David Harvey and Capitalist Hypertension

By Lambert Strether of Corrente

In this very informal post I’ll take a look at David Harvey’s The Enigma of Capital, because I want to see if Harvey’s conceptual toolkit can give an account of the statistical and conceptual Bermuda Triangle of what’s happening with our shipping and the supply chain generally. (Here is a review of Enigma in the London Review of Books.) My favorite meme these days has for quite some time been the “This Is Fine” dog:

Although I suppose a “This Is Fine” bear would be more appropriate, for reason’s we’ll get to.

Back to shipping: I started following shipping in Water Cooler partly because it’s fun, but more because shipping is about stuff, and tracking stuff seemed like a far more attractive way of getting a handle on “the economy” than economics statistics, let alone whatever books the Wall Streeters were talking on any given day. And don’t get me started on Larry Summers. So what I noticed was decline, and not downward blips followed by rebounds, but decline, for months and then a year. Decline in rail, even when you back out coal and grain, and decline in demand for freignt cars. Decline in trucking, and decline in the demand for trucks. Air freight wobbly. No Christmas bounce at the Pacific ports. And now we have the Hanjin debacle — all that capital tied up in stranded ships, though granted only $12 billion or so — and the universal admission that somehow “we” invested w-a-a-a-a-a-y too much money in big ships and boats, implying (I suppose) that we need to ship a lot less stuff than we thought, at least across the oceans. Meanwhile, and in seeming contradiction not only to a slow collapse of global trade, but to the opposition to “trade deals,” warehousing is one of the few real estate bright spots, and supply chain management is an exciting field. It’s disproportionately full of sociopaths, and therefore growing and dynamic! And the economics statistics seem to say nothing is wrong. Consumers are the engine of the economy and they are confident. But at the end of the day, people need stuff; life is lived in the material world, even if you think you live it on your device. It’s an enigma! So what I’m seeing is a contradiction: Less stuff is moving, but the numbers say “this is fine.” Am I right, here? So in what follows, I’m going to assume that numbers don’t matter, but stuff does.[1]

Harvey is an oft-cited author of books in the humanities and social sciences, a professor at CUNY and a — dread word — Marxist. (My understanding is that an appreciable number of Wall Streeters read both Marx and Lenin because they’re not mushy, like liberals.) In any case, a long and more or less approving essay on Harvey should put to rest the idea occasionally propounded by partisan enforcers that Naked Capitalism has a dog in the 2016 presidential campaign fight.) First, since we do, after all, live in a capitalist society, I’ll give Harvey’s definition of capital, and then his definition of crisis, which focuses on blockaged that prevent the circulation of capital. Then I’ll see if any of the causes that Harvey posits for blockages can give an account of the Bermuda Triangle of shipping.

Here is Harvey’s definition of capital (from The Enigma of Capital, pp 40-41:

Capital is not a thing but a process in which money is perpetually sent in search of more money. Capitalists – those who set this process in motion – take on many different personae. Finance capitalists look to make more money by lending to others in return for interest. Merchant capitalists buy cheap and sell dear. Landlords collect rent because the land and properties they own are scarce resources. Rentiers make money from royalties and intellectual property rights. Asset traders swap titles (to stocks and shares for example), debts and contracts (including insurance) for a profit. Even the state can act like a capitalist, as, for example, when it uses tax revenues to invest in infrastructures that stimulate growth and generate even more tax revenues.

But the form of capital circulation that has come to dominate from the mid-eighteenth century onwards is that of industrial or production capital. In this case the capitalist starts the day with a certain amount of money, and, having selected a technology and organisational form, goes into the market place and buys the requisite amounts of labour power and means of production (raw materials, physical plant, intermediate products, machinery, energy and the like). The labour power is combined with the means of production through an active labour process conducted under the supervision of the capitalist. The result is a commodity that is sold by its owner, the capitalist, in the market place for a profit.

This seems relatively anodyne, no? If we focus on shipping, I think we focus on “industrial or production capital” (making and moving stuff). So far as I can tell, the crisis has nothing to do with merchants, landlords, or rentiers; although merchants as owners of the goods, landlords as the owners of warehouses and port facilities, and rentiers are involved in trade credit, but none of them seem to be doing anything other than what they normally do; none of them caused Hanjin to go belly-up. So, crisis (pp. 40-41):

Continuity of flow in the circulation of capital is very important. The process cannot be interrupted without incurring losses. There are also strong incentives to accelerate the speed of circulation. Those who can move faster through the various phases of capital circulation accrue higher profits than their competitors. Speed-up nearly always pays off in higher profits. Innovations which help speed things up are much sought after. Our computers, for instance, are becoming faster and faster. Any interruption in the process threatens the loss or devaluation of the capital deployed

Clearly, for Hanjin, continuity of flow has been completely interrupted. More subtly, the entire process is being slowly interrupted as less and less stuff — hence capital invested in stuff — is circulating; rather like a case of hypertension, one of those conditions one does not die with, but from, as blocked circulation culminates in a heart attack: A crisis. In capitalism, a crisis looks like this (p. 215):

At times of crisis, the irrationality of capitalism becomes plain for all to see. Surplus capital and surplus labour exist side by side with seemingly no way to put them back together in the midst of immense human suffering and unmet needs. In midsummer of 2009, one third of the capital equipment in the United States stood idle, while some 17 per cent of the workforce were either unemployed, enforced parttimers or ‘discouraged’ workers. What could be more irrational than that?

