By Sell on News, a macro equities analyst. Cross posted from MacroBusiness
It is a measure of how un-self critical modern economics has been, that the Marxists are starting to appear to be making the most sense of the current crises. The supine acceptance that “the market is always right” — a truism only to traders and vested interests — means that there has been precious little understanding developed about how markets can go wrong. Or what is wrong, as well as right, with markets and the modern practices of capitalism. An article in the London Review of Books came to my attention recently by Benjamin Kunkel that shows how Marxist analysis is actually looking quite pertinent to the current mess.
In particular, it highlights the imbalance between capital and labour, a perennial obsession of the Marxists, of course:
The full cash value of today’s product can therefore be realised only with the assistance of money advanced against commodity values yet to be produced. ‘The surplus value created at one point requires the creation of surplus value at another point,’ as Marx put it in the Grundrisse. How are these points, separated in space and time, to be linked? In a word, through the credit system, which involves ‘the creation of what Marx calls “fictitious capital” – money that is thrown into circulation as capital without any material basis in commodities or productive activity’. Money values backed by tomorrow’s as yet unproduced goods and services, to be exchanged against those already produced today: this is credit or bank money, an anticipation of future value without which the creation of present value stalls. Realisation (or the transformation of surplus value into its money equivalent, as profit) thus depends on the ‘fictitious’.
There has certainly been an excess of “fictitious” capital created over the last two decades, far more than Marx, or anyone else, could have anticipated. Money made out of the money made out of money. $600 trillion of derivatives. High frequency trading insanity with trades reduced to micro-seconds. As Adam Curtis observes in his excellent documentary “All Watched Over by Machines of Loving Grace”, the heart of the insanity has been the belief that systems run by machines are inherently more stable than systems with humans at the centre. This has greatly skewed the system towards the egregious self interests of capital, as against labour. Curtis lays much of this greed at the feet of Ayn Rand and Alan Greenspan.
Now before I get a knock on the door from grey suited men asking me “Are you, or have you ever been, a member of the Communist Party?” I should explain that I regard Marxism as wicked, directly responsible for some of the worst horrors of the twentieth century. I have many other objections to it, which I will come to later. There is, however, a difference between Marxism and what Marx wrote. And there is a difference between Marx’s critique of capitalism, which has some prescience and relevance, and Marx’s political prescriptions and revolutionary impulses, which were riddled with contradictions and, in practice, wholly pernicious.
The value of applying what Marx wrote is an identification of an imbalance between capital and labour:
So, as The Limits to Capital implies without quite stating, the special allure and danger of an elaborate credit system lie in its relationship to class society. If more capital has been accumulated than can be realised as a profit through exchange, owing perhaps to ‘the poverty and restricted consumption of the masses’ that Marx at one point declared ‘the ultimate reason for all real crises’, this condition can be temporarily concealed, and its consequences postponed, by the confection of fictitious values in excess of any real values on the verge of production. In this way, growth and profitability in the financial system can substitute for the impaired growth and profitability of the class-ridden system of actual production. By adding over-financialisation, as it were, to his model of overaccumulation, Harvey means to show how an initial contradiction between production and realisation later ‘becomes, via the agency of the credit system, an outright antagonism’ between the financial system of fictitious values and its monetary base, founded on commodity values. This antagonism then ‘forms the rock on which accumulation ultimately founders’. In social terms, this will take the form of a contest between creditors and debtors over who is to suffer more devaluation.
This is basically what is wrong in the developed world. There needs to be a balance between wages and investment returns for the system to function well. Henry Ford paid his workers well not because he was a generous man, but because then they could buy Fords. Globalisation has, of course, undone this compact, and although it has led to some productivity improvements, it is also having the effect of gutting the middle classes in the developed world. In Europe it is seen in the shape of unemployment, in America, the same as well as in the shape of rising poverty and the evaporation of the middle class.
Now, one does not have to be a Marxist to arrive at these conclusions. But Marxism (as opposed to what Marx wrote) resulted in the demonisation of markets, a perfectly normal human activity that goes back 3,000 years, give or take a century. In response, capitalism (whatever that is exactly) felt the need to overstate the value of markets, producing the kind of market worship we now see. Each position is absurd. Marxism has largely collapsed from its own contradictions. Capitalism is on the way to doing the same because when market worship is applied to financial systems, it produces the kind of endless regresses we are now seeing.
Kunkel does point out that some more mainstream analysts have noticed the problem:
Paul Krugman, discussing Roubini’s book in the New York Review of Books, agreed with him that what Ben Bernanke called the ‘global savings glut’ lay at the heart of the crisis, behind the proximate follies of deregulation, mortgage-securitisation, excessive leverage and so on. Originating in the current account surpluses of net-exporting countries such as Germany, Japan and China, this great tide of money flooded markets in the US and Western Europe, and floated property and asset values unsustainably. Why was so much capital so badly misallocated? In the LRB of 22 April 2010, Joseph Stiglitz observed that the savings glut ‘could equally well be described as an “investment dearth”’, reflecting a scarcity of attractive investment opportunities. Stiglitz suggests that global warming mitigation or poverty reduction offers new ‘opportunities for investments with high social returns’.
The neo-Keynesians’ ‘savings glut’ can readily be seen as a case of what a more radical tradition calls overaccumulated capital. But it is the broader and more systematic Marxist perspective that ultimately and properly contains Keynesianism within it, and a crude Marxist catechism may be in order. Where does an excess of savings come from? From unpaid labour – for example, that of Chinese or German workers. And why would such funds inflate asset bubbles rather than create useful investment? Because capital pursues not ‘high social returns’, but high private returns. And why should these have proved difficult to achieve, except by financial shell-games? Keynesians complain of an insufficiency of aggregate demand, restraining investment. The Marxist will simply add that this bespeaks inadequate wages, in the index of a class struggle going the way of owners rather than workers.
One of Marx’s advantages is that his notion of labour value at least puts humans at the centre of a human system. Which is better than putting “Machines of Loving Grace” at the centre of the system, which is the habit in much neoclassical thinking. But of course investors are human as well. And removing markets, as was done in the Soviet and Chinese horrors, is to remove basic humanity.
One key is to re-establish the interests of labour, probably in some collective form. That is the message of the Occupy Wall Street movement. For some reason, greed for executives and investment bankers, is simply pursuit of the right “incentives”, whereas comparatively modest wage claims is a tyrannous lurch into socialism, to be resisted at all costs. It is hard not to see this as some kind of contemporary class war; certainly it is disgusting hypocrisy. And it is destroying the middle classes in developed economies, which will have dangerous political consequences.
What is becoming clear is that new limits have to be placed on capitalism and some aspects of markets:
The classical economists long ago foresaw that an economy defined by constant expansion would one day give way to what John Stuart Mill called the ‘stationary state’. The idea has gained a new currency in Marxist writing of recent years, and in its contemporary version tends to locate the limits to growth in the depletion of natural resources or in the exhaustion of productivity gains as the share of manufacturing in the world economy shrinks and that of services expands. Of course, peak oil or soil exhaustion might easily coincide with faltering productivity. Harvey doesn’t spell out why growth must have a stop, and the outlines of an ecologically stable and politically democratic future socialism remain as blurry in his later work as they do almost everywhere else. At the moment Marxism seems better prepared to interpret the world than to change it. But the first achievement is at least due wider recognition, which with the next crisis, or subsequent spasm of the present one, it may begin to receive.
I do not agree with Kunkel that Marxism may come into its own. To me, it is just the flip side of the same appalling coin. Marxism has its roots in German idealism (Hegel) which I think we safely blame for fascism as well. Its horrors were no accident.
Both Marxism and capitalist theory are deeply materialistic; which inevitably rules out the human (matter cannot explain humanness, it is just matter). So no surprise that each propose some kind of tide of history argument as being inevitable (deregulation and “free” markets in the case of capitalism).
Both are quasi scientific, and so at once intellectually hollow and subject to the kind of scientific materialism that easily leads to letting machines rule over people. Both use unfalsifiable arguments; typically circular arguments in the case of capitalist economic theory, and dialectics in the case of Marxism that result in contradictions like the claim that there is only the bourgeois and proletariat (a claim that defeats itself as soon as anything changes, given that there are only two possibilities).
A nice matching set of intellectual barbarisms, in other words. Maybe in the current crisis conditions, we might start to get some intellectual grown ups emerging. At the very least, there needs to be close attention given to the balance of labour and capital, and limits must be set on fictitious capital. Another enemy is tiredness, intellectual exhaustion, as GK Chesterton observed:
Man does not necessarily begin with despotism because he is barbarous, but very often finds his way to despotism because he is civilised. He finds it because he is experienced; or, what is often much the same thing, because he is exhausted.
I was talking to a finance academic recently who said it was virtually impossible to get anything published academically that questioned the assumptions of the system; only mathematical analyses based on the the accepted assumptions ever see the light of day. A similar monochrome uniformity is evident in the economics mainstream. It is intellectual despotism, and it arises out of exhaustion.
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Hi Yves:
Don’t worry, I’m not a troll first responder. I just live late too. I want to send out a little shout to my pops. He’s 72 and way more hip than I am. He flew to DC last weekend for a march and he got rebuffed at occupy Austin for handing out fliers because that’s not how it works. He still goes there often and loves it. Guy needs a job?
So, the relevancy is that he proposed considering the “Iron Law of Wages”. That was new to me today. Here’s our exchange. Thanks for the forum.
Hi Scott:
Thanks for your comments and you could be right. Maybe I am too much of an optimist and an idealist. Maybe this worldwide upheaval will peter out when it gets cold and as a result of its lack of effective leadership.
But if it does, it will only be a matter of time until some other approach appears to deal with a situation that cannot continue as it is. As I have been studying history I am struck by the fact that human progress comes in waves, first periods of change then stagnation then another wave of dramatic change. I see us at a point where the political/economic system we have will lead only to even more misery for the majority. Some would argue that it is unrealistic to achieve justice without violence. If so that is what we will eventually get.
As the Yale senior sociologist observed it may take 30-40 years but change will come and we can’t know what it will be. I’ve been reading more about Ricardo and then Marx’s views and am inclining more to the view that Ricardo was right with his iron law of wages and Marx was right in his diagnosis, but not right in his communist manifesto. We have to tailor the changes in raw capitalism to the conditions and realities of this time in history. No matter what the outcome is it could be messy and unpredictable.
Dad
what a thoughtful dad.
this will make mine sound worse than he is, but the last time i broached ‘my stuff’ with him, asking things like do you know who owns the fed, how money is created literally by keystrokes, etc., he shook his head, stomped his foot, and insisted he did not, nor did he have any interest, in knowing, like some recalcitrant child refusing to study math. it was bizarro world.
SH:
I am totally touched by your dialog with your dad that I recall my last conversation with my dad in 1971, a card carrying commie for some, but not all, of his life and decorated veteran.
Holding back my tears, I can remember it like yesterday when he said to me as he lay dying in the hospital — “something like capitalism will always be with us because greed is sp persistent, but so will something like communism because the absence of fairness will always provoke envy and rage in the disadvantaged”.
He would be 94 now, I can imagine his eyes full of sadness not satisfaction, with his prescience.
And when machines rule over people, capital is privileged.
And labor, in part because the Marxists focus on it, is all the more anathema to the current power structure.
And we get stuck in endless recursive loops.
Which becomes exhausting.
How about we talk about private ownership of things? And even more so the accumulated ownership of all those things by a small group of other humans.
What does it matter the definition and relative performance of capital and labor if they are operating within the new Rentier class structure?
Sigh.
Laugh the global inherited rich out of control of our society and into rooms at the Hague. We need to change the social narratives folks and prosecuting our way out of the class structure we are in is a beginning to see the anti-humanistic sicknesses that brought us to this point in our “evolution”.
We are one humanity living on one world. It is time we started to learn to act like it.
if you make the basis of the argument against the elite rentier class the private ownership of things, you concede that a human body is a “thing” that is owned privately.
One of marxism’s, and crony capitalism’s key failures is treating people as things. Consumers or tools of production, the result is horror.
Effective arguments versus rentier elites will not question private ownership, but will simply delimited how it may be used in relation to others. Most of our issues now have resulted from overreach and destruction of limits.
