Right, the distinction usually made is between the petro-military-industrial complex backing the Bush regime, and the financial-commercial-software nexus that profits more from neoliberal Democrats. This isn't necessarily a matter of which companies contribute to which party's coffers, but to the circuitry of capital that benefits more from different types of US imperialism. One might cite not just Domhoff, but van der Pijl's 1984 Making of an Atlantic Ruling Class (especially the appendix).
> We've got something like 41 years of oil left at current rates of
> use. Oil will run out someday, but it's hardly the most urgent
> problem of the moment.
Wasn't the energy strategy that Cheney introduced in 2001 mostly premised on this problem, though? It seems to me that Washington can and does think ahead at least a decade, when shortages and rising prices will become increasingly severe. (I just spent a fortnight in Zimbabwe, returning last week as yet another petrol shortage began to cripple the economy, and it's quite an experience to be confronted with the future like that.)
> Our capital imports have been used to finance consumption more than
> investment. The U.S. corporate sector has been running a surplus
> (i.e., internal funds exceed capital expenditures).
Ah, then it's our old friend overaccumulation again?
> U.S. profit rates rose from 1982-97, fell into 2001, and are
> substantially up over the last three years. So how does that
> empirical fact fit in with the theory?
Check Dumenil and Levy, for two reasons. One of their graphs (which I just sent you offlist) has the non-financial corporate profit rate up from 1982-88, then *way* down to '92, then up. But the main point is that these rates - especially when interest income is corrected for - remain substantially below the profit rates in the period up to '73. The falling rate of profit in the productive sectors has not been overcome, in short.
> True, but when does this become a problem? Is there some magic level
> of debt that becomes toxic? We could go on like this for decades, for
> all we know.
It's bad, as even Slate pointed out last week (how bad? I dunno): Debt, Where Is Thy Sting? The sting is right here, Mr. President, which is why your "ownership society" idea is in trouble. By Daniel Gross Posted Wednesday, Sept. 1, 2004 The Federal Reserve Board lays it out in its quarterly Flow of Funds report. (See tables D.1-3, on Pages 6-8 for the relevant data.) Total U.S. nonfinancial debt-which is all the debt held by governments, households, and companies not in the financial sector-has risen from $18.1 trillion in 2000 to $22.8 trillion in the first quarter of 2004. As a result, after holding steady for much of the 1990s, the ratio of nonfinancial debt to GDP has risen in each of the last few years and has topped 2 to 1 for the first time. Every component of that debt has been rising in alarming ways. Federal debt rose from about $3.4 trillion at the end of 2000 to $4.15 trillion in the first quarter of 2004-up more than 22 percent. Total household debt has soared from $7 trillion at the end of 2000 to $9.5 trillion in the first quarter of 2004, up 36 percent. The amount of outstanding mortgage debt has risen 43 percent in Bush's first term, while consumer credit is up 20 percent. State and local government debt has risen sharply, too, up 33 percent since the end of 2000. And with investment banks and hedge funds taking full advantage of Alan Greenspan's near-free-money policy, financial debt, too, has risen 35 percent since the end of 2000.
> > The other manifestations of crisis
> >displacement - the search for relative and absolute surplus value, the
> >spatial fix through globalisation,
> The use of the word "fix" sounds like some underhanded trick.
Nah, just a way to describe capital's response mechanismsl.
> But
> what if you read "globalization" as a process of the capitalization
> of everything, over an increasing geographic scope, that's been going
> on for centuries?
It goes in ebbs and flows, right? So call it combined and uneven geographical development of capital accumulation, with scale differentiations (global/regional/national/subnational) that vary according, in part, to the degree of overaccumulation. (That was my PhD thesis, with Zimbabwe as case study.) Sure the commodification of everything has been progressing, but unevenly, with leaps and bounds during periods of overaccumulation, declining productive sector profits in the core centres of accumulation, and financial liberalisation. Isn't that also the message from historical works like Arrighi's?
> Growth in China and to a lesser extent India has
> been stunning over the last couple of decades. It looks real to me,
> not like some "fix."
The spatial fix mainly represents the shift of capital from sites of overaccumulation to new geographical terrain. No contradiction there.
