Caught in the downward current | The EconomistMichael, when arguing: *
*
*With no "real" analogy today to the Housing Bubble of 2002-2007, I
lean towards Dean's view ...*
... are you not downplaying a major feature of the past fifty years or
so, one that was on acute display in 2002-07 (and is again now):
/overaccumulated capital that needs somewhere to circulate so as to
restore profit//ability/, especially within non-productive financial
circuits (such as real estate speculation)?
The tendency towards a decline in the rate of corporate profit - a
symptom of capitalist crisis conditions - has been well documented (e.g.
by Michael Roberts <https://thenextrecession.wordpress.com/>). An
underlying causal factor is overaccumulated capital, especially
emanating in recent years from China
<https://cadtm.org/China-s-role-in-amplifying-Southern-Africa-s-extreme-uneven-development>.
That means financiers search the globe for investment opportunities,
sometimes - like here in South Africa now - earning high profits from
financial investments (stock markets and bonds are giving formidable
returns) in sharp contrast to underlying valorisation potential.
Actually, in South Africa, our firms were top of the charts for their
1970s-80s profits crash
<https://ideas.repec.org/p/pra/mprapa/76165.html> - and they needed a
1994 change of government and surrender to 'globalisation' plus
financial deregulation (and a commodity super-cycle) to at least briefly
restore those rates. But speaking of husing, the South African economy
proved to be a far more degenerate bubble site - from 1997-2008, rising
389%
<https://monthlyreview.org/2010/06/01/south-africas-bubble-meets-boiling-urban-social-protest/>
- than even the Irish could muster (prices up 193%) and the U.S. with
its predatory banksters (prices in the Case-Shiller 10-cities were up
102%), according to /The Economist
<https://www.economist.com/finance-and-economics/2009/03/19/caught-in-the-downward-current>./
So often under conditions of overaccumulated productive capital and
financial speculation, the highest returns on investment aren't drawn
from surplus value extraction, because new tricks of managing capitalist
crisis have evolved - much more in the last 50 years than were possible
during the 1930s - and indeed at least three broad strategies complement
what Marx had shown would be the first reactions to falling profits, in
the search for restored profits through more relative and absolute
surplus value. The three strategies that help explain the U.S. housing
bubble and much more are:
* 1) /shifting/ overaccumulated capital around geographically (e.g.
into housing) through creating ever more uneven development;
* 2) /stalling/ its devaluation temporally through the buy-now
pay-later credit system (e.g. home mortgages); and
* 3) seeking ever more ingenious means of /stealing/ from both other
capitalist circuits and the non-capitalist world of decommodified
life, state services privatisation, exploitation of nature, triple
roles for women, etc, i.e. accumulation by dispossession, a
permanent primitive accumulation amplified by Big Data (and in the
case of U.S. housing, theft via those "exploding-ARM"
adjustable-rate-mortgages).
All this suggests that if the U.S. housing bubble was one site of
displaced overaccumulated capital back then (preceded by the dot.com
bubble and followed by many others, as QE kicked in), then the extension
of that search into all sorts of other circuitries might be the analogy
you're seeking?
Sometimes it strikes me that South Africa is the finest place to witness
all this, as the economy rapidly deindustrialised since the 1990s
(manufacturing/GDP went from 22 to 12%), while hosting the world's worst
corporate crime rate, most overvalued stock market, most extreme
relative capital flight, worst inequality, some of the worst forms of
durable racism, one of the most super-exploitative capitalist
patriarchies thanks partly to residual migrant labour, and nearly the
very worst environmental degradation e.g. in the form of greenhouse gas
emissions/GDP/capita.
Our capitalists and their state allies really do demonstrate how the
recovery of corporate profitability has been possible through shifting,
stalling and stealing. (Recently collected data on these are assembled
here
<https://www.cadtm.org/Measuring-Capital-s-Super-Exploitation-of-People-and-Nature-in-South-Africa>.)