Sometimes I read things that make me laugh at their sheer bald-faced truthfulness. This is just brilliant. (the other person that makes me laugh is John Hussman http://www.hussman.net/weeklyMarketComment.html)
Thanks Yves
Hear, hear. The secret to life is sticking with people who are so capable that they don’t have to give a rat’s ass. There’s fck you money, and then there’s fck you intellect.
Marxism? Been there, tried that.
Capitalism? Been there, tried that.
All too-big-to-fail-but-failed-already.
So it’s definitely time for a new thinking, for a fundamental overhaul of the entire system – economics, politics, academia/education. That’s long overdue. But inevitable. Though TPTB will resist it as long as they can. Hence, it’ll first get much worse than it is already. And unnecessarily so. Too bad.
“Marxism? Been there, tried that.”
That’s not so certain. It’s not same thing to have the means of production owned by the workers, which is Marx’s idea, and to have it owned by a central government supposedly representing the people. It’s really the latter that has been tried.
An important French heterodox economist, Frédéric Lordon, proposes a system for the banks that is, I would argue, ultimately more like what Marx thought, as well as being a pretty good proposition in its own right.
Lordon argues that the banking system should be nationalized (once they are no longer worth anything because we really acknowledge their failure), but that it should not then be owned centrally by the state, but instead locally, by the people who use the system and by those who are most affected by its operation. (Remember here that in France, instead of subprime housing loans, variable interest loans were made to communities like cities – by Dexia.) His position is that credit and payment systems should be non-profit but also non-state, although of course the state has to regulate the conditions of the local ownership.
He even got to make that argument on regular French TV, although on a program that’s basically on the frontier of what can be accepted into the public discourse over here (on Ce soir ou jamais). Here’s a video for any interested francophones:
http://www.dailymotion.com/video/xlpiqv_lordon-a-ce-soir-ou-jamais-11-oct-2011_news
You can find some of Lordon’s work in English translation online at Le Monde Diplomatique, although it’s a small selection that’s not adequately representative:
http://mondediplo.com/_Frederic-Lordon_
Lordon argues that the banking system should be nationalized (once they are no longer worth anything because we really acknowledge their failure), but that it should not then be owned centrally by the state, but instead locally, by the people who use the system and by those who are most affected by its operation.
My problem is that this is a prescription for the banks to be owned and run by your local oligarchy. There’s always going to have to be some official system to oversee such a complex activity as banking; and given the clout “the people” running that show are destined to have – indeed, the clout they likely have to get involved on that level in the first place – I think we wind up close to where we are now anyway.
Yes, it’s a risk. The argument would be that there is less risk with smaller entities involved.
And remember, these new, local, ownership structures are to be non-profit and also include members of other non-governmental civil society organizations (such as ATTAC) as well as having depositor ownership and control like a credit union. So, it’s a version of the “bank as public utility” approach.
Precisely because the problems are systemic, there is not one technical solution. Lordon has a lot of other interesting ideas, for example concerning different ways to allocate capital to businesses (based on an analysis of how the stock market actually does not do its job well in this respect at all).
He’s a what you could call a post-Althusserian economist, so he operates with different assumptions. It’s interesting work, if only because Lordon’s research has not been forced into neoclassical/neoliberal models.
‘My problem is that this is a prescription for the banks to be owned and run by your local oligarchy.’
Maybe they should be required to stand for election, though trying to keep money out of elections for bankers could be a worry.
” It’s not same thing to have the means of production owned by the workers, which is Marx’s idea, and to have it owned by a central government supposedly representing the people.”
He-he. We are more marxists then we realize. The means of productions are owned by the labor in the form of 401K.
Oh give me a freaking break when you start talking about workers owning the means of production. What a joke. Most people can not manage anything.
I have spent 35 years in consulting and management. No one ever employees me unless they have problems. I have worked on four continents and a number of billion dollar companies as well as smaller entities and 2 Fortune 500 companies and upper management of the biggest consulting firm in the world. Most people who are trained to manage can not manage. Most people can not even manage their lives.
Do you think all of these people have ended up in foreclosure and no assets because they can manage anything. Oh yes we will hear the cry that people took advantage of them. Hello, that is part of management also — to not let people take advantage of you.
Just another pipe dream of utopian one world thinkers. Thanks for the laugh!
Ishmael,
So what should we do about our current set of problems?
Mansoor
What you should do if you want to understand this stuff is read Veblen’s Theory of Business Enterprise (1904) in which he explains the role of credit in creating booms and busts. In the latest neoliberal incarnation, we have credit on steroids through credit default swaps. We have the Federal Reserve which enables the credit casino. We have a representative government which only represents the major contributors, and we have an ideology of economics which is predicated on an eighteenth century goods economy rather than a twenty-first century steroidal credit economy. Marx was an excellent reporter, but he didn’t understand shit about business. Read Veblen. He understood it all.
http://www.anarchosyndicalism.net/index.php
Seriously, how much cheap invective against “marx(ism)” can you throw into one blog posting? And apparently mostly unburdened by an actual understanding of Marx, to boot. I would strongly encourage the author to read the books Kunkel is reviewing in that lrb article; it might help him gain an appreciation of Marx’s thought that is slightly less burdened by so many things that he here presents as ‘simply true.’
Agreed. And the summation of his moral stance, that both Marxism and Capitalism, as forms of materialism, cannot inform human morality, shows that he not only has failed to understand Marx’s important writings on species life, but also hundreds, if not thousands of years of philosophical inquiry.
Don’t forget the utter silliness of directly linking Hegel with Fascism. That is a real winner!
If you want to wax philosophic on Marx you must read his work. You will find that he says very little about what socialism would look like, and this is quite purposeful. The point of Marxian critique “consists only in making the world aware of its own consciousness, in awakening it out of its dream about itself, in explaining to it the meaning of its own actions.” The point is to establish the necessary pre-conditions for revolutionary transformation without prescribing its end-point in advance, a path that leads to authoritarianism (ie. USSR). He was a rabid anti-Utopian who held up socialism as a utopic ideal that would be constructed along the march of history.
I’m glad to see more and more discussions of his work emerging. That is a plus, but Marxism and Marxian critique are two different things.
Agreed. To be honest, I wasn’t even sure where to start with a substantive rebuttal, as there just seemed so little point to doing so, given how obvious it is that the author doesn’t care to know or understand anything having to do with Marx’s work itself anyway.
Yeah, it is a bit confusing. Marx was a very diverse thinker. Early Marxism dealt with alienation, which a lot of people in today’s materialist, capitalist, consumerist culture would identify with. Doubly given that people are increasingly alienated from what they produce and the value they create, triply given the explosion in wealth inequality the world over. His writing on the American Civil War, the last seven or so chapters in the first Volume of Capital on the birth of the capitalist farmer, the birth of the industrial capitalist, the history of (pre-capitalist) “primitive accumulation”, all of that is really interesting and amazing. The great South Korean economist Ha Joon Chang also talked about how interesting Marx’s writing was on the labor legislation of his times and previous centuries. He, and especially Engels, wrote a lot about environmental issues, which left of center & ecologists economists have only relatively recently started to appreciate.
I find the story of the origin of Marx’s radicalism to be interesting too. One key impact was Marx watching the privatization of resources like the forests. In the area Marx grew up people were given collective rights to the forests, which was laid down in laws like the Charter of the Forests, centuries before his time. Peasants had access to the forests and would use the wood and resources for cooking, to heat homes and to hunt. He witnessed the debates surrounding the enclosures and it hit him how important and changing property was.
Then you get into his economics, even more interesting. The four transactions he identified, which influenced Keynes (Keynes talked about the third, M-C-M’ transaction and its importance while writing the General Theory but only mentioned Marx or Marxists, passingly and disparagingly in the General Theory, I think, twice). His “circuit theory” has influenced Steve Keen. His writing on finance was ahead of its time. The labor theory of value wasn’t his, Smith (for most of his life), Ricardo and Malthus also believed in the labor theory of value. He influenced some of the most influential economists of the 20th century (especially on the left) like Sraffa, Joan Robinson, Kalecki, Karl Polanyi, amongst many others.
To say that he was a bad economist is absurd by the way. He alone created a paradigm shift in economics. He, like the classical economists before him like Ricardo and Smith, analyzed the economic system in regards to class. He, like those economist, used the labor theory of value. He criticized the landed interests of his time, like many of the classical economists did. The capitalist economists who were the founding fathers of neo-classical economics were responding in large part to Marx. He used the ideas of classical economics better than any socialist before or after him as a weapon against the system. They saw in Marx the dangers in the labor theory of value (which Marx used in chapter 13 of the third volume of Capital in predicting the system’s downfall) and analyzing economics in regards to class, amongst other things. How many economists have that big of an impact on the profession and the real world? Sure, he was wrong about things, but so was Smith, Ricardo, Malthus, JS Mill and many others of his time. Yes, his prescriptions were many times flawed, but so where theirs.
He was asked for point to a real world example of the dictatorship of the proletariat and he picked the 1871 Paris Commune. THAT was not a Stalinist dictatorship or anything we saw from Marxist governments in the 20th century.
I am not a Marxist, but at least I have read the man. I don’t think many critics of Marx have. If they did they’d be surprised at what he had to say.
I agree – particularly with the point another responder made about the lazy and ridiculous linking of Hegel and fascism. An excellent commentary on why that is wrong historically and philosophically is found in two of Domenico Losurdo’s books – ‘Hegel and the Freedom of Moderns’ and (though not directly about Hegel) ‘Liberalism: A Counter-History.’
I was mostly enjoying the article up to that stupid thing said about Hegel. Who actually says, ‘Hey, some marxian theorists seem to have something right’ outside of their own circles?
markets, a perfectly normal human activity that goes back 3,000 years, give or take a century.
3,000 years isn’t much in human terms, since humans were hunter-gatherers for most of the last 200,000 years. It’s only very recently that humans started on things such as agriculture, writing, markets, currencies and what-not. I wouldn’t call them normal activities yet. We all have the DNA of hunter-gatherers. The last 200,000 years haven’t prepared us for the recent emergence of systems of agriculture and industry and markets and the consequences of living within them.
“removing markets, as was done in the Soviet and Chinese horrors, is to remove basic humanity”
There are still hunter-gatherer groups of humans that do perfectly fine without markets, provided they are left alone by agricultural-industrialists intent on destroying the environment in the name of resource extraction and farming.
The current warmish era is a bit of a fluke within a much larger ice-age epoch, with ice sheets retreating for the last 10,000 years. I suppose that agriculture and markets will disappear when the ice sheets return with a vengence, allowing hunter-gathering to flourish again, but that might not be for tens of thousands of years, so I’m not setting my consumer-electronics alarm clock for it. In the meantime, the short-lived dances of market-based globalisation will continue to horrify and fascinate in equal measure.
Perhaps people developed agriculture only because they had hunted down all the easy-to-kill big meat animals…
http://esciencenews.com/articles/2011/10/20/tracing.first.north.american.hunters
…which were thriving on the early post-glacial landscape, ten or so thousand years ago.
That is to say: there’s no “going back” – unless we can re-establish the post-glacial mega-fauna which supported those “hunter-gatherers”.
You say: “There are still hunter-gatherer groups of humans that do perfectly fine ….”
Well, that must remain a matter of opinion – I may, and most probably, do, have a very different idea than you do as to what constitutes a “perfectly fine” condition…consider that the measures of life expectancy, infant mortality, and the amount of toil required to meet a given person’s biophysical needs, may be three empirical measures which would indicate that your “perfectly fine” society hunter-gatherers, may not really be so fine after all.
I think you’re peddling myths.
markets, a perfectly normal human activity that goes back 3,000 years, give or take a century
Whereas anatomically modern humans go back 200,000 years, give or take a century. That means markets have been a perfectly normal human activity for around 1.5% of the existence of humans. Or, put another way, for 98.5% of humanity’s time on earth it managed to get by without markets. Somehow that doesn’t support the idea that markets are an intrinsic part of being human.
Further, even over the past 3,000 years markets have not been a full-time activity. All the evidence shows that for most of those 3,000 years they were a regular, but infrequent activity for those that engaged in markets (not all humans did, and some still don’t). People would go to the market for short periods of time or only on specific days. And most of what they did while they were there was social interaction — gossip, discussing politics, courting, etc. — rather than specifically market-activities.
