blowing across this globalized world, from Tunisia to Egypt to Greece to Spain to Occupy Wall Street. How do the theoretical investigations of this site relate to this, to what’s new and emerging? 

This question of the emergence of novelty, of understanding this very changing world so as to help to change it fundamentally, has always been central to this site. And some pivotal issues of the Occupy movement (Who are the 1%? for example) have been explored here as well.

At the urging of Mike Ely from Kasama, we’ve put together a guide to some important writings on khukuri, organized by topic:

What is current the structure of global capital? See essays concerning a transnational capitalist class (TNC) — truly the global 1% (or less) – by Leslie Sklair, by William Robinson, Jerry Harris, and by William K. Carroll, as well as in the recent piece on global corporate networks.

How do we analyze the present crisis, and how do we go forward from it? See this by David Harvey, as well as essays by Don Hamerquist, on the crisis of both capitalism and the left, and hollow states in a time of austerity and chaos, and John Steele’s notes from a conference devoted to this subject.

What is the relevance of Marxism today? This important question is explored in this essay by Vern Gray and in these by John Steele:

Our Relation to Revolutionary Tradition;

We Need a Politics We Haven’t Got;

and To what extent is revolutionary theory detachable?

as well as Bill Martin’s extensive essay Into the Wild.

How can we understand the present historical moment in a way that can also prepare us for the eruption of something new? And what is the relevance of the contemporary thinker Alain Badiou?

John Steele has written a series of essays: Another take on revolutionary theory; on Badiou and the event; Revolutionary fidelity and the radically new; on Badiou’s political value; and on Badiou’s Maoism.

Relatedly, there is J. Ramsey’s essay addressing the question.

And see these by Don Hamerquist: Barack, Badiou, and Bilal-al-hasan; and “…that which in them divides itself from the old”.

(And here too, Bill Martin, in the essay cited above.)

Finally, in terms of understanding the “new wind,” although this is a topic we’ll have more on, for now it’s worth noting an essay by Don Hamerquist on the earlier parts of this sequence.

Related posts:

1. Could the present crisis be an opening to communism?
2. Financialization and hegemony
3. Marxism, politics, and evil, part 2

How Much Is Too Much?

Benjamin Kunkel

The Enigma of Capital, And the Crises of Capitalism by David Harvey

A Companion to Marx’s ‘Capital’ by David Harvey

The deepest economic crisis in eighty years prompted a shallow revival of Marxism. During the panicky period between the failure of Lehman Brothers in September 2008 and the official end of the American recession in the summer of 2009, several mainstream journals, displaying a less than sincere mixture of broadmindedness and chagrin, hailed Marx as a neglected seer of capitalist crisis. The trendspotting Foreign Policy led the way, with a cover story on Marx for its Next Big Thing issue, enticing readers with a promise of star treatment: ‘Lights. Camera. Action. Das Kapital. Now.’

Though written by a socialist, Leo Panitch, the piece was typical of the general approach to Marx and Marxism. It bowed at a distance to the prophet of capitalism’s ever ‘more extensive and exhaustive crises’, and restated several basic articles of his thought: capitalism is inherently unstable; political activism is indispensable; and revolution offers the ultimate prize. This can’t have done much more than jog memories of the Communist Manifesto, the only one of Marx’s works cited by Panitch. The Manifesto remains an incandescent pamphlet, but the elements of a Marxian crisis theory, one never fully articulated by Marx himself, lie elsewhere, scattered throughout Theories of Surplus Value, the Grundrisse and above all the posthumous second and third volumes of Capital. Marx’s brilliant and somewhat contradictory comments on the subject bring to mind Cioran’s remark: ‘Works die; fragments, not having lived, can no longer die.’ Such shards sowed one of the most fertile fields in Marxist economics. Over recent decades, the landmarks of Marxian economic thinking include Ernest Mandel’s Late Capitalism (1972), David Harvey’s Limits to Capital (1982), Giovanni Arrighi’s Long 20th Century (1994) and Robert Brenner’s Economics of Global Turbulence (2006), all expressly concerned with the grinding tectonics and punctual quakes of capitalist crisis. Yet little trace of this literature, by Marx or his successors, has surfaced even among the more open-minded practitioners of what might be called the bourgeois theorisation of the current crisis.

