Monday, 19 October 2015

The Future Economy and Marx’s Theory of Crisis

[The Future Economy 1]

In Marxism, capitalism comes before socialism and communism. Marx thinks after the working class gains class consciousness, they will mount a revolution against the capitalists. However, Marx’s Theory of Crisis failed and interestingly, with the help of government, capitalism survives as seen today.

Singapore is a beneficiary of capitalism.  Our pragmatic model of capitalism has created wealth and progress for Singaporeans. In Marxism, it is an ideal situation for socialism as class aware emerges. In fact, all so-called communist states, past and present, have never experienced (modern) capitalism before calling themselves communists.

Why has communism not happened in western industrial world or authoritarian capitalist economy, like Singapore or China?

Professor Ian Shapiro of Yale University explains the failure of Marx’s Theory of Crisis and thinks government and market reflection/adjustment have helped to prevent the fall of capitalism. (see video below).

The 5 Part Theory of Crisis as described by Prof. Shapiro is:
  1. Money
  2. Declining tendency of rate of profit
  3. Monopoly and the elimination of competition
  4. Under-consumption
  5. Working class consciousness

For Singapore to move forward, it is important to look at the theory of crisis as Singapore is already at the advanced stage of capitalism. Judging from the income per capita, we are already one of the top countries in the world. Marx’s failed theory and experience is a learning curve for Singapore or in another word, to prevent it to happen, political change from authoritarian to democracy does have its role.  

How can we solve current capitalism problems facing Singapore? Can the PAP come out with a solution or alternative for Singapore with “The Future Economy” committee headed by Heng Swee Kiat? Is a strong government necessary a stable government?

We can summarize Prof. Shapiro’s viewpoints into the following table for easy understanding:

Saved by
1 Money
Liquidity (hoarding)
Financial crisis
2.Declining tendency of rate of profit
Less profit, less incentive
Manufacturing, e.g China
Technology, shift/new industries
3 Monopoly and the elimination of competition
Massive barriers to entry  
Antitrust laws, fair contest,
‘too big to fail’  
economy of smallness
4 Under-consumption
Overproduction, not enough demand
Great Depression - New Deal
Government, Keynesian economics (countercyclical policies, consumption),  
5 Working class consciousness
Low wage, poverty,
Rich-poor divide,
comparing rich and poor
Psychological assumption - peer comparison

Marx’s Theory of Crisis and Singapore

The above crises have not gone away. These economic and social problems continue to occupy the headlines in the world. And we have to understand the concept of government too. It certainly involves Congress or Parliament.

Below are some examples of the relevant crises in Singapore:

Management of liquidity risk, financial crisis, foreign exchange risk, CPF, foreign reserve and sovereign funds will continue to be challenging issues.   

Declining tendency of rate of profit
The large foreign labour force and increasing property price and rental, and inflation are indicators of falling profit. Lack of creativity and innovation makes shifting or finding new industries difficult.  

Monopoly and the elimination of competition
State monopoly (GLCs) already occupies a big share of our economy. Lack of entrepreneurship and lack 'economy of smallness' activities will make government-led businesses continue to dominate the economy.     

Super-rich and tourists are attracted to Singapore for consumption. The government wants to increase population to increase consumption. Low birth rate means low consumption too.   

Working class consciousness
Singaporeans are not comparing salary with foreign workers. They are comparing with foreign PMETs. There are also demands for poverty line or minimum wage to be established.
All the above are the challenges for the future economy of Singapore. However, the fundamental problem is still politics.

One may argue Singapore is lucky as we have a strong government. And government as explained by Prof Shapiro is the key saver for capitalism. But can a (narrow definition) government without ‘checks and balances’ able to solve the capitalism crises? Even that, we still need to solve issues like entrepreneurship, technology, economy of smallness, psychological comparison, etc.

Government as a rescuer of capitalism, under the attack of Marx’s Theory of Crisis, may explain why the PAP received strong mandate in GE2015.  However, it does not mean strong mandate with an unchecked government can solve the crises. Whether in USA or Europe, debates in Congress or Parliament are the necessary steps of crisis management. Of course, the PAP government may claim debates are not necessary as they can do self-check and self-debate. And Singapore is an exception.   

copyright: Coursera@Yale

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