Re: [Marxism-Thaxis] Capitalism, Socialism and Crisis
A Non-Orthodox View by Walden Bello ZNet (February 22 2009) This is the longer version of an essay by the author released by the British Broadcasting Corporation (BBC) on February 06 2009. Week after week, we see the global economy contracting at a pace worse than predicted by the gloomiest analysts. We are now, it is clear, in no ordinary recession but are headed for a global depression that could last for many years. The Fundamental Crisis: Overaccumulation Orthodox economics has long ceased to be of any help in understanding the crisis. Non-orthodox economics, on the other hand, provides extraordinarily powerful insights into the causes and dynamics of the current crisis. From the progressive perspective, what we are seeing is the intensification of one of the central crises or contradictions of global capitalism: the crisis of overproduction, also known as overaccumulation or overcapacity. This is the tendency for capitalism to build up, in the context of heightened inter-capitalist competition, tremendous productive capacity that outruns the population's capacity to consume owing to income inequalities that limit popular purchasing power. The result is an erosion of profitability, leading to an economic downspin. To understand the current collapse, we must go back in time to the so-called Golden Age of Contemporary Capitalism, the period from 1945 to 1975. This was a period of rapid growth both in the center economies and in the underdeveloped economies - one that was partly triggered by the massive reconstruction of Europe and East Asia after the devastation of the Second World War, and partly by the new socioeconomic arrangements and instruments based on a historic class compromise between Capital and Labor that were institutionalized under the new Keynesian state. But this period of high growth came to an end in the mid-1970s, when the center economies were seized by stagflation, meaning the coexistence of low growth with high inflation, which was not supposed to happen under neoclassical economics. Stagflation, however, was but a symptom of a deeper cause: the reconstruction of Germany and Japan and the rapid growth of industrializing economies like Brazil, Taiwan, and South Korea added tremendous new productive capacity and increased global competition, while income inequality within countries and between countries limited the growth of purchasing power and demand, thus eroding profitability. This was aggravated by the massive oil price rises of the seventies. The most painful expression of the crisis of overproduction was global recession of the early 1980s, which was the most serious to overtake the international economy since the Great Depression, that is, before the current crisis. Capitalism tried three escape routes from the conundrum of overproduction: neoliberal restructuring, globalization, and financialization Escape Route #1: Neoliberal Restructuring Neoliberal restructuring took the form of Reaganism and Thatcherism in the North and Structural Adjustment in the South. The aim was to invigorate capital accumulation, and this was to be done by (1) removing state constraints on the growth, use, and flow of capital and wealth; and (2) redistributing income from the poor and middle classes to the rich on the theory that the rich would then be motivated to invest and reignite economic growth. The problem with this formula was that in redistributing income to the rich, you were gutting the incomes of the poor and middle classes, thus restricting demand, while not necessarily inducing the rich to invest more in production. In fact, it could be more profitable to invest in speculation. In fact, neoliberal restructuring, which was generalized in the North and south during the eighties and nineties, had a poor record in terms of growth: Global growth averaged 1.1 percent in the 1990s and 1.4 percent in the 1980s, compared with 3.5 percent in the 1960s and 2.4 percent in the 1970s, when state interventionist policies were dominant. Neoliberal restructuring could not shake off stagnation. Escape Route #2: Globalization The second escape route global capital took to counter stagnation was extensive accumulation or globalization, or the rapid integration of semi-capitalist, non-capitalist, or pre-capitalist areas into the global market economy. Rosa Luxemburg, the famous German radical economist, saw this long ago in her classic The Accumulation of Capital (1913) as necessary to shore up the rate of profit in the metropolitan economies. How? By gaining access to cheap labor, by gaining new, albeit limited, markets, by gaining new sources of cheap agricultural and raw material products, and by bringing into being new areas for investment in infrastructure. Integration is accomplished via trade liberalization,
