Thanks for the comment. You asked:
Do you agree with those in the U.S. and Europe like Alan Greenspan who represent the interests of finance capital that this dramatic and escalating shift in flows of capital can continue indefinitely (as long as enough surplus value can be squeezed out of a shrinking working class)?
In terms of economic theory, that is a possibility, yes. But in reality, I think no, basically because I think, with Marx, that the economy is a social system, not a sort of "engine" which can be controlled with decisions based on mathematical equations. Even with the most perfect plans for staged economic adjustment, there's the people factor, i.e. at the most basic level, what people are willing to accept, or can accept. Deregulated markets create more socio-economic inequality and more social competition, and that creates big problems in terms of organising and unifying people, getting them to co-operate with plans that could transform capitalism in sustainable ways. That's a question of power, of the conflicts of social classes. At stake is not just whether the system can deliver the goods, but also how it delivers them, and the latter involves cultural factors which have nothing to do with economics directly. James Heartfield reminded me poetically that Marx had no theory of the "automatic collapse of capitalism". Lenin for his part said, "there are no absolutely hopeless situations for capitalism", provided that the ability to accumulate private capital stays intact. But I don't operate with a unilinear historical schema of feudalism- capitalism-socialism either; capitalism does not necessarily lead to socialism, the system could mutate in various ways. To establish a socialist system requires a class of people with a definite positive project for the transformation of society, not simply a bunch of people who complain about exploitation and injustice, real or imagined, i..e. some people have to be prepared to shoulder the social responsibility for this, and provide the leadership required, based on a realistic vision of what society ought to be like and can be like..In that sense I find people like Peter Camejo much more interesting.
You write:
In a series of articles, most recently 1/11/04, US economists Obstfeld and Rogoff argue that the spiralling process of using European and Asian surpluses to 'force balance in international payments' raises the spectre of depression.
Reply:
I don't have a sub to the FT, I think that is a possibility, yes. But in the medium term, the prospects are just for sluggish aggregate real growth I would think. GDP figures are less and less meaningful as indicators however, because they don't tell you what sectors are really growing, and as the "jobless growth" phenomenon illustrates, growth in GDP does not automatically imply increased employment. Also, the growth of international trade and unequal exchange distorts the relationship between the reported value of output and what tangible things are actually produced. It is very difficult to see more than a few years ahead, because critical events (not necessarily economic events) can suddenly have a big impact. You saw this already with 9/11, in itself not a very significant global event in terms of its scope, but it had an enormous cultural impact and an impact on investor confidence. Generally, in social science you cannot foresee much beyond 5-7 years, other than in special cases.
You write:
In Kapital V.3 Ch. 25 Marx dealt in a cursory way with the question of 'Fictitious Capital' which he defined as a mass of speculative capital representing paper claims to a share of the total surplus labor. He stressed that Fictitious Capital was an essential feature of the process of capital accumulation, but also that as the ratio of fictitious claims to surplus labor embodied in circulating use values rose, the fictitous house of cards had to come crashing down eventually.'
Reply:
I don't think that fictitious capital is such a big systemic problem. Fictitious capital facilitates a transfer of net income to property owners without involving a corresponding increase in real output, but there is usually an underlying real asset on the basis of which fictitious capital can grow. Ultimately of course that asset is living labor which can create new value. If you look at the stockmarket crashes since the 1980s, it's clear they had big depressive effects, but they don't destroy the capitalist system. What the massive growth in capital tied up in securities really shows is that there is now overall less confidence in a trade based on artificially inflated values. An interesting snippet: Staff turnover among investment professionals in the U.K. active equity sector has reached epidemic proportions, according to multi-manager Investment Solutions. It has conducted a research study which shows that up to 45% of all investment professionals have changed jobs in the last three years. Fifty-six percent of those who left their employer joined a direct competitor. The report speculates that theses figures reflect a trend among managers to run hedge funds or to seek more seniority and higher salaries. http://www.globalmoneymanagement.com/default.asp? page=1&SID=447788&ISS=11246 Yes, of course the capitalist system is full of contradictions, but in practice what matters is the timing applied in mediating those contradictions. The policy makers have a whole raft of policy ideas in the political cupboard, but what gets implemented depends ultimately on an assessment of where people are really at, what is achievable. Ultimately economics cannot get away from the people factor, and people of course aren't simply "economic agents" as Duncan Foley argues in a recent paper. http://www.newschool.edu/gf/nser/articles/ 0101_foleyd_strangehist_fall04_final.pdf
You wrote:
Marx was writing about national economies and in the context of boom-bust cycles and conjunctural crises. In the globalized economy of today, with all its internal contradictions, it seems that the question of Fictitous Capital becomes a central one, as economic crises assume increasingly the form of credit-monetary crisis.
Reply:
Well the way I have put it is that credit-money enables the postponement of current costs of consumption in space and time, but the limit consists in the ability to pay, and and rate of repayment. Debts can be rescheduled or renegotiated to a large extent. But the question is whether ultimately debt defaults will occur in critical areas of a sufficient size, and the "social trust" factor plays a role in this. Then you would get an Argentina-type situation. Fictitious capital does play a role here, insofar as artificially inflated values are suddenly popped, such that an asset which was worth a certain amount is suddenly worth a lot less (devaluation of assets) which can make it impossible to repay debts and causes chain reactions of debt defaults. But a devaluation of assets need not occur as result of an economic mechanism, it can occur because of extra-economic events. The viability of the credit system depends ultimately on social trust and social co-operation. This is essentially why the bourgeoisie focuses on terrorism, because terrorism is the antithesis of all that, the absolute negation of social trust and social cooperation. Which really leads me back to my initial comment: the people factor, i.e. what people are willing to accept, or can accept. There may be no absolute economic limits, but there are human limits. In Marxist theory, the dialectics of competition and co-operation have never been well-theorized (John McMurtry has an interesting article on this though, "How Competition Goes Wrong." Journal of Applied Philosophy, 8(2): 200-210, 1991).
Jurriaan
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