Capitalism Versus The Social Commons

Yves here. Ed Walker’s piece below makes a big argument in an impressively compact space. I wanted to add a couple of thoughts.

One reason capitalists wind up with profits that they do not adequately reinvest is that they set their return targets too high. This has been documented periodically. A recent example comes from Andrew Haldane of the Bank of England on short-termism and how it leads to underinvestment.

Second is that many projects are best undertaken by government, such as infrastructure that will serve as the foundation for growth, basic research, or other projects where the time frames are too long, the payoffs too ambiguous, or the resource mobilization too great to make sense for the private sector. In keeping with the Ed Walker’s use of writings from long ago to shed light on our supposedly modern problems, Michal Kalecki explained in Political Aspects of Full Employment why businessmen prefer to have lower employment and as a result, growth:

The reasons for the opposition of the ‘industrial leaders’ to full employment achieved by government spending may be subdivided into three categories: (i) dislike of government interference in the problem of employment as such; (ii) dislike of the direction of government spending (public investment and subsidizing consumption); (iii) dislike of the social and political changes resulting from the maintenance of full employment.

When you have finished Walker’s fine piece, please go immediately and read Kalecki’s short, penetrating essay.

By Ed Walker, who wrote as masaccio at Firedoglake and now writes regularly at emptywheel. You can follow him at Twitter at @MasaccioFDL, and here’s his author page at Shadowproof.

For a long time, and particularly since WWII, societies around the world have managed substantial parts of their productive activity in non-capitalist zones. In the UK, for example, health care is provided by the National Health Service. It operates in a market society, but it is not part of the process of capital accumulation. The education system is an example in the US. We can think of these non-capitalist enclaves as a social commons. We all share in them, and we all have a stake in seeing to it that they operate at a high level.

With the turn towards neoliberalism in the past 35 years, the rich have tried to colonize these non-capitalist sectors. Currently UK capitalists and the Tories are intent on privatizing the NHS for their personal gain. They look at the way the US medical/drug system works for the benefit of the rich and they want that for themselves. In the US, we have already turned over big chunks of the prison system to these people, with predictable results. The big push in the US is the effort to take over the education system for personal profit. In a larger perspective, the capitalists and their economists tell us constantly that European welfare states are impossibly expensive and must be privatized. Why? Why is this such a big deal?

It might be easy to put this down to greed, or to the Great Man theory of economic progress, or creative destruction. But perhaps there is something in the nature of capitalism that can explain this better. Two books published in the wake of WWII examine a broad sweep of economic history to try to understand how that war happened. Karl Polanyi’s The Great Transformation sees the war as the end of the experiment with unrestrained free market capitalism, and offers the hope of a more socialist future. Hannah Arendt’s The Origins of Totalitarianism offers a dark view of human nature and of the capitalist system, and is much less hopeful.

It may seem odd to focus on 70 year old books to analyze our current system and the problems we face, but we have to remember how hard it is to understand one’s own time and make sense of it. One reason to read these books is the brilliance of the writers. The works are fascinating works of scholarship, heavily footnoted and discursive in focus, and covering a huge time frame. They seem so different from the books on economics and politics on the best-seller list, with the conspicuous exception of Capital in the Twenty-First Century which plumbs two hundred years of records.

It’s also important to note that neither of these authors had succumbed to what C. Wright Mills called the Capitalist Celebration, the capitulation of the US left to the spell of capitalism. We have to go back that far to find an actual left criticism of capitalism. Arendt has a strong Marxian flavor. Polanyi sees the value of the increase in productivity brought on by the industrial revolution, but believes strongly in the Enlightenment view that humans can control and direct society to prevent the damage that unrestrained capitalism can bring, damage he describes in detail. Far from celebrating capitalism, both Arendt and Polanyi argue that unrestrained capitalism and free market ideology were significant factors in the rise of fascism.

With that background, here’s a look at one aspect of the rise of unrestrained capitalism, Imperialism, largely drawn from Arendt.

The Industrial Revolution created massive wealth for a few, who for clarity I will refer to as the Capitalists, a group which includes some of the hereditary rich, the aristocrats, as well as wealthy merchants and newly rich manufacturers. The Capitalists quickly found themselves unable to create profitable investments for their capital in their home countries. Arendt calls this superfluous wealth. It had no purpose, no utility in the home country, and little prospect of producing gain for the holder. This led to a decade in Europe in which there was massive financial and real estate fraud in the business sector, and corruption at the nation-state, leading to depressions and massive unemployment. Many of the victims of these frauds were artisans, tradesmen and small merchants, who, Arendt says, believed that they had to invest their small savings in these ventures or risk falling into the out of the middle class.

Each round of new technology, each period of growth, was followed by a crisis, usually a financial collapse. Those crises led massive unemployment, the displacement of people from a role in the productive sector of their society. Arendt calls these superfluous people. They had as little utility to their society as the superfluous wealth. Similarly, Polanyi says that government and leading economic writers referred to two groups, the sick, the old and the weak who were the deserving poor, entitled to some assistance from the nation-state; and the able-bodied who could not find work, who were not deserving of assistance, and for whom hunger would serve as a lash to force them to work for any wage, or just for food and shelter..