And today in “the economy,” after eight years of “recovery,” there’s a ginormous amount of capital sloshing about with no place to go, and a rotten labor force participation rate with many people having dropped out of the labor force entirely. And the same goes for shipping in particular: Ginormous amounts invested in ships, with no goods to fill them, and a 9% unemployment rate for water transportation workers. That’s not a 2008-style systemic crisis[2], but it’s a crisis according to Harvey’s definition.

So, what can interrupt capital’s continuity of flow? Harvey identifies six potential types of blockage (p. 47):

Examination of the flow of capital through production reveals six potential barriers to accumulation that have to be negotiated for capital to be reproduced: 1) insufficient initial money capital; 2) scarcities of, or political difficulties with, labour supply; 3) inadequate means of production, including so-called ‘natural limits’; 4) inappropriate technologies and organisational forms; 5) resistance or inefficiencies in the labour process; and 6) lack of demand backed by money to pay in the market. Blockage at any one of these points will disrupt the continuity of capital flow and, if prolonged, eventually produce a crisis of devaluation.

If these six points are not exhaustive, I’d very much like to hear from readers why, though I do notice Harvey leaves out a “capital strike,” and lack of “animal spirits” by capitalists.

Before looking at these potential blockages in the realm of shipping, I want to call attention to Harvey’s methodological, non-dogmatic flexibility, which I find congenial. Harvey writes:

When viewed as a whole, we see a series of potential blockage points to the circulation of capital, any one of which has the potentiality to be the source of a crisis. There is, therefore, no single causal theory of crisis formation as many Marxist economists like to assert. There is, for example, no point in trying to cram all of this fluidity and complexity into some unitary theory of, say, a falling rate of profit. In fact profit rates can fall because of the inability to overcome any one of the blockages identified here.

Let’s take a brief look at Harvey’s six potential blockages, and see if any of them give an account of our crisis in shipping. (In shipping right now, we have surplus capital, and surplus labor, and no way to put them together. That’s a crisis. Now, I don’t know whether idle containers with goods for the holiday season create “immense human suffering and unmet needs,” but they create suffering for whoever put their business at risk in purchasing goods that might not be delivered, and they will create suffering for those whose employment in retail depends on the goods having been distributed.)

Can the crisis in shipping be attributed to a shortage of (p. 49) initial money capital needed to start a fresh round of accumulation? Highly unlikely. Initial money capital, among other things, is Marx’s famous “primitive accumulation” (accounting control fraud, asset stripping, reneging on pension obligations). It’s also privatizing services and property once considered common. Plenty of all that going on!

Can the crisis in shipping be attributed to (pp. 58-61) difficulties with labour supply? Again, unlikely. High unemployment means we have an “industrial reserve army” sufficient for competition between workers to keep wages low, were the workers not also divided by, well, identity politics. We also have creative forms of precarious employment continually being invented. It is true that the Pacific Coast longshoreman’s unions are militant, but that doesn’t account for declines in trucking or rail.

Can the crisis in shipping be attributed to (pp. 68-71) inadequate means of production? Clearly not. We have more ships than we know what to do with, splendid facilities in Asia and on the Pacific Coast, a widened Panama Canal, and new infrastructure on the Atlantic Coast, including lots of warehouses in Pennsylvania.

Can the crisis in shipping be attributed to (p. 69, pp. 86-88) inappropriate technologies and organisational forms? Highly unlikely. Everything I read about shipping and supply chain management — remember, sociopaths are gravitating to the field! — testifies to how dynamic moving stuff is, these days, both technologically and institutionally.

How about (p. 102) resistance or inefficiencies in the labour process?Harvey writes eloquently:

The human relations involved within the labour process are always complex affairs, no matter how rigid the disciplinary apparatus, how automated the technology and how repressive the conditions of labour appear to be. It was one of Marx’s most signal achievements to recognise that it is in fact the labourer – the person who actually The Enigma of Capital 102╇ does the work – that holds the real power within the labour process, even if it appears that the capitalist has all the legal rights and holds most of the political and institutional cards (through command over the state in particular). In the labour process, however, the capitalist is ultimately dependent upon the labourer. The worker produces capital in the form of commodities and so reproduces the capitalist. If the labourer refuses to work, downs tools, works to rule, or throws sand into the machine, then the capitalist is helpless. While the capitalist may organise the labour process, it is the worker who is the creative agent. Refusal to cooperate, as Marxists such as Mario Tronti who adopt the so-called ‘autonomista’ perspective have emphasised, is a crucial point of potential blockage where the labourer has the power to impose limits. When we think of class struggle, too often our imagination gravitates to the figure of the worker struggling against the exploitations of capital. But in the labour process (as is indeed the case elsewhere) the direction of struggle is really the other way round. It is capital that has to struggle mightily to render labour subservient at that very moment where labour is potentially all-powerful. This it does both directly through the tactics of organisation of social relations on the shop floor, in the fields, offices and institutions and throughout the transport and communications networks. If capital is to be produced, then these social relations must be shaped in collaborative and cooperative ways. This can sometimes be achieved by brute force, coercion and technical modes of regulation but more often than not it involves forms of social organisation that entail trust, loyalty and subtle forms of interdependency that acknowledge the potential powers of labour while shaping it to capital’s purpose. It is here that capital so frequently concedes to the labour movement certain powers, to say nothing of material advantages, provided of course that capital continues to be produced and reproduced.