The term bourgeois will seem apt enough if we note that a recent and distinguished addition to the long shelf of books on the crisis, Nouriel Roubini’s Crisis Economics, summons as its audience not only ‘financial professionals’, ‘corporate executives’ and ‘students in business, economics and finance’, but also – exhausting the list – ‘ordinary investors’.[1] No one, in other words, who is unmotivated by gain. Maybe it’s to be expected, then, that the Marx celebrated by Roubini and his coauthor Stephen Mihm, in a résumé of earlier theorists of crisis, appears as a mere herald of continual disruption rather than as an economist who located at the heart of such crises the existence of bourgeois society as such, or the social cleavage between profit-seekers (financial professionals etc) and wage-earners: the fatal schism, in other words, between capital and labour. Roubini goes no further than to quote the same ringing lines of the Manifesto that appear in Foreign Policy. Here again is the resemblance of capitalism to ‘the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells’. Credited with the alarming but vague insight that ‘Capitalism is crisis,’ Marx then departs the scene.

To date, a revived Keynesianism has formed a left boundary of economic debate in the press at large. Only specialised socialist journals have undertaken to diagnose capitalism’s latest distemper in explicitly or implicitly Marxian terms. As for books on the crisis, until recently the jostling crowd of titles included no Marxist study, the exception to this rule, John Bellamy Foster and Fred Magdoff’s Great Financial Crisis, having been bolted together out of editorials from one of those socialist journals, the American Monthly Review.[2] Not until now, with David Harvey’s Enigma of Capital, have we had a book-length example of Marxian crisis theory addressed to the current situation.

Few writers could be better qualified than Harvey to test the continuing validity of a Marxian approach to crisis, a situation he helpfully defines – dictionaries of economics tend to lack any entry for the word – as ‘surplus capital and surplus labour existing side by side with seemingly no way to put them back together’. (This is at once reminiscent of Keynes’s ‘underemployment equilibrium’ and of the news in the daily papers: in the US, corporations are sitting on almost two trillion dollars in cash while unemployment hovers just below 10 per cent.) Harvey, who was born in Kent, is the author of the monumental Limits to Capital – a thoroughgoing critique, synthesis and extension of the several varieties of crisis theory underwritten by Marx’s thought – and has been teaching courses on Marx, mainly in the US, for nearly four decades. His lectures on Volume I of Capital, available online, have become part of the self-education of many young leftists, and now supply the framework for his useful Companion to Marx’s ‘Capital’. (I sat in on his lectures at the City University of New York in the fall of 2007; a good Marxist, Harvey made no effort to find out whether any of us – too many for the available chairs – had registered and paid for the class.)

Since the publication of The Limits to Capital in the second year of the Reagan administration and at the dawn of what has come to be known as the financialisation of the world economy, the dual movement of Harvey’s career has been to return time and again to Marx as a teacher, and to extend his own ideas into new and more empirical territory. The most substantial of his recent books, Paris, Capital of Modernity (2003), described the city’s forcible modernisation by Baron Haussmann as a solution to structural crisis – ‘The problem in 1851 was to absorb the surpluses of capital and labour power’ – and situated this urban transformation within the renovation of Parisian humanity it induced. Harvey’s other post-millennial volumes, The New Imperialism (also 2003), A Brief History of Neoliberalism (2005) and now The Enigma of Capital, amount to a trilogy of self-popularisation and historical illustration, taking current events as a proving ground for what Harvey has called, referring to The Limits to Capital, ‘a reasonably good approximation to a general theory of capital accumulation in space and time’.

The mention of space is considered. Harvey received his doctorate in geography rather than economics or history – his first, non-Marxist book was taken up with differing representations of space – and the whole thrust of his subsequent work, alert to the unevenness of capitalist development across neighbourhoods, regions and nation-states, has been to give a more variegated spatial texture to the historical materialism he would prefer to call ‘historical-geographical materialism’. In a sense, the emphasis confirms Harvey’s classicism. Marx himself somewhat curiously concluded the first volume of Capital – a book otherwise essentially concerned with local transactions between capital and labour, illustrated mostly from the English experience – with a chapter on the ‘primitive accumulation’ of land and mineral wealth attendant on the European sacking of the Americas. In the same way, Rosa Luxemburg, Marx’s first great legatee in the theory of crisis, insisted in the Accumulation of Capital (1913) that imperial expansion across space must accompany capital accumulation over time. Without the prising open of new markets in the colonies, she argued, metropolitan capitalism would be unable to dispose profitably of its glut of commodities, and crises of overproduction doom the system.

