Is Constantin Gurdgiev Ireland's Economic Rasputin?

international | anti-capitalism | opinion/analysis Friday November 11, 2011 13:36 by Paddy Hackett rasherrs at eircom dot net

Constantin and the Irish Economy

Gurdgiev makes the false assumption that capitalism isa rational system that serves the interests of all citizenry if rationally organised. Like the reformists on the Left he believes that a reformed capitalist social system can advance the interests of the capitalist class, middle and working class. In this way he is an idealist reformist who mistakenly believes that reason (ideas) can determine social reality. To achieve economic recovery he argues that that there must be a massive reduction in state spending on a scale that makes past and present governments' reductions look lilliputian. He shows here his failure to understand the nature and function of state spending under capitalism.

The following comments by Constantin Gurdgiev, leading figure of the right, is taken from his blog:

"To summarize, there is no hope of growing out of the debt crisis we face when the expected growth this economy can achieve in the next decade or so is roughly ten times smaller than the debt repayments we have to finance for the combined public and private non-financial debt. Once we rule out sovereign debt restructuring, the only solution to our crisis will require reducing the private sector debt overhang."

Within the framework of capitalism growth is the only solution to Irish economic recovery. This growth has a global character. But the economy of the Irish Republic cannot grow independently of world growth. As capitalist economic growth such growth is exclusively derived from the profitability of industrial capital and cannot be sustained on a platform of expanding debt. This means that only  stronger capitals can sustain economic growth. Weaker capitals have to be eliminated. The latter are largely enterprises that have been sustained by debt --bubble companies. Under these conditions the productivity of industrial capital must be enormously increased. Under such conditions total surplus value compensates for the tendency of the general rate of profit to fall. Big increases in the intensity of labour is another must. State spending must be minimised. The outcome is a shrunken world economy with a much more impoverished working class. This is the only kind of capitalist economic recovery possible today. It is a reovery that is unacceptable to the working class. But it is capitalism's nature to maximise profit not to serve the interests of the working class. Successful capitalism is capitalism that advances the interests of the capitalist class. Benefits accruing to the working class under capitalism are, at most, merely the means to guarantee profitability. If the forgoing prescriptions are not realised then civilisation will either collapse into chaos or else a global social revolution will happen whereby capitalism is replaced by communism.

By contrast Gurdgiev's programme is a call for an idealist utopia that has no basis in history. He couches his programme in fancy "economeese" in order to fool the working class. It is merely a programme to disarm the working class thereby rendering it vulnerable to a defeat leading to its subjection to the kind of naked capitalism indicated above. State spending and bank capital don't produce value nor surplus value. Value and surplus value are created from within the production process. Consequently the slimming down of state spending can at most reduce the volume of value being "wasted". But the state cannot, however trim it becomes,  create value. Neither are banks value producers. They can only, at most, more efficiently guarantee and assist in the circulation and realisation of exchange value and ultimately the accumulation of capital.

The only real alternative for the working class is communism. Under communist society the law of value and the other related social laws of capitalism will have been abolished. Consequently profitability is no longer the driving force, and limit, to the expansion of wealth.

Gurdgiev is mistaken when he claims that massive slashing of state spending together with the creation of an effective banking system largely constitutes the platform from which recovery can take off. He omits the ultimate source of the problem --the capitalist production process.The lack of productivity within the process of production is the principal cause of the sustained capitalist crisis. There must be a transformation of the technological basis of production entailing large increases in the rate of exploitation of labour power if recovery, albeit only temporarily, is to establish itself. But enormous technological development is not something that can be developed at will. Technological change (and thereby large productivity increases) cannot be introduced to the labour process at will. Consequently adequate productivity of labour increases are highly unlikely although not impossible. This being so it is highly unlikely that authentic economic recovery can be achieved.

Gurdgiev  argues that public service spending must be savagely cut. Along with this he calls for radical reform of the public service and indeed the capitalist political system itself. The implication of this programme of his is that a massive cut in public service expenditure together with a radical transformation of the public sector together with the political system can result in a society that serves the interests of the Irish citizenry. He suggests too that the Irish banking system must be radically reformed. He attacks any attempts to increase taxation. He claims that the latter only dampen down effective demand or consumption. The foreging prescriptions form part of Gurdgiev's idealist utopian programme. It is idealist because it is not grounded in the process of production which must constitute the materialst basis of any valid programme. His prescriptions apply to circulation and not production. The former cannot create value which is the way out of the contradiction. In so far as he makes references to the labour process it is only on the unestablished assumption that if the Irish economy follows his instructions global production will have picked up in such a way that the Irish economy will be able to benefit from this change. Given the global situation this assumption cannot be made especially when a massive spike in productivity is the requirement if there is to be recovery.         

