Showing posts with label economic crisis. Show all posts
Showing posts with label economic crisis. Show all posts

Saturday, February 23, 2013

A Few Notes on Austerity

There's no doubt that the global economic crisis has precipitated a wave of austerity measures across Europe and North America. As banking crises mutated into sovereign debt crises, austerity has been forced upon working people from California to Catalonia. In "peripheral" European economies, the continued existence of the welfare state---a virtually unchallenged feature of the political landscape for at least a generation---is by no means assured. That wasn't the case before the crisis.

In the United States, we have not faced austerity drives as severe as those faced by the Greek working class, but we are still witnessing historic, unprecedented attacks on basic social programs at the federal level, combined with deep cuts and anti-labor restructuring at the city and state levels.

This would make it easy to think that austerity is a relatively new development---an outgrowth of the crisis that began with the collapse of big banks in late 2007. That, however, would be a mistake, and it's worth reviewing why.

The politics of austerity dates all the way back to the origins of neoliberalism in the early 1970s.  David Harvey's account of this is process is as good as any. He argues that the post-war Keynesian consensus breaks down after stagflation and global recession set in by the early 70s. The fiscal and monetary policies that had prevailed a generation were no longer capable of restoring profitability to a world economy that was in protracted crisis. After a number of fits and starts, a strategy for restoring profits began to emerge.

This new strategy involved, first of all, breaking the power of organized labor in order to push labor costs down, reduce the number of strikes, and drastically speed up production on the shop floor. It also involved eliminating all barriers to the flow of capital across the globe---a move which opened up huge pools of the global industrial reserve army to corporations in core capitalist economies. The rest of the neoliberal package is well-known: deregulation, big tax cuts for business, drastic reductions in social spending, privatization, an emphasis on reducing inflation rather than aiming at full employment, and so forth. These policies weren't confined to specific countries, but were implemented on a global scale---from Deng's China to Thatcher's Britain to Pinochet's Chile. We could continue, but you get the point.

What this makes clear is that austerity has been a permanent feature of the neoliberal era. It has been ratcheted up ten-fold as a result of the crisis, but it is not a new development. The idea that austerity produces growth is a cornerstone of neoliberalism which, although new cracks in the edifice emerge every day, remains the default theory and practice of capitalist states across the globe.

The fact is that the working class all over the globe has, by and large, been enduring austerity for more than 40 years. It has by no means been a one-note symphony---it has varied in form and intensity in different times and places. But austerity is definitely the word we should use to describe the punishing "shock therapy" applied to Russia after the collapse of the USSR as well as to the brutal regimes of "structural adjustment" forced upon Africa, Latin America and elsewhere during the 80s and 90s. (I note, in passing, that Egypt, now the site of intense social struggles with global ramifications, was the first country in the world to undergo IMF-imposed structural adjustment). The same goes for developments in Europe and the US---think, for instance, of Clinton's decision to "end welfare as we know it".

This has important ramifications for understanding social struggles in the context of the current crisis. There have been a number of fights against austerity all over the world since the crisis began. But they have not yet been able to turn the tide. This is, to be sure, a frustrating fact that the left has to soberly assess, but it is less depressing when we keep in mind that we aren't simply organizing against a policy---austerity---that began with the financial meltdown in 2007/08. We are pushing up against a ruling class offensive that has dominated world economic and political affairs for more than four decades. During that time---especially during the "irrationally exuberant", triumphalist years of the 1990s---neoliberalism was, as Perry Anderson put it, on pace to become the most successful ideological/political movement in the history of the planet---more so than any of the major world religions. To expect, as many leftists did, that all of that momentum could be shattered by a few flare-ups of militant class struggle was unreasonable, to say the least.  

This should not be cause for pessimism. Sure, it's true that the left is not on the offensive and it's undeniable that the working class is taking it on the chin all over the globe. But that has been an enduring feature of the whole neoliberal period. What's different about where are today is that the neoliberal configuration is experiencing a deep, protracted internal crisis. This crisis is both structural as well as ideological. Structurally, there is not yet a clear path out of the stagnation and anemic growth brought on by the Great Recession. Overproduction on a world scale and sovereign debt crises in Europe remain unresolved, although temporary solutions have been found. Ideologically, neoliberalism is no longer the ascendant, up-up-and-away set of ideas it was in the mid 1990s. By now, an entire generation has lost confidence in the absurd technophilic triumphalism that underpinned the internet boom of the late 90s. Growing numbers of people see that the notion of the "free market" has always been a facade for the socialization of costs and the privatization of profits. Young people today in the United States say that they look more favorably on "socialism" (49%, according to a recent Pew Poll) than "capitalism" (46%). In 2012, the number one, most highly-searched word on Miriam Webster's website was "socialism". It is by no means unambiguous what these figures mean---or what the participants understand the word "socialism" to mean---but they do show, at the very least, that growing numbers of people are interested in systemic alternatives to what they see around them. We can imagine their reasoning going something like this: if capitalism means war, ecological disaster, insecurity and economic crisis, then it's opposite---socialism---can't be all bad. It stands to reason that the politics of socialism-from-below will continue to be best placed to appeal to young, newly radicalizing people who are unlikely to be inspired by the grey bureaucratic domination of Stalinism and its progeny.

