This interview first appeared in the superb Irish political economy blog, <<politicaleconomy.ie>>
1 – A crisis erupted with the collapse of Lehman Brothers in 2008, but this had been brewing for some time. Can you briefly explain how you view the crisis?
Economists and pundits alike — caught watching an event unfold that simply could not happen — portray the 2007-2008 collapse as a singular event, an accident brought on by an unlikely coincidence of human failings. Of course that perspective masks the inherent, systemic flaws of the capitalist system. The seeds of the current crisis were planted many decades earlier. The intense global competition resulting from the post-war revival of the European and Asian economies, replete with new technologies, engaging new principles of industrial organization, and flooding global markets with innovative products, placed enormous pressure on the rate of profit. The implicit Cold War labor contract — support US, NATO, and SEATO policies, maintain labor peace, and receive compensation at least in step with productivity and costs of living — pressured capitalist profits from below. The stagnation of the 1970’s resulted.
Capital found a solution: mount an all out war on workers and their wages. The slash-and-burn Thatcher and Reagan axis restored profitability (and the celebration of its rewards) by feverishly jacking up the rate of exploitation. The collapse of Eastern European socialism added new markets and cheap labor to the favorable conditions for profit-making. Not surprisingly, the loss of a real-world beacon of socialism proved profoundly demoralizing to the labor movement. Many Western Marxists turned to navel-gazing or the”rethinking” of the socialist project.
Without filling in the details, the hyper-accumulation of this triumphalist era stretched the bounds of available productive and safe investment opportunities. Thus began the explosion of financial exotica (and financial “profits”!) to absorb the glut. On the investment side, this took the form of venture capital and dot.com initial public offerings at the end of the 1990’s; risky speculation inflated an enormous bubble of virtual value and unsecured debt. As we know, that ended badly. Since 2001, capital has sought to rally and sustain profitability. The collapse of 2007-2008 shows that it is not possible without speculative brinksmanship and courtship of hazard. That seems to me to still be the case.
2 – There is some debate amongst Marxists about the development of capitalism post WWII and the traditional understanding of the declining rate of profits versus financialisation and super-profit/under-consumptionist theories. Are these theories conflicting or can we reconcile the declining rate of profit with financialisation and monopolisation and concentration of wealth?
A. Post-war Marxists, both in the socialist countries and in the West, fell under the influence of Keynes, locating the principal contradiction of capitalism in the stagnant (or declining) purchasing power of the working class (underconsumptionism). This was a convenient and appealing explanation for crisis, but, unfortunately, it doesn’t fit the facts, misrepresents the accumulation process, and encourages a turn towards social democracy. Marxist economists were unjustifiably impressed with the “success” of pump-priming in stemming the seemingly unstoppable economic collapse of the Great Depression. While what came to be called “Keynesian” policy may have slowed, even stopped the bleeding, it didn’t heal the wound. But many Marxists reasoned — mistakenly — that if force-feeding consumption halted further collapse, then the crisis was caused by insufficient consumption.
Neither the Great Depression nor the current crisis were preceded by any consumption shock, an event, if it had occurred, that would have given some credence to an underconsumptionist explanation of crisis. On the other hand, the crises did cause a shock to consumption, a major factor in amplifying and extending the course of crisis. So the facts would seem to suggest that the underconsumptionists actually conflate cause with effect. The relatively long post-war period without a major systemic crisis (1945-1972) further seduced far too many Marxists into acknowledging the success of Keynesian policy prescriptions. By crediting the perceived stability of the capitalist system to the welfare state support of consumption, they concluded that failing consumption was the demonstrated explanation of capitalist crisis. The severe and lengthy decade of stagflation that followed should have cast some doubt on that too easy conclusion.
B. The 2007-2008 crash spawned a renewed and welcome interest in the tendency-of-the-falling-rate-of-profit explanation of systemic capitalist crisis. Outside of the Marxist mainstream, Henryk Grossman and Paul Mattick were often-isolated voices supporting this explanation which drew largely from Marx’s account in Volume III of Capital. While we owe them much for keeping this theory out of the dustbin, they developed it in a mechanical, formalistic way alien to Marx’s method.
And the new generation of advocates, largely academic Marxists, have unfortunately followed this road. They fail to understand that tendency laws — like the tendency of the falling rate of profit — are not logical demonstrations, but descriptions of social and economic forces that shape the course of a social structure’s (in this case, capitalism’s) trajectory.
The great value of the rate-of-profit explanation is that it locates the cause of crisis at the main spring of the capitalist production process: accumulation. It insists that the ultimate cause of malfunction must and will be found in the ultimate element that powers capitalism as an economic system: profit. In my view, a robust explanation of capitalist systemic crisis can only emerge by beginning with the crucial role of the rate of profit, the determinant that keeps the capitalist class in the reproduction game or, as the system stumbles, out of the game and on the side lines. I believe that a comprehensive contemporary explanation of the nature of capitalist crisis is yet to appear, though I have offered modest sketches in my writing.