Arendt says that some Capitalists sought opportunities in foreign lands, but they experienced losses in those investments, as the foreigners didn’t play by the rules of the Capitalists. Beginning in the 1870s, the Capitalists demanded that the nation-states protect their investments by force. They wanted profits without risks, and the nation-states did as they demanded. Arendt claims that this served the interests of the nation-state in that that it enabled the productive use of superfluous capital, and the employment of superfluous men as soldiers and sailors, and supervisors or workers in the new colonies, or in the transportation of imports and exports.

Arendt says that the driving force of capitalism, the demand for profits, means that capital can never stand still. It must always be in motion.

The decisive point about the depressions of [the 1860s and 70s], which initiated the era of imperialism, was that they forced the bourgeoisie to realize for the first time that the original sin of simple robbery, which centuries ago had made possible the “original accumulation of capital” (Marx) and had started all further accumulation, had eventually to be repeated lest the motor of accumulation suddenly die down. In the face of this danger, which threatened not only the bourgeoisie but the whole nation with a catastrophic breakdown in production, capitalist producers understood that the forms and laws of their production system “from the beginning had been calculated for the whole earth.” P. 148 fn omitted.

The first omitted footnote cites Rudolf Hilferding for the proposition that “… imperialism “suddenly uses again the methods of the original accumulation of capitalistic wealth””. Arendt is asking us to think about how wealth was originally accumulated.

Adam Smith tells a charming story about the accumulation of capital in Book 1 Chapter 6 of The Wealth of Nations. “In that early and rude state of society which precedes both the accumulation of stock and the appropriation of land…” societies rewarded hard work and talent with extra stuff. Then we jump to “As soon as stock has accumulated in the hands of particular persons…”.

Smith doesn’t discuss the fact that during the interim period the rich and vicious seized personal property and land by force. He doesn’t mention the Enclosures, or any of the bloody history of accumulation of the initial stocks of wealth, either in the home countries or in other lands. For that history, take a look at Polanyi.

After this jump, we get Smith’s explanation that given the initial distribution of land and other assets, including cash, profits are the natural result of the work of the owners of those initial capital stocks, who organize production and are entitled to keep the profits as compensation for their skill and effort. Smith doesn’t discuss the use of force and violence against workers and peasants or the assistance of the nation-state with laws and militia and patents and corruption. Smith is the father of modern economists who ignore the role of force, violence, state power, fraud and corruption and substitute mythic cover stories about entrepreneurship and disruption.

It’s true that some capital accumulation takes place as Smith says, from frugality, skill, or luck. But it’s equally true that at the outset of the Industrial Revolution, most capital was held by nobles and aristocrats who took it by force, and the rest was owned by their bankers and a few merchants. It’s also true that much current capital accumulation takes place through monopoly, oligopoly, and fraud and corruption. Look no further than the Great Crash.

Back to the Imperial period. Arendt points to Rosa Luxemburg’s posthumous work, The Accumulation of Capital for its explanation of the roots of imperialism. Luxemburg was a Marxian intellectual and activist, who took part in the German communist uprising in the wake of WWI, and was murdered by the Weimar Freikorps.

Accumulation is impossible in an exclusively capitalist environment. Therefore, we find that capital has been driven since its very inception to expand into non-capitalist strata and nations, ruin artisans and peasantry, proletarianize the intermediate strata, the politics of colonialism, the politics of ‘opening-up’ and the export of capital. The development of capitalism has been possible only through constant expansion into new domains of production and new countries. But the global drive to expand leads to a collision between capital and pre-capitalist forms of society, resulting in violence, war, revolution: in brief, catastrophes from start to finish, the vital element of capitalism.

The first sentence of that quote relates to a problem uncovered by Mars, who wrote about the primitive accumulation of capital through force and violence, but was not able to account for capital accumulation in the capitalist system as he understood it. Of course, Luxemburg was a Marxist, so it’s easy to dismiss both the problem and her insight. It seems to me, though, that we can see it standing alone as an observation of the actual behavior of capitalists and the results of their armed expansion into other countries, in the unrestrained use of their money, assets and power.

Luxemburg says that capitalism only works if it has non-capitalist areas, or non-capitalist parts of its home society to colonize. These might be lands and resources in India, or South America, or the Belgian Congo, as they were in the Imperialist period, the period she was thinking about. Or they might be the National Health Service in England, or the education system or the medical system, or the prison system or any other government service in the US. Or it might be the people of Bangladesh who can be colonized to make cheap tee-shirts for greater profits to manufacturers.

Three thoughts.

1. The imperative of capital to stay in motion is a force that underlies the expansionary motives of every capitalist. There’s a logic to capitalism. We won’t uncover that logic with the economic theories that teach that capitalism is natural and just.

2. The problem for decades has been superfluous capital, not a shortage of capital.

3. The problem with capitalism is that it creates superfluous people, people estranged from the productive life of their society. These people are fertile ground for authoritarian extremism.

Print Friendly, PDF & Email


  1. Alice X

    Thank you! Beside Luxemburg’s Accumulation of Capital are, among many, her critique of the war and German Social Democrats complicity, which got her imprisoned, The Junius Pamphlet; her critique of the Russian Revolution, which got her the wrath of the Marxist-Leninists; and finally her statement of the demands of the Spartacus League in December 1918 and the uprising of the following January which got her killed, What Does the Spartacus League Want? Powerful writing.

  2. Keith

    “It may seem odd to focus on 70 year old books to analyze our current system and the problems we face”

    1920s/2000s – high inequality, high banker pay, low regulation, low taxes for the wealthy, robber barons (CEOs), reckless bankers, globalisation phase

    1929/2008 – Wall Street crash

    1930s/2010s – Global recession, currency wars, rising nationalism and extremism

    70 years seems just right, with 10 years to analyse exactly the same mistakes as we have made today.