Which is all very well, but I’m not seeing signs of that in the shipping industry. Leading us to…

Can the crisis in shipping be attributed to lack of demand backed by money to pay in the market? That sounds right, to me. After all, the very simplest reason for why stuff isn’t being shipped is that people don’t want it; “the dog won’t eat the dog food,” as the saying goes. Harvey (p. 107) writes eloquently — Marxist writers are often the most eloguent on the elegancies of capitalism — of how capitalism opens new product lines:

Since Marx’s day the elaboration of new product lines and product niches has been a life-saver for capitalist development at the same time as it has transformed daily life, even down to the modest incomeevels of so-called developing countries (witness the rapid proliferation of transistor radios and cell phones throughout the world in a few decades). The household technologies now commanded by the professional bourgeoisie and the upper and middle classes of the advanced capitalist countries (which now include, in addition to Europe and North America, much of east and south-east Asia) are simply astonishing. Product innovation and development, like everything else, has in itself become big business applicable not only to the improvement of existing products (like automobiles) but also wholly new sectors of industry (such as computers and electronics and their huge fields of application in government, pharmaceuticals, health care, corporate organisation, entertainment, and the like, as well as in household goods). Much of this depends, of course, on the tastes of consumers and their level of effective demand (matters to be considered shortly). But the astonishing penchant for creating wholly new product lines and the acceleration that has occurred in new product development since the 1950s or so has placed the development of consumerism and a rising effective demand at the centre of the sustainability of contemporary capitalism in ways that Marx, for one, would have found hard to recognise.

But that life-saving elaboration doesn’t seem to be happening right now; the best we seem to be able to come up with for a new product line is self-driving cars, which are vaporware and a bezzle, so far as I’m concerned. And apps. Meanwhile, the products we do have are increasingly crapified (as anecdote in suffficient volume to mutate into data at Naked Capitalism has shown). And with wages flat, the reality of credit revulsion, and kids these days up to their eyeballs in debt, it’s no wonder people don’t want more stuff. In fact, they want less stuff. This is fine.


Obviously, this is a superficial lightweight appreciation of Harvey’s work. However, we really are looking at a chronic crisis in shipping — and, in the case of Hanjin, an acute one, a seizure and a stoppage — and, at least in the sources I read, I haven’t seen anybody give an account of it. I think it’s reasonable that Harvey’s framework can give such an account, and I hope to dig deeper into it, from the perspective of blockages in the circulation of capital.


[1] I’m also going to bypass the credit system, to which Harvey devotes a lot of time, entirely, to keep the focus on stuff. I’m sure readers will tell me if that vitiates what follows.

[2] There don’t seem to be any derivatives derived from shipping.

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.


  1. Jim Haygood

    ‘In midsummer of 2009, one third of the capital equipment in the United States stood idle, while some 17 per cent of the workforce were either unemployed, enforced parttimers or ‘discouraged’ workers. What could be more irrational than that?’

    On a parallel note, Robert Shiller’s book Market Volatility (1990) noted that stock price declines in recessions are way out of proportion to what one would expect. If stocks are valued to discount the next half century of earnings and dividends, one year of bad earnings in a recession shouldn’t reduce their price more than a few percentage points. But stocks fell 55% into early 2009, as if the world were ending.

    Evidently mass psychology plays a powerful role in systemic over-reaction, in the form of excessive collective optimism and pessimism. This has gone on for centuries, as documented in Mackay’s Extraordinary Popular Delusions. It may be irrational, but it’s a myth that people are fully rational, particularly in large groups.

    Swings in mass psychology appear to be as intrinsic to human culture as cyclical swings in predator/prey populations. Every industry has a capacity cycle, and shipping is no exception. Trying to repeal the capacity cycle would be futile. An economy without capacity cycles would be as dead as a person without a pulse, or an earth without tides. It doesn’t need to be fixed. That is, the trend is your friend. :-)

    1. Foppe

      If stocks are valued to discount the next half century of earnings and dividends, one year of bad earnings in a recession shouldn’t reduce their price more than a few percentage points. But stocks fell 55% into early 2009, as if the world were ending.

      Evidently mass psychology plays a powerful role in systemic over-reaction, in the form of excessive collective optimism and pessimism. This has gone on for centuries, as documented in Mackay’s Extraordinary Popular Delusions. It may be irrational, but it’s a myth that people are fully rational, particularly in large groups.

      They are? And here I was thinking that the stock market suffered from inflation — and accordingly amplified swings when unexpected shit happens — because too many people with savings were looking for returns in a market that has too few healthy/sorta-safe potential investment opportunities on offer. Guess that’s simply inconceivable…?

      1. Jim Haygood

        Stock indexes have tripled since 2009, while the U.S. economy has grown 25%.

        Apparently stocks were valued too low in 2009, too high in 2016, or perhaps both. We have no objective way of saying, other than empirical evidence.

        These extremes in valuation, which don’t correlate with any major change in long-term economic growth prospects, are what Shiller investigated as excess volatility.

        1. Foppe

          I’m sure I’m ‘missing’ something, but it seems to me that given a finite world, there necessarily exists an inverse correlation between both the (compounding) overall size of an economy and the absolute amount of money floating around, and the amount of room left for new investments, that makes the trends Shiller marvels at a given.