***
Oh, an autobio note since you raise it below: yes, after surviving
undergrad at Swarthmore in the early 1980s, Dean went across to Michigan
and did a proper econ doctorate, so he could better fight economists
from the left, and more power to him, he's one of the very best I've
ever encountered.
Um, I went down the road to Johns Hopkins to do an anti-econ doctorate
in Marxist geography. Maybe that fork in the road helps explain the
divergence in interpretation today.
When I first met you, Michael, at URPE's 50th b'day party in Amherst in
2018, I remember asking you - and everyone I could there - whether in
retrospect working so hard to achieve at least minimal respectability
/within /the economics profession was worth it... Or, instead of wasted
time and effort facing the stultifying, repressive conditions that
comrades (or even "canceled" Keynesians as Paul Krugman confessed
<https://messaging-custom-newsletters.nytimes.com/template/oakv2?CCPAOptOut=true&campaign_id=116&emc=edit_pk_20210601&instance_id=31997&nl=paul-krugman&productCode=PK®i_id=64675225&segment_id=59554&te=1&uri=nyt%3A%2F%2Fnewsletter%2F41b9ba2a-b998-5d36-9aa2-a79dbdcec326&user_id=8a3fce2ae25b5435f449ab64b4e3e880>
he was, last month) suffer working within bourgeois-economic departments
- with all the associated bogus professionalism and mathiness - it would
have been better to work outside the formal discipline.
Better to be outside, it strikes me, finding infinite sites from which
to delegitimise economists, perhaps? (Nearly everyone in my biased
sample ruefully agreed with me, after, that is, a couple of beers at the
end of the day).
Our own younger activist economists (in the Rethinking Economics For
Africa movement) are faced with this choice now; here's
<https://doi.org/10.29086/2519-5476/2020/sp33a6> one version of how it's
playing out. Anyone else have ideas about interpreting the markets: from
within, or without, the tyrannical economics discipline?
Keep strong,
Patrick (about to hop to a Department of Sociology, in fact, at the Univ
of Johannesburg where radicals are thick on the ground)
On 7/3/2021 2:45 PM, Michael Meeropol wrote:
What is interesting about this discussion is that it highlights Dean's
disagreement with "conventional wisdom" which saw that Great Recession
as a "follow on" to the financial meltdown which required the
intervention of TARP and the Fed turning on the spigot (very
specifically actually buying Commercial Paper directly as well as more
generalized QE). If I read Dean right (and he's here to correct me
of course) his point is that it was the HOUSING BUBBLE specifically
that turned the financial meltdown into an (almost) depression ----
(In the period after the Stock Market crash of 1929, it was the wave
of Bank failures in 1930 which the Fed failed to prevent that turned
the "normal" financial crisis --- remember there had been a pretty
significant one in 1921 from which the economy [not the farm sector]
bounced back! --- into the Great Depression.)
The overhang from the housing bubble coupled with the Obama
Administration's faillure to "go big" with the Recovery Act but merely
(following Geithner et al) hit the "reset button" on the financial
system that led to the ridiculously sluggish recovery and --- (IMHO)
--- Trump's completely unpredictable election.
With no "real" analogy today to the Housing Bubble of 2002-2007 I lean
towards Dean's view --- (if I have it right) ---
But it sure would be great to see Bitcoin investors take a bath!
[by the way --- Dean and Patrick are Swarthmore alums --- who survived
a very non-radical econ department --- Dean of course was a Philosophy
major which might have increased his immunity to neo-classical garbage!]
On Sat, Jul 3, 2021 at 8:15 AM Patrick Bond <[email protected]
<mailto:[email protected]>> wrote:
Dean's reply:
On 7/3/2021 1:47 PM, Dean Baker wrote:
Asset valuations are definitely very high, but they are not
driving the economy, as they did in the 1990s and 00s. If markets
were to plunge 20-30 percent, with some assets obviously falling
much more, I don't see major economic consequences. Bitcoin
investors would obviously be burned, but the economy could keep
going just fine, with some patchwork to the financial system to
limit the damage from failed lenders. (Yes, Patrick and I go way
back)
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