Markets are a lot like sport — another activity humans have been engaging in for around 3,000 years. Human beings engage in sport regularly, passionately and vigourously. Some individuals devote a great deal of their time to sport, some less, some none at all. Sport plays a large part in uniting communities and creating bonds between people, whether of mutual support or good natured rivalry (and, occasionally, not so good natured rivalry). It even plays a big part in modern international affairs.
To the best of my knowledge, though, no-one has ever suggested that all human activities could be understood through the prism of sport or that sport as an activity is an intrinsic part of being human. Viewed from that perspective, the modern fetishization of markets comes across as more than a little perverse.
The truth is human nature never changes…
Mario,
But that does not mean we cannot manage is better. Just like some businesses are better managed than others.
Therefore, practice of some models will lead to a better result than others. Thus, the reason for blogging.
Mansoor
There always wiil be 1%, and I’ve seen it all…
The truth is human nature never changes…
If that were true, human beings never would have adopted markets (or sport, medicine, technology, etc.).
If we accept your premise, then we should abandon all of that because it’s unnatural.
Also, do you just mean anatomically modern humans? Or are you willing to include the entire genus Homo? And if something’s essential nature never changes, then how did modern humans develop in the first place? Where was this unchangeable nature 300,000 years ago when there were no modern humans around?
“And if something’s essential nature never changes, then how did modern humans develop in the first place?”
There is something about humans that will never change. We are constantly in the process of dividing the pie. Just because we are still evolving, in some aspects we are same old savages.
“Marxism resulted in the demonisation of markets…markets, a perfectly normal human activity that goes back 3,000 years”
For good damn reason. If you ask me, the best critique of markets I have ever read is by Robin Hahnel. I would suggest reading his ABC’s of Political Economy for a comprehensive view of his critique. Here’s an article by him on the subject:
http://findarticles.com/p/articles/mi_qa5437/is_4_41/ai_n29398483/
I, personally, don’t always think that markets are inherently good or bad. It is what markets do and how they are used in societies in which resources and the means of production are privately owned, where externalities are dominant, where there are huge differences in wealth and power, where markets are dominated by a handful of large companies, where the majority of wealth is either inherited or gained by monopolizing the work of someone else or on keyboards within the financial markets, etc. That is where Hahnel comes in. Markets could be good or bad, depending on what type of economic system and society they are in and how they are structured. Hahnel critiques them because of the role they play within capitalism and modern societies. We could imagine situations where markets wouldn’t be so biased towards the social, where they didn’t ignore external costs, where they weren’t biased themselves, but those conditions don’t exist. They seemed to exist more in the golden age of capitalism in the West in the quarter of a century after WWII, but not since or before.
I am not totally sold yet on Hahnel’s prescription for the problem though (participatory economics), although I think it has some merits. As of now markets are in a Thatcher TINA type of situation.
Markets are a tool.
They’ve been treated as a god. They’re a tool.
Interest bearing consumer debt makes being human difficult. Usury. Not as cool as we thought.
“I was talking to a finance academic recently who said it was virtually impossible to get anything published academically that questioned the assumptions of the system…”
Modern day “Dark Ages” – lets start the inquisition – Fools all . They teach that all is relative, that ALL beliefs are right . But shun truth . Hypocrites All. I can see why there will be a rise in Marxist thought , and violent class warfare . Its inevitable. And not 40 yrs away .
In case anyone wants to watch the excellent Adam Curtis docs referred to above:
http://topdocumentaryfilms.com/all-watched-over-by-machines-of-loving-grace/
The SBS stream doesn’t appear to function outside of AUS.
I have found Archive.org an excellent place to view Adam Curtis docos.
Here’s a link for “All Watched Over By Machines of Loving Grace”:
http://www.archive.org/details/AdamCurtis-AllWatchedOverByMachinesOfLovingGrace
And here’s a link for a search that lists all Adam Curtis work at Archive.org:
http://www.archive.org/search.php?query=adam%20curtis
I guess it depends on what you mean by Marxism. To me a Marxist is somebody who tends to view society, politics and history through the lens of class conflict. I think that is a perfectly legitimate and probably the best way to analyse our current problems and many past problems and historical events as well. I believe Vico and others actually took this approach before Marx. Marxism is not really synonymous with Marx’s ideas about capitalism, socialism and communism in my view. I think Marx was a much better sociologist than economist actually.
I got your class warfare right here:
http://www.youtube.com/watch?v=rAaWvVFERVA
Lloyd Blankfein as King Arthur: We’re doing God’s work!
What Foppe said.
Also, I am a bit disturbed by the gratuitous invective against materialism and scientific thinking. What muddled and disturbed thinking is lurking behind the following confused sentences?
Both Marxism and capitalist theory are deeply materialistic; which inevitably rules out the human (matter cannot explain humanness, it is just matter).
Medicine is materialistic, and so is agriculture. All of science really. Why is that? Because it has never been any use in the history of human thought to invoke the supernatural. We never found daemonic possession or curses actually causing an illness, we found material causes like germs or genetic disorders. We found that using fertilizer and pesticides guarantees a good harvest much better than sacrificing a goat to the goddess of fertility, or whatever. Materialism works. More importantly, I have not the foggiest idea why it should rule out the human – humans are also entirely material.
So no surprise that each propose some kind of tide of history argument as being inevitable.
No idea how that follows logically. Marx did, but are you sure that even a plurality of the adherents of market-radicalism considers the triumph of their ideology inevitable? Well, perhaps today, but up until the 1960ies many of them were genuinely concerned that communism might turn out to be more competitive.
Both are quasi scientific,
Not even creationists or climate change denialists use the word so transparently as an invective; this sounds rather like a postmodernist humanities scholar unable to get over their inferiority complex from not being able to test hypotheses like those arrogant eggheads across the campus.
and so at once intellectually hollow and subject to the kind of scientific materialism that easily leads to letting machines rule over people.
I am a scientist, a biologist to be more precise. Even worse, I do not believe in fairies, souls, daemons, heaven or hell, guardian angels etc., so I am also one of the shadowy materialists the author apparently despises so much. Nonetheless, I am unaware of ever having promoted the installation of Skynet as the supreme leader of the planet – but maybe I am the exception among my colleagues, who knows.
I understand it’s good to be scientific wherever one can. It’s been a boon to the advancement of medicine and other technological progress that we’ve come to understand the laws of physics as well as we have. It has made the physical reactions to the physical things we do somewhat predictable and allowed us to somewhat control them.
Leaving out the bugaboo of metaphysics, I think the previous commenter’s objection to materialist-type theorizing in realms that involve human activity has to do with seeing this theorizing as not taking into account the unpredictability of human nature, the inventiveness of human minds in our ceaseless efforts to get around restrictions whether naturally or artificially imposed, the apparant dichotomy in our natures between altruistic and selfish impulses and the seeming impossibility in predicting which will surface in which instant, and stuff like that.
So far, AFAIK, fields such as economics, sociology, psychology, lack the predictive ability of the ones that depend more on physics. In that context, “materialistic economics” seems kind of an oxymoron. (It seems to me, by the way, thinking in this brief moment of your field, biology, that it might lie somewhere in the middle. I mean, don’t some of the events and conditions in the biological environment appear quite accidental, or dare I say it, miraculous?)
“Miraculous” is not a helpful category for understanding the world, it is a capitulation. I am just saying that if there is a way to model economics and history to understand what actions lead to what consequences, such a model will not include anything non-materialistic.
It also seems to me as if the major problem in economics is the ideological rejection of certain models or conclusions, and not so much the complexity of the study system, although the inability to conduct experiments does not help either. Yes, biology is a more messy field than, say, chemistry, but even though there is a lot of individual plants, animals and bacteria you can still extract information about how they behave in aggregate and arrive at generalized observations about population genetics, selection pressure, patterns of evolution, etc.
The same should be possible in economics, and I guess it is; the difference is that no Koch brothers et al pour tons of money into biological think tanks, no Randian foundation finances university departments to fight against the acceptance of the Hardy-Weinberg formula.
Alex, you make some good points. We humans are material too. There’s one point of view that everything is.
‘Why is that? Because it has never been any use in the history of human thought to invoke the supernatural.’
But it’s fair to point out that we also transcend materialism in a sense. Agricultural method produce more than incantations, you say. Is that better, or just more? Why is it better to distribute good food than to let it rot in the fields to raise prices?
It’s only the supernatural that makes any difference. It’s only meaning that makes one thing better than another. Is meaning contained in the matter?
Maybe, but isn’t even that a mystery?
«There has certainly been an excess of “fictitious” capital created over the last two decades, far more than Marx, or anyone else, could have anticipated. Money made out of the money made out of money. $600 trillion of derivatives.»
Most importantly their political enabler: low-tax or tax-free capital gains on stocks and houses stupidly and insistently demanded by middle/upper class voters to redistribute income (in the form of purchasing power) from people owning no property to people owning property (and much more so from people owning a little property to people owning a lot of property, but the dumb middle classes don’t get that).
In the past 30 years the main political demand of boomer (especially female) voters in most (anglo) first-world countries has been a steady stream of fictitious (but spendable) capital in the form of capital gains to the middle and upper classes.
The other main demand of the same voters has been for lower wages via destruction of wage earner safety nets and higher imports of workers or goods from low wage areas.
The goal the same in both cases: to enable middle class voters to join the plantation economy in a commanding position as rentiers.
«High frequency trading insanity with trades reduced to micro-seconds.»
The problem with HFT is not so much that it is HFT, but that:
* People who can afford to place computers nearer to exchanges get an unfair advantage in being able to front run other people’s trades.
* Exchanges allow front runners to start and cancel “phantom” trades so that price discovery for front running costs almost nothing.
As usual, almost everything about our current situation is already described with barely different words in “The Great Crash 1929” by J. K. Galbraith, in this particular case on page 48:
«The purpose is to accomodate speculators and facilitate speculation. But the purposes cannot be admitted. If Wall Street confessed this purpose, many thousands of moral men and women would have no choice but to condemn it for nurturing an evil thing and calling for reform. Margin trading must be defended not on the grounds that it efficiently and ingeniously assists the speculator, but that it encourages the extra trading which changes a thin and anemic market into a thick and healthy one.»
On the “global savings glut” really a convenient way to blame the Chinese:
China has a few trillion dollars in foreign currency reserves.
The Western world is hundreds of trillions of dollars in debt.
What savings glut? The Chinese should spend their money before it becomes worthless.
«China has a few trillion dollars in foreign currency reserves.
The Western world is hundreds of trillions of dollars in debt.»
But China and other foreign entity holdings are a big part of the government debt market, and of the currency markets, so they matter.
However your observation that total private debt is much greater than foreign holdings is interesting.
The question is then who is the creditor for those dozens/small hundreds (more than “hundreds”, to get to the hundreds you need to get into derivatives) of private debt.
The answer is simple: ultimately it is pension funds.
That’s why both USA and European governments are terrified of an overt cramdown on creditors and bailout financial institutions and countries to bailout their creditors: it would mean telling their middle/older aged voters that their vested pensions have to be cut.
It is far better for them to extend and pretend, and hope inflation eventually takes it all away.
No Benign. The savings glut was caused by health advancements which extended longevity. No need to blame anybody unless we want to blame say the Romans for inventing surgical tools still used today.
Greenspan’s solution to force continued consumption using a banking solution set would have the same effect if I as a marketer had overweighted marketing as a solution.
Banking solution sets gurantee that the Golden Calf is built at the command of the High Priest Aaron. Problem is, there is no Moses with the military might to force the break-up of the Golden Calf without super duper violence and that is what we’ll get.
