Thursday, August 11, 2011

Free! Two Reviews for the Price of One:

“The Law of Worldwide Value,” Samir Amin, 1978/2010
“Bad Money: Reckless Finance, Failed Politics and the Global Crisis of American Capitalism,” Kevin Phillips, 2008.

Both of these books analyze capitalism from two different perspectives. Amin is a modern Marxist connected to the Monthly Review school, intent on updating the Marxist analysis of value on a worldwide scale, something Marx had planned to do in the 6th volume of Capital, but died before accomplishing. Phillips has developed his own idiosyncratic brand of analysis that combines historical analogy, regulatory reformism and a cultural critique to create an independent view of events. He is not a partisan of either party, and this gives him the ability to be intellectually honest… unlike those shills of the Democratic Party we know so well.

Amin’s book suffers a bit from being originally written in 1978, thus missing the capitalist rise in certain 2nd and 3rd world nations. And this mars its somewhat muddy conclusion – exactly ‘who’ in the nations of the ‘periphery’ will rise above imperialist under-development. Amin seems to be a former member of the Communist Party of Egypt, and hence that might be where some of the confusion comes from.

Several chapters in this thin book devolve around economic algebraic equations – and for those, dear reader, I had to skip to the conclusions. Real economists might find them interesting. Amin’s central thesis is that ‘surplus value’ - which he calls ‘value’ – can be extended as an analysis beyond the borders of the central capitalist countries to include, not just unequal exchange of trade or import/export substitution, but the increased value culled from dependent nations he calls ‘imperialist rent’ – resulting in what he calls “globalized value.’ He looks at the relation between the imperial center and the financial ‘colonies,’ taking into account the ever-popular extraction of minerals (‘extractive’ or ‘mining’ rent), the exploitation of the natural resources of the imperial colonies (like water) and the extreme differential in wages for labor power – and combines them as a concept. Amin gets this concept of ‘imperialist rent’ from Marx’s ‘ground rent.’ He shows how alliances with colonies allow the imperialists to lower prices or wages in their ‘home’ countries. Imperialist rent is mostly invisible – ‘a transfer hidden behind the observed wage and price system.’ Amin maintains this asymmetry has been maintained and deepened by capital – hence the popular understanding of how capital ‘under-develops’ the rest of the world. As he puts it, the way capital functions will not allow the rest of the world to every fully ‘catch up.’ Amin calls his theory, the “shoreless Marx. He is not interested in just regurgitating Marx, but advancing Marxist analysis into the modern day, and that means a full grasp of the global profit system.

On the way, Amin makes a stab at Joseph Stiglitz, the sainted hero of the Keynesians. Amin says that at the UN General Assembly in 2009 Stiglitz proposed ‘an auction of the world’s resources (fishing rights, license to pollute, etc.)” This statement makes Stiglitz just another imperial barbarian waiting to buy the water from under Tanzania.

Amin endorses the Monthly Review position that, added to Marx’s ‘two departments’ (capital and labor) there is a 3rd economic department – the ‘state’ – which plays a role in absorbing surpluses. He also agrees with Monthly Review on the absolute centrality of the environment in any analysis of the economy and capital’s ruthless (and unavoidable) exploitation of it.

Amin maintains that there can be ‘no economic theory of the world economy,’ only an analysis of the elastic struggle between various factors and classes:

“Vulgar economics is obsessed with the false concept of ‘true prices,’ whether for ordinary commodities, for labor, for money, for time, or for natural resources. There are no ‘true prices’ to be ‘revealed’ by the genius of the ‘market.’ Prices are the combined products of rates of exploitation of labor (rates of surplus-value), of competition among fragmented capitals and the deduction levied in the form of ‘oligopoly rents,’ and of the political and social conditions that govern the division of surplus-value among profits, interest, ground rents and extractive rents.”

Until recently, of course, underdevelopment was the only pattern. However, we know, for instance in Brazil, that a booming local capitalist economy has been made possible by a partial liberation of the Brazilian nation under Lula’s “Worker’s Party,” which succeeded a long line of subservient (to imperialism) military and liberal comprador governments. However, all of Brazil is not part of this – not the landless peasants, not the indigenous peoples of the Amazon, and not the favela’s. While conditions have improved for the working classes, the rich and middle classes are the biggest gainers. And that is because Brazil is still under indirect imperial control. As Brazil shows, a simple endorsement of the struggle of ‘southern’ or ‘periphery’ countries against imperialism, as Amin hints at, is simply not possible as a tactic in the struggle against capitalism itself.