    2. Ignacio

      I don’t buy this. OK it is true for the casino, I mean, the stock exchange. But i don’t thik that what looks like overinvestment in freigth capacity is driven by mass psychology but miscalculation of demand growth by very few.

  2. tegnost

    Excellent, thanks, i like the circularity of the 6 points and the implication that at some point labor not having money leads to capital not being able to sell things,among the other variables and as simplistic as that seems. This combined with the real news thing where he mentions increases in productivity really points to how producing more and more junk with less and less value, then counting on global labor disparities to make up the difference in profit margin works, until it doesn’t. Whatever surplus savings had been accumulated in the US seems to have been vaporized, and what policy can set us aright again?

  3. paulmeli

    Have you considered the decline (of growth) in Federal Spending over the past 4 years? Which is unprecedented post WWII.


  4. Mark John

    Thank you for the insight. It will be interesting to see what the ripple effects will be. Probably not pleasant, but interesting.

    As a Marxist, I think it is important to adapt, learn, and add as contexts change even if the big picture is pretty much what the original Marxist criticism indicates. Solutions, therefore, must also be adapted.

    1. Oregoncharles

      City planning is all about stopping, or moderating, the “capacity cycle” in housing and offices. Doesn’t always work, but the city is healthier when it does.

      It’s true the people involved are gonna be people, complete with enthusiasms, but dampers on the system make all the more sense – like stopping trading when a swing is excessive. They don’t vitiate the system, but they do prevent some waste.

  5. Paper Mac

    What is Harvey or Marx bringing to the table here that wasn’t already present in the conventional analysis, which already has made clear that there’s an oversupply of ships and rolling stock and inadequate demand to employ them all?

    1. paulmeli

      If conventional analysis has it right, and smart investors understand it, why has shipping overplayed it’s hand?

      1. Paper Mac

        Because the alternative was to go out of business? I was hearing industry predictions that the major shippers were deliberately pursuing oversupply in the knowledge that they would drive minors out of business and probably be propped up by gov’ts anyway literally 5 or 6 years ago. The logic of the situation didn’t permit anyone to just quit.

        1. Yves Smith

          A lot of hedge fund and private equity money went into shipping too. Nothing like the smartest guys in the room thinking they know better than people who have been at it, in some cases for generations.

      2. Paper Mac

        It’s worth noting also that Harvey’s marxist explanation assumes that capital is autonomous and must systemically overplay its hand, so there’s no additional information in that frame that would have allowed market participants to find a way out of the contradicitons of capital..?

        1. hemeantwell

          no additional information in that frame that would have allowed market participants to find a way out of the contradicitons of capital

          It’s not a matter of information, but systemic regulatory capacity. Left to their own devices, capitalists tend to min costs to max profits and so end up collectively undercutting the demand for products as they try to save on labor costs. The Keynesian consensus was, in part, an attempt to counterbalance the fallout from this contradiction. The idea of regulating business cycles with countercyclical spending and such was an attempt to use government to provide spending power to mop up overproduction/underconsumption. I think what has become terribly evident is that a crucial part of the consensus involved supporting unions to buttress consumption. With that mostly in tatters, and with austerian ideology dominant, the regulatory capacity of the state is greatly weakened.

          Thanks for your work on this, Lambert. Your reference to Harvey’s omission of “animal spirits” is well-taken. I wonder if the frightening potential for environmental calamity is not working as a sobriety check, reinforcing the incentives for short-term corporate planning that have often been criticized here at NC.

        2. Fiver

          ‘..capital is autonomous and must systemically overplay its hand, so there’s no additional information in that frame that would have allowed market participants to find a way out of the contradicitons of capital..?’

          War and imperialism – see Lenin.

      3. Oregoncharles

        One big spanner in the works is delay. For instance, it takes quite a while – years, I would think – to order and build a ship. They’re big, and big investments. So you order in one economy, and take delivery in quite another. And usually, you don’t know just what your competitors are doing.

        Since no one can actually predict the economy because it’s technically “chaotic” – delays like that being one reason – lag time is one reason for cycles.

  6. Foppe

    Possibly superfluous, but a few things to look into is what this slowdown will do for these related businesses/sectors (is warehouse demand going down, or merely stagnating; do these have buffers to weather a downturn, or are they perhaps financed in a different way? are there ports/warehouse facilities elsewhere that have been foolishly expanding? Who financed the Panama Canal expansion?), and whether there spill-overs to be expected from these to other sectors on a local/regional level around major shipping hubs.
    Aside from that, are there overviews somewhere (by tonnage?) of the bulk goods that were and no longer are being shipped this way?

    1. Mark John

      Yes, that, and one could we see the biggest companies surviving as the little and medium sized companies go under or sell themselves off, creating a monopolizing effect and a further stranglehold of large corporations on the world economy.

  7. Left in Wisconsin

    One point of caution (though you have a better handle on the shipping data than I): it seems like most of the shipping data is measuring quantity in weight or bulk, not in “value.” One could imagine a large reduction in bulk that was a much smaller reduction in the value of what is being shipped. Also, are the absolute numbers way down or just shipping capacity? If capacity has dramatically increased in recent years, you could have a crisis in shipping that was not really a result of crashing demand.

