This post is the second in a two-part series of "I Told You So." Well, that's not really accurate. More like, I have been arguing against some people who take what I perceive to be more dominant points of view, and I have recently seen a number of articles come out which undermine their positions.
In this case, it is the economic debacle of Europe. For some time now, I have mostly heard people admonishing the carelessness and irresponsibility of Greece, Spain, et al., while praising the success of the Germans. Why should Germany be punished for other countries' mistakes? But, no matter. Germany is an unbeatable machine. Germany has discovered the key to everlasting economic dominance. And so on.
Part of my argument against this sentiment (I will get to the other part later) is that Germany's economy is entirely dependent on exports, and thus the markets (i.e. "reckless spending") in eastern and southern Europe. A bail out would not be a punishment for Germany, then, it would be a lifeline.
And now, such an oppositional point of view has been gaining some ground in Europe, and has been championed by some reputable figures. They even go so far as to allege that Germany purposely set the whole system up to function as it did (not realizing, of course, how it would all pan out) because it was economically beneficial to expand its markets in Europe. I wonder how much traction these claims will get. Will Germany be able to maintain its Good Guy status?
As interesting as that dynamic is, there is still the other half to my argument, which I doubt will ever be raised outside of the fringes. You cannot place blame for an economic crisis on any individual country or industry. Crisis is systemic. Do people really think it's a coincidence that the crisis in Europe occurred around the same time as the "downturn" in the U.S., and the slowdowns in other parts of the world? The system itself caused the crisis.
Overproduction: investment in the capacity to produce more than what is profitable. I'm becoming a broken record, but then again, only I read all my posts. The global economy has been bogged down by overproduction since the late 1960s. All that has occurred since then is a whole series of bubbles in different parts of the world, and a three-way seesaw game among the U.S., Germany, and Japan (who was pretty much left in the dust after the 80s). Every industrial power is dependent on exports (including now China), and all are desperately scrambling to create markets. Deficit spending is encouraged in different times and places to create more demand, which never seems to match the excessive supply.
It's not Germany's fault, it's not Greece or Spain's fault. But then again, everyone who has participated in and helped to perpetuate the capitalist system is really to blame.
Showing posts with label economic bubbles. Show all posts
Showing posts with label economic bubbles. Show all posts
Wednesday, June 6, 2012
Wednesday, March 21, 2012
European Exploitation: Phase 4
I have already described how exploitation of the so-called “Third World” has proceeded over the past few centuries according to a succession of variants (though the basic theme remains the same), and I have also explained how that exploitation has been and continues to be vital for capitalist/industrial profitability. In another post, I delineated to some extent the rigidity of the global hierarchy of wealth.
Specifically, I think it is important to emphasize that the only time during which the lower rungs make some sort of progress is when the top of the pyramid (the industrial north) experiences any kind of set-back. In a very simplistic and abstract way (which very much belies the complexity of the actual mechanisms of change), this is due to the fact that wealth is finite (based, of course, on a given level of technology) and essentially zero-sum (just like, for all you physics fans, the amount of energy in a closed system never increases or decreases, but merely changes form).
Now, on a slight tangent, I have heard some official reports from institutions like the World Bank that extreme poverty has recently been reduced around the world. Get out the champagne, right? Unfortunately, I would not put too much stock in this claim. For one thing, official statistics regarding global poverty produced by multilateral organizations like the World Bank tend to be extremely misleading and, quite frankly, useless. Not only do these organizations have agendas (as instruments of the industrial north), but statistics, in general, tend to be ineffective for understanding poverty. A true Marxist looks to structural realities and daily experiences. Take a look at any local newspaper in a Third World nation, and you will see no evidence of improvement in the conditions faced by ordinary people. (Where there are gains, these tend to concentrated at the top of the internal hierarchy, in typical capitalist inquality-increasing fashion.)
Regarding the structural realities, it is clear that the basic pecking order, the global relations of domination, has not changed. At all. And since gains in the underdeveloped world come at the expense of the industrial north, they are almost always limited and temporary.
Often, gains are temporary because the industrial north tries to regain their position in much the same way that, when two people are struggling to stay afloat in a pool, one tries to stay above water by holding the other down. This happened at the end of the 1970s. Global economic stagnation had set in by the late 1960s (caused by a crisis of overproduction and merely exacerbated by the energy crisis). As growth slowed in the industrial north, the Third World made some impressive gains. This was especially facilitated by the initial attempt of capital to find areas of investment and possibilities for cheaper production in other parts of the world.
But then the 80s, and with it the Reagan-Thatcher brand of neoliberalism, rolled in and flattened the developing world. The policies (“austerity measures,” if you will) of the industrial powers undermined all the prior investments and resulted in devastating financial crises which destroyed any economic progress made in the Third World in the previous decade.
In the intervening years we had some bubbles that did not resolve any of the underlying problems of overproduction, but made us feel pretty good about ourselves, nonetheless. Shockingly, the bubbles burst and we once again found ourselves on bumpy terrain. And once again, whose head are we going to hold under water so that we might have another gasp of air? Who are we going to screw over in an attempt to save ourselves? It seems that the EU is busy devising new ways to drain the world of its wealth and resources.