In the United States, we've seen no shortage of resistance---think of Wisconsin, Occupy, the wave of protests against the murder of Trayvon Martin, the successful teachers' strike in Chicago, and so forth. The last four decades have left the labor movement and the left in shambles. Many have no direct memory of what mass movements look like. It is inevitable, therefore, that the first flashpoints in the growing resistance to neoliberalism will be works in progress. A collective learning process will have to occur within the working class whereby it re-gains, by means of these struggles, some of the confidence and militancy that has been shattered by a 40 year class war from above.

This won't happen overnight. But there is more space to build this fight now than there has been in a generation. What looked unassailable 10 years ago is now vulnerable and open to a challenge from below. The future is uncertain, but the potential to re-bulid the left is greater today than it has been since the demise of the movements of the 60s. We should be sober about what has happened since the crisis broke in late '07. But we should not lose sight of the fact that there is an opening today that did not exist for decades. We have to keep that in mind when soberly assessing recent defeats and setbacks in the class struggle.

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Friday, August 5, 2011

It's impossible to deny the obvious...

"...which is that we are not now and have never been on the road to recovery." That's what Krugman is saying in his most recent Op/Ed.

Now, he's certainly right that "we are not now and have never been on the road to recovery." That's true. But is it impossible to deny this obvious fact? Of course not. Obama and the Democrats will continue to do it right up until election day in 2012. And large portions of the liberal left will be prodded into plugging fallacious narratives about "green shoots" and "recovery" and the like in order to advertise Obama's "accomplishments" during the campaign.

Readers of Krugman's column will by now have noticed a couple of frustrating trends. First of all, the guy repeats himself quite a lot. Part of that's not his fault. The economy really does suck, Washington really is worsening the crisis by holding tightly to neoliberal orthodoxy, austerity really is awful, etc. He's right that Washington cares about all the wrong things. That's not changing, so neither should critical commentary. I can't blame him for being repetitious in this sense.

But there are other repetitious features of Krugman's work that are less excusable. His perpetual surprise at the "excessive compromise" and "betrayals" of the Democrats (and Obama in particular) lacks rational grounding. Didn't Einstein say something about doing the same thing over and over and expecting different results... The fact is that Krugman, while his solidly liberal critique of existing policy is commendable, has nothing to say about how we can get out of this mess. He doesn't appear to have any views about how social change happens. He doesn't have a critical analysis of the electoral mechanism in our society and how it forecloses the possibility of real change. He doesn't have any perspectives on the role of social movements. Although his work sometimes shows brief glimpses of an analysis of class power, he doesn't follow through on these questions enough to understand why it is that the Democrats are flipping the bird at liberals. For the most part, he just seems perplexed that the Democrats aren't listening to his good ideas.

But the problem isn't that Obama and the Democrats are simply ensnared by "bad ideas". Neither is the problem that they are "cowards" or poor bargaining strategists. The certainly aren't cowardly when it comes to ridiculing and chastising the Left. They certainly weren't timid when it came to saying at onset of the health care "debates" that single-payer was absolutely off the table.

In order to understand the Demcorats' political trajectory as a party, one needs both a historical analysis of role of the Democrats have played at different points in time, as well as an analysis of the role that corporate-backed political parties play in a capitalist system. We get neither from Krugman.

For an excellent historical analysis of the role the Democrats have played, their relation to left-wing social movements, and so on, I highly recommend Robert Brenner's New Left Review article "Structure or Conjuncture?". Lee Sustar's The Democrats: A Critical History is also worth noting. But any critical study of a progressive social movement in relation to the DP will suffice, because the pattern is always the same. The Democrats (or Republicans, as the case may be, historically speaking), pressured by unrest and militancy from below, enact policies meant to quell social unrest and co-opt militant forces into the "official" political realm. The following co-optation typically leads to the terminal decline and passification of the movement in question and, with it, the hopes for deepening the process of reform. It's for this reason that many on the Left refer to the Democratic Party as the "graveyard of social movements".

For an excellent analysis of the role of the state in capitalist society, there are several sources of good, quick information. The basic point is this: regardless of which party is in power, the state is structurally dependent on the capitalist class. What that means is that the state relies upon capitalists to invest, employ people, grow the economy, produce necessary goods, and, importantly, to accumulate profits which can then be taxed to fund the state's activities. When the capitalist class isn't accumulating profits, they don't invest, jobs are lost, tax revenues plummet, and a political and economic crisis ensues. For this reason, state officials are compelled to do what they can to make sure the capitalist class is happy. Making the ruling class happy means creating a "good business climate", or putting in place "pro growth" policies aimed at creating the conditions for the maximal accumulation of profits. Call this the imperative of accumulation. Left to it's own devices, the system tends to encourage state officials to fulfill this function to the detriment of other functions (e.g. looking after the well-being of citizens).

But, as history makes clear, sometimes the imperative of accumulation comes into conflict with what we might call the imperative of legitimation. No society can reproduce itself over time unless it manages to convince a large portion of its citizens that it is legitimate. But when the imperatives of accumulation compel governments to, say, slash social spending and bail out banks, this creates legitimation problems. A contradiction between accumulation and legitimation arises. Governments will attempt to solve this in any number of ways. The main strategies we've seen thus far as "budget cut fatalism" and "deficit fear mongering". Both of these arguments aim to convince citizens, against their better judgment, that the policies meant to re-establish the accumulation process are, in fact, legitimate (in the interests of society as a whole).

