> But I don't think there's anything mysterious
> going on here. It was an asset bubble. Asset
> bubbles have been happening for centuries. You
> can analyze them as minutely as you want but
> they all basically follow the same pattern.
> Prices start going up because people expect
> them to keep going up. Then at some point the
> bubble bursts because it sinks in that prices
> are too high. Debt both fuels the price
> inflation and is in turn fueled by it (since
> rising asset values act as collateral). The
> exact timing and micro-mechanisms are interesting
> but beside the point here. So..... when bubbles
> burst, is that always due to a tacit agreement
> among capitalists? Or just this time? Is that
> what made the Nasdaq bubble pop?
I'm not as sure that the mechanism of bubble popping is beside the point in a general reflection on the crisis. The issue has its pedigree as a conceptual riddle, even before H. Minsky ("A Model of Financial Instability," 1974) tried to pin it down.
As to your question, if you think in terms of the stylized dynamics of a capitalist economy, where the bulk of value flowing is aggregate capital, then -- almost tautologically -- the inflections are always and everywhere tacit agreements among the capitalists (including here their official representatives). Again, tacit.
The interesting part, I'd think, is understanding what are the specific factors weighing in, that is, leading to that tacit agreement. In this case, David makes the point that it was the effect of home ownership on the social discipline of labor, a process building up since the 1990s. Frankly, I think that's a thin hypothesis, but I wouldn't say it's crazy. More on this below.
> But even that is sort of beside the point. The
> thing that went really off the rails was the
> idea that the ruling class felt threatened by
> the expansion of working-class home ownership
> and decided it must be stopped because it exerted
> some sort of de-proletarianizing force. Frankly
> that's crazy in so many ways I don't know where
> to start. The capitalists must have been really
> mad at every president since Harding for promoting
> mass home ownership!
Again, there's more here than meets the eye.
I remember when I first read the analytical Marxists (Cohen and Roemer), at a point when they were already in the way out, in the mid 1990s, I thought (and still think) they had a point when they demanded that every assertion made by Marxists re. collective "policies" (in the broad sense of the term) of the capitalists be backed up by plausible explications of the micro mechanisms involved. You cannot get around this with the functionalist fallacy: X must be a deliberate policy, because X favors the collective interest of capitalists.
You may be familiar with this, but I'll explain the point for the benefit of interest readers. For example, if you say that racism "is used" by the capitalists to fragment the working class, you have to explain how the capitalists, who compete ferociously in the markets, reach this tacit agreement to "use" racism and split workers to their collective advantage. How do coalitions, explicit or tacit, form in an essentially competitive environment.
Now, when I read this, I didn't think (and I don't think) that the analytical Marxists were necessarily denying that racism was indeed used by the ruling class to divide workers. Denying the empirical existence of racism because it may be difficult to explain it in terms of some methodology is like pretending you can cover the sun with your thumb. I think they wanted a plausible mechanism that you could test against empirical observation.
So, if capitalists compete with one another, how do they reach these tacit agreements? To me, again, this doesn't imply that it is impossible to make competition among capitals compatible with tacit agreements in a general theory. After all, it can be verified empirically that indeed capitalists reach tacit and explicit agreements, form coalitions, etc. to advance their collective interest. Witness the existence of chambers of commerce, business associations, elite clubs, not to mention the state, the legal and political superstructure, which are institutions not *essentially* mediated by the markets (although the markets intrude in them heavily).
So, capitalist competition doesn't exclude the existence of (non-market) cooperation among capitalists, that agreements be reached, enforced, and lasting for particular goals. In other words, you don't need to prove it *in general*. You just need to show which are the specific factors at play in each particular case and, from the point of view of theory, you needed to rationalize this theoretically, because doing so might help you understand other things.
So, back to the issue David raises. Yes, a strong argument against the idea of some tacit grand design to end the asset boom is that, IMO, the political consequences of an economic crisis are not easy to control or contain. And, given the political climate in the mid 2000s (utter discredit of the Bush administration), an ideological, political, and economic backlash against capital could not be excluded in advance. That big capitalists circa 2006 or 2007 also reached a near consensus that the existing, still mild wave of political activism (given that it could reinforce the effect of home ownership and further weaken social discipline), could be deactivated by unleashing an economic crisis is not very plausible, IMO. I think it could be expected in 2006 and 2007 that a massive economic crisis would be hanged on the Republicans' neck, on their favorite economic ideology, policies, etc. How would another FDR (or an FDR light, if you so wish) be better for enforcing the social discipline of capitalism? At the time the tremors began, Edwards and to a lesser extent Obama could be viewed as compatible with this role.
If I'm not retrojecting 20-20 hindsight (and I believe I'm not), then this is problematic in David's thesis, IMO.
But, other things constant, is home ownership good and then bad to the interest of the capitalists as a whole? Obviously, the answer is yes, both. Marx in Grundrisse refers to the paradox of capitalists want to drive the wages of their own workers to zero and need the wages of all other workers high, because the workers of other capitalists are their consumers. If you say that, because it's best for all individual capitalists to lower wages, what's best for capitalism as a whole is a lower overall wage bill, then you're incurring in a composition fallacy, at least in the sense that workers are also consumers.
Yes, competition from other capitalists weighs heavily on the choices capitalists make. But I'm absolutely persuaded that a bigger factor weighing in their collective *and individual* decisions is the class struggle. The downside of competition is that an individual capitalist go broke. The downside of the class struggle is that capitalism gets abolished. So, "What effect is this choice going to have on labor?" is a big question.
When you observe capitalists apparently shooting themselves in the foot, pause and ponder whether they are displaying such "foolish" behavior because they want to keep workers in their place. Conventional economists tend to look the other way, but I'm sure this is a big thing. And of course, on the public policy side as well. Doug has aptly emphasized the role that monetary policy (as per Fed chairmans own admission) has had as a stick to hit workers on the head, as a social disciplinary device. But, I'm saying, this carries over also to decisions where the shirking of some capitalists at the expense of others can't be kept in check.
Where I'd depart with David is in the idea that home ownership became should a big deal right in the mid 2000s; actually the preeminent issue to him. I mean, to the point of being the main factor sabotaging capitalist discipline in the U.S. and other rich capitalist countries, and leading the capitalists to pull the plug, with possible and not hard to anticipate nasty consequences. I'm sure that inflating home ownership had some kind of effect, but the way I look at it, there were many other relevant factors at play, most of them offsetting, as far as I can see. I'm thinking here of lots of economic insecurity (high costs of private health care, frayed social safety net, threats to Social Security), international competition (the pressure of China, India, etc. on the wages in rich countries), technological change (born by workers privately due to lack of social insurance against tech unemployment), etc.
But, again, if I were to look favorably at David's views, then I'd say that, indeed, if you start to allow poor workers to acquire property, and you keep the bubble going *beyond a point*, because it's good business for some capitalists, then that starts to offset the other disciplining factors in play, which sucks for capitalism in the sense of social discipline. It's a matter of degree and trend. Is there strong evidence that the social discipline of workers in global capitalism was declining due to or about to be seriously threatened by home ownership? That's to be settled empirically. Here, David's weak spot on empirical economics may be harming his analysis.
Anyway, I'm not saying that the way David put things is not problematic. I'm just trying to persuade you that crazy he's not.