Capitalism Caused the European Debt Crisis

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.

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!

Fashion: The Super Model of Late Capitalism

Finally, I get to use a bad pun! If I didn’t want my posts to be easy to find via Google searches, I would do this more often.

There have been a number of attempts in pop culture to get behind the more superfluous aspects of the fashion industry – for example, the comedy film Zoolander, and recent novel Zero History. The former, while jokingly implicating the industry in international conspiracy, also highlights the political-economic realities (namely, sweatshops) associated with it; the latter explores the relationship between the fashion industry and defense contracting. Of course there are other examples as well.

While avoiding any attempt render the industry as some sort of conspiratorial cabal, an examination of the industry along with the phenomenon of “fashion” and “trends” more generally can provide a good glimpse into the rhythms and logic of late capitalism.

By late capitalism, I mean the post-WW2 era, specifically characterized by fully automated production, “Fordism,” multinational corporations, and mass consumption. Several key problems resulted from its extraordinary successes (demonstrating the point that capitalism is based on contradictions that threaten its very existence): the prominence of sectoral (as opposed to regional) inequalities expanded the role of research and development and increased the risk of investment; mass production and consumption left fewer and fewer avenues for profitable investment (thus the turn to financialization) as well as a level of production grossly disproportional to human needs; and a high level of state spending and gradual devaluation of currency (responses to the aforementioned problems) destabilized the international monetary system.

It is also important to note that changes in the methods and organization of production in the post-WW2 era have sharply increased the turnover time of capital (and hence, accelerated the rhythm of production). As the value of capital depreciates over time, increasing its turnover time (approaching zero) is a natural tendency of capitalism.  Thus... constant bombardment with NEW! things.

And how does fashion (as an industry or a phenomenon) embody these trends?

First and foremost, of course, a basic human need (protection from the elements) is transformed into a commodity, but more importantly, a commodity which one must constantly purchase and replace. Through media and socialization, we acquire the mindset that one should have a variety of clothes (bearing no relation to the need clothing is supposed to fill). We believe with religious fervor that an outfit should never be worn more than one day in a row (even if, privately, we do not wash it between uses). Clothing begins to take on specialized functions. There are work clothes, leisure clothes, formal wear, athletic wear, summer clothes, winter clothes, etc. etc. And then, if that isn’t enough, things are constantly going out of style that so we continually feel a “need” to update our wardrobes. We see something new and have to have it. We give our old (perfectly functional) clothes to charity.

One thing that makes style so important to us is the idea, implanted into our conscious, that clothing expresses identity. What you wear says something about who you are as a person. In fact, the fashion industry has absorbed many of the people who, as a result of the capitalist division of labor, are able to devote their labor entirely to “artistic” productions, as a livelihood. Fashion has become an art form (as have other human necessities such as food and shelter). The fact that it is an “art” in some way legitimizes the attention people devote to personal style. Of course, as a type of art, clothing has also become a means of identifying and expressing class affiliation (in Pierre Bourdieu’s terms, a form of cultural capital). Wealthier people will spend inordinate amounts of money on clothing, purchasing high-end brands, just to demonstrate to everyone that they can spend inordinate amounts of money on clothing.

The thing that real galls me is the seeming aversion of many celebrities to wearing a piece of clothing more than once. Must clothing really be that dispensable? Talk about senseless waste.

Another thing to pay attention to: why is it that every event, organization, vacation, any occasion whatsoever, requires a t-shirt? (College students have this down to a science.) How many people have many more t-shirts than they need or could ever wear? And somehow, t-shirts come to function as holy relics, objectifying the memories and emotions of past experiences. (People make quilts out of them!) Why something so silly and cheap as a t-shirt?

As the actual human need gets increasingly obscured, we are impelled to buy more and more. We are socialized to shop for new clothes at the beginning of every season. Clothes are not meant to last. All because demand and short production cycles are necessary for capitalist profitability.

