John Maynard Keynes - the second coming

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Politicians and economists across the world are dusting off their copies of the works of economist John Maynard Keynes. Suddenly the free market needs rescuing and state intervention appears to be the only solution to the crash.

Financial cupboards that were declared bare for every other demand - public sector pay, pensions, education and public housing - are suddenly bursting with borrowed billions to bail out the system.

Yet the contradiction of pouring public money into heartlands of the capitalist system, without fully nationalising them with public control, quickly exposed faultlines. Bankers who had begged for help complained that they weren't going to receive dividends from investments in banks the state had stepped in to save. What incentive would there be to invest? The system is driven by profit and it won't work without it, they cried.

Yet the Labour government insists it won't take political control of the banks it has bailed out and that its role is solely to get them back on their feet and then set them free to gorge themselves on credit derivatives and six figure bonuses once again, no doubt. As the Financial Times editorial had it on 14 October: "Nationalise to save the free market... Gordon Brown came to save capitalism not to bury it."

A column in the Economist also made it clear that this embarrassing lurch into the safe arms of state intervention was a "pragmatic not ideological" move. "In the short term defending capitalism means, paradoxically, state intervention... Capitalism is at bay, but those who believe in it must fight for it. For all its flaws, it is the best economic system man has invented yet."

Some on the left argue that this apparent shift from rampant neoliberalism to Keynes by Brown marks a return to "old" Labour politics. Ian Aitken wrote in Tribune last month, "What Brown and Darling have done is the right thing and we Tribunites must now do our best to see that it is the start of a steady progress back to the principles which formed the foundation of the Labour Party."

Gordon Brown the neoliberal is being recast as Flash Gordon: the man who saved the global economy. But for many voters this is not good enough. What does talk of saving the economy mean when you lose your job, face a pay cut or can't afford to pay your heating bills? Labour is under pressure from a public that resents the bailout of the very people who brought the economic catastrophe down on us all. Which is why we are now seeing moves by the government to show it cares about the plight of ordinary people due to the crisis. Yvette Cooper's call for banks to only repossess homes as a very last resort and the plans to buy empty properties to use as social housing are examples of this.

This is a shift by the government and if it is followed through will be popular. Even if only a handful of Labour councils took over one or two empty developments and housed homeless families in them it could have a big impact.

Such possibilities can open the door for socialists to argue and agitate around demands that the government should do much more and pose nationalisation with public control as the only sane and rational response to the system's immediate problems.