Notice that I haven't even mentioned the problems raised by the colonization of state officials by big business. That is a serious problem, and, of course, public financing of elections would be a small step toward reducing the efficacy of some of the more common ways that politicians are bought off. But the problems go deeper than campaign financing and lobbying. There are fundamental problems here that have to do with the ways in which large amounts of social/economic power are concentrated in the hands of a small class that has a monopoly on the control and ownership of the means of production. A truly democratic society wouldn't be one in which democratic bodies were subordinated to a powerful economic class that owns the basic structure of society. Nor would a truly democratic society be one in which citizens are subordinated to the inhuman systemic imperatives of accumulation for accumulation's sake. A genuinely democratic society -that is, a socialist society- would be one in which the basic structure of society was under the democratic control of citizens. It would be one in which the operations of the economic system were subordinated to the needs of human beings, rather than the other way around.

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Sunday, July 24, 2011

Rick Wolff: Ongoing Crisis and Liberal Blindness

The double dip of this crisis is upon us. The latest data agree: the housing market has been in full double-dip mode for five months as home prices keep declining. The foreclosure disaster keeps increasing the combination of homeless families and empty homes. Think capitalist efficiency. Unemployment rose back above 9% again. The average length of unemployment is now 39.7 weeks, the longest since these records began in 1948. Investments by businesses are decelerating and governments keep dropping workers...

...The so-called "recovery" benefited US banks, larger corporations, and the stock market. It bypassed everyone else and is now over. Still wondering what hit them, victims of the crisis -- the mass of working people -- now face paying for that recovery. "Their" government borrowed massively to bail out the corporations. That boosted the national debt. And that now "requires" cutting government spending by "absolutely necessary" reductions in government jobs, services, social security, Medicaid and Medicare. What money the government saves by cutting public services it can then turn over to the corporations, the rich, and the foreign governments (led by China) who lent it the funds to produce that short-lived recovery (for them).
Read the rest here.

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Thursday, July 21, 2011

How to Argue Against Austerity

Austerity refers to policies that lower the living standards of working people by cutting public services. In the US, as with elsewhere, this involves busting public sector unions, closing schools and libraries, laying off public employees, cutting public health care programs, reducing public transit, allowing infrastructure to crumble, cutting unemployment benefits, and so on. The two most common arguments for austerity are what we might call the "inevitability argument" and the "moral argument".

I've criticized the inevitability argument elsewhere, under the heading of "budget cut fatalism". The "moral" argument, incisively skewered many times over by Richard Seymour, typically depends on an analogy between government finances and household finances, concluding that because "we" have over-indulged and "lived beyond our means", "we" must now accept "our" just punishment in the form of austerity. Seymour correctly observes that this ideology is tantamount to "the petit-bourgeois manner of thinking, universalised – the nation imagined as a corner shop that has to balance its books and keep an eye out for thieves."

The point of this post is to offer some suggestions about how the Left might quickly and effectively defuse these damaging ideologies. Of course, argumentative strategy is not all the Left needs: there is no substitute for patient, diligent organizing, agitating and so forth. But here goes.