    Separately, I wonder how much shipping cargo over the last three decades was the tooling to produce manufactured goods for an entire industrial society being shipped from North America and Western Europe to China. At some point, one would think that either the Chinese has as much tooling as they need or that they have learned how to make higher quality industrial tooling. So a decrease in that particular shipping cargo would not indicate decreasing consumer demand.

    1. Paper Mac

      It’s as much the other way around, I think- the collapse of commodity prices has driven down the booked value of bulk cargo, which creates the impression that commodities shipping has collapsed when on a per-volume basis the decline is much less pronounced.

      1. Lambert Strether Post author

        I try to follow things like container counts — stuff — for exactly that reason. “Booked value” is a rather slippy concept. Yes, I know a stranded ship full of Cartier Watches would have a different “value” than a stranded ship full of stuffed animals, or grain, but still. The physical movements tell us circulation is slowing. Idled tonnage and ships beginning to be broken up tell us circulation is slowing.

  8. Oregoncharles

    Maybe I’m picking nits, but there’s a fundamental flaw in the theory:

    “(raw materials, physical plant, intermediate products, machinery, energy and the like)”

    He’s mixing up – equating, if you will – natural inputs with human-made ones. That’s a fundamental error in both Marxism and Capitalism (Adam Smith-ism?), and an indirect source of our disastrous environmental problems. Herman Daly (environmental economist, now retired) saw it as underlying corruption in the field of economics, which apparently Marx shared: they chose sides in the then-hot battle between landowners and merchants. They did very well out of the sell-out, but it’s one reason the field is so corrupt.

    How is this relevant to shipping and its discontents? Don’t know yet, maybe just a pet peeve, but it’s relevant as all h..l to the distinction between finance and “stuff”.

    1. Synoia

      All inputs are human ones.

      You seem to be trying to differentiate between mining and agriculture (extractive industries) and manufacturing.

      1. Oregoncharles

        I’m distinguishing between natural resources and human products, like factories. Farms, of course, are a combination.

        All economic activity depends on and is limited by the resources of the Earth. Economists mostly will not acknowledge that reality, and Marxists are no better on this point than Capitalists.

        1. bdy

          Harvey often expresses the way Marxism offers the possibility for better engagement with resource limits than Capitalism because it negates the necessity of profit driven growth. I’ve heard him cite the fact that a Capitalist economy has to grow exponentially within a finite resource pool as one of the best arguments for using Marxist models to drive urban policy.

          One reason many environmentally motivated voters supported Sanders was the promise implicit within his attack on profit-driven everything — that he was also attacking the growth in consumption and waste built into the profit machine.

            1. John

              But it’ll be much, much easier to make the changes necessary for ecological survival if we have a command economy.

    2. John

      I think you’d have to read Harvey more closely. He has a very nuanced, advanced definition of capital that would probably include natural capital as well (it’s been a few years since I last read Enigma). For him, it’s a process, rather than a tangible thing.

  9. Chauncey Gardiner

    Lambert, regarding your Note 2, freight futures contracts; i.e., financial derivatives, appear to be offered through the Shanghai Shipping Exchange, the Intercontinental Exchange, the International Maritime Exchange in Oslo, and perhaps some other venues.

  10. don

    Rather than focusing on lack of demand, a more insightful perspective might be to focus on overproduction/over capacity. Harvey tends to downplay this perspective (as he does overconsumption – and for that matter human overpopulation which he refutes), but it offers a counterweight to the lack of demand thesis. Another Marxist that fills this void: Robert Brenner, Economic Historian, UCLA.

    Overproduction relates directly to a lack of areas to invest in, in which case all that money slushing around the global finds its way into speculative finance.

    1. Fiver

      I’ll take the egg to that chicken and argue the ‘lack of areas to invest in’ is as due to the excessively-financialized economy’s requirement for profits that can compete with the returns of speculation permanently gone mad – US corporate debt is far greater than the supposed ‘cash horde’ at their disposal, the debt taken on for the purpose of buying back (reducing) shares while driving prices and dividends, senior management and large investors effectively become parasites on the host.

    2. John

      Dude, Harvey completely ACCEPTS Brenner’s work. That’s what he based the economics of Enigma off of. Read it again.

      Glad to see someone on here who has read Brenner though. The Boom and the Bubble is the most convincing work of economics I’ve ever read, and why I ultimately believe the current crisis is a result of overproduction/under-utilization of capacity rather than simply the law of the rate of profit to fall (as described by Andrew Kliman and Michael Roberts).

  11. Jay

    Dimitry Orlov has speculated in The Five Stages of Collapse that financial and commercial collapse go hand-in-hand as less money and less demand for disposable crap and petroleum scarcity will lead to a collapse in global shipping. He predicted that as resources become more scarce, the ships would slow down to conserve diesel until the point where they just stop. Obviously there are other reasons for ships to stop shipping; I’ve been watching coverage of the Hanjin bankruptcy with this in mind, as well as the shipping news in Water Cooler. If we can create a system of homeless people in a landscape of empty foreclosed homes, surely we can create a system of well-inventoried warehouses where staggering numbers of unemployed can’t buy what’s in the warehouses. Doubtless we would call this “recovery.”

    1. sd

      That raises a question.

      The warehouses – are they empty, full, something in between? Are they actually being utilized or are they being built in anticipation of inventory that isn’t coming? For instance, a glut of luxury apartments is starting. Rather than reduce rents to meet demand, so far, landlords seem to be throwing in extras like flat screens, etc.