Check It. Sorry, Africans!
Specifically, I think it is important to emphasize that the only time during which the lower rungs make some sort of progress is when the top of the pyramid (the industrial north) experiences any kind of set-back. In a very simplistic and abstract way (which very much belies the complexity of the actual mechanisms of change), this is due to the fact that wealth is finite (based, of course, on a given level of technology) and essentially zero-sum (just like, for all you physics fans, the amount of energy in a closed system never increases or decreases, but merely changes form).
Now, on a slight tangent, I have heard some official reports from institutions like the World Bank that extreme poverty has recently been reduced around the world. Get out the champagne, right? Unfortunately, I would not put too much stock in this claim. For one thing, official statistics regarding global poverty produced by multilateral organizations like the World Bank tend to be extremely misleading and, quite frankly, useless. Not only do these organizations have agendas (as instruments of the industrial north), but statistics, in general, tend to be ineffective for understanding poverty. A true Marxist looks to structural realities and daily experiences. Take a look at any local newspaper in a Third World nation, and you will see no evidence of improvement in the conditions faced by ordinary people. (Where there are gains, these tend to concentrated at the top of the internal hierarchy, in typical capitalist inquality-increasing fashion.)
Regarding the structural realities, it is clear that the basic pecking order, the global relations of domination, has not changed. At all. And since gains in the underdeveloped world come at the expense of the industrial north, they are almost always limited and temporary.
Often, gains are temporary because the industrial north tries to regain their position in much the same way that, when two people are struggling to stay afloat in a pool, one tries to stay above water by holding the other down. This happened at the end of the 1970s. Global economic stagnation had set in by the late 1960s (caused by a crisis of overproduction and merely exacerbated by the energy crisis). As growth slowed in the industrial north, the Third World made some impressive gains. This was especially facilitated by the initial attempt of capital to find areas of investment and possibilities for cheaper production in other parts of the world.
But then the 80s, and with it the Reagan-Thatcher brand of neoliberalism, rolled in and flattened the developing world. The policies (“austerity measures,” if you will) of the industrial powers undermined all the prior investments and resulted in devastating financial crises which destroyed any economic progress made in the Third World in the previous decade.
In the intervening years we had some bubbles that did not resolve any of the underlying problems of overproduction, but made us feel pretty good about ourselves, nonetheless. Shockingly, the bubbles burst and we once again found ourselves on bumpy terrain. And once again, whose head are we going to hold under water so that we might have another gasp of air? Who are we going to screw over in an attempt to save ourselves? It seems that the EU is busy devising new ways to drain the world of its wealth and resources.
Check It. Sorry, Africans!
Sunday, July 31, 2011
Inside Job
I managed to not see Inside Job (the 2010 documentary) until a couple nights ago. Well, I guess I'm only a year behind, and for me that's pretty good. Naturally, I want to write about my reaction to the film.
The film did a fairly good job at demonstrating the lack of separation between private and public, business and government. Although this is in keeping with Marx's contention that the state is merely a tool of the capitalist class and not an independent entity, Inside Job suggested that this state of affairs is a sort of perversion rather than the norm. In fact, just restricting one's attention to the United States, there has never been a time when business interests were independent from the state. The country was founded by elite land owners, and has been run by people with business connections ever since. That is the inherent nature of a state, not a perversion of it.
The film also showed how these business interests cut across the boundaries of individual presidencies. It does not matter who is in office, Republican or Democrat, liberal or conservative. That is more of a symbolic matter. Behind the illusion of different personalities and disparate ideologies, there lies the same corporate elite making all of the decisions.
The primary argument of the documentary is that the root cause of the financial crisis can be traced back to the period of deregulation of the financial sector inaugurated by Reagan.
First, I think it is important to note that deregulation began under Carter's presidency, not Reagan. Volcker, who they noted was a VP for Chase Manhattan bank (but failed to mention was the chairman of the Federal Reserve from 1979 into the 80s, and thus responsible for many of policies they decried), was appointed by Carter. Once again, individual presidencies do not matter. It was the VP of a major bank who was really calling the shots.
Second, it is also necessary to remember that financial deregulation was a response to global economic stagnation which set in at the end of the 1960s. It's not like the economy was doing great before hand. Yes, Keynesian strategies prevented any major recessions from occurring, but they did not resolve underlying stagnation (thus, "stagflation") or contribute to any growth. Therefore, financial deregulation cannot be held as a root cause; it itself is a symptom of a broader crisis of overproduction.
This is all in keeping with a general pattern regarding periods of economic stagnation. Such periods are always characterized by a shift in focus from productive activities (which no longer yield good returns) to high finance. And the shift toward financialization is always the nail in the coffin, the thing that leads to ultimate collapse before global economic and political structures are eventually reorganized. It is representative of the attempts of the wealthy elite to try to get as much out of the system as they can before it finally implodes.
