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Zombie anti-imperialists vs the 'Empire' by James Heartfield ... JM: Behind the 'war for oil' legend is a coalescence of the old left's theory of imperialism and the new cynics' predisposition to see all government as corrupt.
PB: No, it's a coalescence of the left's concern that state actions generally follow national economic interests, and that oil will run out, hence the US strategy for decades to come is to have Iraq play vassal.
JM: Early in 2003, Guardian columnist George Monbiot gushed that 'in a series of packed lectures in Oxford, Professor David Harvey, one of the world's most distinguished geographers, has provided what may be the first comprehensive explanation of the US government's determination to go to war'. Monbiot was probably unaware that he was regurgitating a garbled update of Lenin's analysis of imperialism from 1916: 'The underlying problem the USA confronts is the one which periodically afflicts all successful economies: the overaccumulation of capital.' (7) But while David Harvey's doctrinal adherence to the results of Lenin's analysis was satisfied,
PB: Actually, Harvey rejects Lenin (and his interimperial rivalry theory) in favour of Luxemburg (who has a broader theory of capitalism and non-capitalism as the lynch-pin for imperialism).
JM: it is wrong to say that the USA is awash with capital, overflowing into the less developed world. In fact, America is a net importer of capital, dependent upon foreign purchases of US treasury bonds to recycle as consumer credit (8).
PB: Harvey argues the world is awash with capital, and that uneven development entails various kinds of switches in flows of capital. There is no shortage of financial capital bubbling around organically within the US (even if US T-bills are purchased by East Asians); witness the real estate and mortgage bubbling going on.
§ 'Over-accumulation' - in relation to what?
JM: Theories of over-accumulation have been with us since Adam Smith first anticipated that too many capitalists chasing the same profits would drive profits down to nothing. The resonance of theories of a 'law of diminishing returns' arose from the coincidence of growing investment and dwindling profits - in 1813-1815, the 1870s, 1920s, and 1970s. The 'profit-squeeze' was widely seen as a harbinger of economic doom (9).
PB: Actually, the profit squeeze is seen as the squeeze that tight labour markets or class struggle puts on profits. The overaccumulation thesis - that profits stem from excessively productive capital and underpaid labour (unable to consume the massive output of the system) - is the opposite.
JM: In fact, investors did suffer diminishing returns on their investments in the 1990s. But Wall Street investors were not even put off paying fantastic prices for stock with negligible or no earnings. They accepted the advice to ignore the traditional rule of thumb comparing the price of the stock to the earnings (PE ratings) on the grounds that flotations like Netscape's indicated a 'world-changing event' that created a 'new way of financing companies' (10).
PB: Even without that rhetoric, the financialisation of the 1990s and contemporary economy would have continued apace. It moves around, but there are many non-productive circuits in which overaccumulated local and global capital could be found in the main middle-income countries, including South Africa.
JM: Diminishing returns did cause problems. Companies like Enron, Parmalat and Shell forged their accounts to disguise poor earnings. But these problems never caused the difficulties that the profit squeezes of the 1880s, 1920s or 1970s did.
PB: One could argue that the overall impact of overaccumulation is going to be worse, because the scale of displacement - not resolution - of the problem is so much more severe. Just as one example, all the debt ratios (which indicate what Harvey terms the 'temporal fix') are far higher today in most every country, especially the US, than the 1970s. I can send anyone a slide show I do on this, if interested. The other manifestations of crisis displacement - the search for relative and absolute surplus value, the spatial fix through globalisation, amplified uneven development, worsening 'accumulation by dispossession' (including via superexploitation of women) - all appear far more advanced, and I'd argue that all are the result of the general overaccumulation crisis as witnessed by the persistently low rates of profit in the 1970s-90s era.
JM: Without any challenge from organised labour, declining profit rates are a problem that can be contained. Everyone understood that the climb in stockmarket prices was speculative, meaning that money was to be made, not from dividends, but by selling the stock on as it appreciated (11). Where previous generations were scandalised by falling profit-to-capital ratios, in the 1990s these were welcomed for what they were: a stockmarket boom.
PB: Heartfield doesn't understand that a 'speculative boom' is a reflection of deep-seated crisis tendencies let loose in the stock market. That's Marx 101.