Democracy and Capitalism

The title of this post is also the title of a recent On Point episode.  It begins by questioning:  "Is Democracy up to the challenges of this century? Is Capitalism? We’ll look at two great pillars, and the questions now around them."

As the episode began, I was excited to hear a mainstream news outlet actually addressing these questions.  However, as things progressed, particularly when Gideon Rose began to speak, it was clear that no one was willing to really question the taken-for-granted ideas about our political economic system.  It became the same old line about "our system is really great, or at least the best we can hope for, but we just need to make some tweaks to make it work better."  Yawn.

Gideon Rose asserted that, if we could just somehow get things to work the way the did in the Good Old Days (1950s and 60s) then more wealth would be generated and it could be spread around to level inequality and alleviate poverty in the U.S.  This line of reasoning very well demonstrates the myopia and Americentrism that pervades the thought of most economists.  Things may have been going well in the U.S. (and the other industrialized powers) in the post-WW2 period, but that does not mean that capitalism was creating and spreading wealth on a global scale!  In fact, the rest of the world (even if one excludes the communist world) was mired in poverty as a direct result of the global relationships that enabled expansion in the industrialized centers.  Income inequality was much more polarized on a global scale.  So yes, the 1950s-60s were great times... if you ignore the rest of the world.

In this vein, Rose and Kupchan both seem to think that globalization is a recent phenomenon.  It may be more visibly now in the first world, as corporations have moved their manufacturing operations to other parts of the world in order to exploit cheap labor and resources.  People in the U.S. and Western Europe are suddenly angry that "their" jobs are being sent elsewhere.  But, capitalism has always been a global system.  In the post-WW2 era and earlier, manufacturing in the U.S. and Western Europe depended on the cheap raw material inputs from other parts of the world, which were obtained under conditions of colonial/neo-colonial exploitation.  The citizens of the first world, furthermore, depended for their high standard of living on the unequal global exchange relationships that allowed them to purchase, with money representing a small fraction of their own labor hours, commodities whose actual production required a far greater number of someone else's labor hours.

Furthermore, Rose and Kupchan never seem to consider why the Great Capitalism of the post-WW2 era didn't last for more than a couple decades.  Was it just that people got bored and wanted to try something new, as if an economy were a pair of shoes?  If this form of capitalism was so great, why was it not preserved?  In truth, the conditions of the post-WW2 era could not be sustained because of the inherent contradictions of capitalism, that transformed a period of great economic expansion, through the the workings of its fundamental logic, into a period of great economic stagnation.  Specifically, the revolutions in production (assembly line technology, mechanization, transnational organization), which are responsible for the economic boom enjoyed by a fraction of the world's population, also laid the groundwork for its own demise.  Production was proceeding at a scale that far outstripped actual human needs, and profitability plummeted. Everyone became Keynesians and tried to manufacture demand to keep up with the unnecessarily ballooning supply.  Result:  increased consumerism, accelerated cycles of production (i.e. things become obsolete much more quickly so that people are constantly having to buy new stuff), private and public indebtedness, bombardment by advertisements and corporate sponsorships...  As it turned out, trying to artificially manufacture demand never solved the problem of overproduction; profitability was never restored and now everyone is saddled with massive debts.

Precisely for this reason I would say, contrary to Rose and Kupchan, that capitalism does not come in different forms.  It comes in one form (whose basis is wage labor and generalized commodity production), with varying levels of state involvement and approaches to social welfare depending on ever-fluctuating circumstances determined by capitalism's underlying and unchanging logic.  The state is an instrument of the capitalist class, and so it is used strategically to respond to changing environments and maintain the general conditions that are necessary for capitalism to function.

Rose says that, among the members of the Occupy Wall Street movement, it is the smart ones who want to return to the capitalism of the 1950s-60s.  I can only find that statement arrogant and offensive.  Wouldn't the smart ones be those who are able to think outside the bounds of dominant ideology?