Several of the interviewees in Inside Job made a good point: the wealth that was created from the 1980s onward was imaginary: it was not rooted in material or creative processes; it was spun out of thin air (out of debt, actually). This is in keeping with my point in the last paragraph (that dependence on high finance is a last-ditch effort that is chosen when material/creative processes are declining in profitability), but it also illustrates a more general Marxist principle. Marx insisted that economic processes could not be understood apart from material productive relationships. When one forgets that profits, investment, monetary transactions, etc. only occur in relation to production - particularly the manufacturing sector - then one imbues statistics and economic indicators with a power they do not have. For, if material productive processes are faltering, it does not matter how much stock prices are rising or asset values increasing, or income growing. Because wealth can temporarily be spun out of thin air, but only temporarily.
The film did a fairly good job at demonstrating the lack of separation between private and public, business and government. Although this is in keeping with Marx's contention that the state is merely a tool of the capitalist class and not an independent entity, Inside Job suggested that this state of affairs is a sort of perversion rather than the norm. In fact, just restricting one's attention to the United States, there has never been a time when business interests were independent from the state. The country was founded by elite land owners, and has been run by people with business connections ever since. That is the inherent nature of a state, not a perversion of it.
The film also showed how these business interests cut across the boundaries of individual presidencies. It does not matter who is in office, Republican or Democrat, liberal or conservative. That is more of a symbolic matter. Behind the illusion of different personalities and disparate ideologies, there lies the same corporate elite making all of the decisions.
The primary argument of the documentary is that the root cause of the financial crisis can be traced back to the period of deregulation of the financial sector inaugurated by Reagan.
First, I think it is important to note that deregulation began under Carter's presidency, not Reagan. Volcker, who they noted was a VP for Chase Manhattan bank (but failed to mention was the chairman of the Federal Reserve from 1979 into the 80s, and thus responsible for many of policies they decried), was appointed by Carter. Once again, individual presidencies do not matter. It was the VP of a major bank who was really calling the shots.
Second, it is also necessary to remember that financial deregulation was a response to global economic stagnation which set in at the end of the 1960s. It's not like the economy was doing great before hand. Yes, Keynesian strategies prevented any major recessions from occurring, but they did not resolve underlying stagnation (thus, "stagflation") or contribute to any growth. Therefore, financial deregulation cannot be held as a root cause; it itself is a symptom of a broader crisis of overproduction.
This is all in keeping with a general pattern regarding periods of economic stagnation. Such periods are always characterized by a shift in focus from productive activities (which no longer yield good returns) to high finance. And the shift toward financialization is always the nail in the coffin, the thing that leads to ultimate collapse before global economic and political structures are eventually reorganized. It is representative of the attempts of the wealthy elite to try to get as much out of the system as they can before it finally implodes.
Several of the interviewees in Inside Job made a good point: the wealth that was created from the 1980s onward was imaginary: it was not rooted in material or creative processes; it was spun out of thin air (out of debt, actually). This is in keeping with my point in the last paragraph (that dependence on high finance is a last-ditch effort that is chosen when material/creative processes are declining in profitability), but it also illustrates a more general Marxist principle. Marx insisted that economic processes could not be understood apart from material productive relationships. When one forgets that profits, investment, monetary transactions, etc. only occur in relation to production - particularly the manufacturing sector - then one imbues statistics and economic indicators with a power they do not have. For, if material productive processes are faltering, it does not matter how much stock prices are rising or asset values increasing, or income growing. Because wealth can temporarily be spun out of thin air, but only temporarily.
Wednesday, May 25, 2011
Book Review: The Boom and The Bubble
I realized that I have repeatedly referred to the global crisis of overproduction, yet I do not think I have ever discussed the concept of overproduction in any detail. To start, I recommend the book The Boom and The Bubble: The U.S. in the World Economy by Robert Brenner. Brenner traces the history of the current crisis of overproduction and describes the way in which it has proceeded throughout the past few decades. I find that it is a very useful resource for understanding recent economic history. However, Brenner neglects any consideration of overproduction from a theoretical standpoint. That is what I plan to accomplish in my next post.
Just in brief, though, I will summarize a couple of Brenner's main points. First, he argues that the position of the U.S. in the world economy is such that its patterns of deficit spending and high levels of internal consumption have been the lynchpin of global economy. Enervated by overproduction, the economy has come to depend on U.S.-manufactured demand to prop up the demand side of the supply-demand equation. Second, Brenner contends that the global economy, as a whole, has been stagnant since the late 1960s. Apparent economic growth in any given country has only come in the form of bubbles, and directly at the expense of other countries, via manipulations of currency value, exchange rates, interest rates, etc. In essence, there has been no real economic growth for four decades.
Just in brief, though, I will summarize a couple of Brenner's main points. First, he argues that the position of the U.S. in the world economy is such that its patterns of deficit spending and high levels of internal consumption have been the lynchpin of global economy. Enervated by overproduction, the economy has come to depend on U.S.-manufactured demand to prop up the demand side of the supply-demand equation. Second, Brenner contends that the global economy, as a whole, has been stagnant since the late 1960s. Apparent economic growth in any given country has only come in the form of bubbles, and directly at the expense of other countries, via manipulations of currency value, exchange rates, interest rates, etc. In essence, there has been no real economic growth for four decades.
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