Having seen some of the discussion of Brenner's "Global Turbulence" on
the list, I thought a short critique of my own might be of interest. This
will appear as (a major part of) the "Editorial Perspectives" section of
*Science & Society,* Spring 1999 issue (Vol. 63, No. 1). A few footnotes got
lost in uploading, but the basic argument is there.
Best to all,
david
David Laibman
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Unlike the original Biblical confounding of the tongues
carried out, the Old Testament tells us, for punitive reasons
the modern version was inflicted on academia (and indirectly on
the working class) by the bourgeoisie, as a matter of strategy.
This latter-day Tower of Babel, built in the 19th century, was the
formation of the academic disciplines, especially in the social
sciences. The onward march of specialization is an instance of
technological determinism, and like all other such instances it
masks its real agenda: to make it impossible to talk about capi-
talist power, capitalism as a system, class conflict, or the tran-
scendence of exploitative and dehumanizing conditions in an inte-
gral manner. Thus as noted before in this space students are
sent to the Sociology Department to learn about social class; to
the Political Science Department to study power; and across campus
to the Economics Department (most likely in the building housing
the Business School) to explore the nature of markets and econom-
ic institutions!
The Marxist counter-strategy, of course, is to attack these
artificial boundaries and work toward the (re)unification of so-
cial science. In particular, there is a trend among academically
trained philosophers and political theorists to address issues in
political economy that were formerly the preserve of Marxist econ-
omists. As examples we have a recent volume debating market so-
cialism, and work by a number of philosophers on the methodologi-
cal foundations of Marx s Capital.
Now a historian takes center stage: Robert Brenner of UCLA,
well known as the progenitor of the Brenner Debate about the
role of class conflict in the origins of agrarian capitalism in
England and opponent of the neo-Smithian position locating capi-
talism s source in the expansion of trade. Brenner has recently
produced a major study, published as the entire contents of an
expanded issue of New Left Review (No. 229, 1998), on The Econom-
ics of Global Turbulence. This monograph is a major effort to
synthesize the available information about the post-World War II
evolution of the world capitalist economy. It is especially note-
worthy in its attempt to relate the experience of recent decades
to the tradition of Marxist theorizing about capitalist crisis,
and to provide a theoretical framework for thinking about the
present world situation.
It is impossible to adequately summarize, let alone debate,
the entire contents of this 265-page work in a brief editorial
review; there will undoubtedly be much discussion in later issues
of NLR, and the pages of S&S are open for this purpose as well.
What follows are a few glosses on some of the issues raised.
Brenner begins by stating his opposition to what he takes to
be the dominant explanation for the long downturn in the world
capitalist economy beginning around 1965-73: this is the supply-
side, profit-squeeze theory, according to which the crisis re-
flects the rising power of the working class, expressed both at
the point of production and in the political support for the wel-
fare state, which caused wages to press upon profits, thereby de-
pressing the profit rate. Brenner s discussion of the limitations
of this approach is quite apt (and congenial to a similar critique
by John Weeks, in where else? SCIENCE & SOCIETY, Fall 1979).
The power of labor or capital-labor accord do not explain why
wage growth was able to exceed growth of labor productivity. The
theory does not address the numerous possibilities for capital to
evade wage pressure on profits, through the negative effects this
would have on investment and demand for labor, and through capital
mobility (including its ability to emigrate to low-wage areas
abroad). Finally, the profit-squeeze approach rings increasingly
hollow in the light of evidence of the erosion of working-class
economic power, wage repression, and dismantling of the welfare
states, especially in the period after 1979-80.
Brenner also rejects the approach to capitalist accumulation
that focuses on biased technical change, as well as the entire
post-Keynesian/Kaleckian/Monthly Review tradition emphasizing
structurally determined demand limitations. What, then, does he
propose in their place?
The section of his monograph entitled Outline of an Alterna-
tive Explanation (pp. 24-38) gives the heart of his proposal.