Why don’t you ever build a Golden Calf commanded by a high priest? Because the rest of the people no longer have anything of value to trade or you only get one major trade for the Golden Calf so you better damn well hope the high priest is honest. When inevitable he isn’t you have seven billion people all stampeding for the Promised Land with no supplies. A lot of the people begin to realize the high priest has the gold ans has led them astray. What do you think they will do? The high priest has really big weapons and has decided it is time to flee with the Golden Calf. China is not to blame for welcoming the Golden Calf but it may be blamed later if it protects those high priests. This is all just a story of morality and vanity isn’t? Or maybe this is a geopolitical analysis we’re discussing. Hard to say…
Benign is right, the Chinese savings as a cause of the crisis was debunked in a BIS paper we linked to and Andrew Dittmer summarized:
http://www.nakedcapitalism.com/2011/09/the-very-important-and-of-course-blacklisted-bis-paper-about-the-crisis.html
Marx put money into the system as purposeful, it’s use had a destiny. We create money by the basketful, without a purpose, it becomes abused and hoarded.
Keynes was troubled by hoarding and money that was not purposeful (used locally). Local surpluses could create a wondrous local culture rather than being drained off by speculators (he was a currency speculator).
Colonial banks were chartered and produced their own script which was used locally. Some thought about this needs revisiting. Are there advantages that overcome the obvious disadvantages. Is it possible to have local and global script? A Euro and a Greek Euro that convert only under controlled conditions?
«I was talking to a finance academic recently who said it was virtually impossible to get anything published academically that questioned the assumptions of the system; only mathematical analyses based on the the accepted assumptions ever see the light of day. A similar monochrome uniformity is evident in the economics mainstream. It is intellectual despotism, and it arises out of exhaustion.»
Oh nooo, it arises out of people knowing very well which side their bread is buttered on.
One aspect is that Finance and Economics faculty deans are always looking for donations, and in particular for big endowments from very wealthy donors. It does not look good if anybody in the faculty overtly supports research that hints that the very wealthy donor made money like a bandit because. Deans have influence over tenure committees, and no member of those committees is likely anyhow to be grateful to an idiot who upset a potential large donor.
One of the most amusing examples of this is that Ken Lay of Enron endowed 35 chairs in Economics and Finance and Accounting (ehehehehe!).
So the only practical options for people who realize that the usual verities are weak may be:
* Publish absolutely standard useless verbiage and then do a complete turnabout when you get your tenured chair (or endowed chair).
* Bury your actual research in technical jargon so thick that it is not obvious that it deviates from the standard truthiness.
* Do your career at second-echelon or foreign instutitions that are not constantly competing for big-sum endowments from very wealthy donors.
* Make a lot of money in finance/trading/consulting and then write about your dissonant research after becoming independently wealthy.
There is BTW not just the mechanism of greedy deans policing their faculty to make sure they don’t deter big contributions from very wealthy donors by deviating from the standard truthiness: as reported in an appendix to a business book called “High stakes, no prisoners” most famous Economics professors make most of their money, becoming wealthy millionaires, by selling consulting or expert witness billable hours to large corporations, and they keep two different CVs, an academic one that they publish, and a much longer consulting/expert witness one that they don’t publish (because it lists in essence all their conflicts of interests) but supply only to potential corporate customers.
These big names as the author of the book says make a lot of money on the side, and are very careful to ensure that neither themselves not their junior colleagues or research associates or phd students write a word that might alienate potential customers.
When the shadow of the tree next to my window strikes the window I may think that the sun is behind it producing the shadow, but I am told that the sun was there eight minutes ago. When I am told that a star is 3000 light years away I am told that the star was there three thousand years ago. Where it is now, who knows?
These discussions about matter miss the point that the concept of matter is a reflection of our mind. We feel matter when a bat strikes us but what we feel is a current that traverses our body and that current when you come to think of it is ineffable. What is magnetism? What is electricity? What is gravitation? We know the effect that we call magnetism or gravitation. But what they are in themselves is impossible to know. There is no matter, there is only energy, and energy is nothing else but a word that tells us that things are someway and then change into something different and we invent the word energy. How can one tell of the remote future or the future next minute?
If my heart stops right now, is that a falsifiable proposition for me? Consciousness is all, the fear of death forces every one of us to do reprehensible deeds. That is Marx’ materialism, it is nothing else. We do everything to survive and what we do to survive is the basis for beliefs, religions, philosophies. Accumulation is a hope and faith in the possibility of prolonging our lives a tad longer.
Jose,
So what should we do about bad bankers?
Mansoor
Even if you should kill all the bankers their successors would have the same tendencies towards accumulation and power grabbing. There is no exit from the human condition which is tragic, though everyone wants to make it comic expecting a messiah a deus ex machina that will free us us from our fear. I full well realize that my contribution adds nothing economic or mathematical to the question of Marxism’s explanation of capitalism but one cannot ignore that behind all the problems is the tragic human condition. That is a religious problem.
Jose,
So you have no suggestions for the “way forward”?
Mansoor
I have no solutions because there aren’t any. The system will change, everything does all the time. I suspect all the experts. Remember when butter was demonized and margarine praised and now margarine is demonized and butter praised.
I do suspect however that the banks will disappear on their own because they are useless and useless organs atrophy. Since consumption is necessary the government will provide credit that is money for all of us. But once panes et circenses are available without effort we will not want to work. Then the government will have to take rigorous measures to force all of us to work.
If you observe the panorama functionally you may notice that an enormous number of prosperous people do nothing that is useful. What do astronomers contribute except curiosities, and exploration of space, or financial advising, or psychology, or dietitians, or politicians, or TV personalities etc.
We are already there but we still have notions of freedom and responsibility. Who picks up the strawberries in California or the oranges in Florida.?
I think you have to create conditions, or a “playing field”, where it is not in people’s interests to behave badly in the ways that we are familiar with. Then, after awhile, when people invent ways to make badness profitable, you have to modify the rules. It’s kind of discouraging to think we have to remain vigilant not only in enforcement, but in law/regulation creation as well, but that’s the way it is. I don’t know how this reflects on the previous poster’s ultimate reality musings. Maybe that in our imperfect human understanding of things we have to make do with approximations. Still, we press on toward the mark.
Jose and JonboinAR,
Here is how see the “real” problem that humans have:
1) Our right brains (the imaginative, the philosophical, the artistic part) CAN conceive of perfection and infinity (perfect peace, perfect justice, material abundance, infinite life, etc).
2) But our left brains cannot deliver on this vision that the right brains is able to conceive. The left brain is what deals directly with the natural world (logic, management, creation of actual goods and services).
Why would our creator make our brains like this?
I don’t think animals have this issue.
Mansoor
There needs to be a balance between wages and investment returns for the system to function well. Sell on News
The banking system, a government enforced/backed money cartel, is a means by which business steals purchasing power from its workers and the general population.
So, if the money cartel was abolished it would follow that business might be forced, by competitive economic pressure, to share wealth with its workers by say paying them with common stock.
It probably causes few Progressives to lose sleep but why the heck in our so-called “free market economy” do we have a government backed/enforced cartel? Hmmm?
It’s this simple: Government does not need banks and as for the private sector some, the so-called “creditworthy”, should NOT be allowed to steal purchasing power from everyone else.
Moreover, if the workers were paid with common stock, there would be no division between capital and labour.
“Moreover, if the workers were paid with common stock, there would be no division between capital and labour.”
The arein in the form of 401K. Worth to mention common stock is one of the riskiest assets.
Worth to mention common stock is one of the riskiest assets. mario
Our entire economy is put at risk by the government backed/enforced counterfeiting cartel more commonly known as “the banking system.”
Without that cartel, then the value of a common stock would be measured directly by the demand for its goods and services, not by the amount and velocity of Federal Reserve Notes.
Marx split with the Young Hegelians and began his attack on German Idealism with his “Theses on Feuerbach” in 1845. In other words, Marx disowned this tradition three years before the publication of the Communist Manifesto; Kapital vol. I wasn’t published until over 20 years after this point. Please don’t write about Marx if you don’t know anything about Marx, thank you!
How about a return to regulating the capital markets and using tax policy to ensure the difference between the haves and have nots does not destroy our social cohesion as it is doing now. In addition, our experience demonstrates that the current neo-liberal ideology does not work as claimed, therefore, it is time to try something different. The different thing we try does not have to be an either or propositon, more neo-liberal capitalism or marxism. As I read critiques of our current situation it appears that MMT provides a clear analysis of the problems with neo-liberalism and a solution which uses markets to ensure jobs are created and public welfare supported within the capitalist framework. An iterative approach to how we structure our economies is what is needed as opposed to a revolutionary one.
The problem is simple. Our micro and macro incentives are in direct conflict with each other.
It’s good for my individual business to mitigate the cost of human labor, but it’s bad for the economy when every other business follows suit, because it reduces the capacity of people to participate in the economy entirely.
Through endless toil to find ways to produce more with fewer actual people engaged in production we’ve accelerated the above problem without addressing it at all.
The trick is finding ways to bring those incentives into alignment. I’ve been toying with the idea of changing corporate structures to assist this. Currently, the public offers liability protection to ostensibly incentivize risk taking and entreprenuership. Gambles for growth. The problem with this, as highlighted by the micro/macro conflict, is that this gift from the public trust doesn’t necessarily benefit the public.
My thinking is that we should remove the current forms of LLC, S-corp, and C-corp. Then we should only offer liability protection to corporations which organize themselves as cooperatives. People who want to conduct business, but who don’t want to dilute their profits through a cooperative, can still operate as a fully liable sole proprietorship or partnership.
This does a few things. First it helps those in cooperatives see some personal benefit to the gains in production and output, rather than only the downside and having those benefits filter to the few at the top. Second it provides an incentive to organize and invest in cooperatives. Finally it still allows for “capitalists” to be capitalists, just without public protection from failure. Something the public shouldn’t be protecting anyway considering that failure is supposed to be a countervailing force in capitalist systems.
Cooperatives are a good idea but what’s to stop a so-called “creditworthy” individual or business from stealing purchasing power and out-competing the cooperatives with their own stolen purchasing power?
We need something like:
1) Make the FED part of and subservient to the government.
2) Allow the government to issue currency in all forms (coins, paper bills and bank deposits).
3) Outlaw Fractional Reserve Banking. Make all bank deposits 100% reserve government issued money.
4) Abolishing the FED will lead to very unstable pre-FED like banking. Bank runs and bouts of extreme deflation.
5) The government can fight deflation via increased government spending or just by “increasing” citizens’ bank account balance.
6) The government can fight inflation by decreasing government spending and/or taxing and destroying currency.
Mansoor
1) Make the FED part of and subservient to the government. mansoor h. khan
OK. We certainly need a check clearing service but the government should NEVER borrow or lend money. The FED might also serve as a free, risk-free money storage service for fiat that made no loans and paid no interest.
2) Allow the government to issue currency in all forms (coins, paper bills and bank deposits). mansoor h. khan
Certainly only government should create government money BUT that money should only be legal tender for government debts, not private ones.
3) Outlaw Fractional Reserve Banking. Make all bank deposits 100% reserve government issued money. mansoor h. khan
Perhaps. At the very least ALL government privileges for the banks such as a lender of last resort and government deposit insurance should be abolished. Furthermore, as the monopoly issuer of fiat, the government is the ideal institution to provide storage and account services for that fiat. A nationalized FED might do this.
4) Abolishing the FED will lead to very unstable pre-FED like banking. Bank runs and bouts of extreme deflation. mansoor h. khan
There should be no lender of last resort. Banking is inherently risky. Attempts to reduce that risk merely endanger the entire economy. Besides, without government privilege, banking would shrink to an inconsequential role in the economy.
5) The government can fight deflation via increased government spending or just by “increasing” citizens’ bank account balance.
6) The government can fight inflation by decreasing government spending and/or taxing and destroying currency. mansoor h. khan
Certainly the government should have the right to manage ITS OWN money supply BUT that money supply should only be legal tender for government debts, not private ones.
Interesting ideas. But contravenes a basic principle of economic policy–do anything and everything you can to help the people, except actually helping the people.
I’m not sure I understand your question or objection. There’s nothing to stop competition. That’s not the point.
I am not objecting to cooperatives. I am objecting to the government enforced/backed counterfeiting cartel, the banking system. It is naive in the extreme to ignore it. Otherwise, cooperatives would be the rule not the exception.
One of the most striking aspects of mounting US isolation is the black hole in our patriotic propaganda where the ILO would be. Human rights, humanitarian law, we pay lip service to it and pervert into genocidal hate speech without batting an eye. We like development fine, as long as it’s for swarthy sweaty third-world people. But international labor standards, which are integral parts of both development and rights, are an absolute taboo in this country. We don’t dare bring them up here at home.