The Goals of "Occupy"

Although I wrote in a previous post that I disagree with the major criticisms of the "Occupy" movement, I do have one to level of my own. I think it is okay that they are not necessarily "for" anything, and I think it is fantastic that they are not (as of yet) working through the political process. The problem, as I see it, is how they have defined what they are against.

The name "Occupy Wall Street" says it all. The movement is targeted foremost at the "financial sector," as well as at large corporations, and thus the problem is framed in terms of "corporate greed" coupled with the government's inability to impose regulations and make everyone pay their fair share (to the contrary, offering large bail-outs). This, of course, is a worthy cause. However, I also believe it is myopic, in much the same way that I argued was the view espoused by Inside Job.

The inherent contradictions of capitalism (the drive to decrease wages and simultaneously increase demand; the negative effects of investments in technology on the rate of profit) have caused a decades-long period of economic stagnation - via a crisis of overproduction - of which the entire financial crisis is a mere symptom. All the while, the normal laws of capitalist production continue to redistribute wealth upward. The problem, then, is not greedy corporations per se, or the unregulated financial sector, but the very nature of the capitalist sytem.

The "Occupy" movement could easily turn into a critique of capitalism, although I highly doubt it will. The ideological work of turning capitalism into a sacred cow has been pretty successfully managed up to this point.

But even if "Occupy" was elevated to a critique of capitalism, its scope could be broader still. Capitalism is more than an economic principle. It is a way of organizing social relations. To that end, if one desires real change, a comprehensive critique of society, including all of its interlinked institutions, ideologies, and practices, is necessary. For everything is interrelated, and together comprises a system that is in its very nature exploitative. One should start to question the nature of the state, the justice system, the media, the family, science, the medical establishment (with its associated industries), and so forth, as well as highlight the ways in which racism, sexism, xenophobia, homophobia, and all other forms of discrimination emerge from the exigencies of these institutions.

Occupying Wall Street is nice, but there's a whole world to occupy!

Holidays and Capitalism

From my limited study of the history of feast days and fetes, I can surmise that such occasions used to consist mainly of: going to church, dressing nicely, and eating a large meal. Perhaps some drinking and merrymaking, and maybe even some specific rituals. Holidays can serve a variety of purposes, and in the early history of the U.S. they primarily functioned as a vehicle for nationalist propoganda (and thus covertly supported the agenda of the federalists, who represented one of the two main political parties at the time). Accordingly, speeches and prayers pervaded with nationalist sentiments were one of the most salient characteristics of these events.

Now, in the U.S. major holidays have transformed into seasons and they serve capitalist, rather than political, ends (as if the two can really be distinguished). People talk about "Hallmark holidays" (holidays that were supposedly created by greeting card companies just so they could sell more cards), but this understates the reach of capitalism into our ritual life.

Each holiday comes with its own set of products that people are expected to buy: special decorations, food, and candy, for example. Halloween also necessitates costumes, pumpkins, and fun-size candybars; Easter: baskets, egg-decorating kits, stuffed bunnies; 4th of July: American flags, fireworks, sparklers, patriotic gear; Valentine's day: boxes of valentines, candy hearts, teddy bears. The list goes on. Companies create special holiday-season-themed products to increase sales, like pumpkin spice lattes and shamrock shakes.

Christmas, of course, is the biggest cash cow. It is a capitalist's best friend. First, a number of expensive decorations are required: at the very least, christmas trees, ornaments, lights, wreaths, garlands, stockings, candles, and, for the religiously inclined, advent calendars and nativity scenes. Then, there are all the traditional Christmas treats: candy canes, gingerbread, sugar cookies, egg nog, christmas-themed candybars, etc. And of course there are the movies, tv specials, and music (you can make some good money off a Christmas album!). Most importantly, though, is the tradition of buying gifts for friends and family. From what I can tell (especially talking to people of my parents' generation) both the variety of the decorations and holiday-themed goodies, as well as the expectations for gift-giving (from perhaps one or two toys per child to hundreds of dollars per child), has increased at an exponential pace. Add to this the fact that the Christmas season keeps extending itself further back into the fall (when I was young Christmas season did not start until after Thanksgiving - end of November; now it begins on November 1, the day after Halloween), and it is apparent the stark rate at which Christmas-related consumption has been increasing throughout the decades.

