Monday, December 26, 2011

St Paul

People are attracted to Ron Paul as a candidate who is against war, for drug legalization, hands off the internet, etc. and then they swallow the pill and think they hold the key to 'righting' the economy with his gold standard ideas. Why are so many leftists offering sympathy to Ron Paul , a free-market capitalist, right-wing pseudo-libertarian? The ONLY things they have in common is some degree of anti-government sentiment and an anti-war position. Opposition to the state might sound pretty good, but the Libertarian anti-state position is based on a blind faith in the free market. They argue that the benevolent forces of the market economy are curbed by the centralised power of the state, which results in a curtailment of individual liberty. Libertarianism states that it shall be legal for anyone to do anything he wants, provided only that he not initiate (or threaten) violence against the person or legitimately owned property of another. That is, in the free society, one has the right to manufacture, buy or sell any good or service at any mutually agreeable terms. Thus, there would be no victimless crime prohibitions, price controls, government regulation of the economy. If libertarians are serious about liberty, and truly want to live under a state-less system where peace then they must end capitalism, whose invisible hand has been slapping all of us around and pushing us to slay each other.

Today in the United States, Ron Paul seeks to abolish what little services the state still provides for its poor, hungry, and dispossessed. These services were paid for in sweat and blood by activists who aimed to alleviate the stress and misery of poverty for the American working class. Although against reformism we cannot deny the reality that certain reforms such as an eight-hour work-day or welfare assistance help those who cannot endure the nature of our survival-of-the-fittest capitalist state. Social and welfare services which have been forced upon the elite and conceded to the working class during the New Deal and the Great Society, amongst other epochs cannot be written off as unimportant. Militant labour fought for concessions. Poor people now have social programs. Ron Paul's visions are nothing more than the resurrected dreams of robber barons past. He may be against state authority, but it is inconsistent to oppose tyranny in the public sphere of government and leave it unaddressed in the private sphere of work. It is to simply trade one slavemaster for another.

The logic goes something like this: Free-market capitalism on its own would naturally lead to a world of personal freedom and economic prosperity, but this is thwarted by the power of the state, an organism that grows robustly at times of war. Hence, war must be opposed not only because of its own obvious evils, but as a way to drive back the power of the state which is standing in the way of a better life. For Libertarians capitalism is an inherently peaceful system. They ridicule the idea that there is a connection between the nature of capitalism and the wars that constantly break out under it. In the Libertarian’s mind, capitalism is—or should be—a world made up of enterprising capitalists, minding their own business(es) and interacting peacefully, without any need for the state to intervene in these affairs or for wars to be waged overseas. Here we are basically dealing with the viewpoint of the individual capitalist, particularly the small-scale one, who experiences the state as an unpleasant institution that appropriates his hard-earned wealth through taxation, sometimes to pay for wars that bring him no direct benefit. Remove this alien force, he reasons, and life would immediately be much rosier. The “liberty” that Libertarians wax so philosophical about is the freedom of this economic actor to chase after his profit in peace. Ron Paul feels that capitalism can somehow behave more rationally than it does. This Libertarian view of the benevolent nature of a market economy is a selective one. Their focus is on exchange, as a mutually beneficial act. This is a real “win-win” situation, where I give you my widget and get your gadget in return. The reality is quite the opposite. What is left out, however, are some of the strikingly war-like aspects of a capitalist economy, starting first and foremost with the cut-throat competition that goes on in the pursuit of profit. Nor do they dwell on the class divisions inherent to such a system and the conflict that that results. Never minding the fact that profits are squeezed out of workers, thus depriving them of their own personal liberty!

The state and the wars it wages may seem a complete waste of taxpayer money to the individual capitalist (and to the Libertarian who translates his blinkered viewpoint into a grand philosophy), but things look a bit different if we consider the capitalist class as a whole. Like any ruling class throughout history, the minority capitalist class needs the state, as an apparatus of coercion, to maintain its grip on power. And in addition to this age-old function of the state, a capitalist state is also necessary as a means of coordinating the diverse interests of individual capitalists in order to represent their collective interests as capitalists. The example of banking alone shows how deregulation may benefit a tiny stratum of capitalists at the expense of their bourgeois brethren who have to purchase exorbitant or shoddy products. Given this twin-necessity for the state—as policeman and mediating judge—the more far-sighted or financially more comfortable capitalists view the taxes directed to the state apparatus as money well spent. Libertarians, in short, loathe the state without understanding why it must exist and play certain roles under their cherished capitalist system.