    1. TedWa

      Apparently 2 generations is time enough to forget the hard lessons learned – among our politicians anyway.

      1. JTMcPhee

        The politicians and the rest at the top don’t forget the lessons. They just turn back a few pages in the playbook.

        You can bet Blankfein and Cheney and the rest know the history and the epitrochoidal nature of the series…

  3. Norb

    Past generations had a more innate sense of the use of power by the elite and the state. The abuse was more direct, less refined by years of propaganda. It is refreshing, and inspiring, to go back and read authors form the 19th and early 20th century as they struggled to understand the economic issues of the day. The writing is much more direct and honest which stands in stark contrast to much communication today. So much unnecessary complexity is used to confuse the simple fact that providing goods and services to people is really quite simple, especially with advances in technology and science. The trouble is, and always has been, the political component.

    When we struggle to formulate plans of action to reverse the devastation of neoliberal capitalism, the first steps are always around the understanding of history and the proper use of language. Even that simple idea is illuminating in itself. The obfuscation of language is so pervasive today, you are branded a troublemaker for using language that is direct and honest. Words like thief, liar, and mercenary need to re-enter common usage.
    The key is directing this powerful simplicity toward the correct target and overcoming the misdirection always utilized by the elite.

    A simple and honest message communicating the importance- the imperative- of common social spaces is a message that most people are eagerly waiting to hear. While the world is full of complexity, there are many simple truths hiding in plain sight.

    1. Uahsenaa

      I don’t think the abuse of power by elites with corporate interests at heart is obfuscated at all. I recall watching a panel discussion on CSPAN attended by hundreds of people, most of the foreign press, in which former secretaries of defense (going back to the Carter administration) talked about global defense issues. China was brought up a great deal, so was Russia, but very little discussion focused on the nature of the military or national security. Business interests, however, were brought up again and again as an obvious subtext as to why we would, say, send an aircraft carrier to the South China Sea. I believe it was Hagel who said that this naval activity was expressly to assert freedom of movement through the seas for commercial traffic.

      I realize “watches CSPAN” might label me as a weirdo, but in open hearings, meetings, and think tank to-dos, the elites make no effort at all to conceal what they are doing and why. It’s all right there to peruse on basic cable, so it astounds me that people need to be convinced of these issues.

      1. James Levy

        When I was a senior in college (1987) I was chosen by my university to go down to Annapolis to deliver a paper at a conference for undergrads that the Naval Academy was hosting. At the cocktail hour before dinner a bunch of us got to sit down with Bobby Inman (former Admiral and CIA deputy director). He told us two extraordinary things–1) all issues of verification of arms control treaties vis-à-vis the Soviets were a joke: we knew exactly what they had and could monitor it all the time; 2) the Strategic Defense Initiative was aimed at subsidizing our high tech sector in its struggle with Japan, not at dealing with those pesky Soviet ICBMs. I was flabbergasted then and remain so today that he was so candid with us, but he simply assumed we were all “on side” and on the make (why else would one be there? he must have thought) so he spoke to us in that knowing insider way that makes journalists swoon and report the opposite so they can keep getting those hits of insider information.

        1. Uahsenaa

          A few years back, the mother of one of my wife’s closest childhood friends got remarried to one of those “Old South” types, as in a portrait of a Confederate officer from the family hung over the mantle of his study, so we were obligated to attended, as my wife was singing at the mass.

          I remember sitting in this very same study drinking the smoothest bourbon I’ve ever had in my life, side-eyeing the Confederate office, as he regaled us with stories of all the famous people his family had cheated over the years to gain their fortune. He told the story as if he, being liberal minded, was above all that, but these yarns were laced with no small amount of familial pride. Of course, all the off color comments about “Negroes” (this was 2008, mind you) were safe to make, or so he presumed, because we were all family now and, at any rate, we were all white, so no one was going to get too uppity about it.

          It’s amazing what horrible crap people are just dying to tell you, the moment they think you’re on intimate terms. Long story short, this guy apparently did something so horrible a few years later that caused he and my wife’s friend’s mom to get divorced in a hurry and which both families have gone out of their way to cover up.

      2. HopeLB

        I agree. C-Span is a finely attuned guage of what the ruling classes are promoting and of who amonst our “representatives” are most obliging. It is also informative to note that often switching between C-Span 1,2 and 3, you find your cable funded” public service channel” offerring Brookings, Heritage and AEI.

  4. Benedict@Large

    There is no such thing as superfluous people; only involuntarily unemployed people. People are unemployed (involuntarily when the currency issuer fail to create enough new money to employ them (preferably via a CofFEE-style job guarantee).

    (This eventually creates superfluous money, which must be absorbed via bonds issued by the currency issuer or by taxation.)

  5. aka

    Central banking was invented around the same time as the Industrial Revolution and its now glaring fault is that accounts were only available to commercial banks (and to the monetary sovereign, eg. the British Government) and not available to the general population. This constitutes a huge implicit subsidy for usurers* and the most so-called “credit worthy”, which always includes the rich, at the expense of the poor, whose savings are bypassed by government-subsidized private credit creation

    But fiat is, by definition, the People’s Money and thus all fiat users should be allowed accounts** at their respective central banks, thus eliminating the privileged position of commercial banks.

