Chinese banks raising tens of billions of dollars in share rights issue are reported in the financial pages of newspapers, whereas front-page headlines are dominated by austerity measures taken by western governments to repair their finances.

How is such a state of affairs brought about? The answer is quite simple. Post-capitalism in the emerging countries (mainly BRIC – Brazil, Russia, India and China) is investing money in capital to render more money (M-C- M1), whereas neo-liberalism in the western countries seeks to inflate asset prices (M-M1) by speculation in order to pander to its electoral base; which often enough results in the government dispossessing citizens of their rights to balance their budgets (PIIGS – Portugal, Ireland, Italy, Greece and Spain) or by waging wars as the US/NATO is doing in Iraq and Afghanistan.

So the way forward in the West – as in the emerging countries – is for the state to take those measures which would enable the business world to expand by producing profitable economic investment – in primary and secondary sectors – with workers duly remunerated for their work, rather than engaging in fruitless policies to manipulate asset prices, as is the case of immoveables (with sub-prime lending in the US being an extreme example of this practice) and oil prices (as the continuous wars in the Middle East show).

The state’s resources are thus put to use to regulate speculation – asset bubbles – and render the economy productive – with workers earning a decent living.

This is easier said than done, with the current neo-liberal ideology being so predominant!

Mario Mifsud