  1. Any suggestion that austerity is the deserved punishment for "bad government" or "profligate spending" should be met by a swift, matter-of-fact explanation of why public budgets are in the tank: (a) because the global economic recession, itself caused by the internal contradictions of capitalism and reckless investing, has caused tax revenues to drop sharply; (b) because bailouts, in effect, converted enormous amounts of private debt into public debt. Toxic assets were transferred from private to public rolls. The losses were socialized, the profits were privatized. Succinctly put: bankers caused the crisis, and the crisis has devastated public finances. Of course, it doesn't help that Washington continues to spend vast sums on two, as yet unpaid-for, imperial ventures. But the crisis is the most immediate source of public financial difficulties.
  2. Here's a reductio ad absurdum of the "profligate spending" narrative. The narrative says that "excessive public spending" is the sufficient cause of the budget crises faced by federal, state and municipal governments. That means that the only thing that can explain the sudden emergence of public budget crises is the amount of public spending that a government is involved in. But if that were true, then we should be able to look back and detect some drastic uptick in the amount of public spending around the time public budgets tanked around 2007-2008. Moreover, since the public budget crisis has manifested itself at the municipal and state levels, there would have had to have been a coordinated, nation-wide movement (involving hundreds of municipal, county and state governments far and wide) that suddenly increased spending all at the same time. Of course, I don't need to tell you that none of this happened. Public budgets were more or less fine (setting aside other internal problems owing to regressive taxation and so on) until the global economic crisis sent them into a downward spiral. The bottom line is this: The main reason that public budgets (from city to federal levels) are in very bad shape is because tax revenues have fallen off a cliff due to the economic crisis (in fact, they've reached 60-year lows). It is flatly absurd to claim that "profligate spending" is the sufficient cause.
  3. Now, even though we've dispensed with the moralized, masochistic pro-austerity ideologies, there is still the claim that austerity, though regrettable, is inevitable. If "we're broke", the story goes, "tough choices will have to be made." Two points must be made here. First, "we" aren't broke. The US is the richest society in the world, and the ruling class managed to make record-breaking profits last quarter. That means the richest upper echelons of the ruling class made more money in one quarter than ever in US history. "We're broke" my ass. The working majority may be broke, but the ruling class sure isn't. They're pulling in record-breaking profits at a time when the gap between rich and poor is reaching record levels as well. The money is there- we have only to modestly increase our obscenely low marginal income tax rates, reinstate the estate tax and close corporate loopholes in order to bring all public budgets out of the red. Hell, with the amount of surplus wealth lying about in ruling class bank accounts we could even expand such programs drastically (e.g. imagine re-vamped and greatly expanded public transit, a genuine single-payer health plan, lower tuition for public universities, a nation-wide rail network, etc. etc.) Such measures would obviously be unpopular with the ruling class, but that is to be expected. Second, the amount of money spent on foreign military interventions proves, beyond the shadow of a doubt, that the funds exist to cover budget shortfalls at home. It's obvious that the money spent blowing things up in the Middle East could just as well be spent building things (like bridges, roads, hospitals, schools, libraries, etc.) right here in the US. Moreover, the amount of subsidies and spending allocated to the ruling class in the form of "corporate welfare" also prove that the funds already exist, even under the current regime of taxation, to cover the things that matter. Succinctly put: we live in a society with vast sums of wealth concentrated at the top, which could easily be tapped to ameliorate the suffering brought about by unemployment and budget cuts. And, re: the imperialist military machine, if our government can find money to kill people, why can't that money be spent helping people instead?
  4. Now, some will still claim that austerity is "unavoidable" since the following suggestions, attractive though they may be, are "unrealistic" or "politically infeasible". To be sure, looked at through the narrow lens of our electoral mechanism, it is true that the above suggestions are "politically unrealistic". The Democrats have made absolutely clear that they stand firmly behind austerity, as do the Republicans. So it's true that it is completely unrealistic to expect that the Democratic Party will consider taxing the rich and ending the wars to fund the things that matter. But is that our only option? Of course not. The cul de sac of electoralist lesser-evilism only means that resistance, in order to be "realistic", must take shape outside the proper channels. It must take the form of grassroots, independent social movements which are prepared to take a confrontational, oppositional political stance vis-a-vis the traditional corporate parties and their candidates. That doesn't mean talking tough while, at the end of the day, committing to throwing in with whomever the Democrats put up for election. It means actually organizing with broader goals in mind, e.g. defending social security and medicare from attack, fighting for expanded (rather than reduced) public transportation, fighting local budget cuts of all kinds, defending teachers from savage scapegoating attacks, fighting against the privatization of public assets, etc. Moreover, these fights should be waged with the assumption that Democratic representatives will tend to contain and minimize, rather than ignite and encourage such independent struggles. This isn't some new idea: the fact that we have collective bargaining rights and the Civil Rights Act are testaments not to the progressive character of the Democrats, but to the power of independent Left social movements that had more ambitious goals than electing a Democrat to office. People power, from Greece to Spain to Egypt to Tunisia, is anything but a utopian phrase. It is the watch word of those on the frontlines of the struggle against austerity. The explosion of mass protest in Wisconsin was only the beginning. The Left needs to invest all of its energy in building ground-up struggles like Madison all over the country. Without such struggles, there will be no progress.
  5. It's also crucial that we emphasize the following. Austerity is not new. It used to be called "Structural Adjustment" when it was imposed from above by the IMF on populations in the global South who fiercely resisted it. It's the same thing today, except that its the "advanced" capitalist countries in the US and Europe that are undergoing "Structural Adjustment" this time around.
  6. Austerity is, at rock bottom, a matter of the ruling class forcing the working majority to pay the bill for a crisis it didn't cause. It is an externalization of culpability, a socialization of massive private losses. The state in capitalist societies, no matter what representative government is at the helm, fulfills the basic function of securing the conditions for the accumulation of profits. This falls under the heading of securing "economic growth" or "a good business climate". Any government, within the framework of capitalism, which fails to do this risks economic stagnation, a capital strike, or, in some cases, violent reaction. To say this is just to say that in capitalist societies the state is structurally dependent on capital. Right now, austerity is the policy adopted by ruling classes the world over to try to restore profitability to the system. It is both a hail-mary pass by the ruling class to insulate its assets in the short term, and a long-term strategy pedaled by neoliberal ideologues who are still convinced, despite all contrary evidence, that economic health is brought about through slashing regulations, public spending and cutting taxes. As such, it is a policy meant to serve narrow class interests. But, as always, the ruling class is obliged to legitimate such policies by speaking the language of universality and shared interests. In public spaces it will seek support for the policy by claiming that it is the best policy for the vast majority. We shouldn't be surprised that this gap between rhetoric and reality is so wide.

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Friday, May 13, 2011

The Non-Recovering Recovery

THE STRUT of confidence is gone, and the jitters are back. A flurry of dreadful statistics at the end of April made sure of that.

On April 26 came the news that the British economy grew a mere 0.5 percent in the first quarter of 2011. Coming on the heels of a contraction by that amount in the previous quarter, one commentator was prompted to declare that "the UK is teetering on the brink of a doubledip recession."[1]

Forty-eight hours later, the Commerce Department revealed that the U.S. economy had slowed to a crawl, recording a meager 1.8 percent growth rate in the first quarter, down from over 3 percent at the close of 2010. A day later, word arrived that the Canadian economy had shrunk in February, and that the official rate of unemployment in Spain had jumped to 21.3 percent--and the youth jobless rate to a staggering 40 percent.