    *Usury is not necessarily bad but it should definitely not be subsidized by government.

    **Thus allowing the abolition of government provided deposit insurance, another huge subsidy of commercial banks.

  6. Torsten

    I would only quibble with Walker’s first takeaway:

    1. The imperative of capital to stay in motion is a force that underlies the expansionary motives of every capitalist.. . .

    The presumption that an impersonal “force” is the root cause allows capitalists to lay claim to innocence. They are not innocent.

    It should be plainly stated and universally acknowledged that predators have an appetite for the weak and that it is the first duty of society to stop them.

    1. Jef

      But to blame the predators implies that the if removed then the game would be fair and right which is absolutely is not. An argument can be made that the predators are simply playing the game better than others. I know for a fact that that is how they see it.

      We have arranged the rules of the game to bring out the worst in people then we berate them for behaving badly.

        1. aka

          Who decided, for example, that only commercial banks could have accounts at the Federal Reserve and the rest of us must lend to commercial banks (a deposit is legally a loan to a bank) or else make do with only physical cash and the mattress?

          Who decided that government provided deposit insurance for accounts at commercial banks was the solution instead of risk-free accounts for all at the central bank?

          Short sighted pragmatists, at best?

          1. RBHoughton

            “Who decided, for example, that only commercial banks could have accounts at the Federal Reserve” That was Barings, pushing the British precedent on Morgan a century ago.

            The status of deposit insurance has perplexed me too, now that governments are allowing banks to seize customers’ deposits. Help, please?

            1. aka

              A deposit at a commercial bank is legally a loan to that bank so it serves you right to lose that deposit if the bank is short of reserves for not choosing* the right bank to deposit in (or borrow from since “loans create deposits”)! :)

              Of course deposit insurance will bail you out of your involuntary bail-in of the bank so it comes down to an indirect bailout of the commercial bank by the public.

              *Ignoring the fact that the lack of individual accounts at the central bank FORCE us to lend to one commercial bank (including credit unions, I suppose) or the other. That or descend to “stone knives and bear skins”, ie. physical cash and the mattress.

    2. Ed Walker Post author

      I recognize that the imperative of capitalism operates through individuals. But the fact is that if it isn’t one, it will be someone else. If it isn’t the odious Walton heirs, it will be the Kochs or some other filthy rich jerk. But the understanding that superfluous capital must keep moving, whether or not it is a conscious understanding, is a force that drives these people, and perhaps all of us to some extent.

      1. aka

        “superfluous capital”?

        When what percentage of the American population has less than a $1000 in savings?

        I’d say the capital is in the wrong hands and how did that happen? Our system isn’t unfair, is it?

        Indeed it is unfair when one considers that the rich are the most so-called creditworthy and when one considers that private credit creation is massively subsidized by government.

        But progress, progress! Yes, we’ve had progress so WWIII (may God forbid!) will be even more destructive than WWII. So much for progress however attained?

        Meanwhile we could have been a light on a hill instead of a likely candidate for Babylon the Great.

        Hopefully, it’s not too late.

        1. Norb

          Physical conquest and thievery have evolved into conquest by financial means. Common people don’t realize the power of borrowed money as a means to acquire property. All too often the elite are given a pass by the commoners because it is assumed their acquisitions are driven by their own hard earned resources. Insider dealings, with borrowed money, somehow never enters the conversation.

          1. aka

            In the case of commercial banks, the “money”* is not even borrowed; it is created (“loans create deposits”) on the spot for the most so-called credit worthy, which always includes the rich.

            With individual accounts at the central bank and the abolition and end of government provided deposit insurance for accounts at commercial banks then the savings of the non-rich could no longer be bypassed so easily, especially if the central bank was forbidden to lend to commercial banks and if all spending by the monetary sovereign was directed by default to individual, business, and organizational accounts at the central bank for lending to the commercial banks and others, if desired.

            *Bank credit is also known as “bank money”.

            1. Norb

              That arrangement truly sounds like a government by and for the people. A shared common risk where society rises and falls through collective action and inequality would be kept in check by removing the dynamic of “heads I win- tails you loose”. Not the current arrangement where the governments main purpose is to shelter and protect the rich in times of crisis.

              A system that breeds inequality cannot stand. Rot can last for many years though.

  7. Paul Hirschman

    It’s illuminating (to me at least) to think of the development of human beings (raising the young, providing resources that allow the young to flourish, creating a social environment in which the young discover what interests them and develop skills they need to actually do what interests them at a high level) as the most important part of “the Commons.”

    Alienation, to use an old word, is the capture of that part of the Commons that exists within each human being as potential for free, purposeful action. Alienation warps this common human potential to keep the process of capital accumulation going. Human “being” is degraded into human “skills appropriate to labor markets.” Human “labor,” in short, is a distilled version of “human self-directed action.” Human “being” is defined not as the healthy process of enabling human beings to identify and meet their needs, but as the deforming process of making individual human beings suitable to labor markets.

    Consider current efforts of our neoliberal friends to capture public funds used to educate the young for purposes of employing their capital in the next wave of capital accumulation. Consider their attempts to define public education (literally called “common schools”) as the process of preparing the young for “college and career readiness,” as opposed to enabling the young to discover and shape themselves, and their world.