      So, is it less a case of demand for warehouse space and more a case of oversupply? Which would dovetail with what’s happening in shipping.

  12. clarky90

    I have noticed fewer and fewer people outside walking around my little village. Those I do come across, tend to be older (over 60yo).

    IMO, people are abandoning the physical world for the digital world (I say, at my standing desk, on the internet). Our public parks are empty, even on a weekend.

    Also, disturbingly, people are abandoning their physical bodies. I look at the “state of affairs” of the majority of physical human bodies in my town. Abandoned or neglected! Falling apart, except for a small number of health nuts and the young people.

    I think that this may explain the slowing of shipping

    1. Skip Intro

      What, has no one heard of pokemon go? No reason you can’t walk around outside without leaving the digital world!

  13. KPL

    “Can the crisis in shipping be attributed to lack of demand backed by money to pay in the market? That sounds right, to me.”

    It sounds right to me too. IMO, pulling forward the demand, through the mechanism of debt and lower interest rate, has run its course as people reach their limits in taking on debt and the central bankers reach their limits (one cannot say that with any certainty as these lunatics have proved to the short sellers who have been constantly squeezed over the years) in their ability to lower interest rate. This demand manifests in companies like Hanjin taking up debt to fulfill the drummed up demand and going belly up when the demand drops like a stone.

    Couple this with screwing of savers, retirees and prudent prople with low interest rates by the central bankers (depriving them of money to spend and also making them save more, spend less – a double whammy if you will), lack of wage growth and drop in labor participation rate – both of which create demand, it makes for easier understanding wht it can be attributed to lack of demand.

    Meddling begets this. These central bankers have got everything upside down and are constantly on the job with their insane policies to drive up demand by inducing people to take on debt, instead of allowing it to evolve naturally as people’s ability to spend increases. I am not saying more as it will become a rant on the central bankers.

    In short, I agree with this thesis of lack of demand.

  14. PlutoniumKun

    Back then oil was threatening to hit $150 a barrel there were lots of stories floating around about companies deciding to shorten supply chains – frequently US companies looking to Central America and German/French companies looking at Eastern Europe as an alternative to Asia. Given the time lags in these things could be seeing the impacts on long distance shipping?

    1. Ignacio

      That could work for some stuff. It is called regionalization I believe. Some commodities are quite sensitive to price changes and shifts in supply can occur very fast. For instance, raw materials for feed. I think that cars are worth a look at them.

      1. PlutoniumKun

        Yes, it occurred to me that with a hypothetical supply chain with 10 links, if even one link (on average) was regionalized, then that would have quite a significant impact on aggregated shipping distances. And logically, companies would be seeking to regionalise the bulkier (more expensive to transport) elements. They may also have focused on products that are energy hungry to transport, such as frozen goods. I recall reading that one US company was shipping frozen chickens to China for butchering, and reimporting the processed breasts and legs.

        Other issues that occur to me are:

        1. Widespread false invoicing in Asia, mostly China, in order to disguise money transfers. This could be causing an imbalance between reported and real trade. While the level of false invoicing is well known between mainland China and HK, there may well be other unreported chains.

        2. In the aftermath of the Crash, lots of companies (especially again in China) were reported to be using cheap cash to warehouse commodities or components. Perhaps we are seeing the impact as these stockpiles are being surreptitiously wound down.

  15. JCC

    The Loadstar site has some interesting articles on Hanjin (and the Supply Chain in general). The amounts of money involved are phenomenal. For example, Hanjin is racking up millions of dollars a day in costs while 5/6ths of their total capacity is stranded, and they make up only about 3% to 4% of container ship world-wide total capacity.

    If “shipping stuff” continues to remain stagnant, this is a very big deal and the fallout doesn’t look good. There are a few articles here discussing the fact that Hanjin is not the only bulk shipper in serious trouble, and as already mentioned, consolidation is guaranteed while prices will remain low for some time as long as shipping price wars continue due to the lack growth of “shipping stuff”.


    The HANJIN Group
    “The Hanjin Group (Hangul: 한진 그룹; hanja: 韓進 그룹; RR: Hanjin Geulub) is a South Korean conglomerate, or chaebol. The group is a holding company that includes a shipping company, Hanjin Shipping (including Hanjin Logistics), and Korean Air (KAL), which was acquired in 1969.”
    By THE ASSOCIATED PRESSSEPT. 6, 2016, 3:39 P.M. E.D.T. Associated Press writer Josh Cornfield in Trenton, New Jersey, contributed to this report.

    “The world’s seventh largest ocean shipper, Hanjin Shipping is part of the Seoul-based Hanjin Group, a huge, family-dominated conglomerate, or chaebol, that also includes Korean Air.”
    (of interest):
    “The shipping company has posted net losses every year since 2011. Last week, creditors led by the Korea Development Bank rejected a plan by Hanjin Group to spend another 500 billion won ($447.2 million) to rescue the shipping firm, way short of Hanjin Shipping’s more than 6 trillion won ($5.37 billion) in debts.”
    By Costas Paris and
    In-Soo Nam
    Updated Aug. 31, 2016 3:12 p.m. ET
    “U.S. shippers say they are bracing for steep rate increases out of Asia after South Korea’s Hanjin Shipping Co. filed for receivership on Wednesday.”

