Along with goofy photos of anxious traders and overworked metaphors, every market meltdown (there’s one now) comes with predictions of capitalism’s imminent demise.

These are just poor renditions of Marx’s observation that capitalism’s inexorable ups and downs will eventually swing out of control. Maybe this is the downturn that finally kills it.

But if the current crisis and the response to it tells us anything about the end of anything (which we doubt), it’s that socialism has the problem.

As heavyweight capitalism limped back into the ring this week, bruised from head to toe, dragging its tattooed knuckles — “GOLD” on the right, “STOX” on the left — socialism should have been leaping out of the red corner to land the last swingeing blow and claim the 21st century as its own.

Not so much.

It tells you something about the state of socialism that the people proposing to nationalise banks are the freedom-loving idiot child of a wealthy Texas oil family and an ex-denizen of Wall Street.

For his part, Barack Obama is simply too cool to do ideology. John McCain, for a 72 year old, is giving a pretty good impression teen political petulance with his populist riff on Wall Street greed and corruption (if only he could raise his fist above his head). His tax policy remains oddly steadfast in its encouragement of people accumulating large piles of cash.

It also raises the obvious question of what he would do about lust, gluttony, sloth, wrath, envy and pride, all of which seem to be as big a challenge to America’s better angels these days.

Over the Atlantic, mainstream democratic socialist parties are into their second re-branding as “New-Something-Not-So-Dirty-and-Working-Class” in the UK, eking out an existence in left-right limbo coalitions in Germany and Austria or still smarting from the association with communism in the east. The left’s one time home turf in Mediterranean and Nordic Europe has been all but overrun by conservatives, who now hold power in France, Italy, Greece, Sweden, Denmark and Finland.

In all western democracies, the response to the finance crisis has been to devote state resources to saving capitalism, rather than crafting anything to replace it. Regulation, while flavour of the month, is likely to take the form of repairing profit machines, not replacing them.

In Australia, socialism’s weakness as a political force is best displayed by the fact that a Labor Government now justifies an increase in the pension not with a moral case for protecting the vulnerable in hard times (that would have been nice when inflation was the menace) but the pitch that pensioners’ hand-to-mouth budgets makes them a useful conduit for macroeconomic pump-priming. Presumably if Treasury had found sugar gliders had a higher marginal propensity to consume, Kevin and Wayne would be selling their Flying Marsupial Stimulus Package right now.

The clear message for middle-class voters is that a one-off pension increase is OK because the cash will eventually trickle up into their more deserving pockets. (For the record, we support increased pensions only because it might lower the incidence of geriatric nudity on TV.)

If this crisis says anything, it is that we are firmly in the era of non-ideological policy competence. Which is not to say that all politicians are competent. It does mean that the key political test in western democracies is a politician’s ability to ensure markets work and welfare is maximised around the middle and upper levels of the bell curve, where most voters either are or aspire to be. Distributing wealth to the genuinely needy is, at best, a secondary goal.

If this seems like capitalism’s darkest hours, it’s because we’re at the dawn of its next century.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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