Read the rest here.

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Sunday, March 27, 2011

Democrats Push Austerity in New York

Democrat Governor Andrew Cuomo has "struck a tentative deal" in New York that includes big tax breaks for the rich and deep cuts to health care and education:

The deal would end a temporary income tax surcharge on high-income New Yorkers, which some have called the "millionaire's tax" even though it affects incomes starting at $200,000 annually.

Mr. Cuomo’s aggressive and strategic approach to negotiations appeared to have yielded significant victories, including a year-to-year cut of more than $2 billion in spending on health care and education, the two largest drivers of New York’s ever-growing budget.
Predictably, the NYTimes paints this as a prudent move and speaks of "bloated" health care programs. This is treasonous as far as I'm concerned- to say that our already inadequate public health care and education institutions are bloated is horrifically misguided. If anything is bloated- it is the massive, record-breaking profits raked in last quarter on Wall Street amidst widespread social misery, unemployment, and, as above, steep drops in working class living standards. Chopping from the top is a perfectly fair and efficient approach to balancing budgets that were sunk by those at the top. There's nothing risky about it- it's rather simple actually. Thus we must ask: why is it that Democrats staunchly refuse to pursue such a course of action? Why are they dead set on forcing the majority of the population -who had no hand in the causation of the economic crisis- to clean up the mess caused by Wall Street? Any honest answer would have to include the fact that the Democrats are not a progressive political force. When push comes to shove, they side with their own- the ruling class. So while Democrats are busy breaking their arms patting themselves on the back for not being as extreme as Scott Walker, the rest of the country would do well to recognize that they are still pursuing a program of austerity for working people. They don't bite the hand that feeds them- when it comes down to it they'll pass the tax breaks for the rich before they preserve the schools of the poor.

As I keep pointing out, the proper way to assess the Democrats is to ask where we'd like to go and whether the Democrats are a good means of getting there. Crudely put, what the majority of us want is simple: to end the wars, to tax the rich, and to fully fund health care and education. Are the Democrats a plausible vehicle for attaining such goals? Well, they passed a health care "reform" bill written by insurance industry lobbyists when they had supermajorities in the Senate, so that's a clear "no" on the health care front. And, as we know, Obama gladly inherited two wars, sharply escalated in Afghanistan, and has now intervened militarily in Libya. Moreover, the Democrats pushed through a continuation of the Bush tax cuts and have been steadily chipping away at education and health care at the same time. Obama's "race to the top" education policy is a more aggressively conservative program than "No Child Left Behind". At the very least, liberals have to concede that the Democrats are a rather poor vehicle indeed. I would say that instead of an actual vehicle the Democrats are more like a virtual reality ride at a carnival (you know, the ones with screens inside that make you feel like you're flying but in fact take you nowhere at all). The sooner that progressives dump the aptly-described "graveyard of social movements" that is the Democratic Party, the better. What we need are independent left-wing organizations, with political clarity, that are rooted in workplaces, campuses and neighborhoods, which are organized and ready to fight for social justice.

Instead of buying into the "de-escalate and let us handle everything" message of the Democrats, what we need is precisely the opposite. We need to reject the idea that the Democrats are the legitimate leaders of Left movements and we need to embolden the burgeoning progressive fight-back that is growing out of this crisis. Wisconsin was inspiring because of the explosion of ambitious political energy that grew out of the big protests and demonstrations. It has ceased to be as inspiring of late because the Democrats opportunistically jumped on board, extinguished it, and transformed it into an electoral gain for them the next election cycle. This is instructive for the Left. If I were in an organization that dogmatically latches itself to the Democrats no matter what (e.g. like Democratic Socialists of America, Progressive Democrats of America, and others) I would be doing some serious soul-searching right now.

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Wednesday, January 19, 2011

Robert Pollin: "Back to Full Employment"

Read his generally excellent Boston Review article here.

This is a much-needed corrective to the consensus among Democrats and Republicans regarding the "need" for austerity and tax gifts for the rich. Pollin also does nice job of ridiculing the heinously flawed neoclassical analysis of employment (e.g. the neoclassical view that "it is a fundamental posit of our theory that all unemployment is necessarily voluntary").

But there are problems. He rightly notes that the obstacles to full-employment aren't merely technical or economic, but political. That is, he rightly says that the class compromise needed to make Keynesian social-democracy work is politically unstable, because capital eventually gets upset and breaks the pact as the political and economic confidence of workers increases.

For me, this is the single most important objection to social democratic politics. Yet, having made this important point, Pollin strays from it and suggests elsewhere that "healthy profits can be made" under such an arrangement. There is a question of how to read this claim: is he merely making certain kinds of moves to try to win over those who aren't yet ready for the claim that capitalism as such is the problem?

He is also a bit naive about Sweden I think. He basically gets things right, but underestimates the role of capital in thwarting the class compromise and he misses a more general point. That point is this: an inherently unstable system that only functions when capital is happy with it's rate of profit is a recipe for disaster. Even if capital continues to play nice for a while and maintain the class compromise, there are other sources of instability that threaten to upset capital. Inflation is only one example. To be sure, Pollin does point to the global political pressure on Sweden to adopt a neoliberal model, but the fact that such a move looked reasonable to Swedish policy makers speaks to an unjust configuration of class power on the one hand, and the contradictions of premising all economic well-being on decent profits for capital on the other. In other words, Pollin appears to have an unduly sanguine picture of what's possible within the confines of the capitalist state on the one hand, and doesn't take seriously enough the internal contradictions of capitalism as a system on the other.