> How's what's happening today all that different from, say, the mill
> girls of 19th century Lowell, or the homeworkers of the same period?
The labour regimes associated with contemporary accumulation are diverse, to be sure. No reason you can't compare the same high-quality garment made using capital-intensive clothing production methods in Northern Europe on the one hand, and using sweatshop labour on the other. But neither the search for relative (the former) or absolute (the latter) surplus value, nor the spatial fix associated with moving the problem around, can substitute for a *resolution* of overaccumulation. You need bouts of sharp devalorisation for that.
> So when the bubble broke, why didn't the U.S. unemployment rate rise
> to a 1932-ish 25%?
Well, why wasn't there a payments freeze and general banking crisis, an upturn in Smoot-Hawley protectionism, and a rise in worker militancy? The main reason: they (the economic-managerial ruling elite, especially in Treasury, the Fed and the Bretton Woods Insts) found new bailout and bandaid mechanisms, by shifting and stalling the crisis. The main one was letting loose new forms of credit, it seems to me, ranging from Mexico bailouts to credit card liberalisation.
> So is the breakdown coming? If so, when?
Wish I knew. I do think it's terribly important to keep a close eye on Treasury's managerial capacities, which compared to the Fed, is amazingly underresearched by the left. More on that issue in coming weeks.
> Sweatshops don't tell the whole story. It's an empirical fact, not
> welcome or even acknowledged by a lot of activists, that MNCs
> operating even in places like Indonesia pay more than local
> operations.
Surely that's not the point, it's that once you factor in declining currencies, the EPZs/IDZs are vastly more profitable outlets for production than the MNCs' former home production sites.
> I thought Marx 101 holds, aside from the usual
> immiseration and crisis bits, that capitalism can develop economies
> and create new sets of "needs," and that 101 Marxists half welcomed
> this.
Yes, but at some stage capitalism ceases being a progressive force. That's where most of the world is now, Doug, thanks to the ravages of what Harvey calls accumulation by dispossession.
> I hope that James's point is that capitalist social relations are
> frustrating the potential payoffs of new technology. Don't you agree,
> Patrick?
Of course. But he had a prior point, that the standard marxian argument about rising organic composition of capital doesn't work. I think it does.
> Why strip out interest-related profits?
The Dumenil/Levy explanation (graph 6/30) is to correct 'for the depreciation of debt resulting from inflation', which is a sound technical answer on empirical grounds, I reckon. But your point is different:
> Their source is value
> production elsewhere, and the financial relation merely changes the
> ultimate recipient.
That *should* be true, in the event that the financial system is correlated
closely to the monetary basis in value production. Does that condition hold
today?
> > James Heartfield: 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.
> I don't share James's fondness for cars, but I'm entirely behind the
> general point.
Well then you'll have to write a book explaining to future generations your hedonism as a normal (carless) US consumer. James makes the wrong argument in contrasting the eco-left's critique of hedonistic consumption with economic development. Most of the red-green campaigners I know are committed to 'economic development' in the interests of the masses, and more humane and ecological means of achieving the satisfaction of basic needs. Since LM's terrible late 1990s doccie on environmentalism, I've never seen James and his people make any effort to explore red-green politics (e.g. in the journal Capitalism, Nature, Socialism). Nor you, comrade Doug.
> How important is this, really? We've had many bubbles in many asset
> classes over the centuries. They burst, periods of stagnation or
> decline follow, and then the system recovers. Why is every cycle
> taken somehow to be the working out of some final crisis?
Not "final" crisis, Doug (that depends on political trends to either socialism or barbarism). But why worry? Because in the midst of these overaccumulation/falling-profit/financial-bubbling periods, *enormous* damage is done. In the upcoming Historical Materialism journal issue on Africa, I try to contextualise the old Hilferding/Grossmann debate about whether there is a "breakdown" by going back 100 years to similar conditions associated with amplified combined and uneven development during an epoch of financial expansionism. Here's an excerpt (apologies for length), with an obvious punchline - we need to return to the conditions in which defaulting on debt was politically feasible, a topic for discussing another day, perhaps:
***
International and domestic financial markets in Africa amplify traditional forms of primitive accumulation, establish new kinds of 'accumulation by dispossession' (as Harvey puts it), and maintain other features of underdevelopment, particularly in recent years as commodification has spread more rapidly under neoliberalism. This process is coordinated by financial agencies, whose influence derives from Africa's crippling debt, capital flight, import dependence and the compradorisation process. To establish how this happens requires a detour into debates over financial power and vulnerability that can be traced back a century, and that are reflected in durable questions of both an analytical and political nature still on the agenda today. In particular, definitions of 'finance capital' are revealing, as they identified the 'unification' and 'merger' of various fractions of capital, with banking capital hegemonic.[1] Hilferding, Bukharin and Lenin thus emphasised the institutional power bloc characteristics of finance, at the expense of drawing insufficient attention to the vulnerability implicit in financial relations and their relationship to capitalist crisis.