It’s not, however, until the last third of The Limits to Capital that the spatial implications of Harvey’s project loom into view. The book starts as a patient philological reconstruction, from Marx’s stray comments, of a Marxian theory of crisis. The method is fittingly cumulative as, from chapter to chapter, in lucid, mostly unadorned prose, Harvey adds new features to a simple model of the ‘overaccumulation of capital’. And overaccumulation remains in his later work – including The Enigma of Capital – the fount of all crisis. The term may seem paradoxical: what could it mean for capital to overaccumulate, when the entire spirit of the system is, as Marx wrote, ‘accumulation for accumulation’s sake’? How could capitalism acquire too much of what it regards as the sole good thing?

Overaccumulation of capital

Overaccumulated capital can be defined as capital unable to realise the expected rate of profit. Whether in the form of money, physical plant, commodities for sale or labour power (the latter being, in Marx’s terms, mere ‘variable capital’), it can only be invested, utilised, sold or hired, as the case may be, with reduced profitability or at a loss. Overaccumulation will then be variously reflected in money hoarded or gambled rather than invested; in underused factories or vacant storefronts; in half-finished goods or unsold inventories; and in idle workers, even as the need for all these things goes unmet. In such cases, the most basic of the contradictions Marx discovered in capitalism – between use value and exchange value – reasserts itself. For at times of crisis, it’s not that too much wealth exists to make use of – in fact, ‘too little is produced to decently and humanely satisfy the wants of the great mass’ – but that ‘too many means of labour and necessities of life are produced’ to serve ‘as means for the exploitation of labourers at a certain rate of profit’. A portion of the overaccumulated capital will then be devalued, until what survives can seek a satisfactory profitability again. Thus asset prices plunge, firms go bankrupt, physical inventories languish and wages are reduced, though this devaluation is no more equally divided among the respective social groups (rentiers, industrialists, merchants, labourers) than prosperity was during the good times.

On Harvey’s account, standard in this respect, the risk of overaccumulation is intrinsic to the capitalist pursuit of ‘surplus value’. The temptation is to say that surplus value is merely Marx’s name for profit, but this would be to assume success where there is only speculation: surplus value (in commodities) can be realised as a profit (in money) only in the event of a sale, and this is the rub. A capitalist, in order to produce, must purchase both means of production (Marx’s ‘constant capital’) and wage-labour (or ‘variable capital’). After this outlay – C+V in Marx’s formulation – the capitalist naturally hopes to possess a commodity capable of being sold for more than was spent on its production. The difference between cost of production and price at sale permits the realisation of surplus value. The production of any commodity, as well as the ‘expanded reproduction’ of the system itself, can thus be described by the further formula C+V+S: to a quantity of constant capital, or means of production, has been added a quantity of variable capital, or labour power, with a bonus of surplus value contained in the finished commodity.

The trouble is already there to see. Imagine an economy consisting of a single firm which has bought means of production and labour power for a total of $100, in order to produce a mass of commodities it intends to sell for $110, i.e. at a profit of 10 per cent. The problem is that the firm’s suppliers of constant and variable capital are also its only potential customers. Even if the would-be buyers pool their funds, they have only their $100 to spend, and no more. Production of the total supply of commodities exceeds the monetarily effective demand in the system. As Harvey explains in The Limits to Capital, effective demand ‘is at any one point equal to C+V, whereas the value of the total output is C+V+S. Under conditions of equilibrium, this still leaves us with the problem of where the demand for S, the surplus value produced but not yet realised through exchange, comes from.’ An extra $10 in value must be found somewhere, to be exchanged with the firm if it is to realise its desired profit.

In this stylised scheme, with the entire capitalist economy figured as a single firm, the supplementary value can be produced only by the same firm and only in the future. The full cash value of today’s product can therefore be realised only with the assistance of money advanced against commodity values yet to be produced. ‘The surplus value created at one point requires the creation of surplus value at another point,’ as Marx put it in the Grundrisse. How are these points, separated in space and time, to be linked? In a word, through the credit system, which involves ‘the creation of what Marx calls “fictitious capital” – money that is thrown into circulation as capital without any material basis in commodities or productive activity’. Money values backed by tomorrow’s as yet unproduced goods and services, to be exchanged against those already produced today: this is credit or bank money, an anticipation of future value without which the creation of present value stalls. Realisation (or the transformation of surplus value into its money equivalent, as profit) thus depends on the ‘fictitious’.

