Re: [OPE] Great article from Jan Toporowski

  On 2010/10/04 03:17 PM, Cipolla wrote:
> For what I read of his he (John Bellamy Foster, without a dash) certainly
> qualifies as an underconsumptionist. His account of the late crisis is based
> on Sweezy´s (and on Baran and Sweezy's) tendency towards stagnation due the
> fact that supply of consumers goods grows ahead of demand.

I think he's moved beyond underconsumption. I've been really impressed
with the last three of his books that I've read. Here's a review of the
crisis study I did for GreenLeft Weekly, but before that, a more
classically marxist statement he made to Klassenkampen: 'an
overaccumulation of capital in a number of senses: an overbuilding of
productive capacity (physical capital) in relation to a demand
constrained by monopoly within what economists call the “real” (as
opposed to financial) economy, an overamassing of profits and wealth at
the top of society, and a hypertrophy of financial claims to wealth. In
terms of the financial crisis itself, there has been a massive, highly
leveraged expansion of money claims to wealth, creating a huge debt
overhang, and forcing, at this moment, a massive devaluation of capital.
All of this is related, however, to the breakdown of the capital
formation process, accumulation proper, in an increasingly stagnant real
economy.'

The Great Financial Crisis
By John Bellamy Foster and Fred Magdoff
New York, Monthly Review Press, 2009
ISBN: 978-1-58367-184-9 paper

Four decades ago, Monthly Review cofounder Paul Sweezy vigorously
debated financialisation of the US economy with Robert Fitch and Mary
Oppenheimer, whose article ‘Who Rules the Corporations?’ in Socialist
Revolution proved most irritating. The central dispute was over whether
debt relationships between banks and corporations – as well as
interlocking directorships and other ruling-elite relationships -
translated into control by the former. Asking ‘The Resurgence of
Financial Control: Fact or Fancy?’, Sweezy disdainfully answered ‘fancy’.

During the Golden Age era of financial stability, tracking
intracapitalist power relations allowed Sweezy to conclude that bankers
were not in control, they were mainly facilitators. In an earlier epoch
(in FinanzKapital, a book published in 1910), Austrian Marxist Rudolf
Hilferding had projected that concentrated banking capital would merge
with other capitals to become omnipotent: ‘If you control the six Berlin
banks, you control all of German industry’.

Times changed radically after the crash of finance in the 1930s, as the
JP Morgan hold on industry was wrenched loose, and a stable fairly well
regulated system was established in the US through a ban on interstate
banking and passage of the 1933 Glass-Steagall Act which delinked
lending from investing and set up deposit insurance to halt bank run panics.

However, in subsequent years, Sweezy and Harry Magdoff became
increasingly concerned at rising debt levels and financial deregulation,
particularly from the mid-1980s. And today, Monthly Review’s leading
political economists, John Bellamy Foster and Fred Magdoff, help turn
the older argument around entirely. It’s not power but vulnerability in
the relationship between finance and production that should have alerted
us to the underlying contradictions of capital, and the need for a
socialist economy.

The easy centrist approach is to consider financial vulnerability as a
deviation from standard capitalism, as John Maynard Keynes himself
argued: ‘Speculators may do no harm as bubbles on a steady stream of
enterprise. But the position is serious when enterprise becomes the
bubble on a whirlpool of speculation.’ In contrast, going far deeper,
Foster and Magdoff reinforce the core concept that Sweezy, Harry Magdoff
and Paul Baran developed during the 1950s-70s, but to ‘monopoly capital’
they add finance: ‘the crucial problem of modern monopoly-finance
capital: the stagnation of production and the growth of financial
bubbles in response’.

This brief book collects a series of the authors’ MR essays that spell
out why a friendly amendment to Sweezy’s framework is appropriate.
Though I mainly agree, some comradely semantic and conceptual points are
worth making. And though the book is mainly a story of the US economy,
and though this after all is where the most important processes in the
world economy can be located, there is a whole world of financial
explosions to investigate.

For Foster and Magdoff, the route from stagnation to speculation is
logical. US corporate profits declined due to stagnation tendencies, but
picked up after 1983. However, a vast part of the increase was due to
financial profits, which amounted to 17% of total profits in the
mid-1980s, and around 40% two decades later. The ‘hollowing’ of
corporations became more obvious with extreme cases such as General
Motors becoming the largest holder of mortgages (through GMAC) by the
late 1980s, Ford buying up Nationwide S&L’s portfolio at that time, and
General Electric gaining a vast share of its profits from GE Finance.

The hollowing process picked up in earnest from the 1980s, as the high
real rate of interest following the Volcker Shock – the Fed trebling US
interest rates in 1979-80 - attracted spare investment resources into
financial markets. Those resources were not otherwise being deployed
because of the worsening stagnation of the 1970s.

Some political economists would go deeper, establishing a longer-term
story of overinvestment in capital-intensive plant and equipment (not
inconsistent with Foster and Magdoff’s argument). Gerard Dumenil and
Dominique Levy, Marxist economists based CEPREMAP (Paris), have
documented how the core driver of profit generation under ‘normal’ US
capitalism, i.e. surplus value extraction from goods production within
the national economy, fell steadily from the 1950s from levels of about
50% to the low 20% levels today. The international source of profits
rose, as globalisation’s search for cheap labour and new markets
rewarded US corporate capital, but most importantly, financial sources
of profits rose dramatically.

