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  • The Crises of Capitalism, 26 April 2010

  • Is it time to look beyond Capitalism towards a new social order

  • that would allow us to live within a system

  • that could be responsible, just and humane?

  • .

  • Ok, so we've been through this crisis

  • and there are all sorts of explanatory formats out there.

  • And it's interesting to look at the different genres.

  • One genre is that, it's all about human frailty.

  • I mean, Alan Greenspan took refuge in the fact "it's human nature",

  • he said, "you can't do anything about that."

  • But there's a whole world of explanations

  • that kinda say it's the predatory instincts

  • It's the instinct for mastery.

  • The delusions of investors.

  • And the greed and all the rest of it.

  • So, there's a whole range of discussion of that.

  • And of course, the more we learn about the daily practices on Wall Street

  • we kind of figure there's a great deal of truth in all of that.

  • The second genre is that there's institutional failures.

  • That, you know, regulators were asleep at the switch.

  • The shadow banking system innovated outside of their purview.

  • Etc etc etc.

  • And, therefore, institutions have to be reconfigured.

  • And it has to be a global effort, by the G-20, something of that kind.

  • So, we look at the institutional level and say

  • that has failed and that has to be reconfigured.

  • The third genre is to say, everybody was obsessed with a false theory.

  • They read too much Hayek

  • and believed in the efficiency of markets.

  • And it's time we actually got back to something like Keynes.

  • Or we took seriously Hyman Minski's

  • theory about the inherent instability of financial activities.

  • The next genre is that it has cultural origins.

  • Now we don't hear that much in the United States

  • but if you were in Germany and France

  • there are many people there who would kind of say it's an Anglo-Saxon disease.

  • And, and it has nothing to do with us.

  • And I happened to be in Brazil when it was going on, and

  • Lula was kind of saying, well, first off he was saying

  • "Oh, thank God the United States is being disciplined by the equivalent of the IMF

  • We've been through it 8 times in the last 25 years

  • and now it's their turn. Fantastic!", said Lula,

  • and all the other Latin Americans I knew, until it hit them, which it does.

  • And then they kind of changed their tune a little bit.

  • So, there's a way of which it became cultural.

  • And, you can see that by the way in which this whole Greek thing is being handled.

  • The way the German press is saying, "Well, it's the Greek character

  • It's defects in the Greek character".

  • And there's a whole lot of rather nasty stuff going on around that.

  • But actually, there are some cultural features which have led into it.

  • For instance, the US fascination with

  • home ownership,

  • which is supposedly a deep cultural value.

  • So 67, 68% of US households are home owners.

  • It's only 22% in Switzerland.

  • Of course its a cultural value in the United States

  • that's being supported by the mortgage interest tax deduction,

  • which is a huge subsidy.

  • It's being promoted since the 1930s, very explicitly in the 1930s.

  • It was built up because the theory was

  • that debt incumbent home owners don't go on strike.

  • And then there's a kind of notion that it's a failure of policy

  • in that policy has actually intervened.

  • And there's a funny kind of alliance emerging between the Glenn Beck wing

  • for Fox News and the World Bank,

  • both of whom says the problem is too much regulation

  • of the wrong sort.

  • So there are all these ways, and all of them have a certain truth.

  • And skilled writers will take one or other of those perspectives and

  • build a story and actually write a very plausible kind of story about this.

  • And I thought to myself,

  • "Well, what kind of plausible story can I write, which is none of the above?"

  • Which is one of the things I always think to myself, and it's not hard to do

  • particularly when you're coming from a Marxist perspective because, you know

  • there aren't many people who try to do this analysis from a Marxist perspective.

  • And I was really clued into this by this thing that happened

  • at the London School of Economics about a year and a half ago when

  • Her Majesty, the Queen, asked the economists

  • "How come you guys didn't see this thing coming?"

  • She didn't say it exactly that way, but you know, it's the sentiment.

  • And, they got very upset. And she actually called the Governor of the Bank of England.

  • And said, "How come you didn't see it coming?"

  • And then the British Academy put forward this

  • got together all these economists and they came up with this fabulous letter

  • to Her Majesty.

  • And, it was actually astonishing. It said

  • "Well, you know, many dedicated people, intelligent, smart, spent their lives

  • working on aspects of this thing, very, very seriously

  • But the one thing we missed was systemic risk."

  • And you say, "What?!"

  • [Laughter]

  • And they went on to talk about the politics of denial and all the rest of it.

  • So I thought, well you know, systemic risk, you know

  • I can translate it into the Marxian thing.

  • You're talking about the internal contradictions of capital accumulation.

  • And maybe I should write a thing about the

  • internal contradictions of capital accumulation and

  • try to figure out the role of crisis in the whole history of Capitalism.

  • And what's specific and special about the crisis, this time around.

  • And there are two ways which I thought I would do that,

  • One was to look at what's happened since the 1970s to now.

  • And, the thesis there is that in many ways

  • the form of this current crisis is dictated very much

  • by the way we came out of the last one.

  • That the problem back in the 1970s was

  • excessive power of labour in relationship to capital.

  • That, therefore, the way out of the crisis last time

  • was to discipline labour.

  • And we know how that was done.

  • It was done by off-shoring.

  • It was done by, you know, Thatcher and Reagan.

  • And it was done by neo-liberal doctrine;

  • it was done in all kinds of different ways.

  • But by 1985 or 86, the labour question had essentially

  • been solved for capital. It had access to all the world's labour supplies.

  • Nobody in this particular instance, has cited

  • greedy unions as the root of the crisis.

  • Nobody, in this instance, is saying,

  • "It has something to do with the excessive power of labour."

  • If anything, it's the excessive power of capital.

  • And in particular, the excessive power of finance capital

  • which is the root of the problem.

  • Now, how did that happen?

  • Well, we've been, since the 1970s, in a phase, of what we call "wage repression".

  • That wages have remained stagnant

  • The share of wages in national income

  • right throughout the OECD countries has steadily fallen.

  • It's even steadily fallen in China, of all places.

  • So that, there's less and less being paid out in wages.

  • Well, wages turn out to be also the money

  • which buys goods.

  • So if you diminish wages, then

  • you got a problem with where's your demand going to come from.

  • And the answer was, "Well, get out your credit cards.

  • We'll give everybody credit cards."

  • So we'll overcome, if you like, the problem of effective demand

  • by actually pumping up the credit economy.

  • And American households and British households

  • all roughly tripled their debt over the last 20, 30 years.

  • And a vast amount of that debt, of course, has been within the housing market.

  • And out of this comes a theory which is very, very important

  • that Capitalism never solves its crisis problems.

  • It moves them around geographically.

  • And what we're seeing right now is a geographical movement of that.

  • Everybody says, "Well, okay, everything is

  • beginning to recover in the United States"

  • And then Greece goes bang, and everybody goes,

  • "What about the PIIGS?", you know.

  • And it's interesting, you had a finance crisis

  • in the financial system.

  • You sort of half-solve that

  • but at the expense of a sovereign debt crisis.

  • Actually, if you look at the accumulation process of capital

  • you see a number of limits and a number of barriers

  • and there's a wonderful language that Marx uses in the "Grundrisse".

  • where he talks about the way in which Capital cannot abide

  • a limit.

  • It has to turn it into a barrier

  • which it then circumvents or transcends.

  • And then when you look at the accumulation process

  • you look at where the barriers and limits might lie.

  • And the simple way to look at it is

  • to say, "Look, the typical circulation process

  • of accumulation goes like this.

  • You start with some money.

  • You go into the market and buy labour, power