    We are born free yet exist everywhere in charter schools (apologies to some French philosopher). The undefined and unknown capacities and potential we are born with are part of the Commons, yet that potential is warped by the needs of capital to expand. Alienation is the deformation of our common humanity, a socially held potential that is realized only through the exercise of genuine human freedom. Education becomes a product to serve the needs of capital, rather than the development of free, purposeful, skilled, effective, human activity. Common schools become charter schools.

    1. so

      Being an artist all I can say is Thank You. Imagine a world where the highest calling was to find the gift that is inherent in everyone and everything. An economic system based on that.
      I’ll continue to dream.

    2. Ed Walker Post author

      Alienation is another one of those old words that we don’t use in discourse about the economic system. As we know, beginning in the late 1940s, the Democratic party first drove out all the Communists and Marxists, and then turned on the socialists, especially those in unions. When they left, the sterilization of economic theory began to take hold. It was oriented around math, actually, college calculus and linear analysis, and had no room for discussion of the relation between human beings and the forces of production, in other words, no space to discuss the nature of being human in a changing time.

    3. Robert McGregor

      I like your definition, “Alienation is the deformation of our common humanity.” In a Neoliberal society, workers exist to serve capital! “Capital” is a fairly abstract concept, so it seems peculiar that abstract capital would have so much control over concrete people, and physical buildings, equipment, and products. If you’ve ever been laid off, you know the experience where your boss doesn’t want to lay you off. His boss doesn’t want to lay you off. And the customers don’t want you laid off! But the capital wants you laid off. The manager-in-charge’s interpretation is that the business can no longer afford you. That’s another way of saying

      the capital can no longer afford you

      . The libertarian has a wet dream over this. He sees capital as this wonderful thing that naturally flows where it is most needed–building and creatively destroying as needed–spreading wealth and wonder to all whom are not too dense to understand its

      invisible hand

      workings. But if you believe this, then you believe Equity Capital firms are society’s saviors.

  8. JohnnyGL

    Interesting post.

    The interaction of loose Fed policy popped into my head. More cheap capital (savings glut?) sloshing around, looking for something to colonize/privatize, a scheme to ripoff tax dollars, or it starts itching for war-profiteering.

    Speaks to the idea that to serve the public at large, capital needs to be boxed in, walled off, slowed down, taxed, broken-up and disbursed or otherwise controlled. Otherwise, it’s probably going to go and stir up trouble in some fashion. And that the history shows this occurs repeatedly, too!

  9. susan the other

    Interesting. Walker is contemporary, Kalecki is turn of the 19th century. Kalecki sounds more like an MMTer than Walker re full employment. But he fails to appreciate fiat and the rejection of the gold standard as they hadn’t happened yet. Kalecki doesn’t see it coming – that (as Steve Keen puts it) a sovereign government can just write off all debts to itself because double entry bookkeeping, etc. Walker makes the interesting observation (as does the person he quotes – Arent) that capitalism must have new frontiers and the commons has been a favorite grazing ground. He says that capitalism needs the commmons (aka socialism) to provide this forage. Yet it has seemed (to me) in the last 70 years that the general consensus gradually became that socialism needs the innovation of capitalism. Walker points out, without saying so, that this is a little false. Full employment, however, comes to threaten the power of capital – so naturally capitalism and the commons are reluctant partners.

    1. Ed Walker Post author

      Kalecki’s article is fascinating, and I thank Yves Smith for the link. WWII brought out a lot of interesting ideas, including Beardsley Ruml’s Taxes For Revenue are Obsolete: Ruml sounds very MMT. It really makes you wonder why academic economics took the path it did. The other ideas are so much more plausible than the absurd myths and maths of modern mainstream economics. It’s one thing to explain the situation today as the result of rich people buying up the academics, as in the Mercatus Center, or the econ departments at Stanford and UChi. 70 years ago, before the field was utterly corrupted by wealth and power it could have gone another direction.

      1. Alice X

        Thank you for the Ruml link, I appreciated that from an earlier series of yours.

        If you have not read it you might find the speech by James K. Galbraith at the May 13, 2011 Copenhagen conference of some interest. Thinking back now I am not sure of who made an earlier reference to it. If that was you, I apologize for the redundancy.

        Such pronouncements are, to my thinking, why the likes of JKG and Wm K Black are banished to the hinterlands while in the absence of such, more mainstream economists hold such sway.

        I believe the observations are still germane.

        The Crisis in Economic Thought: The Final Death (and Next Life) of John Maynard Keynes


        …What you cannot get – not at a meeting sponsored by the International Monetary Fund, not from the participants at the Institute for New Economic Thinking – is any serious discussion of contract law and fraud. I’ve tried, repeatedly. No one will deny, in response to the question, the role that fraud played in the financial debacle. How could they? But they won’t discuss it either. And it seems to me, this reflects a logic which bears pursuing.

        Why not? Why is this one of the great taboo topics of our modern economic history? Well, personal complicity, frankly, plays a role among present and former government officials, regulators, consultants and the academics who advised them and those who either played the markets or took fees from those who did.

        At the INET conference at Bretton Woods, a few weeks ago, Mr. Summers stated that he was – it was a wonderful phrase – that he was not among those who regard financial innovation as necessarily evil. I took a note as I heard him say that, I thought that really bears quoting.

        There is a web of negligence and complicity here. Of culpability, abetted by the way universities are funded and by what they teach.