In fact, a lot of U.S.-based capitalist interests have come to absolutely depend on Christmas. It is a sort of crutch, to guarantee sales even in a sluggish economy.

This is yet another manifestation of the crisis of overproduction in which we now find ourselves. Capitalists struggle to get more from what they invest in labor, as well as (somewhat contradictorily) find ways to generate demand: from enormous investments in adevertising, coupons, and specials, to the cultivation of fads and obsolescence. The promotion of holiday-themed consumption is another way in which demand is manufactured against the general momentum of economic contraction.

I am a bit curious to what extent American holiday trends have been reproduced internationally. I realize that Americans tend to be more fanatical about holidays than, say, Europeans, but I have a feeling that the general forces of capitalism may be creating similar sorts of circumstances in other parts of the world.

I must end, however, with a confession. Capitalist ploy or not, I wholeheartedly buy into (literally) the holiday phenomenon. In some sense I find it grotesque, but I also love me some holiday-themed candy and decorations.

The Education Industry

Since the crisis of overproduction set in, capitalist interests have been scrambling to exploit any last bit of potentially exploitable territory, seeking to find some source of water amid a major drought. The arena of education, both public and private, has been one such source of profit throughout the past couple decades. Who has "made out"? Just to name a few...

-Textbook Companies: Constantly churning out new editions and taking advantage of the ever-changing fads of school reform; defining curricula and making arrangements at the state level in order to cultivate monopolies

-Testing Companies: Hugely benefiting from NCLB's mandates for frequent assessment; offering increasingly more extensive and expensive test prep services

-Private school management and charter school chains: taking advantage of the availability of public funds; in some cases, mirroring what happened in the financial sector, individuals have been able to make out like bandits while their schools fall apart.

-Private institutions of higher education: accused of marketing programs to people who are unlikely to finish, encouraging them to take out loans, not fulfilling what they have promised in their educational offerings, and then leaving them with massive debt

In fact, both private and public institutions of higher education are guilty of promoting student loans and debt, while churning out more degrees than there is a market for (and making the degrees value-less).

[The more I think about it, the more capitalism seems like a sort of weed, which ends up spreading everywhere and choking out all other life.  Nothing is safe!  Not even education.]

The above examples just happen to illustrate many of the primary characteristics and tendencies of capitalism:

-an endless chain of fads and perpetual obsolescence
-monopolies
-a parasitic relationship with the state
-individual gain at the expense of everyone else
-multiplication of debt

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 Crisis of Overproduction

One of Marx's most fundamental propositions is that capitalism is based on a number of contradictions that limit its potential for unfettered growth, and ultimately destabilize the entire system.

1.  One of the primary ways by which capitalists profit is by keeping wages low. However, lowering wages also reduces demand for the goods that are produced. Thus, the tendency to try to minimize wages and to maximize demand are contradictory.

2.  Investment in new productive technology, while increasng the efficiency of the production process and initially raising profits, actually lowers the rate of profit. This is because profit is the realization of surplus value, and surplus value derives from the ability to obtain human labor in excess of what one is paying for the labor through wages. Thus, surplus value and profit are directly dependent on human labor. Introducing new technology into the production process reduces the proportion of human labor embedded in the price and cost of each object produced. This means that it is more difficult to accumulate surplus labor at the same rate. The reduction in the rate of profit can be forestalled through the creation of monopolies (for example, through copyrights), which allows one to keep prices high despite lowered production costs. However, monopolies can only be sustained for so long.