Re: [Marxism-Thaxis] Capitalism, Socialism and Crisis
Capitalism, Socialism and Crisis By Prabhat Patnaik _http://www.politicalaffairs.net/article/articleview/8201/_ (http://www.politicalaffairs.net/article/articleview/8201/) Original source: People's Democracy (India) Comment Having read this article several times and gone to its location source above, I could find nothing that indicates that this article purports to be a Marxist analysis. My initial response was based on a false premise. Critiquing an article for failing to be Marxists, when nothing states that the article is submitted as a Marxist analysis, is wrong. Sorry for my misunderstanding. WL. **Need a job? Find employment help in your area. (http://yellowpages.aol.com/search?query=employment_agenciesncid=emlcntusyelp0005) ___ Marxism-Thaxis mailing list Marxism-Thaxis@lists.econ.utah.edu To change your options or unsubscribe go to: http://lists.econ.utah.edu/mailman/listinfo/marxism-thaxis
Re: [Marxism-Thaxis] Capitalism, Socialism and Crisis
CB: This is one of the worst unsupported, conclusory assertions I've seen since Ralph's embarrassing posts a couple of days ago. An empty outburst, with no thought in it whatsoever. Who cares what you think without any argumentation ? I thought it was a fairly good piece (assertion for now unsupported), but I'd be curious as to why WL thought it was so bad it was beneath at least some sort of explanatory comment. CJ ___ Marxism-Thaxis mailing list Marxism-Thaxis@lists.econ.utah.edu To change your options or unsubscribe go to: http://lists.econ.utah.edu/mailman/listinfo/marxism-thaxis
Re: [Marxism-Thaxis] Capitalism, Socialism and Crisis
OK . . . fair enough. Maybe later. It was so bad I was embarrassed to actually comment on it. WL. In a message dated 3/4/2009 1:00:13 A.M. Eastern Standard Time, cdb1...@prodigy.net writes: Capitalism, Socialism and Crisis By Prabhat Patnaik is one of the worse, if not the worst economic analysis, I have read (under the banner of Marxism) in perhaps the past decade. WL. ^^ CB: This is one of the worst unsupported, conclusory assertions I've seen since Ralph's embarrassing posts a couple of days ago. An empty outburst, with no thought in it whatsoever. Who cares what you think without any argumentation ? **Need a job? Find employment help in your area. (http://yellowpages.aol.com/search?query=employment_agenciesncid=emlcntusyelp0005) ___ Marxism-Thaxis mailing list Marxism-Thaxis@lists.econ.utah.edu To change your options or unsubscribe go to: http://lists.econ.utah.edu/mailman/listinfo/marxism-thaxis
[Marxism-Thaxis] Capitalism, Socialism and Crisis
OK . . . fair enough. Maybe later. It was so bad I was embarrassed to actually comment on it. WL. ^^ CB: You haven't been too embarrassed to post bad stuff yourself in the past. When did you get to be so sensitive ? (smile) ___ Marxism-Thaxis mailing list Marxism-Thaxis@lists.econ.utah.edu To change your options or unsubscribe go to: http://lists.econ.utah.edu/mailman/listinfo/marxism-thaxis
[Marxism-Thaxis] Capitalism, Socialism and Crisis
Capitalism, Socialism and Crisis By Prabhat Patnaik http://www.politicalaffairs.net/article/articleview/8201/ Original source: People's Democracy (India) A common view of the current financial crisis of capitalism holds that it is essentially an aberration. Some attribute this aberration to specific mistakes committed in the past, for instance by the US Federal Reserve with regard to monetary policy. Some hold the lack of adequate regulatory mechanism as being responsible for this aberration. Paul Krugman, the current year’s Nobel laureate, blames it on insufficient supervision of the financial system. And even Joseph Stiglitz, the well-known radical economist and Nobel laureate, characterizes it as a “system failure,” a term which makes the crisis a phenomenon that in principle could have been avoided with impunity. This entire perception however is untenable. The crisis is a result not of the failure of the system but of the system itself; it is a part of the mode of operation of contemporary capitalism rather than being unrelated or extraneous to it. Massive speculation In a “free market” regime, asset markets tend to be subject to speculation. Speculators buy assets not because of the yield on these assets but because they expect its price to appreciate in the coming days. They have no long term interest in the assets and are concerned exclusively with capital gains. Since buying today to sell tomorrow entails carrying the asset during the intervening period for which a “carrying cost” has to be incurred, the assets most suitable for speculation are those