Still, this is the kind of debate I'm happy to see in public as compared with what we usually have to stomach (e.g. Democrats asking each other "how much should we screw workers and cut services?"). We should be having more debates like this: between Keynesian left-liberals and more radical critics of capitalism. So it is more than a little frustrating that the "forum" put together by Boston Review to discuss Pollin's argument appears to have no serious Left critics at all. Though Pollin spends time discussing Marx and the left-wing arguments against achieving full-employment under capitalism, it doesn't appear that any of the participants in the forum will be defending such a position. This is a shame.

The Right response to the Pollin piece is nauseating and not even worth responding to. Reihan Salam's response is typical neo-classical garbage. He begins by acting skeptical about the idea "neoliberalism" suggesting that it is not a real historical phenomenon but a bit of a left-wing boogey-man. He is so far off-base in understanding how the world works, it's hardly worth reading what he thinks should be done to fix it. His argument seems to be that we need to "remove barriers" so that workers will get up off their "lazy" butts and go get a job. I don't really know what to say to that. Where does one begin? I sort of just want to ask Salam if he's ever heard of this place called "earth". Seriously, how many times over does this tripe have to be refuted and discredited before we stop wasting our time. To put it in a slightly klunky Marxist way, the only reason it still gets a hearing is because of its functional utility in maintaining unequal relations of power.

Thus, the best way to make sense of the neoclassical stuff is not to take it as a set of serious arguments, because in many ways that's not what it is. The best way to make sense of it is to understand it as an ideology, in the Marxist sense. There are numerous dimensions in which such an approach is fruitful: from remarks in the Grundrisse regarding ideological types of abstraction, to arguments to the effect that neoclassical economics merely expresses the point of view of the capitalist, i.e. that neoclassical economics is merely a commentary on a capitalist firm's financial accounting practices. Allowing the neoclassical view to assert itself as a "reasonable" participant in the debate is a bit like tolerating "intelligent designers" in scientific discussions.

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Sunday, January 2, 2011

Rick Wolff: Calling Time on Capitalism

Excerpt:

Like someone convicted of murdering his parents who demands leniency as an orphan, corporate America demands conservative government and austerity on the grounds of excessive budget deficits. Mainstream media and politicians take those corporate demands seriously, reminding us who controls whom.
Read the rest here.

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Saturday, December 18, 2010

David Harvey on the Crisis

In the not so distant past I was fortunate enough to see David Harvey give a talk on the global economic crisis. What follows is a summary of some of the key points he made.

Mainstream analysis of the crisis is totally inadequate on at least two fronts. First, it has no historical depth. It hardly even bothers to connect recent events with things that went on in the 1990s, let alone the 40-year global economic trend known as neoliberalism.

Second, there is no sensitivity to the geographical dimensions of the crisis. It's important to see where the crisis has been concentrated and where it has been felt most acutely. Globally, skyrocketing unemployment is most acute in the US. Compare this to China and Argentina, both of whose economies are still growing steadily. Though China has been growing, however, there are many signs of overproduction there. There's a question about whether the crisis will hit there next.

The center of the crisis has to do with the banking systems that were plugged into collateralized debt obligations in the US. Banking systems that were insulated from that dirty business have largely been able to weather the storm so far.

Importantly, capitalism doesn't solve it's crises, it moves them around geographically. For example, consider the East Asian Financial crisis in the late 90s. Loads of profits went to those who speculated on it- but the crisis, at the end of the day, was not solved. It was moved around geographically.

In Vol. 2 of Capital, Marx talks about the flow of capital in a "healthy" capitalist system. In his view, a "healthy" capitalist system is one which is growing via the exploitation of labor. Any blockage of capital flow, he notes, can cause crisis. Capitalism must, in order to function, constantly expand. If you're a capitalist, for example, you must reinvest constantly in order to remain a capitalist (i.e. in order to compete and stay afloat in the market).

When capitalism cannot expand it goes into crisis. This creates a deep problem for the system. As more and more capital is accumulated, more and more profitable investments need to be found to absorb all of this surplus. When there are not enough profitable investments to absorb this surplus, the system goes into crisis because the flow of capital, the expansion and growth necessary for capitalism, have ground to a halt.

It doesn't take a lot of reflection to see that this process cannot continue ad infinitum.

But the system isn't rational: it isn't self-aware and it does not "learn" from its mistakes or reconfigure itself to be sustainable. It is like a car driving towards a cliff with no one at the wheel. Thus, the pressures to expand and accumulate that drive investment and production create increasingly irrational processes. The huge turnover in consumer products created by "planned obsolescence" has been steadily increasing over the last 30 years- this is a desperate way to try to prop up profits (because if you sell someone a blender that lasts for 50 years, they won't need to buy another one for a long time).

Another "bellwether" here is Olympics opening ceremonies (probably the same is true of Super Bowl halftime shows). They get progressively more and more costly, spectacular over time. There is a push to make the NFL season longer and longer and it is well known that the Super Bowl itself is being pushed back further and further to allow even more TV build-up and ad dollars to accumulate.