I have reviewed one other Phillips book, “American Theocracy,” (see review below) which is a better introduction to his thought. This book, “Bad Money,” is centered around the August 2007 events which lead to the deepening of the crash in 2008, and being written in 2008, smacks of some ‘haste’ to publish while the iron was hot. Even authors must make money. As such, he misses many events, but these would probably not change his views.

Phillips’ thesis is that mercantilist and fully capitalist societies which aspire to ‘empire’ are brought down by four things: finance/debt, religious rigidity, the failure of their particular brand of physical power, and war. It doesn’t take much time to show that the U.S. role as an empire is threatened by all four. Financialization and debt, according to Phillips, brought down the U.S. economy in 2007. (He repeatedly emphasizes, unlike the twin parties of government, that PRIVATE debt is far more of a threat than public debt. And indeed, corporate debt is the largest worldwide.) Fundamentalist Christian religiosity in the U.S. has captured at least one party, and part of another. Oil, the power source of the American imperium, is running ‘out’ due to peak oil. And war, the war economy, and the costs of war have become endemic to American capitalism.

However, Phillips should ask himself why all 4 seem to show up in Spain, Holland, Britain and now the United States. What underlying dynamic unites these nations? I would say it has to be the development of capital in each. Let’s just look at one of his arguments. Phillips spends pages thundering against financialization. He claims no one but Minsky (“the Minsky moment”) and perhaps the Austrians (!) caught the deep problems with it – except the …“Marxists, mostly given to repeating ideological doctrine.” (BM, p. 40) As we know, in America, Marxism is verboten. Yet much scientific and historical materialist work was done years ago, initially being included in Baran/Sweezey's "Monopoly Capital." Starting in 1972, again by the Monthly Review school, they picked up on the development of financialization (and debt) in the U.S. Dismissed, though. Invisible men, as they say. Even when you’re right, you’re wrong.

And what is Phillips solution to the financialization dilemma of modern capitalism (or the former capitalisms)? Re-regulation. A return to the ‘real economy.’ The return of manufacturing to the U.S. Themes echoed by Krugman, Stiglitz and other reformists, including trade union economists. Now it is not to say that these are not laudable goals. The destruction of the Glass-Steagal Act in 1999 by the neo-liberals under Clinton and the Republicans was a historic loss, leaving us open to more market-driven financial instability. Earlier revisions of financial law in the 80s under Reagan lead to the massive S&L crisis. However, it is happening for a reason.

Phillips himself mentions that many manufacturing companies (GE, Ford, General Motors) have immense financial arms. GE, Obama’s poster child, even gains most of its profits from operations abroad now, and a big chunk of that is financial. While Phillips tries to ‘separate’ finance and manufacturing capital, the actuality is that they are combined, two arms of the same thing. It was precisely the dropping of profits in manufacturing in the United States that led corporations to send manufacturing south, then to Mexico, then to China and everywhere else. And at the same time, those same firms turned to ‘paper’ to make more money, because manufacturing was looking for an outlet for their profits outside manufacturing. Manufacturing capital now needs the profits from Wall Street in order to fund their manufacturing operations - of course if they ever do so. That is the basis of M&As, IPOs, stock offerings, stock splits, derivatives, options, futures and every other arcane financial transaction undertaken by manufacturing capital. In essence, capital can no longer make money only ‘the old fashioned way.’ They have to have Wall Street, like athletes need steroids or junkies need a fix, to dispose of surpluses and, oddly enough, to make super-profits. Unlike the golden age of the 50s and 60s, manufacturing capital seems no longer to be able to fund itself from internal surplus value, gained off of labor, and must find other outlets. It must turn to derivatives and the casino to generate profits and/or get rid of surpluses.

So, re-regulation will actually not return the U.S. to the ‘good old days’ because those days are actually gone – the product of a short historical hiccup. Financialization is now the ‘real’ economy too. Manufacturing will only return to the U.S. if it can exploit the American worker at the same level as the Chinese worker. Or if oil becomes so expensive that shipping becomes less cost effective. Even Keynesian solutions will not be pursued by the American ruling class – not without class struggle. It is not an ‘intellectual’ question – it is truly a question of force. Krugman can talk all he wants about a jobs program – but until the American working classes put some kind of a political and strike gun to the government’s and the businessmens’ heads – there will be no jobs program. Nobel laureates do not win class wars. Classes do.

As to Phillips position on peak oil – he ignores global warming. Fighting peak oil with more coal will accelerate global warming. Or his idea that the U.S. can limit war making – it ignores the very real bind that capital is in. War necessarily absorbs and destroys profit surpluses, while providing part of the economy with a constant “Keynesianism” stability. Human society, not just capital, is in quite a bind, and capital, presently, has no way out.

I bought Amin at Mayday Books.
I bought Phillips at Chapman Street Books, Ely MN

Red Frog
August 11, 2011

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