Harvey is not adding to Marx here: his achievement is to piece a heap of fragments into a coherent mosaic. And for his reconstructed Marx, the end of capitalism – or at least its latest stage, of globally integrated finance – lies in its beginning. What is sometimes called the system’s GOD imperative, for Grow Or Die, entails from the outset the development of finance as the earnest of future production. Finance and production, production and finance, can then chase each other’s tail until together they have covered the entire world (or exhausted the tolerance of the working class). Marx proposed that ‘the tendency to create the world market is directly given in the concept of capital itself,’ and Harvey glosses the idea: ‘The necessary geographical expansion of capitalism is … to be interpreted as capital in search for surplus value. The penetration of capitalist relations into all sectors of the economy, the mobilisation of various “latent” sources of labour power (women and children, for example), have a similar basis.’ Hence both the involution and the imperialism of capital, commodifying the most intimate of formerly uncommodified practices (education, food preparation, courtship) as well as sweeping formerly non-capitalist regions (China and Eastern Europe) into the global market.

Fictitious capital

Marxist economic writing at its best praises the system it comes to bury in more dazzling terms than more apologetic accounts ever achieve, and Harvey’s sardonic paean to ‘the immense potential power that resides within the credit system’ finds him at his most eloquent. For if it at first appeared from a logical point of view that capitalism must immediately founder in a crisis of overproduction and underconsumption it now appears that this problem enjoys a solution. Consider, Harvey suggests, ‘the relation between production and consumption’:

A proper allocation of credit can ensure a quantitative balance between them. The gap between purchases and sales … can be bridged, and production can be harmonised with consumption to ensure balanced accumulation. Any increase in the flow of credit to housing construction, for example, is of little avail today without a parallel increase in the flow of mortgage finance to facilitate housing purchases. Credit can be used to accelerate production and consumption simultaneously.

In the aftermath of the greatest housing bust in history, from Phoenix to Dublin to Dubai, that should sound an ominous note. Harvey goes on: ‘All links in the realisation process bar one can be brought under the control of the credit system. The single exception is of the greatest importance.’ Credit can co-ordinate the flow of economic value, but can’t create it ex nihilo: ‘There is no substitute for the actual transformation of nature through the concrete production of use values.’

In the case of real estate, it might happen – as it has – that more building and selling of houses has been financed than can actually be paid for with income deriving, in the last instance, from production. So the credit system that had seemed to insure against one kind of overaccumulation (of commodity capital) by advancing money against future production, now seems to have fostered another kind of overaccumulation (of fictitious capital) by promising more production than has occurred. More housing has been created than builders can sell at a profit; more mortgage debt has been issued than can be repaid, through wage income, to ensure the lenders’ profit; homeowners who took out loans against the rising value of their property find that prices are instead plummeting; and with the collapse of the housing sector more money capital now lies in the hands of its owners than they can see a way to invest profitably.

‘The onset of a crisis is usually triggered by a spectacular failure which shakes confidence in fictitious forms of capital,’ Harvey writes, and everyone knows what happens next. The flow of credit, at one moment lavished to all comers on the flimsiest pretext of repayment, at the next more or less dries up. In the resulting conditions of uncertainty, those without ready cash, forced to cough it up anyway, can be pushed into fire-sales of their assets, while those who do have cash prefer to save rather than spend it, so that the economy as a whole sinks toward stagnation. So far, so familiar. But what explains the special liability of capitalism to crises of disappointed speculation? And why should real estate so often be their privileged object?

‘Such speculative fevers are not necessarily to be interpreted as direct manifestations of disequilibrium in production,’ Harvey says: ‘They can and do occur on their own account.’ Yet ‘overaccumulation creates conditions ripe for such speculative fevers so that a concatenation of the latter almost invariably signals the existence of the former.’ If capital has been overaccumulated, this means by definition that it can’t easily find a profitable outlet in increased production. The resulting temptation, Harvey suggests, with his emphasis on finance, will be for capital to sidestep production altogether and attempt to increase itself through the multiplication of paper (or digital) assets alone. The question that goes all but unasked in the more respectable literature on the crisis, is why the opportunities for profitable investment looked so scarce in the first place.

