 15 barrels of oil to purchase one ounce of gold; rising to 34 by mid-1973.[6]

As the value of oil fell, members of the Organisation of Petroleum Exporting Countries (OPEC) cut output in order to raise prices. The US encouraged the hikes as petrodollars flowed into Wall Street, financing US deficits. At the time of Nixon’s gold standard announcement, the price of oil stood at less than $3 per barrel, continually rising to $30 long into the 1980s. While the price of oil stayed within its historical range relative to gold, it was a massive shock to the global economy. By the end of 1974, the main stock indexes of the G7 countries fell in real terms by 43%. The US market did not recover its losses until 1993.

Nixon was replaced by the Democrat Jimmy Carter, whose administration went on the offensive against inflation, making borrowing more expensive by hiking interest rates to 11 and then 21.5%. This brutal monetary policy – also partially a reflection of a fall in the demand for debt amid rising bankruptcies – pushed inflation down from 13.5% in 1981 to 3.2% two years later. Unemployment shot up.

In Britain, where the aggregate rate of profit fell by 3% between 1960 and 1970,[7] inflation hit 25% in 1975. A large-scale sell-off of the overvalued pound began as investors anticipated another devaluation. Britain was forced to take on a record-breaking loan from the IMF,[8] which

demanded heavy cuts in public expenditure and the budget deficit to keep inflation down as a precondition. The Labour government’s relatively strong left-wing eventually acceded to a 20% cut to the deficit, as refusing the loan would have been followed by a further disastrous run on the pound. The Keynesian cadaver only needed finishing off. The Labour Party began a war on benefits, wages, and unions, to be finished by Margaret Thatcher’s Tories through a combination of police brutality and bribes (shares in reprivatized assets and below-market prices for the purchase of social housing).[9]

In the US, there were 39 work stoppages by government employees between 1962 and 1981, but none after Ronald Reagan fired 13,000 striking air traffic controllers.

When Thatcher won the1979 general election, nationalized industries represented 10% of the economy and 14% of capital investment. By 1990, when she was ousted from office, the former figure had fallen to under 2%.[10] Riding a relatively strong period of accumulation, the Labour government of 1997-2010 continued the privatization drive but did increase public spending somewhat, only to start reversing such measures as the global financial crisis struck in 2008.

Obsolete

Everything that unfolded tallies with Marxist theory. In the long run, even the mild temporary redistribution in wealth through taxation served to centralize property into fewer hands, since such expense helped to bankrupt poorer capitalists. At a certain point, the threat of bankruptcy hit a critical mass, and the remaining capitalists collectively had no option but to push taxes and borrowing back down.

The public infrastructure built or restructured by the state did not create new value until it was later privatized. It also removed the burden of putting such costs on the capitalist class at a time when the latter could not afford the such investment. Through innovation, efficiency drives, and decommodified production, state enterprise cheapened means of production bought by the remaining capitalists, who still made up the vast majority of all ownership. The key industries were more productive by the time capital was compelled by overaccumulation to reprivatize them in order to expand commodity production.

Keynesianism did exactly what Keynes set out to achieve: to save capitalism from itself via a restructure so that it was able to embark on the next, evermore demanding round of accumulation.

Today, the capitalist state is already drowning in record levels of debt and running out of social assets to privatize and commodify. It increasingly drives down the last remnants of social spending so that it can be redirected to shareholders desperately trying to stave off insolvency. Quantitative leaps in computing and automated production are bringing about profound qualitative leaps, rapidly driving down the costs of production and the outlay on wages but accelerating the concentration of monopoly ownership and overaccumulation as human labor becomes a relatively vanishingly small part of the productive process. Capitalists offset this problem by cutting production to raise prices, redistributing value upwards and thus making life increasingly unaffordable as the labor participation rate tends to trend downwards to new lows.

The pursuit of a Keynesian alternative is even more of a dead end than in the past, for there can be no ‘reindustrialization’ of the workforce. Keynesian nationalization, in any conditions, would accelerate the automation revolution. The reality is that accumulation itself – the accumulation of production – increasingly demands no ‘mixed economy’ but the public ownership of all production. That is what the working class must be convinced to turn to this time. It is Keynes who is obsolete.

[1] See “Marx’s Capital – ‘scientifically erroneous and without application to the modern world’?” by Michael Roberts.

[2] Ibid.

[3] Paul Mattick, Economics, Politics and the Age of Inflation, “Chapter Six: The Great Depression and the New Deal”, Marxists.org, 1977. All further Mattick quotes from the same source.

[4] Kimberly Amadeo, ?New Deal summary, programs, policies, and its success?, TheBalance.com, 25 February 2015.

[5] Varoufakis, The Global Minotaur, p. 90.

[6] Ibid, p. 90.

[7] David Yaffe and Paul Bullock, “Inflation, the Crisis and the Post-war Boom”, Revolutionary Communist No 3/4 (November 1979), 12.

[8] “Sterling devalued and the IMF loan”, nationalarchives.gov.uk.

[9] The number of shareholders ballooned from three million to between 12 million and 15 million. In the privatisation of BT in 1984, up to 10% of shares were reserved for employees and 96% of employees bought shares. ?Privatising the UK?s nationalised industries in the1980s?, Centre for Public Impact [online], 11 April 2016. [10] Ibid.

[5] Varoufakis, The Global Minotaur, p. 90.

[6] Ibid, p. 90.

[7] David Yaffe and Paul Bullock, “Inflation, the Crisis and the Post-war Boom”, Revolutionary Communist No 3/4 (November 1979), 12.

[8] “Sterling devalued and the IMF loan”, nationalarchives.gov.uk.

[9] The number of shareholders ballooned from three million to between 12 million and 15 million. In the privatisation of BT in 1984, up to 10% of shares were reserved for employees and 96% of employees bought shares. ?Privatising the UK?s nationalised industries in the1980s?, Centre for Public Impact [online], 11 April 2016. [10] Ibid.