After all, from around 1870 to 1920 it appeared that financiers had arranged the concentration and centralisation of key industries, and were the motor behind imperial tendencies. According to Lenin, the typical bank had 'fuller and more detailed information about the economic position of its clients'. Specialisations within banks increased to accommodate the new control functions, and financiers utilised interlocking directorates with firms and also influenced crucial state functions. Moreover, the new capitalism had a profound geopolitical sensibility, for 'Finance capital spreads its net over all countries of the world. An important role in that is played by banks founded in the colonies and by their branches.' Ultimately and most importantly, for Lenin, finance was increasingly 'separated' from production:
Imperialism, or the domination of finance capital, is that highest stage of capitalism at which this separation reaches vast proportions. The supremacy of finance capital over all other forms of capital means the predominance of the rentier and of the financial oligarchy; it means the singling out of a small number of financially 'powerful' states from among all the rest.[2]
This was also the period of Africa's carve-up, with national borders decided at an 1884-85 Berlin conference. In Southern and Central Africa, the consolidation of settler colonialism was feasible in large part thanks to the 1880-90s entrepreneurship and geopolitical leadership of Cecil Rhodes, a financier who graduated from diamond merchant cartelisation in Kimberley, where the DeBeers monopoly was born, to become governor of the Cape Colony. Rhodes received permission from Queen Victoria to plunder what are now called Gauteng Province (greater Johannesburg) once gold was discovered in 1886, and then Zimbabwe, Zambia and Malawi; his ambition was to paint the map British imperial red, stretching along the route from the Cape to Cairo. Rhodes' two main vehicles were the British army, which invented the concentration camp and in the process killed 25,000 Afrikaner women and children and 14,000 black people during the 1899-1902 Anglo Boer South African War, and the British South Africa Company (BSAC), a for-profit firm which in 1890 began its drive from Cape Town north of the Limpopo River by sponsoring the 'Pioneer Column'. That settler initiative soon founded present-day Harare while massacring thousands of Shona and Ndebele people who had established pockets of resistance from 1893-96. London imperialists assumed that competition would continue beyond Berlin's 'Scramble for Africa ', and that only BSAC-style expansion, at relatively little cost to Britain' s taxpayers, would ensure geographical dominance over the interior of the continent in the face of hostile German, Portuguese, French, Belgian and Boer forces. Such a strategy was critical, they posited, to the protection of even the Nile Valley, which in turn represented the life-line to the prize of India.[3]
As is the case today, however, a crucial economic dynamic was playing out in Europe, above and beyond the never-ending search for gold, which helped explain the resource flows behind Rhodes' conquests: chronic overaccumulation of capital, especially in the London and Paris financial markets. Moreover, the push of capital was joined by the pull of white settlers from the colonising powers, as a result of growing social, ethnic and nascent class unrest across Southern Africa, itself a logical consequence of the establishment of systemic migrant labour systems. This dynamic fit the general thesis concerning financial control, capital-export, subimperial settler sites, and the advanced capitalist countries' 'labour aristocracy' advanced by, among others, Hobson, Hilferding and Lenin.[4] Likewise, the easy availability of foreign portfolio funding for nascent Southern African stock markets in Johannesburg and Bulawayo stemmed from a lengthy international economic depression, chronic excess financial liquidity (a symptom of general overaccumulation), and the global hegemony enjoyed by City of London financiers. Surplus capital was still concentrated in the London stock market in the early 1890s, and flowed easily not only to other European countries and the New World, but also to the high-profile, well-tested initiatives of Rhodes, supported by the likes of the then journalist, Winston Churchill.