Three underlying conditions

If capitalist crises are crises of profitability, Marxian theory ascribes diminished opportunities for profit to one of three underlying conditions. First, a profit squeeze may be induced by the excessive wage bill of the working class, so that capitalists lack enough income to invest in new production on a scale compatible with growth. This line of thought takes inspiration from Marx’s remark that wages are never higher than on the eve of a crash, and enjoyed a heyday of plausibility in the early 1970s, a bygone era of labour militancy, near full employment and high inflation, allegedly spurred by the so-called wage-price spiral. Robert Brenner disputes, however, that a profit squeeze imposed by labour truly afflicted the early 1970s, and doubts whether, given the superior mobility of capital over labour, such a profit squeeze could ever take hold over the long run; capital would simply relocate to more docile markets. At any rate, what Brenner calls the Full Employment Profit Squeeze thesis hardly appears to caption the current picture of high unemployment and stagnant real wages across the developed world.

A second condition is the tendency of the rate of profit to fall as a result of the ‘rising organic composition of capital’, or in other words the penchant, given increased technological and organisational efficiency, for using relatively less labour than capital in production. Since profitability reflects the ‘rate of exploitation’ – or the ratio of the surplus value produced by the worker to the wages he receives – using less labour relative to capital diminishes profitability, unless capital goods become cheaper or exploitation is ramped up. This problem too can be solved, at least in principle: the capital/ labour ratio can simply be rejigged by deploying more labour relative to capital. Indeed, something like this has occurred on the grandest scale in recent decades, through the rough doubling of the amount of labour available to capital with the proletarianisation of huge populations in Eastern Europe and Asia. The effect, on one estimate, has been to reduce the global capital/labour ratio by 55-60 per cent.

Finally, and most plausibly today, theories of ‘underconsumption’ argue that capitalism lends itself to crisis because, by resisting wage growth, it deprives itself of the market, expanded by wage growth, it would need in order profitably to employ its swelling quantities of capital. Marx, in Volume II of Capital, is to the point: ‘Contradiction in the capitalist mode of production: the labourers as buyers of commodities are important for the market. But as sellers of their own commodity – labour power – capitalist society tends to keep them down to the minimum price.’ Of course ‘a sufficient prodigality of the capitalist class’, as Marx called it, could in principle maintain effective demand at a level consistent with the steady expansion of the system, by substituting luxury consumption for the satisfaction of the population at large.[3] But this solution was never likely, for as Keynes observed, ‘when our income increases our consumption increases also, but not by so much. The key to our practical problem is to be found in this psychological law.’ The worldwide defeat of labour since the 1980s, leading the wage share of GDP to fall throughout the capitalist core, along with the persistent inability of the higher reaches of the capitalist class, in spite of their best efforts, to attain a level of expenditure proportionate to their wealth, makes an underconsumptionist analysis of the current crisis an appealing one, and suggests a possible convergence of Keynesian and Marxian views.

Marxists tend to battle each other, often in the heroic footnotes native to the tradition, over the merits or defects of these differing explanations of crisis. Harvey’s own approach is catholic, all-encompassing. For him, the various strands of crisis theory represent, but don’t exhaust, possible departures from a path of balanced growth in finance and production. What unites the strands is the fundamental antagonism between capital and labour, with their opposing pursuits of profits and wages. If there exists a theoretical possibility of attaining an ideal proportion, from the standpoint of balanced growth, between the amount of total social income to be reinvested in production and the amount to be spent on consumption, and if at the same time the credit system could serve to maintain this ratio of profits to wages in perpetuity, the antagonistic nature of class society nevertheless prevents such a balance from being struck except occasionally and by accident, to be immediately upset by any advantage gained by labour or more likely by capital.

So, as The Limits to Capital implies without quite stating, the special allure and danger of an elaborate credit system lie in its relationship to class society. If more capital has been accumulated than can be realised as a profit through exchange, owing perhaps to ‘the poverty and restricted consumption of the masses’ that Marx at one point declared ‘the ultimate reason for all real crises’, this condition can be temporarily concealed, and its consequences postponed, by the confection of fictitious values in excess of any real values on the verge of production. In this way, growth and profitability in the financial system can substitute for the impaired growth and profitability of the class-ridden system of actual production. By adding over-financialisation, as it were, to his model of overaccumulation, Harvey means to show how an initial contradiction between production and realisation later ‘becomes, via the agency of the credit system, an outright antagonism’ between the financial system of fictitious values and its monetary base, founded on commodity values. This antagonism then ‘forms the rock on which accumulation ultimately founders’. In social terms, this will take the form of a contest between creditors and debtors over who is to suffer more devaluation.