  17. cnchal

    Can the crisis in shipping be attributed to lack of demand backed by money to pay in the market?

    Yes. This is the result of the concentration of wealth.

    Remember last week, in one of Colin Powell’s hacked email releases he complained that Hillary went before him and cleaned out the University’s money available to pay speaking fees, and now he was sort of going to starve?

    We are all Colin Powelled now.

    Also, the warehouse building sociopaths don’t like it when you call those big hollow buildings warehouses. They prefer the term ‘fulfillment centers’. It sounds so much better, and it might even fool people into thinking working in a modern day satanic mill is fulfilling.


    Hanjin chartered vessels to be returned to owners after unloading: Judge
    By AT Editor on September 19, 2016 in Asia Unhedged, Koreas
    By Joyce Lee
    “Banks led by state-run Korea Development Bank (KDB) withdrew backing for Hanjin late last month, saying a funding plan by its parent group was inadequate to tackle debt that stood at 6.1 trillion won as of end-June.
    South Korea has said no government or central bank money would be directly injected into the firms restructuring in the ailing shipping and shipbuilding industries, though it is helping small-to-medium sized businesses hit by the restructuring.”

  19. Sound of the Suburbs

    Milton Freidman descended from heaven and Western elites worshipped him.

    In their rapture they lost their minds.

    In the 1970s we had the lowest levels of inequality in history in the developed world.

    This is what most East European, South American and Russia hoped for as the old order disappeared.

    What we all got was economic liberalism that drives inequality.

    Thatcher and Reagan started the revolution in the 1980s and inequality immediately started to rise.

    It was bought to these other nations that were hoping for the old, gentler capitalism. The new capitalism bought massive inequality with widespread and brutal poverty.

    Small state, raw capitalism is not new, it was how capitalism started in the 19th Century UK.

    A few at the top were fabulously wealthy and the majority lived in poverty and squalor.

    We used to have first world and third world nations.

    The first world nations used some redistribution to improve the standard of living for those lower down the scale to create a modern civilised society.

    The third world nations had very rich people and very poor people and paid no attention to creating a civilised society where there was some redistribution to improve the standard of living for those lower down the scale.

    We took away the things that differentiated first world nations and third world nations and soon all the first world nations started to resemble third world nations as the middle class began to disappear.

    We aimed for a system that drives inequality.

    Debt paved over the cracks for a while but the global consumer was gradually being pushed into poverty.

    Eventually the global consumer reached maxed. debt where the soaring costs of housing, healthcare, student loans and debt repayments used up all of their disposable income.

    That was the day the system died due to lack of demand.

    “The Marxian capitalist has infinite shrewdness and cunning on everything except matters pertaining to his own ultimate survival. On these, he is not subject to education. He continues wilfully and reliably down the path to his own destruction”

    These people don’t change.

    1. Sound of the Suburbs

      How is the global consumer these days?

      1) The once wealthy Western consumer has had nearly all their high paying jobs off-shored. As a stop gap solution they were allowed to carry on consuming through debt. They are now maxed out on debt.

      2) Japanese consumers have been living in a stagnant economy for decades.

      3) Chinese and Eastern consumers were always poorly paid and with nonexistent welfare states are always saving for a rainy day. Western demand slumped in 2008 and the debt fuelled stop gap has now come to an end.

      4) The Middle Eastern consumers are now too busy fighting each other to think about consuming anything and are just concerned with saying alive.

      5) South American and African consumers are busy struggling with economies that are disintegrating fast.

      Nearly there.


    Recall above entry: ““The shipping company has posted net losses every year since 2011.”
    (This entry was posted on Monday, August 8th, 2011 at 4:00 pm and is filed under News & Events)

    .Seaspan and Carlyle order seven 10,000 teu ships with Hanjin charter
    The seven ships will be chartered to Hanjin for ten years with an option for two additional years. They are scheduled for delivery in 2014 and 2015.

    Seaspan and Carlyle order seven 10,000 teu ships with Hanjin charter
    05 Aug 11 – Seaspan Corp. has officialized last night a contract for three ships of 10,000 teu, part of a seven ship order concluded in June with the Yangzijiang Shibuilding group (YZJ) by Greater China Intermodal Investments LLC (GCI), a Marshall-based investment vehicle established by an affiliate of the Carlyle Group (a US asset manager) and in which Seaspan holds an 11% ownership interest
    As always…”Follow the Money” and the devils in the details.


    Some interesting correlates: Can Reorganization trump bankruptcy for some transfers in this neo-capitalist strategic shuffle?
    http://worldmaritimenews.com/archives/175358/hanjin-shipping-considering-sale-of-h-line-stake/. Last November 2015 Hanjin Shipping Considering Sale of its stake in H-Line Shipping.

    “The sale is estimated to be worth around USD 139.35 million.

    Hanjin Shipping has a 22.2% stake in H-Line Shipping, an entity created in 2014 following Hanjin’s offloading of dry bulk and LNG shipping businesses for USD 298 million.

    Private equity firm Hahn & Company holds a 77.8% stake in the business.

    Hahn & Company one of Korea’s leading
    private equity firms Founded in 2010 is a South Korea-focused private equity firm founded by Scott Hahn, formerly Morgan Stanley Private Equity (MSPE) Asia’s (MSPEA) chief investment officer. Yeo-Eul Yoon is Chairman of Hahn & Co. Mr. Yoon was previously President & CEO of Sony Group.