                                                                                     
The Irish economic crisis is a manifestation of the global crisis that has beset contemporary capitalism. The recent property bubble is an expression of the world economic crisis. To identify the crisis being suffered in Ireland as  nationalist is to misunderstand the entire character of capitalism. The recent role played by the Irish banks in contributing to the property bubble was also an extension of the global crisis. Many commentators, from both right and left,  position the source of the the problem hitting Ireland in reverse order. They mistakenly posit how the crisis appears as the cause of the crisis.

Gurdgiev argues that that there must be a massive reduction in state spending on a scale that makes past and present governments' reductions look lilliputian. He shows here his failure to understand the nature and function of state spending under capitalism. He is unable to grasp that state spending has been undertaken to shore up capitalism and to pacify both the working class and middle class. Contrary to his thinking the state was not established and expanded as part of a formal rationalism originating originating in the European Enlightenment. The capitalist economic system is incapable of providing permanent full employment and enhanced living standards for the masses. Consequently the state steps in to fill the gap. This political intervention forms part of a necessary strategy to discourage the working class from challenging capitalism. The upshot is a burgeoning debt sustained social democracy.

Capitalism in the West sought to overcome this problem by increasing state spending. This led to, among othe things, improvements in the infrastructure together with improved working and living conditions. However state enlargement could only be provided chiefly by deductions from total surplus value while leaving less exchange value available for private capital formation. Clearly the reduction of surplus value accruing directly to industrial capitalism is correspondingly less. This shortfall could be compensated for by increasing the productivity of labour and thereby the exploitation of labour power. The result of increased productivity is a massive transformation in technology.

Now the conditions that enabled this process to occur were massive state spending on infrastructure and state iniated industry. The capitalist class were not in a position, for reasons which I shant go into now, to engage in such undertakings at the time. The basis for these developments, as alluded to above, were the following. The victory of one group of monopoly capitalists over another as a result of the two world wars along with economic depression from 1929 to 1939. Defeats suffered by the world working class in France, Spain, Britain and elsewhere. These changes helped bring about a large scale recovery in the general rate of profit. This was due to the destruction and devalorisation of capital.eant the continued burgeoning of state expenditure eventually culminating in empires of debt. This development enabled many weak entrepreneurs to stay in business. The debt empires sustained a burgeoning demand for commodities --the mass consumer society. Because of the growth and perpetuation of weaker capitals and the increasing debt, total surplus value increasingly failed to compensate for the falling rate of profit. The gap continually widened forcing the system to create even further debt. This helps explain thecauses underlying  recent financial crises such as the Asian, Russian and Mexican crises. Now these crises were "artificiallly" resolved by futher debt expansion. But this was no real solution and merely kicked judgement day into the future. The situation has now reached such an enormous size that capitalism can no longer offer debt based solutions to economic disturbances. The problem is not a European problem but a world problem.

Gurdgiev never makes clear the philosophy that underlies his nationalist model for Irish economic recovery. His philosophy is based on extreme right wing assumptions. It is these that really need to be expounded by Gurdgiev in order to render his conception of economics more intelligible. Another problem is his use of obscurantist language both in his writing and his public utterancesn --highly jargonised language.(Not meaning to offend personal sensibility. His mode of speaking renders it more difficult to comprehend what his verbalisations). There is no need for much of what he writes to be enveloped within a vast cloud of jargon. Its effect is to lend his outpourings an all knowing mystique.

It is highly unlikely that bourgeois representative democratic institutions are capable of bringing about capitalist economic recovery given the scale of the sustained attack that must be mounted by the bourgeoisie against the working class. It is very likely that naked bourgeois dictatorship may become the order of the day. Even now such tendencies have been surfacing. We see this in relation to the conduct of Merkel and Sarkhozy with regard to Greece. Just as the capitalist economy  has been reaching its limits so too may its representative democracy.