Looking at the crisis in broad historical context requires, first of all, that we say something about the crisis of the 1970s. This seems to have dropped out of the popular discussion of economics and finance entirely, but it's important to compare and contrast our present situation with that of the early 70s.

The view from the top holds that the crisis of the 1970s was caused by the "excessive" power of organized labor. Labor was too powerful and was able to bargain too effectively. In other words, labor's power was getting in the way of profitability insofar as trade unions were able to win decent contracts with relatively high wages, good benefits, pensions, and all the rest of it. The power of labor and social movements meant that nation states were, relatively speaking, under pressure from below to meet some degree of human needs. Moreover, the relative power of the nation state in the global system meant that it was not easy to move capital around globally.

The big problem for the ruling classes in this situation was that they were being taxed too heavily and made to negotiate with labor on terms that were far too close (for the taste of the ruling class) to equality. Mind you it was not anything like "dual power" between labor and capital- but even this modestly equitable arrangement was not to the liking of capital once a global recession set in and profits were down across the board. Something had to give.

One strategy was to loosen up immigration. This was passed in the US in the 60s in order to try to undercut the bargaining power of organized labor thus driving down wages. It didn't work. Thus the ruling class pushed for the "liberation" of the financial institutions so that they could more easily move capital all over the globe. This enabled off-shoring and outsourcing so that capital could get access to the global "reserve army" of labor. This enabled it to avoid dealing with the social power of labor in the advanced capitalist nations.

But ruling class praxis was not entirely indirect. The late 70s and early 80s were a time of intense attack from above on the power of labor. Thatcher and Reagan were elected to break the back of labor and they largely succeeded in doing so.

All of the above factors lead to a stagnation of the living standards for working people, which had been steadily on the rise during the period from 1945-1973. The gap between what labor was earning and what it could purchase (because prices continued to rise) began to be covered by credit cards and other forms of debt from the early 80s onward.

It was true, from a ruling class perspective, that the power of labor was "too strong" in the early 70s in order to keep profits rolling in. But nobody could really say that labor is the problem this time around. In fact, labor has been so thoroughly beaten back by the last 40 years of neoliberalism, it would be laughable to try to blame this crisis on the excessive power of labor. As everyone seems vaguely aware, the present crisis was caused entirely by the reckless speculation of financial elites.

What is the story with the bailouts? Bailouts are not a new concept. When, for example, Mexico was threatening to declare bankruptcy, this scared the shit out of New York financial institutions. They were scared because if Mexico really did go bankrupt, they would have been fucked because of all the money they had tied up there in investments. Thus, the ruling class pushed for the US to bail out Mexico. They pushed for the bailout so that they didn't lose out on their investments.

Let's be clear: the bailout wasn't administered for the protection of the well-being of the Mexican people. On the contrary, it was purely a move aimed at protecting the investments of New York financial institutions. Thus, the bailout came with conditions: it would be administered only if the Mexican government promised to implement punishing austerity measures, so that the investors can make their $ back as quickly as possible.

This happened in various different ways, all over the globe. The process came to be known as "structural adjustment". The IMF would give massive loans to cash-strapped developing countries on the condition that they consent to structural adjustment (i.e. austerity).

That is more or less what the US is undergoing right now. We are undergoing structural adjustment. The ruling class is using the power of the state to create a "good business climate", i.e. a situation in which corporate taxes are low, toxic assets are moved from private to public rolls, interest rates are near zero, labor is docile, etc.

Why is this happening? Because this whole rotten system only works when it is making handsome profits for capitalist investors. It only works when capitalism is growing and expanding. And given that it is clear that the State is not an enemy, but an enabler of profit accumulation, we shouldn't be surprised that everything the State is doing right now has to do with attempting to jump start the process of profit accumulation again. If that means punishing ordinary people, cutting living standards, wages, and jobs for the masses.... so be it. The State isn't set up to meet human needs- it's basic function is to create the conditions for profit accumulation, what the bourgeois press calls "growth". So when the contradictions are laying out in the open for all to see- we shouldn't in the first instance find fault with the State itself, but with the whole rotten system of which the state is but one element.


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Tuesday, November 2, 2010

Is Keynes the Answer to Crises?

Is Keynes the answer? Read John Molyneux's answer here.

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Monday, October 11, 2010

Socialist approaches to the recession

Infrastructure is crumbling all over the country, states are slashing education budgets, public workers are being scapegoated, forced into accepting pay cuts, or being laid off. Working people, all across the board, are being forced to shoulder the consequences of a crisis that they had no hand in creating. Unemployment is very high across the board and show no signs of improving in the immediate future.

Yet, in the midst of the worst crisis since the Great Depression, ours is still an extremely rich society. Our society has the surplus capital and resources necessary to wipe out all of the unmet human needs, gaping holes in municipal and state budgets, etc. Yet the economy is discussed as if it were bad weather, that is, something we could not actively change or alter, which we can merely plan to shield ourselves from (if we're lucky enough to have shelter) when the time comes. Yet the economy is nothing other than a massive accumulation of human actions over time, in the form of coordinated actions, institutions, laws, etc. But how can something created by human beings be so completely out of our control? What's to explain the irrational warpath of capitalist recessions and crises?

