Posted by John, November 4th, 2009 - under Uncategorised.

Tags: Capitalism, Crisis, Economic crisis, Economists

The tipsters for the Melbourne Cup were wrong. Bart Cummings didn’t win.

In fact the hoopla about the 81 year old winning his 13th Cup was just that – a feeding frenzy that had a material effect. Millions of working class Australians put millions upon millions on his horses. Why? Because Bart trained them.

I had a look at the tipsters. Almost to a man (and the occasional token women) they had a Bart trained horse in their picks. So it was a Shocking result for them.

Apparently Bart is the Warren Buffett of Australian horse racing. Unfortunately the oracle of odds picked the wrong horse.

The tipsters got the fundamentals wrong. They were swept up in rumour and substituted hope for rationality.

That got me thinking about stock markets. In Australia the stock market has grown 50 percent in in the last seven months. The pundits are starting to tell us that the crisis is over. And every bookie economist and pub tipster is telling us to back their favourite.

Even bourgeois economists are entering the ring.

Ken Henry, Treasury’s head honcho, thinks that the golden times are back. He can see the Australian economy growing on China’s back for the next 40 years. No major slumps, no recessions, no depressions, with one provision – a long as the working class bears the burden of capitalism’s costs around climate change, population growth, and the like.

I would have thought the very threat to existence climate change poses, the possibility of revolution in China, the boom/slump and depression history of capitalism itself, might make him a little more cautious.

But no. Obviously the bandwagon effect is not limited to punters.

Most economists in early 2008 had no idea about the possibility of a global financial crisis. Now they have no idea about the recovery.

As John Kenneth Galbraith said ‘the only function of economic forecasting is to make astrology look respectable’.

The Australian Financial Review runs a hypothetical investment competition every couple of months. This time it was won by the dart board picker, with the astrologer and the monkey runners up.

Bourgeois economists look not at fundamentals like the rate of profit but at surface phenomena.

It’s like driving by looking in the rear view mirror.

None of this means Marxists can predict the stock market or the economy specifically.

But we do understand that the system is crisis ridden because competition forces the bourgeoisie to invest more and more in capital compared to labour. Since labour is the source of value and hence profit this means over time that there is a tendency for the rate of profit to fall.

This is the dagger at the heart of capitalism.

Some economists, drawing on the chaotic lessons of the global financial crisis (which is in fact a crisis of profitability), are puzzling over the global stock market recovery and the spectre of increasing unemployment.

They worry about the fundamentals. What caused the crisis and why is the market bouncing back?

Like one or two tipsters this minority of economists are not sure the favourites will win the market Cup. But they don’t know which way to jump or who to back.

They have no idea how their own system works.

Let me give you a tip. Economic crisis is integral to capitalism, to the very way production is organised. You can bet on that.