whose carrying costs are low; and these are typically financial assets which have virtually zero carrying costs (requiring only a few taps on computer keys to effect all necessary transactions). Financial asset markets therefore are always subject to massive speculation. Speculation generates bouts of euphoria or “speculative excitement” which have the cumulative effect of pushing up asset prices. An initial rise in some asset prices, caused no matter how, gives rise to expectations of a further rise, and hence to an increase in the demand for the assets in question which actually raises their prices further; and so the process feeds upon itself and we have asset price “bubbles.” Such “bubbles” typically characterize financial assets, which, as already mentioned, are particularly prone to speculation; but they are not confined to financial assets alone (as the housing market “bubble” in the United States has just demonstrated). Such “bubbles” have an obvious impact on the real economy. The rise in asset prices fed by speculative euphoria improves for individuals who own these assets the estimation of their wealth position, and hence causes an increase in their consumption expenditure, and thereby in employment. Likewise such a rise in asset prices, where the assets in question are producible, causes an increase in investment expenditure on these assets, which leads to their larger production, and hence to larger employment. In short, speculative euphoria in the asset markets makes the boom in the real economy, stimulated by whatever had caused the initial rise in asset prices, more pronounced and prolonged. Precisely because of this however if for some reason the asset price increase wanes or comes to a halt, speculators attempt to get out of the assets in question causing a crash in the asset prices. This causes a fall in aggregate expenditure on goods and services; a collapse in the state of credit, as banks face insolvency; and a possible collapse even in the inclination of depositors for holding bank deposits (since they fear banks’ insolvency), as had happened during the Great Depression. In short there is a collapse of the state of confidence all around, and hence a corresponding increase in liquidity preference; i.e. there is a disinclination to hold any asset other than pure cash, or in extreme cases only currency, and of course claims upon the government, which is considered to be the only safe and reliable borrower. Not all crises display this severity; but to a greater or lesser extent these features mark any crisis. Speculation therefore has the effect of making the boom more pronounced and prolonged; but it has also the effect of precipitating a severe crisis, as distinct from a mere cyclical downturn. In the absence of speculation the boom in the real economy will be a much more truncated and tame affair. But precisely because it is not a tame affair, it is followed by a crisis. Two conclusions follow from the above analysis. First, since speculation is endemic to modern capitalism, where financial markets play a major role, speculation-engendered euphoria and the consequent pronounced booms, together with the crises that invariably follow, are also endemic to modern capitalism. “Bubbles” constitute in other words the mode of operation of the
Re: [Marxism-Thaxis] Capitalism, Socialism and Crisis
Capitalism, Socialism and Crisis By Prabhat Patnaik _http://www.politicalaffairs.net/article/articleview/8201/_ (http://www.politicalaffairs.net/article/articleview/8201/) is one of the worse, if not the worst economic analysis, I have read (under the banner of Marxism) in perhaps the past decade. WL. **Need a job? Find employment help in your area. (http://yellowpages.aol.com/search?query=employment_agenciesncid=emlcntusyelp0005) ___ Marxism-Thaxis mailing list Marxism-Thaxis@lists.econ.utah.edu To change your options or unsubscribe go to: http://lists.econ.utah.edu/mailman/listinfo/marxism-thaxis
[Marxism-Thaxis] Capitalism, Socialism and Crisis
Waistline2 at aol.com Capitalism, Socialism and Crisis By Prabhat Patnaik _http://www.politicalaffairs.net/article/articleview/8201/_ (http://www.politicalaffairs.net/article/articleview/8201/) is one of the worse, if not the worst economic analysis, I have read (under the banner of Marxism) in perhaps the past decade. WL. ^^ CB: This is one of the worst unsupported, conclusory assertions I've seen since Ralph's embarrassing posts a couple of days ago. An empty outburst, with no thought in it whatsoever. Who cares what you think without any argumentation ? ___ Marxism-Thaxis mailing list Marxism-Thaxis@lists.econ.utah.edu To change your options or unsubscribe go to: http://lists.econ.utah.edu/mailman/listinfo/marxism-thaxis