As has already been noted, there is a lot of invective in the above essay. It would have been a better review if the author had stuck to discussing economic and social theory. His statement that Communism and Facism come from German Idealism sounds Hegelian to me. As far as I understand Hegel, he said that ideas drive history. Marx said that the experience of everyday life, especially the experience of work and the social relationships around work, shape our ideas. It is materialism — material life — that has shaped society and drives history. Marx did not argue that socialism was inevitable, which the above essay more or less says. The conflict between social classes can always end in the common ruin of the contending classes, which is what our future looks like right now.
“…One key is to re-establish the interests of labour, probably in some collective form. That is the message of the Occupy Wall Street movement. For some reason, greed for executives and investment bankers, is simply pursuit of the right “incentives”, whereas comparatively modest wage claims is a tyrannous lurch into socialism, to be resisted at all costs…”
Yes, but investment bankers are being rewarded at market rates for directing capital to its most productive uses. Union wage demands are thuggish and political attempts to disrupt the proper functioning of the reward-and-punishment system of capitalism. [/it’s enough to make a dog laugh]
There is really no difference between Unions and Investment bankers. They have different processes for money-getting. One uses a club for millionaires and the other disruptive force. They are both capitalists (maximizing ROI, which includes many forms of assets and resources). They both suffer from the same social defect, when is enough, enough? Or depending on the economy, how do you contract from excess. The best system would be regulated by feedback mechanisms rather than Regulations. Narrow banking is an example of limited scope with limited regulation. All things being equal, a business is limited by it’s market. With capital excess the market can be distorted and capital excess increased by revenue stream combination to the point of TBTF or TBTM.
It is possible that the country is Too Big To Manage and the economy has been handed to big players that self-regulate in each sector. It is why the role of the Regulator becomes a mission for success rather than abuse oversight. Now that the economy has been outsourced, the contractors want to disable client oversight and eviscerate dissenting worldviews. This happens in the real world of business all the time. The contractor is not fulfilling the contract, oversight complains and the matter is resolved asymmetrically at the VP level, with the client VP not understanding the actual problem or the impact, as long as there is no negative impact on his bonus (or re-election). Oversight is told to sit in the corner and shut up.
Much of what the Right is producing is not alternate path to success, it is producing massive coordinated propaganda. Congress gets talking points (deficit) as does the media. Think tanks publish for Joe-Egghead, the WSJ publishes for Joe-Minivan, Rush and Tea Party Nation publishes for Joe-Six Pack and the Innocents’ Clubs (An attack on the Constitution by Progressive global socialism and the traitor-in-chief by proposing a wealthy tax). The latest being jobs creation via State subsidies or buying votes from the Unions, therefore all job creation must be resisted, depending on your worldview.
Ransome – Yes or what was already known as the ‘Agency’ problem. You either fire the managment hiring the agencies or the people begin inadvertently destroy the supply chains.
The choices are how creative destruction is handled and unfortunatley for all of us went unaddressed for too long. Now the choices are far more narrow in regards to loss mitigation.
“most productive uses”… what the hell does that mean?
I think it was a joke. I hope it was a joke.
I really don’t understand why Marx is getting so much attention in this crisis. Yes, his model was superior to that of the classicals, but it’s already been built on with far more sophistication by economist, starting with Kalecki and moving through Robinson and, of course, Minsky up to Wray, Mitchell and Keen today. They jettisoned most of the ideological baggage that came with Marx too, which again makes them superior.
The work has already been done to extract from Marx what was interesting and relevant. And yet outdated Marxists are continuing to get attention and publishing in the LRB.
I think it is because the ideas Marx created are still relevant and we seem to continually forget them. This is not to diminish what has been developed post-Marx in any way.
Marx wrote that ficticious capital, besides being absolutely necessary to capitalism (in order for capital to realize/monetize profit), was also the “seed” of a new economic system and that crises would lay bare the inherent constaints of capitalism for the world to see.
This post strongly implies that what is called an “over production” crisis is not an over production of real goods, but an over production of fictitious capital. The current battle is that of the 1% trying to figure out which of them is entitled to what wealth, keeping the economy in hostage while we all wait.
The power of Marx is that he demonstrated that this cycle is inherent to capitalism, we can look forward to more of these once this crisis is over.
You may or may not have noticed this in your perusal of Marx’s work, but it is actually about rather a lot more than about the rather narrow social discipline called economics, showing, first and foremost, how economic development interacts with social developments more generally. I suspect this is why people keep returning to Marx, rather than reading Wray or Keen — the latter of whom, at least, is quite happy to admit that he still finds reading Marx fruitful, belying your normative claim that people should turn to interpreters/inheritors of Marx, rather than Marx himself.
As to your general troll that “the work has already been done to extract from Marx what was interesting and relevant” — grow up, and learn some modesty. When it comes to providing macro narratives of social development (that is, the events leading up to the “this crisis” you refer to), “economic” analysis is a piss-poor way of describing what’s going on in the world, while Marxist-inspired, broader-than-just-economic analysis is far more likely to be interesting than anything else I’ve seen so far.
Because, generally speaking (there are exceptions), it is primarily Marxist-influenced economists who deal with capitalist exploitation and expropriation. As, for example, in this part of the LRB review of Harvey:
“So what then are the ‘limits to capital’? Harvey’s answer, disappointing as it is honest, is that a system bent on overaccumulation will not collapse of its own top-heaviness. Should the world market fail to generate the ever increasing surpluses that form its only rationale, it can always enlarge its borders and appropriate new wealth through what Marx called primitive accumulation and what Harvey proposes to call ‘accumulation by dispossession’, given that the process hardly ceased when the English peasantry was cleared off the land or the Inca Empire looted for its silver. The incorporation into the capitalist domain of non-capitalist territories and populations, the privatisation of public or commonly owned assets, including land, and so on, down to the commodification of indigenous art-forms and the patenting of seeds, offer instances of the accumulation by dispossession that has accompanied capitalism since its inception. This field for gain would be exhausted only with universal commodification, when ‘every person in every nook and cranny of the world is caught within the orbit of capital.’ Even then, the continuous ‘restructuring of the space economy of capitalism on a global scale still holds out the prospect for a restoration of equilibrium through a reorganisation of the regional parts’. Spatial fixes and switching crises might succeed one another endlessly, in great floods and droughts of capital. Devaluation, being ‘always on a particular route or at a particular place’, might serially scourge the earth even as capital in general, loyal to no country, remained free to pursue its own advantage.”
One of the better MMT-influenced economists, Michael Hudson, is also influenced by Marx. By comparison, the MMT *technocrats* are either (possibly dangerous) political naifs or just plain pernicious cronies of The Bernank. (I haven’t decided which yet).
(Foppe, to Pilkington): …”grow up, and learn some modesty. When it comes to providing macro narratives of social development (that is, the events leading up to the “this crisis” you refer to), “economic” analysis is a piss-poor way of describing what’s going on in the world…”
As an MMT technocrat (to borrow JTFaraday’s term), Pilkington will learn some modesty and stop analyzing “the crisis” in strictly economic terms, “quand les poules auront des dents” (when chickens have teeth).
The literal translation of “Quand les poules auront des dents” would be “when hens have teeth”. Sorry.
The world desperately needs a democratic alternative to capitalism and communism. The following contains a critique of Marxism as well as a proposal for a democratic structure for society.
Thinking about Revolution
“What do we mean by the Revolution? The war? That was no part of the revolution; it was only an effect and consequence of it. The revolution was in the minds of the people, and this was effected from 1760 – 1775, in the course of fifteen years, before a drop of blood was shed at Lexington.”
–John Adams, Letter to Thomas Jefferson, August 24, 1815
Once again the time has come for revolution in America. Instead of a British king we have a ruling class of bankers and billionaires who control the government and all the important institutions of society. Despite the electoral circus and other trappings of democracy, the big shots call the tune. Politicians serve them, not us. This dictatorship of the rich has pushed economic inequality to obscene levels, has left more and more Americans unemployed or working at jobs that pay too little, has driven homes into foreclosure, deprived families of adequate medical care, saddled young people with huge student loans, caused environmental disasters like BP in the Gulf, and sent loved ones to kill or be killed in wars based on lies. The future holds misery for the many and privilege for the few.
These and other problems are part of a system in which money is power and most people don’t have any. The powerful men and women who run our world were not elected and cannot be unelected. They can only be removed from power by revolution.
[Full text continues at the web site below. Topics include: Why revolution is not only necessary but possible. What strategy can succeed. Why equality means replacing capitalism with a sharing economy without money, in which everybody has equal access to the wealth and benefits that society creates. Why democracy means laws are only made locally with order in society coming from voluntary federation.]
http://www.newdemocracyworld.org/Thinking.pdf
-“These and other problems are part of a system in which money is power and most people don’t have any. The powerful men and women who run our world were not elected and cannot be unelected. They can only be removed from power by revolution. “-
I’m not so convinced of that. Those who “run the world” were not elected, perhaps, but part of their running the world, as we’ve seen, involves controlling elections. Was it always thus? It must not have been, else how did we get the New Deal that returned a modicum of the nation’s wealth to the common folk? It seems to me, roughly, that in the past 40 years that specific turning points of legislation can be identified that tipped the “playing field” in the direction of the already powerful, such as whatever body of regulations that were done away with that made radio stations have to at least show a degree of non-bias in their programming. Wasn’t there also some kind of regulations that had to be rolled back before much of the media could be consolidated into a few hands? That and other things like eliminating Glass-Steagle, for example.
Can’t a lot be tried before we talk of overthrowing the whole system? I mean, wasn’t it modified to benefit common people before, and then changed in specific ways that benefited the interests of the wealthy, and can’t those specific changes be undone?
Yes, a lot can be tried. Except that the elite political class and the elite financiers who control them will not *let* us try those things without overthrowing the system.
Who’s calling for honest elections and a change in the electoral system to allow for real candidates of change to win? And who’s assaulting protestors, and who’s claiming that spending money to brainwash people is a Constitutional right?
The rot in the system is very deep, and it may well be impossible to reform it, because every attempt to reform one piece of it is stymied by another rotten piece. In Germany, which has a better electoral system and honest elections, a single federal election could probably improve things a lot (but it won’t happen until 2013) — we know this from the German state elections.
But the US doesn’t have proportional representation. The US has gerrymandering, the Electoral College, the circus of Presidential primaries, the malapportioned Senate, the filibuster, a crooked Supreme Court stealing elections and declaring that unlimited campaign spending is good, massive voter suppression, electronic “voting” machines, and more! How do we reform *any* of this without overthrowing the whole system? All the different types of corruption are reinforcing each other.
I get the impression here that when the author says “marxism” what he/she really means is “Stalinism”.
I almost vomited at the stupidity of this sentence:
“And removing markets… is to remove basic humanity.”
(And I’m not just talking about the grammatical error).
Bravo Yves. Well said.
“There is, however, a difference between Marxism and what Marx wrote”
Unfortunately such difference will always remain a concern for many. Historically proven that a movement that starts up with the good idea, ends up with something totally twisted.
“The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.” — Lord Acton
I’ve always felt that Marx’s writings offered a way to look at the issue of distribution and that modern capitalism offered a method of defining the planning the financing of perceived present and future needs for society as a whole.
The issue, it seems to me, is far deeper than just the “people” vs. the “banks” or Capitalism vs. Marxism. The issue is the evolution of human nature and society and how we go about saving and investing surpluses for “tomorrow” whenever or whatever that tomorrow is (or if, at the rate we’re going).
If Ethics and Law are supposed to fill in the differences, then I’m starting to strongly believe that none of us will see any satisfactory answer in our lifetime and that humans still have a very long and sometimes painful evolutionary path of reconciliation of the above in front of them.
Many seem to want to dead stop at Marxism or Capitalism as they are defined today; thankfully, for what it’s worth, things like #OWS and places like this are excellent examples of the fact that many want to “keep on truckin'” towards working it all out.
Interesting comment. The study of building blocks and their shapes might be useful to understand and measure behavioral science.
For example, pyramids sprang up all over the place, all over the earth at about the same time. How could people on the other side of the earth with no method of communication build the exact same structures?