In sum, it was a period, Ian Phimister contends, of increasing geopolitical turbulence across Africa emanating from 'capitalism's uneven development during the last third of the nineteenth century, particularly the City of London's crucial role in mediating the development of a world economic system.' As Britain faced industrial decline during the 1870s in both absolute and relative terms, manufacturers unable to compete in European markets joined ascendant London financial and commercial interests in promoting Free Trade philosophy, in contrast to the protectionism of other Europeans and the United States. [5] A central function of Rhodes' role in the region was, in the course of searching for gold, to ameliorate the contradictions of global capitalism by channelling financial surpluses into new infrastructural investments, such as the telegraph, railroad and surveying that tamed and commodified the lands immediately north of South Africa. Even if these did not immediately pay off for the BSAC, they did succeed in extracting resources and assuring political allegiance to South African corporate power, a power that was generally in harmonious unity with the evolving British-run states of the region. We return to this point shortly, because regional economic domination - through liberalism backed by the forces of colonial power then, and today, through neoliberalism with military capabilities not yet fully tested - has also become the objective of the contemporary South African ruling class.
Before long, however, in both Southern Africa and the metropole, financial institutions suffered tremendous bankruptcies, culminating in system-wide crashes that left international payments in tatters from 1929-33.[6] Marxist theories of imperialism based on finance capital were never fully reconciled to this development, and those who had established arguments over the prior quarter century and witnessed the Great Depression remained divided over the capacities of capital for reproduction under stress. Hilferding, for example, contended that the problem of rising overaccumulation in highly-concentrated branches and sectors of production could be perpetually displaced, thanks to the coordination functions of finance capital, into the more competitive, non-cartelised sectors of the economy. As a result, intensified uneven sectoral development during crisis would not generate further destabilisation of the economy, but rather stabilisation through deepening cartelisation. The subsequent shake-out of the smaller producers would permit the finance capital cartel to increase the level of industrial concentration and survive the broader downturn.
Hilferding even expressed faith that the centralisation and concentration process would result in an 'increasingly dense network of relations between the banks and industry... [which] would finally result in a single bank or a group of banks establishing control over the entire money capital. Such a "central bank" would then exercise control over social production as a whole.' Politically this was extremely important, for it justified seeking a route to socialism that entailed the socialisation of capitalist relations via finance. As Hilferding concluded, 'taking possession of six large Berlin banks would mean taking possession of the most important spheres of large scale industry, and would greatly facilitate the initial phases of socialist policy during the transition period, when capitalist accounting might still prove useful.'[7] Frankfurt School economist Henryk Grossmann offered scathing comment: 'Hilferding needed this construction of a "central bank" to ensure some painless, peaceful road to socialism, to his "regulated" economy.'[8] As German finance minister under difficult circumstances in the late 1920s, Hilferding failed in any such mission, yet as late as 1931 maintained the validity his thesis.[9]
Where did Hilferding go wrong in miscalculating the durability of finance capital power, and what are the implications for contemporary Africa? According to Suzanne de Brunhoff, Hilferding made a critical mistake that led him to dissociate money and the credit system, for 'money as an instrument of hoarding' was ignored, she complained: 'This dissociation has probably been one of the reasons for the overestimation of the role of finance capital.'[10] That overestimation was based on at least five other causes, which Hilferding should have recognised within the logic of his argument. First, uneven sectoral development (disproportionalities) between capital goods and consumer goods, upon which Hilferding grounded his crisis theory, heightened with the rise of finance, notwithstanding short-run amelioration provided by credit. Second, the same problems in the productive sector that led to falling profit rates also forced banks to look further afield, geographically and sectorally, in order to maintain lending and a healthy deposit base, which brings added risk. Third, rather than declining in importance, financial speculation tended to increase dramatically prior to the climax of a crisis. Fourth, Hilferding's argument that joint-stock companies were relatively immune from downturns was contradicted by his analysis of how vital credit was to the smooth operation of stock exchanges. Fifth, the combination of industry, commerce and banking increased temptations for insider lending and thus generated higher risk.