C. “Financialization” is not an explanation of the crisis. Instead, it is too often merely a characterization (like its sibling, “globalization”), a handy descriptor of an aspect of the current crisis. No one would accept “atomization” as a worthy explanation of what happens in an atomic reaction. Nor should we accept “financialization” as more than a neologism useful in indicating that some kind of financial shenanigans played a role in the present crisis. My own view is that “speculation” and “risk-taking” better capture the financial dimensions of the ongoing crisis for those needy of a concise handle. When pressed to unpack financialization to reveal an explanatory theory, its advocates reference familiar developments: deregulation, the growth of financial institutions, their penetration of non-financial corporations, their development of new and and exotic schemes and instruments, etc.
But these developments, in most cases, have been unfolding since Lenin’s time. Moreover, there is no obvious link between these developments and the onset of economic crisis. That link is easily provided by declining profitability, however. One need look no further than Countrywide, Washington Mutual, Merrill Lynch, and Lehmann Brothers to see how speculation and risk-taking eviscerate profits and generate an economic retreat and panic.
Can there be a synthesis of three contestants for a Marxist theory of crisis? I think not. But there are aspects of each that should inform a Marxist theory of crisis. No adequate Marxist theory can fail to address financial innovation and the peculiar status of financial profit; it must pay particular attention to the amplifying effect of debt. And the one-sided class struggle plays an undeniably important role by generating hyper-exploitation, the consequent super-accumulation, and the resulting abundant capital in search of the elusive return. That said, the tendency for capitalism to generate downward pressure on the rate of return remains the centerpiece of any adequate theory of capitalist crisis.
3 – We hear much being made of a US recovery, but you describe it as ‘slug-like motion.What is the real state of the US economy today?
The US economy is in the doldrums. It lacks momentum to escape the doldrums, and it remains precariously afloat. It remains afloat because willingly or unwillingly the rest of the world accepts a part of its burden. The People’s Republic of China continues to purchase enormous quantities of US debt, along with Japan. It remains afloat because the rest of the world has yet to challenge the dollar as the global means of exchange, allowing it to weaken or strengthen according to the needs of the US economy. It remains afloat because the US sets the rules of trade, commerce, and exchange to its own benefit. That’s the reward for imperial domination. Domestically, the US economy is on the life support system that economists call “the wealth effect”.
That is, economic activity is founded on the subjective sense of well being fostered by stock market increases and increases in the value of homes. Both increases today have little or no connection to market realities. Of course, the wealth effect only applies to those owning homes and financial assets. The rest rely on stagnant wages and benefits and assuming debt (household income is at the same level as 1990). Capital continues to wring every drop of value from US workers. A comrade recently computed that the starting wage of an autoworker at a unionized (UAW) shop, adjusted for inflation, is commensurate with that of a Ford worker in 1914, a moment when Henry Ford “generously” raised the wages of the workers so that they could buy his Model T’s. Going forward, the prognosis is no better than continuing stagnation. A shock, possibly reverberating from the EU, Brazil, China, or Japan, could yet rock this shaky stability. Moreover, there are many signs that pre-collapse financial practices are again stretching the bounds of rationality.
4 – You have compared the period we are in to the 1930’s and have challenged the notion that the New Deal investment brought about a recovery pointing to the role WWII played instead. Do you see war is a policy tool being used today and what are you concerns about this?
William Z. Foster, a US Communist writing early in the Cold War period, developed the idea of military Keynesianism. The value of his work — minimized and neglected because of intellectual anti-Communism — was to expose the connection between militarism and government economic policy. For the US ruling class, the idea of “pump priming”, fiscal intervention through the public sector, was much more appealing if it were rendered through spending on open ended contracts with military corporations and armaments rather than spending on human welfare. The former gave government revenue to corporations, the latter some alms to the people. That same ruling class drew important lessons from the thirties and forties: the most complete recovery from the Great Depression was accomplished swiftly by Hitlerite German militarism. And the US economy only began to recover vitality with the military buildup leading to US entry into World War II.
After the fall of the Soviet Union, there was much talk of a “peace dividend” and a radical reduction of military spending in the US. It didn’t happen— a fact that surely demonstrates that militarism is inextricably embedded in US economic policy since there was no and could be no serious threat to US security in the immediate aftermath of the Cold War. Nonetheless, the lap dog media machine has been conjuring up new enemies in order to keep the US public from objecting to militarism. Interestingly, one can observe public opinion shift from skepticism to consent over the course of the constant monopoly media war campaigns. In part, the bizarre anti-Russian campaign, the demonizing of Putin, is only rational in the framework of an economic explanation of militarism.