        But it’s more than that. Let me try to frame it in somewhat more abstract terms. I would say that the commodity is the foundation stone of conventional economics. That the theory of exchange requires the commodification of tradable artifacts. Without that, there is no supply and demand. A world of contracts, each backed by a separate and distinct set of promises each only as good as the commitments made specifically and the ability of the laws and courts to enforce them, is a different sort of world. Just because you can call a set of such contracts by a name, “collateralized debt obligation” or “credit default swap”, and just because you can create something – you may even be able to create something called an exchange to trade them on – does not make them into commodities with a meaningful market price.…

        1. paul hirschman

          Didn’t Judge Posner (U of Chicago) help popularize the idea of “efficient breach”? That is, a contract is only to be followed if it makes economic sense to do so. Hence, a contract is not a promise as such, but merely a promise that should not broken only as long as not breaking it continues to be economically rational. Breaking a promise, that is not continuing to fulfill a contract, is equivalent to the court’s determination of how much it would cost to stop fulfilling the contract.

          Of course economists don’t want us to study fraud, since fraud isn’t really fraud, but merely the rational decision that doing something illegal (costing X dollars) is cost efficient because I “earned” 2X by doing so.

          The old-fashioned idea of fraud is that it is a criminal offense, an offense against society, an offense that, left unchecked, would make it impossible to preserve the society that must exist in order for markets (and fellowship!) to exist in the first place (hence back to Polanyi).

          If economists actually took fraud seriously, they’d all be in jail! They want to eliminate jail for capitalists, but not for the rest of us. Would Judge Posner say that there is no such thing as assault, but merely the rational decision to knock someone out as long as the cost of rehabilitating that person was less than the benefit of knocking him out? If so, robbing Larry Summers is not an offense against society as long as one can get away with it? Hmmm,maybe we’re onto something! Why not dispossess the entire class of crony capitalists? The cost of doing so is clearly worth it.

  10. alex morfesis

    Ism’s of the world unite…It has always been about control and the willingness of most humans to let big daddy lead us by the hand. When big daddy is smart enough to conduct a smoke and mirrors campaign to, as Metaxas did as ” first peasant”, give the impression they are just another member of the “commons”, then people tend to buy into it more easily..

    Capitalism has never been described by anyone who actually practiced it…or better said, most “treatise” on the subject are written by people who never created a single job or met a payroll or delivered anything other than a manuscript. Karl(phillips internatinal) marx is revered as a demi god when…well…my mind just cant absorb the rantings of what would today be some 50 year old perpetual phd candidate hitting on 19 year old girls at the campus lounge…and the feedback loop that comes with all the discussions of his false religion…

    Before the fed was formalized(there were local clearing house systems in place before that)…people tended to work together and take risks together…mind you that may have been because travel was not easy and most people lived their lives within a very short distance from their place of birth…modern transportation systems removed part of the “forced commons”…
    Most people do not have the patience to have faith in a seed and wait for the simple harvest…
    Materialism is the opiate of the masses and idle capital can easily be dealt with by using a 5% excise tax…it is small enough not to destroy ones base but large enough to do damage over a decade…

    People used to be more mobile but the illusion of “crime” and the false image of “finding the one” has created in a large enough portion of our society disfunction in personal relations which tend to end dramatically and violently…

    I know it sounds silly…but i think part of the problem is they dont make grandmas like they used to anymore…

    And grandpas dont plant trees anymore…

  11. Jim

    “Luxemburg says that capitalism only works if it has non-capitalist areas or non-capitalist part of its home society to colonize.”

    Although Marx wrote (See Capital Vol.1) dozens of pages to demonstrate that “…the specific economic form in which unpaid surplus labor is pumped out of direct producers, determines the relationship between rulers and ruled, as it grows directly out of production itself.”—when it comes to explaining the genesis of capitalism he transforms the State—a state not yet bourgeois–into an independent variable whose power somehow appears on the scene to foment the transition.

    Historical materialism is thus apparently unable to solve the mystery of original accumulation and Marx’s explanation appears both incoherent and completely unsatisfactory.

    Can original accumulation be explained by force and violence if there has been violence, subjection, plundering and exploitation throughout the history of every civilization?

    What if it was not the exploitation of colonies that permitted Europe to escape subsistence economy but just the opposite, the European powers could begin the conquest of the world only from the moment in which capitalism put at their disposal a flood of technical, economic and scientific resources no other civilization had?

    Is something essential missing in the Marxist explicative scheme?

    What if the economic is not capable of explaining the economic?

  12. John Merryman

    People think sequentially, so they act linearly, but nature is cyclical.

    Capitalism is eating its own, as it now siphons value out of the industrial behemoth it created, in an illusion of financial wealth.

    The eventual consequence will be that money will have to be treated as the public medium it functions as, not the private wealth it is assumed to be.

    Blood, not fat.

  13. Paul Tioxon

    “It’s also important to note that neither of these authors had succumbed to what C. Wright Mills called the Capitalist Celebration, the capitulation of the US left to the spell of capitalism. We have to go back that far to find an actual left criticism of capitalism.”

    Seriously, you have got to be kidding.

    Synchronicity alert from this month, you’ve got love the vibes of change radiating socially, ecologically, but it times for a meeting the of the tribes. Don’t even pretend most of the people on this site are NOT in one of their own making.

    From the opening overview of this month’s issue.