A geographical dimension

The real originality of The Limits to Capital, however, is to add a new geographical dimension to crisis formation. Harvey goes about this via a theory of rent. One effect of the approach is to suggest why property speculation – with its value ultimately tied up in potential rental income – should be such a familiar capitalist perversion (in the psychoanalytic sense of overinvestment in one kind of object). Another is to convert an apparent embarrassment for Marxian theory into a show of strength. The would-be embarrassment lies in the evident difficulty of reconciling a labour theory of value with the price of unimproved land, given that land is obviously not a product of human labour. Harvey’s bold and ingenious solution is to propose that, under capitalism, ground rent – or the proportion of property value attributable to mere location, rather than to anything built or cultivated on the land – becomes a ‘pure financial asset’. Ground rent, in other words, is a form of fictitious capital, or value created in anticipation of future commodity production: ‘Like all such forms of fictitious capital, what is traded is a claim on future revenues, which means a claim on future profits from the use of the land or, more directly, a claim on future labour.’

From the need to realise ground rent stems capitalism’s whole geography of anxious anticipation. Capital overaccumulated in one place can flow to another which appears to boast better ultimate prospects of profit. Rising land values will shunt capital to new locations, at the same time that the resulting increase in rental costs compels a matching expansion of production, with its accompanying physical and social infrastructure. The relationship between credit and commodities is in this way translated into spatial terms as an uneasy rapport between one kind of capital, highly mobile or liquid, and another kind – ‘fixed capital embedded in the land’ – defined by its inertness. Here, in the latent conflict between migratory finance capital and helplessly stationary complexes of fixed capital, including not only factories and office buildings but roads, houses, schools and so on, Harvey has found a contradiction of capitalism overlooked by Marx and his heirs.

The contradiction may look at first like a brilliant solution to the problem of overaccumulation. Overaccumulated capital, whether originating as income from production or as the bank overdrafts that unleash fictitious values, can postpone any immediate crisis of profitability by being drawn off into long-term infrastructural projects, in an operation Harvey calls a ‘spatio-temporal fix’. Examples on a grand scale would be the British boom in railway construction of the 1820s, the Second Empire modernisation of Paris, the suburbanisation of the US after World War Two, and the recent international pullulation of commercial and residential towers. In each case, a vast quantity of capital, faced with the question of profitability, could as it were postpone the answer to a remote date, since investments in infrastructure promise such delayed returns. Meanwhile, transformed spatial arrangements swap old trades for new ones – Harvey notes that Haussmann’s Paris witnessed the extinction of the water-carrier and the advent of the electrician – or rejuvenate existing industries, like the postwar car manufacturers in the US.

Inevitably, the risk is that a given territory, as a complex of fixed capital, comes to prosper thanks to a stream of finance that one day flows elsewhere. A devaluation of the abandoned land along with its ‘overaccumulated’ workers, industries and infrastructure will ensue. This harsh sequel to the spatial fix Harvey calls a ‘switching crisis’, and in something like the climax of The Limits to Capital, he writes:

The more the forces of geographical inertia prevail, the deeper will the aggregate crises of capitalism become and the more savage will switching crises have to be to restore the disturbed equilibrium. Local alliances will have to be dramatically reorganised (the rise of Fascism being the most horrible example), technological mixes suddenly altered (incurring massive devaluation of old plant), physical and social infrastructures totally reconstituted (often through a crisis in state expenditures) and the space economy of capitalist production, distribution and consumption totally transformed. The cost of devaluation to both individual capitalists and labourers becomes substantial. Capitalism reaps the savage harvest of its own internal contradictions.

In The Enigma of Capital Harvey observes these contradictions sharpening over time, as finance capital becomes ever more mobile while beds of infrastructure grow increasingly Procrustean: ‘The disjunction of the quest for hypermobility and an increasingly sclerotic built environment (think of the huge amount of fixed capital embedded in Tokyo or New York City) becomes ever more dramatic.’