JM: The touchstone for radical theories of over-accumulation would seem to be Marx's celebrated account of the 'tendency of the rate of profit to fall' (12). In Capital: A Critique of Political Economy, Vol. III, Marx shows how increased accumulation can give rise to diminished profits. His underlying assumption is that all societies create a surplus over and above the producers' means of subsistence. Under capitalism, this surplus takes the specific economic form of profits on invested capital. But, explains Marx, as an ever-greater proportion of investment is in capital that does not yield surplus value, such as machinery and raw materials (which he calls constant capital), and relatively less in labour (which he calls variable capital), which does yield surplus value. 'Over-accumulation' for Marx, then, is the over-accumulation of constant capital, relative to the profit-creating variable capital.
PB: And in turn, the overproduction of commodities beyond the capacities of the market to realise profits.
JM: The importance of Marx's theory should not be made into a dogma. Marx was seeking to uncover those trends in the economy that indicated the historically limited, or transient, character of capitalism. Crises suggested that the market system was not synonymous with human civilisation, but might need to be overcome in favour of a more intelligent mode of social organisation. On the other hand, it was never Marx's aim to suggest there was an automatic tendency for capitalism to break down, independent of the deliberate actions of people (13).
PB: Of course class struggle was the central theme in his work, but there is a vibrant literature on Marx's breakdown theory - especially a 1929 book by Heinryk Grossmann (which Heartfield's group promoted very heavily just over a decade ago).
JM: The assumptions that frame Marx's theory of over-accumulation, though, are less pertinent to today's economy. Capital accumulation in the 1990s boom years has typically been extensive investment, or 'job-rich growth': the creation of new points of production, the assimilation of ever-greater numbers of workers, 'the rapid growth of employment taking place without the benefit of a parallel increase in the plant and equipment at the disposal of each worker' (14).
PB: Resort to this sort of language - so reminiscent of French regulationism ('extensive investment') - means Heartfield is merely operating at the
JM: In fact, both the European and American workforces grew - the EU workforce by 15million and America's by 27million - between 1986 and 2001. In East Asia, and especially China, millions more have been drawn into the factories. That implies an expansion of capitalist production,
PB: Sure, but it also implies the search for absolute surplus value, given the sweatshop character of those operations. It implies a worsening of uneven and combined development, which is also a classic symptom of overaccumulation crisis.
JM: but not necessarily an increase in the ratio of investment in means of production relative to labour. There is evidence that the ratio between constant capital and variable moved in the other direction, as a more labour-intensive service sector expanded (15).
PB: But JM knows the problem isn't in the economy as a whole, it's in the 'value-creation' sector, namely sites where surplus value is extracted in commodity production. So much of the service sector - especially financial markets - is not about value creation, but about value *realisation*, e.g. transporting goods further to markets, or the marketing of commodities, or the maintenance of the commodity. It may be true that the production of some new dematerialised commodities - images on the page or on a DVD - is more prevalent than in Marx's time, this basic problem - distinguishing between value-producing and nonvalue-producing labour - remains a central feature of crisis theory, which Heartfield should acknowledge here.
JM: Whatever the real movement of profits, they are not, in this instance, a consequence of the declining ratio of workers to means of production. While raging against 'over-accumulation', today's critics have failed to notice that the real problem is the shortfall of investment in new technologies, the perpetuation of drudgery and the squandering of labour in unproductive toil.
PB: The 'shortfall of investment' - because most evidence is of declining fixed capital investment ratios during the past three decades - itself reflects overinvestment and glutted markets, and that condition hits even sectors like ICT, e.g. from the late 1990s, once these overaccumulate very rapidly (witness the optic fibre gluts all over N.America).
JM: In any event, most of the radical critics of imperialism only pay lip service to Marx's theory of over-accumulation. Their Marxism is what Ulrich Beck might call a 'zombie Marxism', whose categories wander the night, though life has long since drained from them. They like the way that it sounds - full of crashes and 'death-knells' - but each give different explanations for the long-awaited reversal of capitalist fortunes.
PB: There's a healthy, robust debate underway (e.g. on the Brenner 1998 NLR article), but 'lip service'? That's an insulting way to read this literature.