These contradictions that are particular to capitalism derive from principles pertinant to the accumulation of wealth in general (capitalist or non-capitalist). Recall the primary principle that continued investment in profitable enterprises decreases their profitability. Essentially (though this is a slight over-simplication) when one expands an enterprise (by re-investing accumulated surplus capital), then one risks undermining advantages on both the input and output end of the production process:

-Increasing the supply of goods that one is providing drives down prices
-Increasing the demand for inputs drives up the cost of the inputs

Thus, material expansion endangers profitability from both ends. When one accumulates more capital than one can profitably re-invest (i.e. when such a re-investment would enlarge the enterprise beyond the point of profitability) the result is a crisis of overaccumulation. One has two options. Either one can find other outlets for investment (other enterprises, financial speculation, public works and philanthropy - the latter also working as a means to cultivate political power), or one can actually continue to invest the accumulated capital and expand the enterprise. If the latter course is chosen, then a crisis of overaccumulation will become a crisis of overproduction. In a crisis of overproduction, the investment of excess capital in material expansion beyond the point of profitability results in a surfeit of goods produced in relation to demand.

Such is the situation the world now finds itself in. The post-WW2 era was a period of rapid economic acceleration and expansion. The widespread incorporation of mechanized production and assembly line production techniques, in addition to the rise of the transnational corporation, afforded rapid economic growth and productivity increases to the world's industrial powers, most notably the U.S., Western Europe, and Japan. By the end of the 1960s, however, this economic expansion was already becoming a crisis of overproduction.

One response to the overproduction crisis has been the use of Keynesian deficit-spending tactics. This has been most prominent in the United States, even in the 1980s when Reagan ratched up military spending. However, many countries in the world are now saddled with massive amounts of debt, so it is certainly not a strategy confined to the U.S.

Another approach has been to divert investment away from production and toward financial speculation. This began toward the end of the 1970s and particularly with the advent of Reagan-Thatcherism. Results of this strategy have included: Third World economic collapse and debt crises, bubbles, bubbles, and burst bubbles. The events of the past few years have, I think, made it very clear that financial speculation is not a path to sustainable prosperity.

History suggests that a crisis of overproduction of the scale now plaguing the world economy cannot necessarily be "overcome." Instead, a certain level of systemic collapse and reorganization is necessary. And this takes a long, long time. We might have to deal with global economic depression for the rest of our lifetime. Enjoy the ride!

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.

The Rise of China

I am not the only person who argues that U.S. hegemony has been steadily eroding for the past few decades. The question I posed at the end of my last post (what comes next?) is one that is frequently considered and debated by others. This usually occurs in the context of discussions about China. For China is seen as the most likely heir to the U.S. in its role as world superpower (whether this is viewed as a potential threat or an inevitability).

I do not believe that China, or even some East Asian regional block, will be the next hegemonic power. There are two primary reasons for my doubt:

1. China's economic development is based solely on strategic participation in the world market and manufacturing.

Strategic participation: Decades ago, when China was still considered a Third World country, it allied with the Soviet sphere of hegemony rather than that of the U.S. However, China also managed to maintain some distance and independence from the Soviet Union, so that it was never truly a member of the Soviet empire. As a result, China could protect itself against the types of neocolonial exploitation that ravaged other Third World nations (particularly those in the "free world.") When the growth of the world economy came to a screetching halt, China was perfectly poised to take advantage of the situation. Its ability to employ protectionist policies to limit imports and keep the exchange value of its currency low, among other things, has allowed China to develop its manufacturing sector and dominate foreign markets, despite a global crisis of overproduction. However, China succeeds in this regard only to the extent that everyone else fails. In the end, because China is dependent on foreign demand for its products and foreign investment, decrease in global demand and foreign debt crises threaten to undermine the stability of China's economic development.