    “Nearly all of these current orthodox (i.e., neoclassical) analyses of the history of stagnation theory turn a blind eye to the role of Marxian and heterodox thinkers, who have been developing the stagnation thesis in great historical and theoretical detail for more than half a century, building on the debates of the 1930s. This has particularly been the case in Monthly Review, and in the work of such theorists as Michał Kalecki, Josef Steindl, Paul A. Baran, Paul M. Sweezy, and Harry Magdoff—among the most noted dissenting economists of the twentieth century. The concept of stagnation (or secular stagnation) has undoubtedly appeared more frequently and been analyzed in greater detail in MR than any other publication in the world over the last sixty years, as part of a running cri-tique of capital accumulation.

    Yet in most current orthodox economic discussions of the topic, Monthly Review is seldom mentioned. This is not due to any ignorance of MR‘s contributions. For example, when we asked Larry Summers not long ago whether he was at Sweezy’s talk on “Why Stagnation?” at Harvard in 1982, the first answer we got back from him was that he might have been, followed almost immediately by another answer from his staff that he probably was not. Yet it was clear from the nature of the response that Summers was aware of Sweezy’s ideas (“Notes from the Editors,” MR, October 2014). In a November 23, 2015, online article entitled “Printing Money,” The New Yorker‘s talented economic columnist John Cassidy observed that the “phrase of the moment” is “secular stagnation,” and that “Lawrence Summers resurrected it a couple of years ago.” No mention is made of Sweezy and other thinkers on the left, although Cassidy is well aware, as his earlier book How Markets Fail (2009) showed, of Sweezy’s stagnation argument and its importance.”

    There’s more of course, Steve Keen is credited for his role and a blogger from Seattle whose title of a recent piece says it all:

    “But our favorite commentary on this failure of orthodox economists to acknowledge decades of penetrating left analyses of stagnation comes from Charles Mudede, one of the most creative, insightful, and prolific left cultural critics in the United States today. In his November 21, 2013, blog post, “What If Economists for Once Give Marxists Some Fucking Credit?,” for Seattle’s weekly The Stranger, Mudede wrote:

    The thing that drives me up the wall is when mainstream economists (meaning neoclassical economists), after years and years of pushing a bad idea on the public and students, turn to, when finally admitting that their bad idea is really a bad idea, and claim a good idea that they ignored and kept on the fringes. [Paul] Krugman’s recent post [on secular stagnation] serves as an excellent example.… Though it’s about the idea of how the current recession (or stagnation) could be the “new normal,” it…makes no mention of the long and rich research on this very subject by Marxists (most notably the late Paul Sweezy) at the Monthly Review.”

    I would not say that NC is not in of itself the sole mouthpiece of criticism of capitalism without ever allowing Marxist or other less than neo-liberal dissent of the harshest intellectual substance unleashed on the Larry Summers, Ron Rubins, Jamie Dimons of the world. This site certainly has let loose the dogs of war on the intellectual superstructure of capitalism and its financial sub-alterns and does not have to apologize for anything in that regard. My comment is more for those not raised in the intellectual tumult of radical dissent since the 1960s, as the ridiculous comment from the above post which I referenced appears to indicate. Yes, everything you heard about the revolutionary political activity from 60 years ago was true and much much more violent than is usually recalled in florid flashbacks or dismissive claims to capitulation to capitalism. Getting assassinated is not capitulation, and that goes for the assassination of Jimmy Hoffa most of all. What tough guy is going to stand up to take his place after he was disappeared?

    1. Norb

      The elite are using a three pronged attack against the common good. Controlling the power of money, propaganda dissemination, and the use of violence- both the threat and actual use. It seems to me that if individuals cannot protect themselves from all three of these situations exploitation awaits. Forming common bonds between fellow citizens is greatly hampered.

      It is amazing that capitalists – making money on every phenomenon found in nature- attempt to turn every event to their advantage. Honesty and integrity do not enter their calculations. The social discourse has defined this type of action legitimate. The crime is that we allow them this opportunity and permit it to continue. The “we” being anyone not forcefully objecting or criticizing this view of accumulation and inequality whenever it occurs. Capitalists are gamblers- willing to risk the prosperity and opportunity of future generations for their own personal enrichment. Is it Utopian to desire a world not troubled by gambling? Associating risk taking with gambling is another neoliberal false hood foisted upon the public. Looking to the nobility of Kings, the princes of Religion, and now the Masters of commerce is no way of organizing a society.

      Coming to terms with capitalism as a social sickness is a stage we are currently in. The destruction and decay is all around us, but we lack the fortitude to move beyond its confines. A system that rewards the destruction of the commons and promotes the worst in human nature must be seen as illegitimate.

      We are in a slowly evolving civil war. The factions that are forming seem to be those convinced the world should be ruled by the few over the many and by default, the confused many, not able to coherently respond to their plight- as they are cast aside as irrelevant components of the capitalist system.

      We need a new world view- a new perspective. The religion of capitalism and the market is not the answer.

      It really is a choice between a world of peace and equality and one of exploitation.

  14. nothing but the truth

    capitalism is the friendly name for rent extraction. rent just means payments for nothing, or extortion.

    what is considered valuable by our system (collateral)? basically rent extraction.

    This is the Georgist critique (not the Marxist).

  15. washunate

    I’m not sure what value there is in referring to our system either as capitalism or as neoliberalism*. Authoritarianism is the defining characteristic of the Atlanticist project. They are fascists – a blend of individualistic and collectivist – not libertarians. Privatization doesn’t mean market-based economics. It means state-protected monopolies and cartels, the transfer of public wealth to connected insiders. Dare confuse these protected industries for an actual marketplace and you will experience the full weight of the government bearing down upon you.

