The paucity of theoretical (left-wing) analysis concerning the present financial crisis has been bothering me for the last several months. In recent days, however, theorists have begun to examine the context in which this crisis has occurred and its various ramfications.
First of all, there's John Bellamy Foster's essay in the April 2008 edition of Monthly Review, which can also be read online here. I'd suggest that one first read a piece he wrote for Monthly Review a year earlier, in April 2007, to flesh out the theoretical picture, which can be found here. As I understand Foster, the gist of what he's saying appears to be that the shift from an earlier industrial capitalism to today's finance capitalism was prompted by stagnating profit and the concomitant lack of profitable outlets for investment. But a corollary of this move has been a national economy (and increasingly, a global one) that is susceptible to booms and busts (in contrast to the relatively mild cycles of forty and fifty years ago), to speculative fevers and savage "corrections" of the sort not seen in an earlier post-WW2 age. And that what we have today is the inevitable collapse of a financial house of cards, which has been built on -- and succumbed from -- inherent contradictions such as insufficient purchasing power on the part of ordinary people, the explosion of credit, and the frantic and feverish search for super-profits. I hasten to add that I'm not sure to what extent I'm paraphrasing Foster and to what extent I'm depicting my own weltanshauung.
What troubles me now is how little theory informs current political discourse. The ideas put forward so far appear to be to lower interest rates, to provide some relief to mortgage holders, to "stimulate" the economy, to (half-heartedly) attempt some mild regulation of the markets -- all patch-and-mend. What's really needed is an ideological alternative: one that provides a theoretically different perspective from the neoliberal dogma of the last three decades. One that proposes that there may be an alternative to (ostensibly) free markets and ever-widening disparities in wealth and income; one that situates the present crisis as systemic and reveals the ideological bankruptcy of neoliberalism. One cannot, of course, expect the paid apes of the Democratic Party to initiate any such discourse; as I maintain, if the Republicans are killers, the Democrats are whores. So any such discourse will have to come from elsewhere, from some fringe or periphery. Yesterday evening I serendipitously stumbled across a couple of analyses which resonated with me; they can be found here and here. I'd just like to mention a couple of points that I found particularly noteworthy about Chazelle's essay.
First of all, he contends that any real ideology has to be disbelievable just as any real scientific theory has to be falsifiable: this resonates with me because I'm trained as a scientist. Thus saying that the sun will arise in the east doesn't constitute a theory; predicting the existence of Uranus or the existence of radio waves does. And if an ideology is to be disbelievable, it needs to be making concrete proposals that are based on tough choices. Any ideology that doesn't 1) indicate that there are alternatives and 2) suggest which of these alternatives should be chosen (i.e., tough decisions) and why, is no ideology. This is precisely why the Democratic Party is talking through its backside most of the time: it's not proposing a rival ideological framework. It merely puts a smiley-face on harsh realities and "feels your pain." And Democratic politicians assiduously avoid portraying any alternatives to the current status quo. But I digess. Both of the analyses are well worth reading and should provide food for thought.
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4 comments:
Nice essay. I will read the original posts,
I think in the 'old' days the theory was that the market had to be tamed by the government, and primed by that same government, i.e. John Maynard Keynes. This used to be Democratic Party 'ideology.'
Clinton broke with that (although Carter was setting the stages) and embraced the 'market', deregulation and NAFTA. He signalled a definate turn of the Demos away from labor, blacks, populism, and towards the high tech industries, biotech, internet, Hollywood, securities firms, some banks ... in short all those 'clean' businesses that were just growing up.
The republicans still represented the coal/oil/steel/auto/nuclear businesses.
Now, debt seems to be the main provider of 'growth' ... which is derivative of Keynes. However, the debt levels we are talking here are astonomical, as finance has taken over. And there is no oversight. The Credit Default Swaps market alone is $45.5 trillion, and almost wholly unregulated.
Kevin Phillips pointed out that finance capital finally became the majority of the "GNP" sometime in the late 90s, early '00s...not manufacturing or even services. This, as Lenin pointed out, is the final stage of capitalist imperialism.
I don't think the Democrats can have an ideology separate from the market. That is the problem.
This is a great post. There is a dearth of serious leftist analysis for much of the American situation and I feel as though the economic crisis will provide use a venue to express some of the class conflicts present in America that have remained buried and hidden for far too long.
To red frog:
That the state has to mitigate the impact of the market and regulate economic cycles (tempering both booms and busts) was part of Keynesian theory, initially taken up (without much success) by FDR in the late '30s, but then taken up by both parties after WW2. In the early '70s, Nixon famously said, "We're all Keynesians now." This consensus started to break down in the late '70s, partly because of prolonged economic stagnation, which had the American ruling class in a near-panic. (More on this can be found in David Harvey's book, "A Brief History of neo-Liberalism.")
Financial debt has been the instrument of "growth" for perhaps a couple of decades(?) now but I'm not sure that this is derivative of Keynes in any manner. For Keynes, the state incurred debt in a time of slump and replenished its coffers when times were good: the idea was that private sector underinvestment caused or prolonged slumps so the state should step in with necessary investments if required, and deficit-finance it if necessary. this model worked for a couple of decades after WW2 but became increasingly problematic. we seem to be in entirely uncharted territory right now, where the explosive growth of a vast array of ill-understood financial instruments exercises a mysterious and baneful influence on the "real" economy and the lives of real people. And when I say "mysterious," I mean even the quants who've created these instruments can't assess the risks involved or the long-term implications of using them.
Can you cite where Kevin Phillips makes this assertion? I don't think such an assertion (if Phillips actually made it) is factually correct, though in my humble opinion it is correct to say that finance capitalism calls all the shots in the economy today. The GNP is probably still coming from manufacturing and services; it's just that parasitical finance capital is siphoning off a chunk of it into the coffers of arbitrageurs, hedge fund managers, and rentiers. Finance capital controls manufacturing and services, but that doesn't mean most of the GNP comes from or accrues to finance capital (I think). Perhaps I'm mistaken.
Foster is dead on, I think. Thanks for reminding me of Monthly Review. Foster says that financialization leads to stagnation and bubbles, which makes perfect sense.
Phillips uses some of same charts as Foster to show financialization. American Theocracy, Chapter 8 has these stats: Financial firms had 40% of profits in 2004. Financial sector surpassed manufacturing firms in 2000 as part of GDP. Finance assets in 2004 at $45.3 Trillion. Finance was 30% of S&P in 2003.
Bush is using military debt to 'pump prime' the economy, and this is Keynesian policy.
Of course, as we know, this is the most wasteful and useless form of 'pump priming.' Overall government debt has increased, just as civilian and market debt has increased. U.S. debt now is greater than under Roosevelt, even taking into account the growth in the economy.
In the private sector, debt is a product, I think, of the super-profits and hegemonic position of the financial firms. Foster points out that firms are a victim of their own success. Taking on debt is a sign of financial power. "Usually" someone with no money can't get access credit. Also the absolute rule of finance leads to the immiseration of the working class, the poor, the small businessman and small farmers.
However, now U.S. private and public debt is so large, our currency, our government, our firms are all intimately tied to the rest of the world, who hold our debt. It is kind of like being the biggest swindler on the block, and no one can 'call' you on it, because they bought into the Ponzi scheme too. The future of U.S. imperialism is the future of world capitalism itself.
Anyway, it is too bad the economic forum at Mayday was more a primer on basic Marxism and not on current economic issues, as these issues could have been hashed out there.
The issues Foster does not address are peak oil and global climate change, along with water shortages, which should be added to the impact of financialization. Marxists have to take these into consideration at the same time.
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