In sum, nearly all of Hilferding's previous analysis led to the logical conclusion that, contrary to finance capital hegemony during a crisis, banks do indeed lose self-control, as well as control of outside entities and processes. Paul Sweezy observed, 'Hilferding mistakes a transitional phase of capitalist development for a lasting trend.' The transitional phase was one of recovery from the 1870s-1890s financial crises; but the crises would emerge again during the early 1930s and from the 1970s until the present.[11] As Grossmann concluded his 1929 book The Law of Accumulation, 'The historical tendency of capital is not the creation of a central bank which dominates the whole economy through a general cartel, but industrial concentration and growing accumulation of capital leading to the final breakdown due to overaccumulation.'[12]
Why is this important today, especially in considering African underdevelopment? If classical theories of imperialism were based on the finance capital thesis - adopted by Lenin, Kautsky, Bauer and Bukharin - and hence did not focus sufficiently on the vulnerability of financial circuits of capital, then they missed the intrinsic opportunities to combine these weaknesses of capital with the illegitimacy of the political form, colonialism. The anti-colonial struggle was insufficiently linked to analysis of the dynamics of accumulation, particularly in Third International politics. But there is an additional problem with earlier theories, namely that they lined up imperial processes behind the metropole-colonial relationship, which missed what Harvey stresses are the features of primitive accumulation that were continually reproduced through the North-South relationship.
Rosa Luxemburg had a different approach. Notwithstanding flaws in her analysis, Luxemburg observed in her book Accumulation of Capital the core contradiction of capitalism, namely 'the deep and fundamental antagonism between the capacity to consume and the capacity to produce in a capitalist society, a conflict resulting from the very accumulation of capital which periodically bursts out in crises and spurs capital on to a continual extension of the market.'[13] Her thesis regarding the power relationships responsible for global uneven development was straightforward. 'Capital cannot accumulate without the aid of non-capitalist organisations, nor, on the other hand, can it tolerate their continued existence side by side with itself. Only the continuous and progressive disintegration of non-capitalist organisations makes accumulation of capital possible,' she argued:
The relations between capitalism and the non-capitalist modes of production start making their appearance on the international stage. Its predominant methods are colonial policy, an international loan system - a policy of spheres of interest - and war. Force, fraud, oppression, looting are openly displayed without any attempt at concealment, and it requires an effort to discover within this tangle of political violence and contests of power the stern laws of the economic process.[14]
This description immediately alerts us to similarities between early 20th and early 21st century global unevenness. Today, the international stage offers views of a new colonial policy: 'disciplinary neoliberalism' in the form of the World Bank/IMF's Highly Indebted Poor Countries initiative and allegedly 'participatory' Poverty Reduction Strategy Papers; the homegrown neoliberalism of Thabo Mbeki's New Partnership for Africa's Development; the World Trade Organisation's extraordinary reach of private property rights into traditional sites of state sovereignty and biopower; innovations in donor aid that link 'good governance' (better termed 'low-intensity democracy') with liberalisation; and all the other means Washington and its allies deploy to maintain control, including military might.[15] Today, we can witness an international loan system that corresponds to spheres of interest writ large (not merely through banking relations along colonial-geographical lines, as before). Today, there are persistent, periodic wars, in Africa and around the world, that reflect the tensions associated with capitalist crisis, interimperialist rivalry, territorial defence against the devalorisation of capital, and various resulting forms of barbarism.
Drawing upon Luxemburg's insights into the interactions between capitalism and non-capitalist aspects of production and social reproduction, Harvey provides an explanation of how the permanent process of primitive accumulation evolves into the system of accumulation by dispossession, i.e., looting:
commodification and privatisation of land and the forceful expulsion of peasant populations; conversion of various forms of property rights (common, collective, state, etc.) into exclusive private property rights; suppression of rights to the commons; commodification of labour power and the suppression of alternative (indigenous) forms of production and consumption; colonial, neocolonial and imperial processes of appropriation of assets (including natural resources); monetisation of exchange and taxation (particularly of land); slave trade; and usury, the national debt and ultimately the credit system as radical means of primitive accumulation.[16]
We need continual reminding of earlier debates in the same spirit, prior to reviewing opportunities for resistance at the local, national, continental and global scales. For Luxemburg, as for many contemporary critics, capitalist crisis tendencies were translated into an aggressive, systematic geopolitical process, characterised by 'oppressive taxation, war, or squandering and monopolisation of the nation's land, and thus belongs to the spheres of political power and criminal law no less than with economics.' [17] But the laws of economics still unfold according to the Marxist argument, as witnessed by historical evidence of financial ascendance during the accumulation cycle.