So what then are the ‘limits to capital’? Harvey’s answer, disappointing as it is honest, is that a system bent on overaccumulation will not collapse of its own top-heaviness. Should the world market fail to generate the ever increasing surpluses that form its only rationale, it can always enlarge its borders and appropriate new wealth through what Marx called primitive accumulation and what Harvey proposes to call ‘accumulation by dispossession’, given that the process hardly ceased when the English peasantry was cleared off the land or the Inca Empire looted for its silver. The incorporation into the capitalist domain of non-capitalist territories and populations, the privatisation of public or commonly owned assets, including land, and so on, down to the commodification of indigenous art-forms and the patenting of seeds, offer instances of the accumulation by dispossession that has accompanied capitalism since its inception. This field for gain would be exhausted only with universal commodification, when ‘every person in every nook and cranny of the world is caught within the orbit of capital.’ Even then, the continuous ‘restructuring of the space economy of capitalism on a global scale still holds out the prospect for a restoration of equilibrium through a reorganisation of the regional parts’. Spatial fixes and switching crises might succeed one another endlessly, in great floods and droughts of capital. Devaluation, being ‘always on a particular route or at a particular place’, might serially scourge the earth even as capital in general, loyal to no country, remained free to pursue its own advantage.

The Enigma of Capital

The real test of Harvey’s 1982 theory of crisis is how well it serves in the face of the thing itself. The Enigma of Capital can be read as an effort to meet the challenge. Naturally, its success or failure depends on whether it can offer a more comprehensive and persuasive account than rival theories. On the score of comprehensiveness there can be little doubt that Harvey’s work and that of other Marxists goes beyond the alternatives. ‘The idea that the crisis had systemic origins is scarcely mooted in the mainstream media,’ Harvey writes, and that might be extended to include even the trenchant work of the neo-Keynesians. The crisis, after all, is that of a capitalist system, and no account of it, however searching, can be truly systematic if it neglects to consider property relations: that is, the preponderant ownership of capital by one class, and of little or nothing but its labour power by another.

Paul Krugman, discussing Roubini’s book in the New York Review of Books, agreed with him that what Ben Bernanke called the ‘global savings glut’ lay at the heart of the crisis, behind the proximate follies of deregulation, mortgage-securitisation, excessive leverage and so on. Originating in the current account surpluses of net-exporting countries such as Germany, Japan and China, this great tide of money flooded markets in the US and Western Europe, and floated property and asset values unsustainably. Why was so much capital so badly misallocated? In the LRB of 22 April 2010, Joseph Stiglitz observed that the savings glut ‘could equally well be described as an “investment dearth”’, reflecting a scarcity of attractive investment opportunities. Stiglitz suggests that global warming mitigation or poverty reduction offers new ‘opportunities for investments with high social returns’.

The neo-Keynesians’ ‘savings glut’ can readily be seen as a case of what a more radical tradition calls overaccumulated capital. But it is the broader and more systematic Marxist perspective that ultimately and properly contains Keynesianism within it, and a crude Marxist catechism may be in order. Where does an excess of savings come from? From unpaid labour – for example, that of Chinese or German workers. And why would such funds inflate asset bubbles rather than create useful investment? Because capital pursues not ‘high social returns’, but high private returns. And why should these have proved difficult to achieve, except by financial shell-games? Keynesians complain of an insufficiency of aggregate demand, restraining investment. The Marxist will simply add that this bespeaks inadequate wages, in the index of a class struggle going the way of owners rather than workers.

In The Enigma of Capital, Harvey coincides with other Marxists in locating the origins of the present crisis in the troubles of the 1970s, when the so-called Golden Age of capitalism following the Second World War – blessed with high rates of profitability, productivity, wage growth and expansion of output – gave way to what Brenner named ‘the long downturn’ after 1973. Brenner argued in The Economics of Global Turbulence that this long downturn, with deeper recessions and weaker expansions across every business cycle, reflects chronic overcapacity – another variety of overaccumulation – in international manufacturing, a condition brought about by the maturation of Japanese and German industry by the end of the 1960s, and later compounded by the industrialisation of East Asia. As competition to supply export markets increased faster than those markets expanded, the price of international tradeables naturally fell, reducing both the profits of manufacturers and the wages paid to workers. Such impaired profitability moreover discouraged further investment in production, so that finance capital turned increasingly to speculation in asset values. Yet this view, however formidably presented, doesn’t appear to have won general assent. Harvey, content to follow Brenner elsewhere, inclines towards a more conventional profit-squeeze explanation of the crisis of the early 1970s.

