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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?

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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

and means of production.

Then you put them to work

with a given technology and organisational form

and you create a commodity.

Which you then sell for the original money plus a profit.

Now, you then take part of the profit

and you re-capitalise it into an expansion

for very interesting reasons.

Now, there are two things about this

One is that there're a number of barrier points in here.

How is the money got together

in the right place

at the right time

in the right volume?

And that takes financial ingenuity.

So the whole history of capitalism has been about financial innovation.

And financial innovation

has the effect of, also, empowering the financiers.

And the excessive power of the financiers, can sometimes...

They do get greedy, no question about it.

And if you look at financial profits in the United States

They were soaring after 1990; they were going up like this.

Profits in manufacturing were coming down like this.

And you can see the imbalance in this country

I think the way in which this country has sided with The City of London

against British manufacturing since the 1950s onwards

has had very serious implications for the economy of this country.

You've actually screwed Industry in order to keep, you know, financiers happy.

Any sensible person right now would join an anti-capitalist organisation.

And, you have to.

Because otherwise, we're going to have this continuation.

And notice it's a continuation of all sorts of negative aspects.

For instance, the racking up of wealth.

You would have thought the crisis would have stopped that.

Actually more billionaires emerged in India last year than ever.

They doubled last year.

The wealth of the rich in this country has accelerated.

Just last year, what happened was that leading hedge fund owners

got personal remunerations of $3 billion each,

in one year.

Now, I thought it was obscene and insane

a few years ago, when they got $250 million.

But they're now hauling in $3 billion.

Now that's not the world I want to live in,

and if you want to live in it, be my guest.

I don't see us debating and discussing this.

I don't have the solutions; I think I know what the nature of the problem is.

And unless we're prepared to have a very broad based discussion

that gets away from, you know,

the normal kind of pablum you get in a political campaign.

And you know, "Everything's going to be okay here next year if you vote for me".

Well, it's crap!

You should know it's crap.

And, say it is.

And we have a duty, it seems to me

those of us who are academics and seriously involved in the world

to actually change our mode of thinking.

Cognitive media

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