A pyramid is a reflection of how man builds organizations. How he thinks in general about using organizational tools to solve problems.
What do the United States and Central Banking, Corporations all have in common? They are 4d box shaped management tools that diffuse risks of centralization. These structures all seemed to start appearing all at the same time in the shape of architecture as well.
So why does a box design degrade to a pyramid? The answer is not mechanical per se. It is because man has now fully evolved to enter a 4d paradigm. By using Facebook for example, your using a 4d tool. Its initial design still survives (for now) but will degrade to some level of 3d when purchased by Golden Sachs.
Man myopically views passage of time and frames it based on the here and now instead of cycles which was already well understood by many cultures but channeled into a new high priest of the pyramid. Hence being told by the priest and stupidly believed by the gullible masses that only PhD’s can study the cycles of the herd. It is also why I had one of these types tell me a year ago that the odds of my W dip forecast still being right from Q3 2008 was 245-1. Ok pay up!
I can go on Teeveee now and run a vanity victory dance! NOT. I will continue to advance understanding for a more stable hybrid 4d-3d models and watch as the high priests are revealed for what they are. Imperfect men like the Pharoah and certainly not gods.
Thanx for this article! – I found it very useful …
The author being reviewed is David Harvey. His latest book is directly written using not only Marx but considerable intellect and scholarship to help understand the current economic catastrophe. I have just about finished reading this book, “The Enigma of Capital” and find it a good summing up of what just happened, using some relevant Marxist thought. To get a better idea of his thought, quickly, here is a animation from a bit longer lecture.
http://comment.rsablogs.org.uk/2010/06/28/rsa-animate-crisis-capitalism/
While academics in general make a living arguing over smaller and smaller differences, the idea of crisis and surplus capital is not a mysterious dogma put forth for the purposes of mystifying people and confusing them further.
Marx was influenced by Adam Smith. So what Marx talked about, the British Empire and its economic system has the same starting point in the volumes of records of trade, commerce, and investments and banking, available through the highly advanced British society, as Smith. And there is not anything ground breaking about the existence of markets, or merchants selling things for a profit. It is called making money for a reason and no one gets rich by selling for less than what they paid. That is all very basic. What is different about Marx, is that he is part of the intellectual revolution that is using the same scientific method of Newton to analyze society. Like Smith, the insight, that society can be viewed as a big machine, a Leviathan as Hobbes put it, and can be seen to operate with parts that work together to form an operational whole. If we could describe accurately the Leviathan, we could have a better world, just as if we paid attention to our bodies, as informed by scientific medicine, we could have a healthier life. We have to know how society works, in order to make it work better, to have progress. Again, nothing too startling here.
The starting point for Marx, is that we do not live in history, for most of us, we a subjects of kingdoms, believers of some religion, not consciously making decisions for our selves about our lives, but have our lives pre-set by the society we are born into. We live in Pre-History, because we do not get to choose, our choices are made for us. We have not yet written history, it is written for us. It is the “how did this state of affairs come to pass?” and “what are we to do now that we know?”, that Marx passes into intellectual history as Marxism.
The relevant concept of surplus capital in relation to what we are enduring in 2011, is again, not that mysterious. As Yves points out, we see labor idled with the high unemployment, and we also see almost $2TRILLION in corporate cash sitting on the sidelines. What we are enduring is a wait and see period for when profits are reinvested back into the economy into profitable expansion or new enterprises, that will put the idled citizen back to work. But why does it happen at all, when capitalism regularly operates and produces profits, how can they not reinvest them for expansion or into venture capital bets on new technologies and ideas? Here is one main reason
The established business, like the auto industry, are use to expanding as needed for demand. But we already have built all the car factories that we need and the capacity to produce cars is greater than the ability of the population to absorb them, even if we all worked and bought a new car every 3 years. While utilization of manufacturing capacity goes down or stays level, GM still makes a profit. As the cash piles up, what is it supposed to do? As a mature industry, it can’t just keep building more factories. It already redesigns new models to keep demand in place for newer, better, faster etc. So the surplus capital goes elsewhere, if there is a place for it to go to make profits at the requisite rate of return on investment. If not, capital goes idle, the liquidity preference of Keynes.
Profits keep getting made but can not go into the auto industry so where do they go? One solution is GMAC, if you can’t make profits by making the commodity you make profits with lending the profits, to buy cars, houses, commercial real estate, or start a bank, like Ally. Now, spread this across most sectors of the economy and the story is the same. So much profit making continues but only so many places in the world for it to go produces a glut. This is the over accumulation of capital and from here, we get capital destruction, Schumpeter’s creative destruction, in the form of a crisis, so assets prices deflate and industries liquidate and people are put out of work, until new enterprises or innovations come along for the surplus capital to go to. Like electric cars and a solar electric panel powered distributive electrical grid.
Technological innovation, is also a part of Adam Smith, research parks at universities produce the new spaces to be developed into which pour, surplus profits. Marx saw the new markets, as the new territories that capitalism or the British Empire entered into. Its colonies, especially in America, China and India were crucial for surplus profits to go, once the British Isle absorbed all it could, smothering the countryside with factories and its seaports with warehouses and ships.
One of the great insights of Marx is a valid one, and an important contribution to understanding our world. Surplus profits, the purpose of making money, and accumulating it through deferred gratification and then re investing it over and over will produce so much money that, at some point, it is not rational to reinvest it, spend or do anything with it other than wait. But of course, we know, that capital never sleeps, it breaks down all barriers and moves around the world in an never ending search for return on investment. When that is halted, as it periodically does, we have a crisis.
From Marx, we go to the Macro Economics of Keynes, who sees a way out of unemployment and the disaster it brings into the world for so many. Nation building: if there is no new place in the globe left to go to, develop new spaces within the territory you already occupy. We call it infrastructure investment, repair, done by the nation state. Of course, this puts private capital in direct competition with the newly financialized state. The state has finally learned some of the tricks of capitalism, and once it does, no longer needs the services of the creative entrepreneur. The modern research university and associated research parks and nearby think tanks are the new generators of material human progress, new commercialized enterprises and all the jobs and taxes that come with them. Capitalism, with its innovation that conquered the military and religious social orders of the past, has been internalized by the state and is now vulnerable and seen as expendable.
Thank you for acknowledging David Harvey. Everybody else seems to be absorbed in themselves. There are good Greek words for that.
Very educational comment, thanks!
«Surplus profits, the purpose of making money, and accumulating it through deferred gratification and then re investing it over and over will produce so much money that, at some point, it is not rational to reinvest it, spend or do anything with it other than wait. [ … ] Macro Economics of Keynes, who sees a way out of unemployment and the disaster it brings into the world for so many. Nation building: if there is no new place in the globe left to go to, develop new spaces within the territory you already occupy. We call it infrastructure investment, repair, done by the nation state.»
To me this looks like one of my standard worries: that the first-world has a massive underemployment problem, and that (supposedly) make-believe jobs in various sectors like healthcare, entertainment and FIRE have to be encouraged to absorb job-seekers.
But then when you write «But we already have built all the car factories that we need and the capacity to produce cars is greater than the ability of the population to absorb them, even if we all worked and bought a new car every 3 years.» you are stating what in standard Economics is a heresy, that is that wants are limited. Specifically in this case that nobody wants to have a garage with 10 cars in it, just for fun. That’s obviously wrong, and the reason why that does not happen is that cars cost too much (to buy and keep) compared to wages to allow for that kind of demand to be a mass demand. And then we get to the why that is the case, and that’s a bit of a difficult discussion.
«Capitalism, with its innovation that conquered the military and religious social orders of the past, has been internalized by the state and is now vulnerable and seen as expendable.»
A lot of people including you seem to confuse various “ism”s, and this is a glaring example. “Capitalism” technically is a political, not economic, system, in which political power belongs to owners of physical capital.
What most people call “capitalism” today is a 2-3 rather different things:
* The industrial system of production.
* The market (distributed) system of planning production.
* The political pre-eminence of property owners or controllers (plutocracy), and in particular of those who control (rather than own) financial capital, which is the current situation in most of the first-world.
The three concepts above are independent of each other: the industrial system of production can exist without a market system of planning production, and without the political pre-eminence of property owners, and viceversa in almost every combination.
What they state may have internalized as you write above is large parts of the industrial system.
Yves, you write:
“Marxism has its roots in German idealism (Hegel) which I think we safely blame for fascism as well.”
Unbelievable. To assert that Hegel is to blame for fascism is ludicrous. This is only the most troublesome of your many assumptions being made here with incredible and superficial confidence and conceit. It cannot be stated any more plainly than to say that much of what you write here merely reflects your ignorance of a system and methodology that is Marxism. And I say this with reservation because I have great respect for Nakedcapitalism.
As much as you may resist this, you are simply in over your head here, Yves.
Don, the blog post is by ‘Sell on News’.
I was wondering what the hell had happened to Yves to make her write crap like this, thanks for pointing that out
Thanks for the correction. I read the very beginning so should have retained that when I wrote the comment but didn’t, as I completed the read 1/2 through after setting it aside for two hours.
Anyway, that would explain my surprise when reading it thinking it was penned by Yves, knowing she has great deal more going upstairs than that.
Don,
Unbelievable. To assert that Hegel is to blame for fascism is ludicrous.
There two such connections. One via Hegel’s philosophy of history that have influenced the philosophical traditions of marxism, anarchism and national-socalism. All of them borrowed the philosophy of history from Hegel.
Nietzsche Ubermench concept which was the basis of Arian race nonsense was based on treatment of evil as the force of change in society. Nietzsche extended Hegel’s difference between the concepts of “evil” and “bad” in spite of both being considered the opposite of “good.” He justified violence of the “blonde beast,” the barbarian, that maims and slaughters in achiving social goals by pointing out that that there are two very different concepts of “good”: one social force “good” is precisely what the other calls “evil.”
Marxism was another source via which Hegel influenced national socialism. Marxism consists of three distinct parts: political economy based on teaching of Adam Smith and David Ricardo, materialism based of Ludwig Feuerbach phylosophy and Hegel’s dialectics, which became the doctrine of development of material worlds instead of doctrine of development of ideas.
If one looks at the NSDAP (National Socialist German Workers’ Party) program it is easy to notice substantial level of plagiarism:
I see. And had Hegel not been born that neither would have fascism?
Gee, what can I say.
From Marxism point of view it does not matter whether Hegel existed or not :-).
Marxism inherited from Hegel’s objective idealistic theory the belief that historical development and especially the laws of such development are invariant, i.e. they must be realized by any circumstances.
So if Hegel would die in youth his philosophy would still be created by somebody else. May be much later. And national socialism would appear on historical scène too, althouth probably in a different form and a different country.
Here is a relevant quote from http://www.socionauki.ru/journal/articles/129622/:
Kievite: Marxism inherited from Hegel’s objective idealistic theory the belief that historical development and especially the laws of such development are invariant, i.e. they must be realized by any circumstances. Hegel (according to H, =absolute idealism; objective idealism is Plato) never said any such thing. He always emphasized contingency & the retrospective character of philosophy. The Owl of Minerva flies at ducks^H^H^H^H^H dusk, and all that.
I think Marxism analysis is way overrated and while it is important to read and understand Marx in no way his analysis should taken for granted. One serious warning sign is that the condition of labor in the USSR and other “socialist camp” countries was generally much worse that the condition of labor in Western Europe (the USA was a special case because it avoided the horrors of WWII and was the main beneficiary of the after-war reconstruction for probably twenty years or so). So state ownership might not lead to less pain and we should be careful what we wish.
Marxism is half politico-economic theory and half religious cult and it is very difficult to avoid destructive effects of the latter if is it taken uncritically. And that goes beyond the idea of communism as a bright future of all mankind ;-).
One fundamental consideration based on the USSR experience is that it’s simply impossible to suppress markets completely and that market can’t be explained simply in terms of bourgeoisie-proletariat dichotomy. So while neoclassical economy is pseudoscientific crap that does not mean that the opposite view is true.
There is some sense in the statement that markets are fundamental for human society. And that private ownership is fundamental for human rights. And that’s definitely anti-Marxist views :-)
The history of the USSR suggest that even when suppressed by state, markets reemerge, often in perverted forms and state ownership including state ownership of banks is not panacea.