Not only was there a renewed attraction for corporate treasurers to
shift out of reinvestment in manufacturing, and into financial assets.
Simultaneously, the US capitalist class defeated labor in numerous
struggles, leading to a stagnant wage rate during most of the last 35
years. In order to keep up a semblance of the high consumer demand of
the earlier ‘Golden Age’, the system now required increasing doses of
debt to make up for lost income, hence deregulation so as to permit
exotic financial instruments to indebt poorer households.

Even the debt boost to effective demand did not, however, solve an
underlying problem. Late last year, the Norwegian newspaper Klassekampen
asked Foster straightforwardly: ‘Is the credit crisis a symptom of
overaccumulation of capital?’ His reply: ‘I agree that this is due to
what might be called an overaccumulation of capital in a number of
senses: an overbuilding of productive capacity (physical capital) in
relation to a demand constrained by monopoly within what economists call
the “real” (as opposed to financial) economy, an overamassing of profits
and wealth at the top of society, and a hypertrophy of financial claims
to wealth. In terms of the financial crisis itself, there has been a
massive, highly leveraged expansion of money claims to wealth, creating
a huge debt overhang, and forcing, at this moment, a massive devaluation
of capital. All of this is related, however, to the breakdown of the
capital formation process, accumulation proper, in an increasingly
stagnant real economy.’

This is consistent with Marx’s argument, from Das Kapital: ‘The
superficiality of political economy shows itself in the fact that it
views the expansion and contraction of credit as the cause of the
periodic alterations of the industrial cycle, while it is a mere symptom
of them.’ (There are some Marxists, notably Leo Panitch and Sam Gindin
of The Socialist Register, who would not agree with this, and who locate
the crisis primarily in the financial system, for they argue that the
earlier ‘real’ crisis was resolved by the 1980s when labor was defeated.
Given close MR/SR ties, it will be good if in future Foster and Magdoff
address such arguments head on.)

But the crash was delayed, until late 2008. Foster and Magdoff show how
various crisis displacement techniques were applied: ‘In this worsening
crisis, no sooner is one hole patched than a number of others appear.’
The patching of holes means that pressure on the financial bubble might
be eased in one place, but then pops up somewhere else. As the authors
joke at the beginning, The Onion is correct in surmising that ‘America
needs another bubble. At this point, bubbles are the only thing keeping
us afloat.’

Written in classically accessible MR style, this is an extremely useful
introductory text. Still, the book suffers from stitching together
articles (at the risk of some repetition) rather than covering the topic
as comprehensively as the authors have in seminal Marxist books they
have given us on environment and food, amongst other topics. The
emphasis on structural processes and the book’s brevity together prevent
us from learning more about key agents in the process: Paul Volcker who
put the interest rate up to extreme levels in 1979, or Larry Summers and
Robert Rubin who deregulated finance while Clinton Treasury Secretaries
and then went back to Wall Street for personal profit (none are
mentioned). Financial dealmaker Tim Geithner gets one mention, a
positive one, for acknowledging that shocks will be bigger and harder to
control. Fed chairs Alan Greenspan and Ben Bernanke come in for passing
criticism, for believing the financial bubble was well grounded in the
real economy.

Just as importantly, although Foster and Magdoff touch on Marxist
debates with Keynesians like Paul Krugman or post-Keynesians like Hyman
Minsky and Thomas Palley, they do not treat their fellow Marxist
political economists with the respect needed to drive debates forward,
or to flesh out constructive differences. Quite a few important
theorists and applied scholar-activists have done work in much the same
classical Marxist tradition on overaccumulation, uneven development and
financial crisis: Heinrich Grossman (defeating Hilferding’s
power-oriented argument in a brilliant 1929 book predicting the crash)
and Ernest Mandel, and more recently, Suzanne de Brunhoff, Simon Clarke,
David Harvey, Neil Smith, Robert Brenner, Fred Mosely, and Walden Bello,
for example (none of which is reviewed).

Finally, the book concludes with an interesting, hopeful sense of the
future: ‘a radicalized political movement determined to sweep away
decades of exploitation, waste, and irrationality will, if it surfaces,
be like a raging storm, opening whole new vistas for change. Anything we
suggest at this point runs the double risk of appearing far too radical
now and far too timid later on.’

Maybe, but drawing upon the solid structuralist work Foster and Magdoff
have done, it is logical to ask, from what impulses, consciousness,
demands and hard organizing will such a movement surface? After all, the
new ‘tea party’ politics of the populist right against President Barack
Obama’s weak Keynesian stimulus may out-organize the traditional left
urban social movements, notwithstanding brave efforts by ACORN and
anti-foreclosure campaigns. At a time of split, degenerating trade
unions, and with the distraction of so many other social activists into
defensiveness about Obama, the need for more strategic options has never
been greater. Analytically, The Great Financial Crisis sets the stage
for further works in this tradition, assisting activists to concretely
exploit capital’s fatal flaws with socialist insights.

_______________________________________________
ope mailing list
ope@lists.csuchico.edu
https://lists.csuchico.edu/mailman/listinfo/ope
Received on Mon Oct 4 19:13:21 2010