JM: The most common explanation for the crisis is an overproduction of goods, relative to the available market, rather than an over-accumulation of constant capital relative to variable capital. 'In the current crisis of over-accumulation and overproduction, in which the markets are saturated, low levels of income.make it impossible for the poor to access these commodities', argues David Masondo of the South African Communist Party. David Harvey also conflates the two, writing of the 'general problem of excess capacity (over-accumulation)'. Robert Brenner, author of The Boom and the Bubble, agrees: 'The overcapacity that was already showing itself very clearly in 1998, 1999 and 2000 has become blatantly obvious, as bubble years' over-investment, exacerbated by the reversal of the wealth effect, has hit the economy with ever-greater force.' Brenner finds plenty of evidence for his thesis, such as the utilisation of just 2.5 per cent of existing telecommunications networks, 25 per cent surplus in world auto production, and massive increase in retail floor space. But this interpretation represents the perspective of the individual businessman, for whom selling goods is always a source of existential angst, rather than the socialist critique of capitalist production as a whole.
PB: JM fails to realise that the critics use such data as empirical evidence of surface-level conditions, while also making a theoretically-grounded case.
JM: With businesses investing less in developing new products, they concentrate instead on marketing the same old stuff (16). But despite the relative constraint on wages in the 1990s, the growth in numbers working has kept shop tills ringing.
PB: Nothing here about the massive rise in consumer credit required? Quite an oversight.
JM: Brenner in particular has difficulty with the evidence of economic buoyancy in the USA from 1993 onwards, adopting awkward euphemisms like 'up-tick', 'equity price aggrandizement' and 'amplification of the growth of personal consumption'.
PB: Brenner actually titled his book 'Boom and Bubble' to show that the boom got out of control. JM should also consult the data on profitability from Dumenil and Levy (Cepremap website), which strip out the interest-related (rentier) profits from US non-financial corps and demonstrate that profit rates have remained very low throughout the last three decades.
JM: Not surprisingly, he makes great play of the collapse in stockmarket prices around 2000-01, pointing out that these were equal to the aggregate profits these companies reported between 1995 and 2000. 'As one economist pithily put it', he writes, 'what it means is that with the benefit of hindsight, the late 90s never happened' (17).
PB: No doubt Brenner wishes that the 1990s had never happened, since the economic optimism in that decade seems to make a nonsense of his thesis. The reductio ad absurdum of Brenner's argument comes when he describes an 'ongoing international economic stagnation, rooted in overcapacity and over-production' - in other words, decline, rooted in growth.
JM: No, growth would be the capacity to maintain the 1950s-60s ('Golden Age') investment levels forever. Because of overinvestment problems that emerged from the early 1970s (or late 1960s) onwards, the 'growth' that capitalism has generated has been less 'sustainable' (capable of reproducing itself) given how quickly new markets fall victim to overproduction problems. The overcapacity in the system as a whole is occasionally lessened, during recessions or the shutdown of geographically-specific sites of industry, and the rise of the credit bubble allows some of the commodities to be mopped up in an unsustainable consumption boom, to be sure. But moving these problems around across space or through time (credit allows you to buy today - on hopes of realising more surplus value in the future) is no substitute for a genuine resolution of the crisis conditions, and for a renewal of accumulation. The last time such conditions were in place were the 1930s-40s, when the crisis required a Great Depression and World War to wipe out the economic deadwood that had overaccumulated.
JM: Though the old left was providing the intellectual ballast, the real meaning of the 'war for oil' slogan was rather different from the Marx-inspired analysis of over-mature capitalism. Behind the terminology lay the more moralistic preoccupations of the contemporary radical intelligentsia with personal greed on the part of the West. According to Christian Aid, 'the global economy's addiction to oil - its drug of choice - has done more than anything else to skew the world's priorities' (18). The war in Iraq was taken as a sign that the West was over-dependent on cars and fossil fuels. The real target of the criticism was not a social system that stood in the way of economic development, but of economic development itself, and of the greater personal consumption it gave rise to.
PB: Sure, that's part of the problem. The 'old left's' crisis theory never adequately dealt with the social degradations of mass capitalist culture ('personal consumption') and especially of the ecological damage associated with rampant capitalism, including excessive global warming and the looming exhaustion of fossil fuels (especially petroleum). Harvey's thesis about accumulation by dispossession, added to his geopolitics, fills some of those gaps nicely. Since later, JM completely misreads the primitive accumulation debate, and since there are so many other awful bits in his article, I'll just leave it at that for now... Ooops, some endnotes to this last section remain:
(7) Too much of a good thing, George Monbiot, 18 February 2003
(8) Ann Pettifor of the New Economics Foundation objected that George Monbiot 'is wrong to say that the US is awash with capital, striding the Earth in search of markets in which to invest surplus savings', but is actually a net importer of capital. An empire living on credit, Ann Pettifor, Guardian, 20 February 2003
PB: The critique is of the system as a whole, which does indeed create vast excess 'savings' that take the form of financial market surpluses. Just consider how much of this is being invested in the real estate bubble - The Economist last year estimated that of a $70 trillion global property valuation, about 2/5ths is overvaluation - and you get a sense of the scale of the problem. Uneven development means the problem is worse in some places, and sure the US draws in $2 bn each day from the rest of the world (mainly East Asia), but that does not contradict the 'awash with capital' problem.