The US expects to spend over a trillion dollars during the next three decades modernizing its nuclear weapons program. This can solely be justified to the public by inventing threats from a nuclear power. Nuclear weapons are not necessary against men in sandals with AK-47s, rocket-propelled grenades, and improvised explosive devices. But Russia has nuclear weapons. The liberal magazine, The Nation, recently documented the financial ties between retired military leaders and the armaments industry. The same ex-admirals and generals exposed in the article are omnipresent in the US media, posturing as experts on foreign policy while sounding the call for confrontation and aggression. They serve as the transmission belt of militarism to the public and the governing bodies. It is no mystery why we live under the constant threat of violence and war.
5 – How do you define the system globally? There is much talk of neo-liberalism and finance capitalism or financialised capitalism but how do you best understand it?
It is easy to fall into the trap of taking a snapshot of the global capitalist system and drawing hasty conclusions, of announcing a new stage, a new trend, a new era… Certainly that makes for a provocative, but quickly outdated, article or book or garners appearances on talk radio shows. Over the last several decades we’ve been treated to new intellectually fashionable buzz words such as “neo-liberalism”, “globalization” or “financialization”, portentous theories like the decline of the nation-state, and sheer nonsense like Hardt and Negri’s Empire. Fortunately, they, and their ilk, only distract; they seldom persist. Rather than take that tantalizing bait, I will note some important trends. The last three decades have been marked by significant changes in the international division of labor. A veritable revolution in logistics along with political changes in Eastern Europe and the PRC integrated new armies of workers into the global capitalist system.
Together, these developments ushered in a shift of manufacturing to far flung, low wage areas. Accompanying this shift has been the rise of finance, insurance, real estate and services in those countries experiencing a decline in manufacturing. This new division of labor fostered a dramatic growth in the global rate of profit, a level of profitability that has now run its course. Labor markets in previously low wage areas are now tightening while the crisis and unemployment have slammed workers’ compensation in the formerly high wage countries.
Global wage convergence is the ultimate, predictable outcome of labor market competition without restraint or protection. Those workers from formerly extreme low wage areas (PRC, India, Brazil, etc.) who have had a taste of a better life, now want more. Those workers who have been devastated in the vise of international competition and crisis-induced unemployment want to restore and improve their standard of living. Standing in the way of winning these demands is a still resilient, resourceful capitalist system; and frequently standing in the way of fighting for these demands are complacent institutions and leaders— union leaders, politicians, and political parties— that are ill-serving workers in the twenty-first century. Fanciful expressions and speculative theories only obscure the fact that the logic of capitalism and imperialism, capital’s international manifestation, still rule in the twenty-first century.
6 – Globally, the system is objectively in crisis on many fronts , yet in the ‘west’ its politically and cultural hegemony remains unchallenged in any serious way. Is it still a case of progress will likely come from the periphery within Imperialism?
Unquestionably, the struggle against imperialism, particularly in the Middle East and in Latin America, has occupied center stage and has posed more of a challenge to ruling elites than has the anti-capitalist struggles in the West. Even more disappointing is the absence in the West of a formidable anti-imperialist movement— an anti-war, anti-interventionist movement— in solidarity with Middle Eastern and Latin American anti-imperialism. This is not a particularly noble chapter in the history of the Western left. Any thoroughly objective assessment of capitalism today will reveal stark vulnerabilities. It will challenge the sustainability of the shaky global economy, question the viability of the corrupted, undemocratic political system, and abhor the vulgarity and nihilism of bourgeois culture.
Still, the goal of replacing capitalism with a profoundly more just and democratic system appears far off. Some have given up on the task, retreating to incrementalism or accommodation, believing unrealistically that we can gradually or surreptitiously undermine capitalism. Still others have visions of nineteenth century utopias, cooperative communities coexisting with monopoly capital. Free market theocracy has bred a generation disposed to worship the gods of individualism and spontaneity as instantiated on the left by anarchism. In short, left politics in the West churn in a cauldron of wildly idealistic and misguided ideology.
Of course this is frustrating, especially for students of history and the workers’ movement.
Disillusionment and confusion are not new to the socialist project. One-third of the Communist Manifesto is devoted to exposing the dead-end roads and far-fetched ideologies that Marx and Engels contested in their time.
Lenin scathingly recorded the dismal condition of the Russian left after the failed 1905 revolution. Should we be surprised, after the history-altering dismantling of European socialism nearly twenty-five years ago, that much of the Western left has yet to find its bearings?
And yet, as Lenin’s example shows so well, it is precisely when there is widespread political disarray that Marxism (and Leninism) are so desperately needed to bring clarity and unity to the anti-capitalism struggle.
I think we are in such a moment.