It is also interesting to note that in the USSR private market for agricultural products did exist and was able to feed considerable portion of population despite using tiny proportion of agricultural resources. The same was also partially true for small tools market, construction and education (the system of private tutors was very widespread).
The second important observation is that labor market existed too and there was significant competition and high level of (hidden) unemployment, for example, among engineers. Many graduates were unable to find meaningful employment in their newly acquired specialty and were forced into clerical office worker jobs. Situation for university graduates in the USSR in 70th and 80th was not that much different from the situation that exists in the USA now, when there are a lot of graduates of Universities among waiters. No wonder it was semi-officially called “the period of stagnation” (“zastoy period”).
I feel that the system with nationalized banks while is the necessary and very positive step from the current situation in a long run is also prone to abuses which take a form of corruption of government officials for certain privileges (for example cheap loans).
So I feel that there might be no single long term stable configuration of public vs. private ownership. What is important is to permit dynamic adjustments, periodic conversions from public to private (privatization) and from private to public (nationalization) and take into account externalities that exist (it nationalization will be performed only after banks became bankrupt it is not so good). For example in case of boom automatic stabilizers can include increase of government ownership and what is not less important increase of persecution for financial crimes. In other words, the number of banksters jailed per month should generally correlate with deviation of S&P 500 from its 200 days average ;-).
Also very important is suppression of positive feedback loops in financial sector. How to implement this suppression is unclear due to immense power of Wall Street to corrupt regulators. No revolving door policy is probably a must but definitely not-enough. Financial police might be a step in right direction. It has drawbacks but they are less dangerous then the current situation. Another potentially fruitful approach would be to use RICO statute widely against financial institutions. Obvious justification is that in their current form they are way to close to Mafiosi groups and do represent a danger for society at large.
The words of Jefferson that banks more dangerous than standing armies are really prophetic. Financial sector does behave like an occupying army. In this sense “Occupy Wall Street” movement is grossly mislabeled: it should be called liberation from Wall street occupation movement ;-)
In a way the dissolution of the USSR, while detrimental for labor “behind iron curtain” was a serious hit for the labor in Western countries. Its existence provided some built-in stabilizers that prevented oligarchy going too far because of the “Red Menace” danger. So it is not so surprising that the wheels come off the market economics twenty years after the dissolution( I think the current crisis should be viewed as the second phase of dot-com bubble burst which was patched by artificially propelling the housing sector.).
Another disturbing, realistic and anti-Marxist view is that as societies become more complex, the costs of meeting new challenges increase, until there comes a point where extra resources devoted to meeting new challenges produce diminishing and then negative returns. At this point, societies start collapsing. So financial sector hypertrophy and criminality may be just symptoms of deeper problems within the society. In this sense nationalization (again while absolutely positive and necessary) is more like treating the symptoms then the underling problem. Which might be more competition for and as a result diminished access to energy. In this sense the national security state that is emerging after the Patriot Act might be particularly a response of the elite to new challenges.
Exactly Kievite. Teddy the “Trust Buster”‘ Roosevelt came ten years too late to avoid the more serious consequences of rapid centralization (which was spurred on by new information sharing tools like the telegraph). The rich and powerful have access to these tools first and abuse them to prevent their competitors from having the same access as themselves until full adoption occurs. The Internet tool exploition is ending as full adoption has now occured.
What comes next is Teddy Trustbusters and it is this attempt to block them that ultimately precipitates violent revolution if peaceful one fails. For the elite, your answer is not to play this game of slight evolutionary advancement and letting the people get down to business of solving their own problems. The sooner you do that, the sooner you get on to resumed gain in the markets instead of giant bullseyes now symbolically (but soon to be literal) on your back. Bankers make loans. They don’t like fiscal policy and governments have been so weakened their are large gaps in having even discussions of fiscal policy, never mind planning and implementation…
as societies become more complex, the costs of meeting new challenges increase, until there comes a point where extra resources devoted to meeting new challenges produce diminishing and then negative returns. At this point, societies start collapsing. So financial sector hypertrophy and criminality may be just symptoms of deeper problems within the society.
That pretty much describes how I have have come to view the current situation.
I first came across this viewpoint a few years ago (and recent evidence continues to support it) in Thomas Homer-Dixon’s most excellent book “The Upside of Down: Catastrophe, Creativity and the Renewal of Civilization. http://theupsideofdown.com/
It’s a wonderful antidote for apocaphilia. Highly recommended!
Second.
“kievite” while I appreciate in general your arguments, you have a somewhat inaccurate view of Marxism in general, which is easy as it has has many aspects (thus endless theological debates and splits among the faithful), for example in the idea that markets are incompatible with Marxism.
The core of Marxism is the concern about alienation, that is the degradation of most humanity to mere tools in the system of industrial production. Alienation was also associated with inequality of income and wealth, but Marxism at the core is humanist and based on spiritual goals (while strictly materialist as to method).
Marx ascribed alienation to two causes, the industrial method of production, which he thought was both historically inevitable and a very good idea, but which made most people work in collective systems of production based on material capital, and the private property of that capital, which meant in his view the ability for a small elite to be the sole controllers of most agency related to production. Which is of course the view of the world exalted by Objectivists, libertarians, and other elitists, whether race based or not.
His proposed solution was the collective ownership of the material capital used in production (not necessarily of all private property) to reflect the collective operation of those means of production, as reverting to individual methods of production or methods not based on capital was not feasible or desirable. This idea then was developed by him and especially others in more expansive directions.
As such the market is not really incompatible with Marx’s thought, and one can well imagine a market based economy that avoids alienation via collective ownership of material capital. Conceivably any system that returns substantial agency to all human beings and solves the alienation problem would have been welcomed by Marx, even if he thought this could only be achieved with collective ownership of productive capital.
But Leninism is a completely different thing, and I tend to agree with the view that it is the fatal deformation of the vision of Marx towards what is essentially an economy designed to support total-war, thus the abolition of most of private property, the centralized planning etc.; arguably reintroducing alienation in the form of confiscation of agency by the Party elite.
Apart from the humanist/elitist divide, the other important arguments about how to organize industrial production revolve around efficiency, what is what best motivates improvement in the industrial systems of production.
Part of the choice of collective ownership of productive capital made by Marx seems to have also been motivated by hopes it would be more efficient; the Leninist idea is that centralized planning is the most efficient, especially for a total-war economy.
The main non Marxist alternatives are:
* Private ownership of productive capital was once thought to the main driver, but the historical experience of the USA shows that is an illusion (almost all productive capital in the USA is now owned by the state or pension funds).
* The current myth is that the Market (whatever that is) is what drives efficiency in production, but centuries of experience and sound mathematical reasoning show that it ain’t so, and only competitive markets deliver benefits.
My personal impression is that what delivers improvements in efficiency is a good bankruptcy code, because the people with the best interest in policing business efficiency are neither central planners, shareholders, or market participants, but creditors. If creditors have the power to close down businesses that don’t add value and sell their assets most other aspects are secondary to efficiency.
The problem with the Soviet Union is not even that it was a dictatorship of the Party inflicting alienation on most of its citizens just like most non-Leninist states, but that it evolved into a crony system where powerful sponsors could keep inefficient businesses alive indefinitely.
Whether it is crony “capitalism”, crony “communism” or crony “feudalism”, the issue with cronysm is that eventually is not just kleptocracy (stealing a chunk of the profits), but becomes about keeping losing businesses running, and that makes everybody poor.
A similar thought is expressed in a different form by an-ex chief economist of the IMF here:
http://www.theatlantic.com/magazine/archive/2009/05/the-quiet-coup/7364/
which talks a lot about post-Soviet Russia, but is clearly meant to allude to post-Carter or post-BushSr USA.
The advantage of crony feudalism was that killing the members of the corrupt crony government in order to take over their sphere of influence was considered a respectable thing to do. It happened *all the time*. This appears to have been the main check on the tendency towards cronyism in feudalism.
It’s a rather nasty way to stabilize the system, but I don’t see a stabilization mechanism at all in most other systems. Democracy is supposed to allow us to vote out the cronies, but when that doesn’t work, we have a problem.
Marx declared: ‘I am not a Marxist’ – and it seems the author of this post is attributing a lot of the ‘evil’ in subsequent attempts at ‘Marxism’ to Marx himself – who was much more concerned with examining the inherent contradictions in capitalism than making a serious attempt at diving what would come after.
His greatest mistake was in not anticipating the development of social democratic attempts to ameliorate capitalist excesses – now that the neoliberals have disabled that process, we’re back on track to the denouement he envisaged.
Thank you for this great piece of reflection!
One major statement I previously recognized but was unable to formulate this clearly is that both Marxism and neoclassical capitalism as probably most other normative social theories / systems build on a plain analysis and abstract philosophical reasoning, free of values and interpretation. So that basis and only the basis satisfies scientific standards. Normative theories or other politically influenced derivations from that basis do not satisfy this standard as they are infiltrated by ideological objectives and thus contain values. The evil in such normative theories lies in their pretention of undisputable reasoning. Any discrediting of analytical work arguing with Marx’ analytical reasoning merely reverses evil masking.
I don’t see scientific exhaustion to be the reason for blocking criticism of neoclassics, it is ideological fear. Much of the elite in economic science not only sees their work and school of thought endangered, that elite has long left the objective observer spot and is in fact actively involved in economic policy-making. So you may name it exhaustion, but in that case, I would add, it is the exhaustion of scientific ethics. Much in line with this argument, the increasing influence of capital on the financial foundations of science and subsequently on its freedom of thought undermine or exhaust the capability of economic science as a whole. In more practical terms, Harvard professors of economics either originate from ‘the capital’, get promoted by it, have their chair financed by it, or ultimately create the majority of their income from private contracts with ‘the capital’. Such pragmatism may appear opportune in the short term, but the value of science lies in its freedom from such influences. The price for lowering these standards is the exhaustion of critisicm and following the logic of scientific evolution eventually the prevention of innovation (or guiding of evolution).
Another great insight: Both normative Marxist and neoclassical capitalist theory are materialistic in nature, which is somewhat logical, as materialistic reasoning is/was thought to be the driver of individual action – and when aggregated – public opinion. A normative theory with the ambition to constitute a social system according to this logic required materialistic reasoning. The problem with materialism as underlying philosophy is its effect of creating psychological drivers such as greed or desire for power. Any system based on materialism hence faces the ultimate extinction threat of over-accumulation of wealth or power. Personally, I accept the reasoning of quantum physics and its logical conclusion that conscience instead of matter marks the core of our universe and that matter is only the first projection of conscience (To anyone interested, I suggest watching the Quantum Activist). This new paradigm suggests that science on the basis of materialism is never capable of seeing the whole picture, no matter how high it resolutes the detail. Conscience with its subjective/individual/unpredictable notion may offer a path to understand the flaws of normative social theories. At least, it offers a groundwork for a change to the long-socialized psychological drivers of accumulation irrespectable of collective needs. As a PhD in social sciences/economics I very much resisted the idea of incompleteness of objectivity, but the philosophical logic was too compelling to simply turn down.
My quantum excursus may be idealistic itsself and I sure doubt the prevailing power structures of society, the world religions and the intellectual and reflective capabilities of the general public will allow for a quick and frictionless renunciation of materialism.
One last thought: According to Marx, we have reached the endgame (“In social terms, this will take the form of a contest between creditors and debtors over who is to suffer more devaluation.”) with a precedence being created in the discussion over the burden sharing of a EUR sovereign debt default. One thing, we may clearly and without any doubt see from the political standpoints of various entities and the final political decision is which party’s interest are represented by whom (possibly entirely different from public perception). You do not often get a decision of such scope and precedence character, either clearly representing capital or labor.
ClaudeH. Your a genius.
“Capitalism will commit suicide”. –Karl Marx
I think I know what my professor meant when he said that Marx was wrong. Capitalism won’t die. First it will go global, and then we will kill the planet, and then it won’t matter any more.
The guy who wrote this is an idiot who understands nothing about Marx or Hegel. He does know that in the current climate he has to put them down to gain acceptance for his ideas. Another couple minutes of my life wasted.
Congratulations! You’ve taken an important first step.
The more familiar you become with this incredibly rich school of thought and its history, the less need you will feel to apologize for invoking it in your arguments.