    Churning or earnings? While some linear thinking and theory is essential, the global capitalism that exists today liquidates for profit as much as it depends upon economy building. It is difficult to assess a purely crisis model because crisis is now profitable and created by some of the biggest capitalists in the Global churn. This reorganization is strikingly familiar at a different scale to what had (and has) happened to trucking, flag ships, private equity shareholdings and union busting, and contingency workers in the largest Trucking firms and mergers since 2007 that channeled the US economy across the nation.. Parallels and patterns of profit and wealth management do not necessarily follow virtuous economy models. Oceans and spatial dimensions are not boundaries to such strategic divisiveness and capture or restructuring by specialized wealth management global entities.
    There is no doubt that this current crisis has victims, but capitalism is not practiced as a victim-less venture and the dimensions of causality are not always on the surface or even notably present in the immediate empirical reality. While this valuable and insightful analysis by Lambert Strether might self-assess a caveat that it might humbly concede “a superficial lightweight appreciation of Harvey’s work” (an application that merits better than that, in my mind); The critical realism of contemporary times must question if theory has only “a superficial lightweight appreciation” of the micro-macro integrated strategies of global capitalism desperately, intricately and actually at work over time and in situ. We only scratch the surface with the templates derived from a century of capitalist theory, while the gravity of realism has nothing but contempt for patent rules of order.

  22. John

    “I think it’s reasonable that Harvey’s framework can give such an account, and I hope to dig deeper into it, from the perspective of blockages in the circulation of capital.”

    But you don’t succeed in describing Harvey’s framework in this article. Harvey’s theory on the economic crisis comes from Robert Brenner. They see this lack of demand as a symptom rather than the cause: a crisis of overproduction and under-utilization of capacity in manufacturing. Increased government spending may temporarily prop up demand but since it doesn’t resolve this fundamental structural problem, in the long run, we will remain in stagnation. Because as is hinted at in the quoted material here, for Harvey, industrialization and urbanization are ultimately what makes an economy grow robustly. Now that the developed world has mostly finished with these processes (and try to get around this limit through urban renewal projects), we’re left with nowhere to invest the huge amounts of surplus capital flowing through the system, and so we get low growth.

    Of course other Marxists see it differently. As quoted in the article, Harvey writes: “There is, for example, no point in trying to cram all of this fluidity and complexity into some unitary theory of, say, a falling rate of profit.”

    Here he is referring to Andrew Kliman and Michael Roberts (who has a fantastic blog here: thenextrecession.wordpress.com ). There is a whole school of Marxists that very convincingly argue that the current crisis is a result of falling profit rates, and other than maybe once or twice, I’ve never seen them mentioned on nakedcapitalism.

    In spite of my criticism, I really appreciate having an article on a Marxian economist and hope to see more in the future.

    1. jock mctrousers

      I’ll second your recommendation of Michael Roberts Blog. In the archives you can find some very interesting responses to Harvey. Roberts is very convincing, and I would love to see some engagement with his work here. He is also the most readable Marxist economist I have encountered. I have to say I find Harvey deadly dull, dispiriting…

      Yes, Roberts convinced ME it’s down to the falling rate of profit ( and also that Harvey, Sweezy and a whole line of Marxists actually REJECT Marx’s ideas). But then… well, so what? What to do about it?

      1. pretzelattack

        i have to admit i find most writing about economics to be on the dull side, but i slog through as much as i can tolerate. I’ll try roberts. the mainstream bullshit isn’t worth reading, tho one needs to understand some of it to grasp what’s going on as our perpetual motion trainwreck proceeds. maybe we can monkeywrench the process somehow. i’m not optimistic we can avoid a lot of violence in the end.

  23. Greg

    The service economy, namely High deductible health insurance and rapacious tuition of higher education, has all but eliminated the pursuit of commodities for many consumers. The service economy seems less labor responsive and ripe for casino capitalism

  24. Paul Boisvert

    Thanks greatly for the post on Harvey. All NC readers should read his stuff, particularly on capitalism and geography/space. He is a brilliant small-m “marxist”, in the same sense that all evolutionary biologists are small-d “darwinists”. “m”arxism as an analytic framework for understanding capitalism is as absolutely necessary and intellectually productive as darwinism is for understanding evolutionary biology.

    This does not mean that Marx or Darwin were Gods: infallible and dogmatic–hence the need for using the small-m and small-d. All sensible modern socialists/marxists realize this, and the (mild, not particularly obtuse) suspicion and distaste with which many NC readers hold “Marxism” is attributable to many past “M”arxists not being of the small-m kind. That is far less common now…

    But one must overcome the failures of more obtuse people to properly interpret generally correct frameworks, without rejecting the framework. No evolutionary biologist believes that Darwin’s overall evolutionary framework is not the generally correct one, regardless of the many and in some cases quite substantive modifications that have been made over the years. Ditto for marxism–its fundamental framework, in which capitalism is an irrational and essentially exploitative and unjust system of social oppression, is simply…essentially correct– with some substantive and ongoing modification of its analysis of particular capitalist phenomena over the years.

    Thus, since marxism isn’t dogma, the dynamics and details of any capitalist phenomenon (like a shipping “crisis”) are always open to debate and interpretation, as an example of which your astute parsing of Harvey is admirably explicated. Keep up the good work!

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