Within a Marxist framework, the root problem here is this: capitalism is inherently crisis prone, and during periods of recession massive gluts of capital are hoarded by capitalists since there are no profitable places to invest it. Marxists call this the problem of over-production or over-accumulation.

Why are there so few profitable places to invest in recessions? Part of it has to do with long term problems of capitalism, which we can set to one side here. But at least one reason why profitable investments are not forthcoming now is that effective demand is lacking. In short: because so many people are being laid off, evicted, foreclosed upon, forced to accept furloughs and pay cuts, a large percentage of the population is not in a position to consume in such a way that the commodities capitalist firms sell can be purchased. Most people are short on cash to spend right now, and are cutting back on their level of consumption accordingly. Think of the massive glut of houses and condominiums on the market right now with no potential buyer in sight.

Worse still, if the set of profitable investments is drying up because effective demand is shrinking, many capitalist firms are likely to downsize and operate well below capacity, which, in turn, leads to a further erosion of effective demand. It's not difficult to see that these are mutually reinforcing problems.

It is a peculiar thing about capitalism that it makes it appear rational for individual capitalists to fire workers right now. From their own narrow short-term perspective, it is indeed rational for capitalists to slash the rolls, and cut wages and jobs, although it is completely irrational for all capitalists to do this at a system-wide level all at once. That is, the cumulative result of their individually "rational" decisions to cut jobs cause society's unemployment level to rise considerably, and, hence, effective demand is further eviscerated. And, as we've seen above, further eviscerating working people's living standards means further reinforcing this whole sorry state of affairs in which capitalists find it "rational" to layoff more workers. So, even from their own narrow, exploitative perspective, what's going on right now is eroding the conditions for capitalists to be in a position to reap profits in the future.

If this irrationality isn't a reason to reject capitalism, I don't know what is. Why is it that the functioning of our entire economy is conditional upon a small class of investors making handsome profits for themselves? Why are all of us (and all of our jobs, social institutions, etc.) held hostage by this small class?

Take a step back and think about the big picture here. We have massive amounts of capital on the one hand, and massive amounts of willing human labor on the other. What good reason could be given to keep them separated apart from one another amidst a world of human need? And who is keeping them separated?

The answer to that last question is easy: capitalists. In a capitalist economy, capitalists determine where and whether to invest capital, and whether to employ labor.

So why aren't capitalists employing labor and investing capital in order to meet the massive amount of unmet human needs created by this crisis? Their answer to this question is also easily deduced: capitalists won't combine their capital with labor unless it means they can earn a rate of profit cushy enough to meet their requirements. We forget at our own peril that there is only one thing that motivates capitalists to invest: profit.

For these rational misers, the extent of social misery, poverty, want, suffering, etc. visited upon large swaths of the population just doesn't matter, unless, that is, it negatively impacts their profit rates. If using our society's productive capacity to end misery and suffering is not profitable for the small class of people who own and control our economy, it simply doesn't get done. If changing the conditions people in impoverished ghettos isn't a profitable activity, it doesn't happen. If medically insuring chronically ill people isn't profitable, which it isn't, capitalists won't insure it.

If you find this repulsive, you're not alone. The socialist intuition here is that this system represents an irrational, unjust and therefore indefensible state of affairs.

Everyone, even sober apologists for capitalism, will agree that poverty, vast inequality and want are not objectively necessary in a society as technologically advanced and productive as ours (though suffering, poverty, and vast inequality may have been objectively unavoidable in, say, the Bronze Age). The socialist thought is that if vast inequality and social misery aren't objectively necessary, why are they still a central feature of contemporary societies?

Contra defenders of capitalism, socialists think that the productive forces of society should be made to work for goals worthier than profits for the few. The socialist claim is that our society's technological and productive capacity should be mobilized to meet human needs and to cultivate the conditions in which people can live free and flourishing lives.

What this makes clear is that the problem of capitalism, among other things, is a problem of profoundly misplaced priorities. Rather than subordinating all human beings to the demands of profit, as is the case in capitalist societies, socialists think that economic institutions should be subordinated to human beings. Is it really a radical idea to think that the basic function of social institution should be to maximize human freedom and well-being, rather than enriching a small few at the expense of the many? If everyone were in a position to freely choose either option, I find it difficult to believe that the majority would opt for a society in which they were exploited by a small gilded elite.

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Tuesday, July 6, 2010

Excellent Joel Geier piece on the Crisis

Excerpt:

The capitalist state, not the market, produced stabilization, the end of the free-fall, and the start of a recovery. However, the fundamentals of the capitalist economy are so weak that there is no confidence that if the state were to withdraw stimulus that recovery could be sustained. The fear is that if the “free market” was left to its own solutions, and government stimulus sharply curtailed, demand would collapse, renewing recession. All of this has to be subtly presented so that faith in “free enterprise” is not excessively undermined.
Read it here.

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Friday, August 14, 2009

US Income Inequality: The Gap Grows

From Tim Fernholz at Tapped:

As you can see, nearly a quarter of total income goes to the top 1 percent of Americans, nearly as high as the most recent peak, in 1928. (Notice any correlation of events?).
Recessions (depressions?) seem to hurt some people more than others...

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Tuesday, July 7, 2009

David Harvey speaks at Marxism 2009

David Harvey's speech from Marxism 2009 can be viewed free here.

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