The existence of long-waves of capital accumulation is securely established, with global 'crises' - defined in Coxian terms as problems in a system's reproduction which cannot be self-corrected using the internal logic of the system, but instead require an external intervention[18] -- occurring roughly from 1825-45, 1872-92, 1929-48, and 1973-present, during which time large-scale devalorisation (shakeouts of economic deadwood) transpired.[19] To be sure, precise measurement of these cycles of accumulation is difficult.[20] But at least one variable stands out, for our purposes: national financial overextension. In the 1820s, the 1870s and the 1930s, the periodic build-up of foreign sovereign debt ultimately required mass defaults, typically involving a third of all borrowing countries. Christian Suter explains the 'global debt cycle' by way of stages in the long-wave, beginning with technological innovation and utilising international product cycle theory. At the global scale, a three-stage process unfolds comparable to Hyman Minsky's financial instability hypothesis, through which credit moves over time from largely 'hedging' functions, to 'speculative' activities, to a 'Ponzi'-type (reverse pyramid) desperation stage in which borrowers contract new loans in order to cover repayment of interest on the old.[21] At the global scale, this entails, as Suter puts it, 'first, intense core capital exports and corresponding booms in credit raising activity of peripheries; second, the occurrence of debt service incapacity among peripheral countries; and third, the negotiation of debt settlement agreements between debtors and creditors.'[22] Those settlements, even in the forms of default, are crucial to clearing away the deadwood so that accumulation can resume.
---------------------------------------------------------------------------- ----
[1]. See discussions in Brewer, 1980, pp. 103-109; Howard and King, 1989, Chapter Five.
[2]. Lenin, 1986, pp. 41-63.
[3]. Loney 1975, pp. 31-32.
[4]. Lenin (1986, p. 87) illustrated Imperialism with a quote Rhodes uttered in 1895: 'In order to save the 40,000,000 inhabitants of the United Kingdom from a bloody civil war, we colonial statesmen must acquire new lands to settle the surplus population, to provide new markets for the goods produced in the factories and mines. The Empire, as I have always said, is a bread and butter question. If you want to avoid civil war, you must become imperialists.'
[5]. Phimister 1992, pp. .11-15.
[6]. The excesses of financial speculation were more frequent and disruptive in Southern Africa, especially during the early 1920s. The South African history of finance and uneven development is told in Bond 2003, Chapter 12; the Zimbabwean story is found in Bond 1998, Bond and Manyanya 2003, and Phimister 1988.
[7]. Hilferding, 1981, pp. 180, 298, 368.
[8]. Grossmann, 1992, p. 198.
[9]. Sweezy, 1968, p. 298.
[10]. de Brunhoff, 1976, p. xiv.
[11]. Sweezy, 1968, p. 267.
[12]. Grossmann, 1992, p. 200.
[13]. Luxemburg 1968, p. 347.
[14]. Luxemburg 1968, pp. 396,452-453.
[15]. Gill 2003.
[16]. Harvey 2003a, p. 74.
[17]. Luxemburg, The Accumulation of Capital, p. 370. Updates of the theme that capitalism requires pre-capitalist 'articulations' are found in Seddon 1976 and Wolpe 1980; however, as Smith (1990, p. 156) argues, these are best considered a symptom of uneven development, not the cause.
[18]. Cox (1987, p. 269) argues that 'the economy must undergo some structural change in order to emerge from a crisis; in a cyclical downturn, the same structure contains the seeds of its own revival'.
[19]. Gordon 1980, Goldstein 1988.
[20]. Variables such as price series, profitability and production estimates are central to most studies, whereas ideally measures such as capital intensity (and the organic composition of capital), surplus value rates, the velocity of circulation of capital, the geographical expansion of capitalist relations, capacity utilisation and inventory build-up would be preferable for Marxist analysis.
[21]. See, e.g., Ferri and Minsky 1992.
[22]. Suter 1992, p. 41.