And the same shallowness characterizes their view of war, which is fervently opposed without an understanding of its root causes. Tensions between nations are always present over shifts in political allegiances between countries that may benefit some better than others. Global politics is a macrocosm of the local economy, with each company vying to get as much of the business as it can, such as trade, material resources and opportunities for future economic growth. Capitalism, as already noted, generates its own war-like behaviour at home, where capitalists will go to any lengths to vanquish the enemy (i.e. competitors). We may find this behaviour deplorable from the standpoint of human decency, but it does have its own necessity. And there is a similar capitalist logic at play when nation-states jostle and throttle each other for access to markets and resources, despite such behaviour being the height of idiocy from the perspective of humanity as a whole.

Noam Chomsky has said of Ron Paul "He is proposing a form of ultra-nationalism, in which we are concerned solely with our preserving our own wealth and extraordinary advantages..."

Ron Paul wants to abolish "The Fed", the Federal Reserve, America's central bank, a critic of “fractional reserve banking” , as well as an advocate of a return to a gold-backed currency. If Paul had his way, the Fed would no longer manage the issue of the currency. This would pass to the Treasury Department which would only be allowed to issue paper money if it had the equivalent value of gold in Fort Knox. This would be a further absurd waste of resources as much more gold would have to be mined – just to store in places like Fort Knox. Paul thinks that a return to a gold-based currency would eliminate crises such as in the 1930s and today. This is an illusion. There was a gold-based currency up until WWI, yet crises occurred regularly, including a Great Depression in the 1880s and a hundred years ago the same sort of banking crises as today. Capitalism goes through its boom/slump cycle whatever the currency. No monetary reform can change that.

Money originated as a commodity, i.e. something produced by labour that had its own value, which evolved to be the commodity that could be exchanged for any other commodity in amounts equal to the value of the other commodity. Various things have served as the money-commodity, but in the end gold (and silver) was almost universally adopted. Being rare (i.e. requiring more labour to find and extract from nature, so concentrating much value in a small amount), and it was divisible and so easily coined as well as long lasting. As capitalism developed it was found that gold itself did not have to circulate, but that paper notes could substitute for it as long as those accepting or holding it could be sure that they could always change them for gold. Up until WWI in most countries the currency was gold coins and paper notes convertible into gold. The Great Depression of the 1930s led to the major capitalist countries abandoning this convertibility. Since then the currency nearly everywhere has been inconvertible paper notes. With an inconvertible paper currency, the amount of money is no longer fixed automatically by the level of economic transactions, nor is there any limit to the amount of paper currency that can be issued. It is this that Paul objects to because, if the central bank issues more paper money than the amount of gold that would otherwise be needed, then the result will be a depreciation of the currency; the paper money will come to represent a smaller amount of gold with the result that prices generally will rise.

The gold standard was put into effect in the U.S. after the American Civil War. The gold standard in the U.S. was implemented due to demands from Wall Street financiers. they had financed the Union Army based on paper money. They wanted to be able to redeem the debt in dollars worth more than what they provided by tying the dollar to gold, and this would cause deflation, thus raising the value of their dollar-denominated debt. But the effect of this was to restrict growth in the money supply which was to drive down farm commodity prices, impoverishing farmers and driving a huge number of people off the land. That was because, as productivity in agriculture and industry in the U.S. grew in the late 19th century and early 20th century, growth in the money supply didn't follow suit. This led to a constant deflationary tendency. as farmers could get less and less per unit of output, they were unable to pay their debts.

In that era credit in general was extremely scarce. for example, until after World War II, it was hard to get house mortgages in the U.S. Typically you could only get a mortgage for a short period. Consumer credit only really developed in the '20s. This is relevant to the issue of the money supply because expansion of credit expands the money supply. Individualist Anarchists in the US in the 19th century spent a lot of time attacking the gold standard as it allowed the banks to charge extremely high interest as it restricted the money supply. Of course, in practice, banks used lots of techniques to increase the supply to make more profits, of course, but it was a key means of restricting working class access to capital -- which was essential to proletarianise a mostly artisan/peasant (i.e., pre-capitalist) society.

Nor was the deflationary effect necessarily a good thing for workers in the late 19th century. Falling commodity prices meant that employers also were under pressure to cut wages, which they did. It was wage-cutting that provoked the Great Rebellion, the railway strike, of 1877. Recessions/depressions tend to reduce worker bargaining power, and the late 19th century was subject to continual recessionary tendencies, with a big depression in the 1870s and again in the 1890s.

In reality there is no particular reason to tie money to gold. The right-libertarian types such as Ron Paul like gold because the idea is to have control of the money supply independent of the state. Paul cannot be called a currency crank as he has a correct understanding of what causes inflation and his solution would work to stop it, if that what was wanted, even if it would be unnecessary, pointless and a waste of resources.

Ron Paul is not our friend. He is not our ally. He is not fighting for us. If our goal is the eradication of capitalism, then supporting Ron Paul is just completely delusional.

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