Beware of red herrings: There is an immoral equivalency between Marxists and Capitalists – at least where body counts are concerned, just as there are discrepancies between the practice and preaching of monotheisms such as Christianity and Islam.
While Marxism actually proscribes little in the way of solutions, it does seem to do a better job of describing the current situation better than the other major schools of political economy.
Absolutely agree!
There are many things that can be done to fix this problem, but alas nothing will happen until the FIRST problem – the counterproductive incentive structure of those in positions of power – is solved.
I hope the “Occupy” movement gets that ball rolling!
Thanks for posting this article. I enjoyed it. Mostly because Marx caused me to go so cross-eyed in college, I just kinda gave up except for the catch phrases. But have always thought Marx had good instincts. The thing we are faced with now is a turning point. The excerpts above were good: fictitious capital nullifying profit; the disconnect of capital and labor. We are faced with these issues because there aren’t enough good investments out there. We got a whole lotta money to invest and nowhere to put it. What did Marx say about that? That labor should be paid so the imbalance does not come into being in the first place. Yes. That sounds good.
But the problem remains: we have reached the end of the line. We cannot continue to over-develop the planet nor use natural resources irresponsibly. We have to get our kimchee together. (C. Whalen)
So looking only at today since economics is a moving target and you can’t keep track of it all: 600T in derivatives is definitely some very false capital. Lets take a page from Marx: We can either nullify them all (which the banksters will fight to the death) or we can match them with false labor payouts to every citizen. Spread the false wealth. Just helicopter it. Which would buy us time to figure out which environmentally beneficial investments to go forward with to create a sustainable world. And how to include everyone in the opportunities. Marx seemed to believe in a steady-state world which could be achieved through dialectics. Maybe dialectics carrying a big stick.
I’m surprised that Henry George never comes up in these kinds of discussions, especially considering the extent to which the current financial crisis is due to monopolization and speculation in land values.
I find our political system far closer to marxism than I do capitalism. That is one of the main problems. The other thing is everything in our system encourages births when in fact we should be discouraging them. Those who survived the plague experienced a large jump in the standard of living because there was not so much labor competing with it.
For the last 50 years in the US a large push by management has been done to lower the need of human capital. The computer has greatly reduced the need of human bodies. I can do the work with my PC and a cell phone which use to take multiple people if they could even do it at all.
However, our political system has encouraged births and immigration both legal and illegal. Then all of a sudden we realize that the middle class is disappearing and people can not find jobs. Big surprise. In addition, in studies I have seen as populations increase the average IQ drops. The reason for this is the smarter and more educated have fewer children and vice versa.
If you look at the number of people in the upper class that control the wealth instead of the percent, it is really much higher than in the past. The problem is the rest of the population has breed out of control.
Oh I can see the liberal readers now being aghast but this is played out through out history and yes we are yeast people we breed until we are swimming in our own excrement and the die off happens. Time and again.
If the US had not thrown open its doors to immigration like it did in the 60’s it probably would not be in this position. Now don’t start yelling about all the brain power that has immigrated to the US. The highest number of H-1-B’s are accountants used to suppress wages.
Intelligent thoughts but what about the invention of birth control? The die-offs happen because of wealh concentration created by malinvestment. If you see this comment Ishmael, please read my thoughts on who has access to technology tools and how they are initially leveraged. The key word here is ‘initially’.
But no worries, I think mankind will have a new set of high priests soon and at least one last cycle to contend with but at 41 I only have to deal with this one. For I won’t live long enough to see the next one.
“I can do the work with my PC and a cell phone which use to take multiple people if they could even do it at all.”
Ishmael, what “work” is it that you do? How is it relevant to humanity?
I agree that population control is key to a reduction in human suffering and our chances of long-term survival. What US immigration has to do with that question is (to me) largely irrelevant. Most “work” that the US relies on is done overseas. Places like India are positioning themselves to “grow” despite their outlandish populations and birthrates. Just recently in the New Yorker, the story of a 60-y.o. cattle broker transitioning to a new career as a real-estate agent projected nothing but a generally depressing scenario: as in the US, agriculture in India is collapsing under the pressures of more sophisticated and wrong-headed schemes for getting rich.
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Think on this boneheaded conventional assessment:
The agricultural contribution to GDP in the US is so low that it can easily be halved without our noticing!!
“…the effects of destroying the planet are of little concern to economists. William Nordhaus of Yale proclaims, “Agriculture, the part of the economy that is sensitive to climate change, accounts for just three percent of national output. That means there is no way to get a very large effect on the US economy.” Oxford economist Wilfred Beckerman echoes him: “Even if net output of agriculture fell by 50 percent by the end of the next century, this is only a 1.5 per cent cut in GNP.”
http://www.ascentofhumanity.com/chapter4-10.php
I think that there is some evidence that when people are materially comfortable that their birth rate tends to decrease. How about spreading the wealth around as a form of birth control?
The way I was taught in school regarding Marx, Marxism and Dialectical Materialism , was that Dialectical Materialism is intended as a heuristic device to understand the world and capitalism , where as Marxism is converting that device into an ideology . It is rumored that just before Marx died, he said that one thing he did know is ,he isn’t a Marxist.
That seems as apt a way to put it as anything.. Marx provided an analysis that was part historical, part speculative, which was then taken to be his “method”, rather than an analysis.
Anarchist Kropotkin eventually realized that while anarchists did not want to be ruled, nor did they want to rule others, we are social animals and as such share solidarity, the Golden Rule. OWS shared solidarity, they did not need a list of demands, for how do you demand morality?
“the conception of solidarity expresses the physical and the organic relation among the elements in every human being, and in the world of moral relations solidarity is expressed in sympathy, in mutual aid, and in co-miseration. Solidarity harmonizes with freedom and equity, and solidarity and equity constitute the necessary conditions of social justice. Hence Kropotkin’s ethical formula: “Without equity there is no justice, and without justice there is no morality.”
“Marxism has its roots in German idealism (Hegel) which I think we safely blame for fascism as well. Its horrors were no accident.”
AAAAAAAAAAAAAAAAAAAAAAAAAAAHHHHHHHHHHHHHHHHHHH
Marx had good insights. As des Keynes. As did Milton Friedman. The problem is not Freedom/Democracy/Capitalism vs. Slavery/Totalitarianism/Communism. The excesses of “marxism” were nothing more than excesses of any ideology taken to its extremes. Our “market fundamentalism” will share the same fate. Only in hindsight will the true horrors of our “capitalist” system come out. They will be found in the suffering of millions of workers in low income countries who live lives of (not always so quiet) desperation while a few comfortable ideologues in the US extol the theoretical benefits of the “market.” In comparison the suffering of a few noble intellectuals in dire gulags in the Soviet Union will seem trite.
Ives,
Great analysis! The go to person on the topic of both “Capitalism” and “Marxism” is of course John Gray. Not the relationship shyster author but the Philosopher recently retired from LSE. In his well argued work, he points out that both are belief systems (as are Neo-liberalism and globablism) that are all extensions of the western (esp U.S.) “Enlightenment” project. That is a hyper rational system where individual and cultural values are demolished and transformed into a hyper rational market system. Can’t do justice to his brilliance here but Straw Dogs and Enlightenments Wake are well worth the read to gain an understanding of what animates the current madness. He called it all in his work back in 1992. John Gray! Read, read, read him you will love his work and it will resonate with your outlook.
Per Gray–“market institutions legitimately and necessarily vary according to the diverse antional cultures of the peoples who are their practitioners. There is no universal or ideal typical model for market institutions, but instead a variety of historical forms, each rooted in the soil of a particular common culture. In the modern age, this common culture is that of a nation or a people or a family of such peoples. Market institutions which do not express or accord with an underlying culture will be neither legitimate nor stable, they will mutate, or be rejected by the peoples subject to them.
Among European peoples, they must contrary to neo liberal ideologues such as Hayek satisfy vague but pervasive and deep seated norms of equity and fairness. …market institutions will only be stable and floursih only in so far as their forms are workings are acceptable to the underlying population.
Alex SL, the hope you express up above that someone someday will attempt to put some kind of science (for once) into economics was addressed-in-the-attempt decades ago by a radiochemist named Frederick Soddy. He wondered whether an economic analysis rooted in factual physical and energy laws could be developed. He wrote a book based on his efforts called Wealth, Virtual Wealth, and Debt (The Solution of the Economic Paradox). Here is a wiki about him. http://en.wikipedia.org/wiki/Frederick_Soddy
Herman Daly (who used to work at the World Bank and is a tenured professor and everything) saw the destructive effects of growthist economics and its economic growth and took up creating a subdiscipline of Steady State Economics.
I think he did it on his own without any referrence to Marx or Marxism or Marxismism. He recently gave an interview to The European magazine where he referrenced Soddy among others. http://www.theeuropean-magazine.com/356-daly/357-the-end-of-growth
There is a whole pack of people called The Ecological Economists.
http://en.wikipedia.org/wiki/Ecological_economics
http://www.ecoeco.org/content/
There is another whole pack of people calling themselves “Raw Materials Economists”.
http://www.normeconomics.org/
Jay Hanson offers a jeeringly disrespectful view of mainstream economics and its economists as we know them today. Can anyone say his caricature does not reflect them?
http://dieoff.org/_Economics/goteconomics.htm
I have to agree that Yves seems to have internalised the ‘Marxism is utopian lol’ meme that pervades discourse in the West. Your discussion of Marx is leagues below your discussion of everything else.
__Marxism has largely collapsed from its own contradictions. Capitalism is on the way to doing the same because when market worship is applied to financial systems, it produces the kind of endless regresses we are now seeing.__
Despite the depth of the crisis Capitalism is nowhere near retreating, let alone collapsing. There is no political agency able to hold Capitalism in check — let alone collapse it. Just about all the politicians standing in the next US election will be in Wall Street’s pocket. If you want to solve a problem, you must first, take it seriously. Talk about the collapse of Capitalism is out of order.
__Stiglitz suggests that global warming mitigation or poverty reduction offers new ‘opportunities for investments with high social returns’.__
High social returns but low capital ones. Enterprises with low capital returns will just be bought out by those with capital.
__The classical economists long ago foresaw that an economy defined by constant expansion would one day give way to what John Stuart Mill called the ‘stationary state’. The idea has gained a new currency in Marxist writing of recent years…__
Apart from Harvey can you name one other Marxist writer who subscribes to this stationary state notion?
__Both are quasi scientific, and so at once intellectually hollow and subject to the kind of scientific materialism that easily leads to letting machines rule over people.__
Stalinism is ‘quasi scientific’. I don’t see why modern Marxism has to be. Then again, Keynesian can be seen as ‘quasi scientific’ as can the green movement. There’s a lot of quasi science around. I’d define quasi science as making one’s arguments in the language of science while ignoring the facts on the ground.
__Both Marxism and capitalist theory are deeply materialistic__
What’s wrong with that? Do you have a problem taking the world seriously? A materialist world view does not inevitably lead to “some kind of tide of history argument as being inevitable“. Even if you could show that most existing materialist world views led there you’d still be left with many that don’t.
There are a number of absurdities in this article.
“Marxism has its roots in German idealism (Hegel) which I think we safely blame for fascism as well. Its horrors were no accident.”
Marxism is fundamentally anti-idealistic. In fact, it goes too far in the direction of economic determinacy at times.
To say that Marx is just Hegelianism is like saying Nietzsche is just a restatement of Schopenhauer. And to blame Hegelianism for fascism is just as ridiculous and absurd as blaming Nietzsche or Christianity or any of a dozen other things for the Nazis.
Fascism is a widespread, populist reaction to failures in a liberal, democratic state (especially as a result of military or economic victimization and a sense of perceived emasculation). It would and does arise totally absent of any philosophical justification. Any connection it has to “idealism” is infinitely more religious than philosophical.
“Both Marxism and capitalist theory are deeply materialistic; which inevitably rules out the human (matter cannot explain humanness, it is just matter).”
This is confused and vague. Materialism is the only sound philosophical position one could legitimately take. Even vulgar (rather than philosophical) materialism does a better job of explaining human behavior than most of the alternatives.
Overall a good article, but too many unfounded and misinformed assertions.