    Wake me up when these supposed “capitalists” end the drug war, shrink the national security state, break up monopolistic hospital chains, stop asking for papers at airports, stop arresting you for transporting medicine across national borders, get rid of IP law that drives up the prices and eliminates competition in healthcare, and stop doing a host of other big government loving ideas that DC has been forcing on Americans (and trying to push on the world) for decades now.

    For goodness sakes, we have a literal Department of Homeland Security. How much more obvious do the authoritarians need to make it?

    *unless of course by neoliberal, we are talking about the actual power structure, not theoretical ideas from people like Milton Friedman, but in that case the more precise term is neoconservative.

  16. @LulzStJournal

    “Luxemburg says that capitalism only works if it has non-capitalist areas, or non-capitalist parts of its home society to colonize. These might be lands and resources…or any other government service…”

    I think Ed misses Data as a relatively new social common that is being enclosed right under our feet er… thumbs. McKenzie Wark has been doing some excellent work in this area without the (unfounded) hopefulness of Paul Mason’s Postcapitalism:

    Wark proposes that an emergent new class, the vectoralists, rely on asymmetries in data flows instead of manufacturing for their profits (ex: Google, Goldman Sachs). Where as landlords collected rent on Land and capitalists created profit from Capital, vectoralists collect rent on the Data we create using computers, apps, and the (dreaded?) Internet of Things. But unlike Capital or Land, Data is not limited by supply, it’s infinitely reproducible, and it’s production is not strictly reliant on wage labor, we often create it for free.

    This raises a problem for markets which rely on supply and demand to create price signals. If the supply is infinite how is a price determined? For the time being it seems that making Data artificially scarce, an Enclosure made possible with the aid of States, is the solution. As the ruling class switches it’s preferred mode of attaining/maintaining power, States are also changing their mode of imperialism, which rely increasingly on advantages from asymmetrical data flows to conduct warfare/surveillance.

    I would enjoy hearing Ed’s thoughts on how the enclosure of the commons applies to Data.

  17. @LulzStJournal

    “Luxemburg says that capitalism only works if it has non-capitalist areas, or non-capitalist parts of its home society to colonize. These might be lands and resources…or any other government service…”

    I think Ed misses Data as a relatively new social common that is being enclosed right under our feet er… thumbs. McKenzie Wark has been doing some excellent work in this area without the (unfounded) hopefulness of Paul Mason’s Postcapitalism:

    Wark proposes that an emergent new class, the vectoralists, rely on asymmetries in data flows instead of manufacturing for their profits (ex: Google, Goldman Sachs). Where as landlords collected rent on Land and capitalists created profit from Capital, vectoralists collect rent on the Data we create using computers, apps, and the (dreaded?) Internet of Things. But unlike Capital or Land, Data is not limited by supply, it’s infinitely reproducible, and it’s production is not strictly reliant on wage labor, we often create it for free.

    This raises a problem for markets which rely on supply and demand to create price signals. If the supply is infinite how is a price determined? For the time being it seems that making Data artificially scarce, an Enclosure made possible with the aid of States, is the solution. As the ruling class switches it’s preferred mode of attaining/maintaining power, States are also changing their mode of imperialism, which rely increasingly on advantages from asymmetrical data flows to conduct warfare/surveillance.

    I would enjoy hearing Ed’s thoughts on how the enclosure of the commons applies to Data.

  18. john

    Luxemburg is close in her analysis of what drives capital accumulation, but doesn’t quite see the bigger picture.

    Capitalism has existed since the 15th, 16th, or 17th centuries, depending on whom you read. What we do know, however, is that growth was extremely slow even in the most prosperous nations until the industrial revolution. There were several decades, if not a few centuries, of tortoise-like growth under the capitalist system.

    What actually drives economic growth is not the “free market economy” but rather urbanization and industrialization. The only other substitutes are external demand (e.g. accumulation by dispossession, as mentioned here) and bubbles. During the Bretton Woods era, the world saw extremely high growth rates because Europe and Japan were completely rebuilding themselves (urbanization/industrialization) and the US enjoyed a great deal of prosperity due to external demand (the markets provided by the dependent nations coupled with a lack of competition abroad in industry). By the 70’s, however, the rebuilding process had ended and the rise of European and Japanese competitors cut into the profits of American industrial corporations. So started the crisis of industrial overproduction/under-utilization of capacity, and the only available substitute for growth were bubbles (Japanese real estate in the 80’s, US stock market in the 90’s, US real estate in the 00’s, lots of bubble across the EU in the 00’s). When the US real estate market crashed in the 00’s, it exposed the entire sham that the past few decades have been. Despite pumping trillions into the global financial sector to keep it afloat, nearly 8 years later things are still quite precarious, and at some point there will be another crash and trillions more in bailouts in an attempt to extend and pretend.

    Efficiency, technological advancement, and competition, eat further into the profits of the agricultural and industrial sectors, while the service sector (finance) is unable to provide real, sustainable growth. Secular stagnation is a very real phenomenon, one that the Japanese have experienced for 25 years. We all share the same future, they just were the first to experience it.

    What we can be sure of is that the western societies will be unable to tolerate the lack of prosperity (we expect better). The political center will slowly die and the stage will be set for a battle between the revolutionaries (left) and the reactionaries (right). The first act already started in Europe.

Comments are closed.