Brenner highlights the fact that fixed capital has played a promi-
nent role in post-industrial revolution capital accumulation.
Consider the situation of firms in a particular line, or sector,
with large installations of fixed capital in place that cannot be
transferred easily (or at all) to alternative uses. These firms
face competition from cutting-edge, cost-cutting firms, which
can cut price and expand their market share without facing a fall
in their profit rates. There is, however, a (doubly) undermining
effect on the profitability of the other firms in the line (27).
The normal process of adjustment in which the higher-cost firms
leave the line and make room for lower-cost replacements does not
take place, owing to the presence of fixed capital; the higher-
cost firms are forced to accept lowered profit rates, causing the
average rate in the line to fall. Instead of adjustment, there is
widespread excess capacity and over-production. We thus have the
paradox that cost-reduction lowers, rather than raises, the aver-
age rate of profit.
Outside the line, there are gains to the economy as a whole.
Only if these gains accrue entirely to capitalists and not a penny
goes to the workers, the rise in the profit rate outside the line
would exactly balance the fall within the line, resulting in no
change in the economy-wide average rate of profit. If the workers
outside the line are able to get any of the gain, however, then
the average rate of profit for the economy as a whole falls, as a
result of a cost-cutting innovation in the original line (29).
This fall in the economy-wide profit rate is the source of the
economic downturn, as it leads to a collapse of investment and of
productivity growth (which latter in turn may cause wage pressure
to affect the profit rate still further, a secondary aspect of the
process).
This perspective is applied to the international economy in
the postwar period, with Japan and Germany (and later the East
Asian tigers) in the role of cost-cutting firms and the rest of
the capitalist world (mainly the United States) playing the part
of the vulnerable establishment. On this foundation, successive
chapters trace the history of the postwar world economy: e.g., the
rise of Germany and Japan, the role and subsequent collapse of
Bretton Woods, the reversals in the alignment of the world curren-
cies in particular, the role of the undervaluation of the U.S.
dollar in securing U.S. hegemony in the earlier period and of the
overvaluation of the Japanese yen in the current Asian crisis.
What might be said in the way of critical appraisal of this
effort? I must emphasize that this is a preliminary exploration,
not a dismissal; we have often been too quick to defend fixed cap-
ital in the form of our own chosen theories, and that impulse
should be resisted!
Nevertheless, here goes. I find the central argument leading
from the presence of fixed capital faced with cost-cutting techni-
cal change to a fall in the economy-wide profit rate to be unsup-
ported in Brenner s essay. This is true, first, in the sense that
(like the arguments surrounding the rising surplus and stagnation
in Baran and Sweezy s Monopoly Capital) it is not based on a rig-
orous model. Without a careful and systematic quantitative argu-
ment (a model), one simply has no way of knowing whether the cen-
tral claims in Brenner s chain of verbal arguments are valid.
This is not a trivial point. It is a statement concerning the
contribution of the tradition of economic theory to the way we
need to do trans-disciplinary political economy a point to which
I will return below.
Even in its own terms, however, Brenner s argument raises
some obvious flags. Those of us who have attempted to provide
rigorous foundations for biased technical change have had to face
the question of microfoundations : how is the process, however
mediated, related to the actions and intentions of the relevant
actors (in this case, those acting for the controlling capitals of
the firms)? A similar question faces Brenner: If fixed capital
renders existing capitals so significantly immobile and vulnerable
to price pressure, why did fixed capital develop historically in
the first place? This is not an idle inquiry; it is the basis for
the notions of flexible specialization and just-in-time produc-
tion, outsourcing, etc. currently on the circuit.