Manufacturing: The profitability of Chinese manufacturing results from the cheap production costs enabled by protectionist policies and the persistent level of global demand for manufactured products (purposefully cultivated in an effort to ignite demand-driven economic growth). However, once again, this is short-term. In the long run, manufacturing, as it is currently organized socially, politically, logistically, and geographically, will never be able to overcome the crisis of overproduction that has been suffocating its ability to generate adequate rates of profit for decades. Thus, Chinese manufacturing will only be profitable for so long. It cannot overcome the crisis of overproduction.

2. Before the next world order emerges, substantial transformations of current political-economic structures will have to occur. This includes the geopolitical framework of the system of nation-states.  As the social/spatial/mechanical organization of production undergoes radical changes, so too will human geography and institutions such as states and transnational organizations (e.g. the UN).  The map may soon look drastically different.  Indeed, the chaos of multipolarity, which I discussed in my previous post, seems to prefigure such a change.  Thus, it does not make sense to look for the next superpower among the current collection of nation-states.  The answer to the the "What will come next?" question is something that does not yet exist.

China might be having a bit of a hey-day (though nothing that compares to its past splendor), but more in the form of a vulture feasting on a rotting carcass.

Food Inc.

After receiving a couple of enthusiastic recommendations for the film, Food Inc., I had to see it. I heartily recommend it myself, and I think it illustrates several points I have been trying to make regarding the inherent nature of capitalism:

Overproduction
The result of production directed toward profit rather than actual human need.   Food Inc. details how government subsidies of corn and soy have yielded a surfeit of these crops, which are not necessarily the most nutritious sources of calories.  Rather than shifting production toward other, more nutrient dense crops, we instead devise ways to manipulate the chemical components of corn and soy and recombine them so that they serve as the basis of most of our food products.

Monopolies
The hallmark of capitalism.   Limitations to compeititon are necessary for accumulation of wealth. Capitalism takes these limits to a new level.  Over the past decades, fewer and fewer corporations have gained control over an ever expanding share of the world market.  Food Inc. reveals how a handful of corporations have come to control the food industry, despite the increasing variety in actual food products.   For example, a single corporation is aiming to control 100% of meat production in the U.S., and they are not too far off.

Related to monopolies is the concept of intellectual property, a topic which I will revisit in much greater detail sometime later.   For now, I will simply point out that the purpose of "intellectual property" is not to protect or encourage innovation; it has always been a means of creating monopolies.  Food Inc. demonstrates this to great effect with the example of the patenting of genetic material in seeds.

Progress?
Food Inc. provides a good counterpoint to the hegemonic image of "progress." As I have argued before, technological innovation and industrial efficiency are a double-edged sword. In the case of agriculture and food, Food Inc. reveals how mechanization and industrialization are responsible for deteroriating diets, contaminated food, exposure to new pathogens, antibiotic resistance, and environmental degredation.

Conquering disease?
I argued in my first (yes, there will be another) series on health that the perception that we are conquering death and disease is patently false.  Food Inc. shows how epidemics, diseases, and other health threats have been created by the forces of modernity.

Curtailment of Liberties
I have also argued that there is no such thing as a "free" society. At least, not among the modern system of nation-states and colonies. Capitalist interests not only limit the freedom of the market, but other freedoms as well. That is why "democracy" is an illusion. Two cases in point, as shown by Food Inc.

Number one, Food Inc. provides an example within the area of agriculture and food safety of the way in which the governmental functions of the state and supposedly "private" capitalist interests are actually intertwined. The idea that there is a separation between "business" and "government" is pure ideology.

Number two, Food Inc., with its discussion of "veggie libel" and lawsuits pursued by the meat industry, also shows how the protection of personal liberties is constrained by capitalist interests. We have freedom of speech... unless it threatens corporations.

My one critique of the film is that the producers are quick to jump on the "organic" bandwagon, giving such enterprises very one-sided support and abandoning the critical lens employed throughout the rest of the film.  If the organic enterprises are owned by the same corporations responsible for all the horrors described in the rest of the film, then why would their profit-driven practices not affect the organic industry as well?

All in all, though, very worthwhile and eye-opening.