(9) 'The Origin Of The Law Of Diminishing Returns', Edwin Cannan, 1813-15, Economic Journal, vol 2, 1892. Marx quotes Ricardo: 'The natural tendency of profits then is to fall.the very low rate of profits will have arrested all accumulation'. Marx adds: 'This, as Ricardo sees it, is the bourgeois "Twilight of the Gods" - the Day of Judgement'. (Theories of Surplus Value, vol 2, 1969, p544.) Comparing profits in the 1960s with those in the 1970s, William Rees Mogg wondered whether 'maybe Marx was right in saying there will be a historic decline in the rate of return on capital'. (Diaries, Tony Benn, 1996, p370)
(10) As Morgan Stanley analyst Mary Meeker told John Cassidy, quoted in his dot.con: The Greatest Story Ever Sold, 2002
(11) Everyone, that is except Robert Brenner, who worried that the 'glitch of course, was to be found in the ever-increasing chasm between expected profits, on the one hand, and actual profits, on the other, which manifested itself in the stock market bubble' (The Boom and the Bubble, Robert Brenner, 2003, p247). Hype about 'future profits' was really for the brochures, not to be taken seriously.
PB: Easy to say, after the dot.com bubble-burst fact. Lots of New Economy boosters believed it and persuaded investors to gamble on that basis.
(12) So for example, the South African Communist Party's 1999 document 'The current global economic crisis', uses Marx's terminology: 'The present crisis is, in fact, a global capitalist crisis, rooted in a classical crisis of overaccumulation and declining profitability.' Patrick Bond says the document borrows from Robert Brenner's New Left Review article (May-June 1998) which was the basis of his book The Boom and the Bubble - see Green Left Weekly, 5 May 1999
PB: To be precise, it was an October 1998 document. It would repay JM's effort to read the document, because, tragically, it's a case of using marxian crisis theory (talk left) to justify the most milquetoast of global and local reformism.
(13) 'For some of his disciples the "law of value" . seems to assure the breakdown of capitalism', chided Paul Mattick, adding: 'Marx's critique of political economy became the ideology of the inevitability of socialism.' ('Value Theory and Capital Accumulation', Science and Society, Winter 1959, Vol XXIII, No 1, p 33)
PB: It shouldn't have to take this form, obviously. Since Mattick was a Grossmann disciple, I suspect (though haven't read the article) that he had a more nuanced take on this than we're getting in the one-liner.
(14) The Boom and the Bubble, Robert Brenner, 2003, p79
(15) 50 Years of Figures, Eurostat, Bureau of Labour Statistics, 2003
(16) 'The Pitfalls of the Long Transition to Socialism', The African Communist, First Quarter 2002, p101; The New Imperialism, David Harvey, p70; The Boom and the Bubble, Robert Brenner, 2003, p254; 'Too much of everything', R Miller, et al, Business Week, 9 April 2001; 'Branding over the cracks', James Heartfield, Critique 35, May 2004. According to the British Department of Trade and Industry, productivity deteriorated as 'the economy has generated an additional 1.5 million jobs at a quicker rate than it has increased investment', UK Competitiveness Indicators, HMSO, 2001, p75
PB: JM's use of one 2001 indicator as countervailing evidence is unsatisfying.
(17) The Boom and the Bubble, Robert Brenner, 2003, p295. The quote is Robert Barbera, chief economist at Hoenig and Co, talking to Steve Liesman of the Arkansas Democratic Gazette, 19 August 2001. Remember that the asset prices were overvalued, so the losses do not bear upon the underlying profits.
PB: I'm not sure there's time today to do more with this, or that it's a healthy use of time anyhow, given JM's bizarre political standpoint and trajectory. Maybe someone else wants to take up the baton.