Second, Brenner s argument greatly underestimates the poten-
tial responses of existing firms to pressure from innovators, even
in the presence of large fixed installations. The key point is
that the existing capital stock is typically not homogeneous; it
is comprised of machines and shops and other productive constella-
tions themselves created at varying times in the past, each re-
flecting the latest-practice technologies of the various moments
at which they were purchased and installed. In a picturesque im-
age commonly used in growth economics, the capital stock consists
of vintages of capital goods. At any moment in time, the earliest
vintages are becoming non-operational, and more-or-less fully de-
preciated. Existing firms will therefore not sit still to be
fleeced by cost-cutters. They will move aggressively themselves
to replace the retiring portions of their capital stocks with the
latest-vintage (cutting-edge) equipment. They may even force-re-
tire larger portions of their capital stocks, to keep the average
age of their equipment low and its average productivity high.
This depends on their financial strength, of course, but their
financial strength in turn rests on their perceived ability to
keep up with technical trends, much more (presumably) than on
losses incurred in early scrapping of older equipment (some of
which can be made up on second-hand markets in any case).
Brenner s claim that cost-cutting competition combined with
fixed capital necessarily leads to over-capacity and over-produc-
tion implicitly rests on an assumption of perfectly inelastic de-
mand for the products of the line. Price decreases will normally
increase the size of the market, allowing some room for both cost-
cutters and existing firms. Perhaps even more important, his ar-
gument greatly underestimates capital mobility across lines, or
sectors. If excessive competition lowers the rate of profit in
one industry, capital will migrate rapidly elsewhere, losses on
fixed capital equipment notwithstanding. A useable conception of
over-production must relate this phenomenon to demand, and Brenner
does not address the role of limited effective demand in his cri-
sis theory.
Finally, for the present, and in view of Brenner s trenchant
critique of supply-side theories, I must note that his conception
of cost-cutting leading to a falling profit rate does not produce
a cyclical crisis: it suggests a process that is under way contin-
uously, and this does not provide a foundation for a theory of the
postwar boom and the subsequent downturn. Brenner does address
this problem, of course, in his descriptive and historical chap-
ters, but he does not draw on his fixed-capital/destructive compe-
tition story in this connection.
Brenner s effort to place competition, rather than class re-
lations, capitalism-specific paths of technical change, or limited
effective demand, at the center of the theory of crisis, and of
mid-to-late 20th-century crisis in particular, contains many in-
teresting contributions within it, and its study should continue.
It is, however, ironic that the principle critic of neo-Smithian
Marxism as applied to the feudalism-to-capitalism transition in
Europe, should produce a truly neo-Smithian competition-spoiling-
the-market explanation of world capitalist turbulence in the pres-
ent. His story does rely at crucial points on the other aspects
of capitalist reality; for example, the balance of class forces is
clearly present in his statement that the US recovery was built
precisely upon historically unprecedented wage repression and dol-
lar devaluation (253). Perhaps the lesson here is that we should
avoid the polarizing attitude setting competition against techni-
cal change against market limitation against class struggle as
explanatory vehicles. Understanding capitalist crisis clearly
involves all of these, and more. The task, of course, is to fig-
ure out exactly how they fit together.
Concluding, I return to the Tower of Babel theme. Historians
and philosophers and political scientists (and others) should be
welcomed into the house of political economy. Yes, orthodox eco-
nomics has largely rendered itself irrelevant by its hyper-formal-
ism and its free market ideology (but see Editorial Perspec-
tives: In Defense of Economics, S&S, Summer 1997). And yes,
Marxist economists do not have the answers. This vital inquiry
has room for all. But to achieve new steps toward a viable trans-
disciplinary political economy, the non-economists will have to
read the economists carefully, to avoid reinventing the (square?)
wheel.
A final note. The NLR Editors, in their Introduction to the
Brenner issue, write, somewhat exuberantly: In New York, the most
fashionable magazine of the hour [not SCIENCE & SOCIETY D.L.]
has called for the award of a Nobel Prize to the first thinker
able to explain the laws of motion of the global economy in which
we now live. Given the complexion of the Prize committee, there
is little danger of that. But Marx s enterprise has certainly
found its successor. Now, with all respect due to Robert Brenner
for his contribution to our common enterprise, we should avoid
naming any specific successor to Marx, or even the assumption that
a successor ought to be found.