About the sequel to that crisis there is less dispute. Whether or not high wages had undermined profitability, a subsequent effort to curb wages, carried out at gunpoint in the Southern Cone in the mid-1970s, and achieved by ballot under Thatcher and Reagan before spreading to other wealthy countries, eventually resulted in a systemic shortage of demand. In this way, capital’s victory over labour set the stage for a later reversal. In The Enigma of Capital, Harvey charts the dialectical switch in the blunt style he now favours:

Labour availability is no problem now for capital, and it has not been for the last 25 years. But disempowered labour means low wages, and impoverished workers do not constitute a vibrant market. Persistent wage repression therefore poses the problem of lack of demand for the expanding output of capitalist corporations. One barrier to capital accumulation – the labour question – is overcome at the expense of creating another – lack of a market. So how could this second barrier be circumvented?

The lack of demand was of course appeased by recourse to fictitious capital: ‘The gap between what labour was earning and what it could spend was covered by the rise of the credit card industry and increasing indebtedness.’ It was not only consumers who indentured themselves. As Bellamy Foster and Magdoff point out in The Great Financial Crisis, total US debt, owed by government, corporations and individuals, equalled approximately 125% of American GDP during the 1970s. By the mid-1980s the proportion had increased to two to one, and by 2005 stood at almost three and a half to one. Much of the cheap credit, originating in East Asia and flowing through the Federal Reserve, came to promote a property bubble of historic dimensions. ‘The demand problem,’ Harvey writes, ‘was temporarily bridged with respect to housing by debt-financing the developers as well as the buyers. The financial institutions collectively controlled both the supply of, and demand for, housing!’

It can’t be said that Harvey comes late to recognising the housing bubble’s absurdity. In The New Imperialism, from 2003, he recapitulated his theory of the spatial fix, and warned that while some spatial fixes ultimately relieve crises through the elaboration of new physical and social infrastructure, others merely postpone them. After listing several of the more spectacular property-market collapses of the long downturn (worldwide in 1973-75; Japanese in 1990; Thai and Indonesian in 1997), Harvey added that

the most important prop to the US and British economies after the onset of general recession in all other sectors from mid-2001 onwards was the continued speculative vigour in the property and housing markets and construction. In a curious backwash effect, we find that some 20 per cent of GDP growth in the United States in 2002 was attributable to consumers refinancing their mortgage debt on the inflated values of their housing and using the extra money they gained for immediate consumption (in effect, mopping up overaccumulating capital in the primary circuit). British consumers borrowed $19 billion in the third quarter of 2002 alone against the value of their mortgages to finance consumption. What happens if and when this property bubble bursts is a matter for serious concern.

Not only Americans and Britons but the Irish, Spanish and Emiratis live today among the ruins of a broken spatial fix.

What next?

What, if any, switching crisis does this presage? To keep things simple, imagine the world economy of recent years as consisting of two capitalist countries – represented by the US and China – in both of which the working class, employed or unemployed, received too little of the total product for capital not to overaccumulate and risk massive devaluation. Chinese workers, deprived by wage repression and social insecurity (such as lack of health insurance) of the opportunity to consume much of their own output, saw the wealth accumulated through their labour go, in the form of their own savings and the income of their bosses, towards the construction of new productive capacity in their own country and a property boom in the other country. Both the new factories at home, turning out exports for the US, and the deliriously appreciating houses abroad rested on the premise of continuously rising American incomes. But among Americans, wage growth had ceased and household incomes could no longer be supplemented by the mass entry of women into the workforce, something already accomplished. The issuance and securitisation of debt alone could substitute for present income. But in the end so much fictitious capital could not be redeemed. Whatever the destination of future Chinese savings gluts, they can no longer sponsor American consumption in the same way.

In his final book, Adam Smith in Beijing (2007), the late Giovanni Arrighi expanded on Harvey’s concepts of the spatial fix and the switching crisis to survey half a millennium of capitalist development and to peer into a new, probably Chinese century. In Arrighi’s scheme of capitalist history, there had been four ‘systemic cycles of accumulation’, each lasting roughly a century and each organised on a larger scale than the one before, with a new polity at the centre: a Genoese-Iberian cycle; a Dutch cycle; a British cycle; and an American one. A systemic cycle’s first phase, of material expansion, came to an end when the central power had accumulated more capital than established trade and production could absorb. This was followed by a second, financial phase of expansion in which capital overaccumulated at the centre of the system promoted a new nucleus of growth. Ultimately the rising centre came to finance the expenditures, often on war, that the old and now declining centre could no longer cover out of its mere income.

It fits Arrighi’s scheme that the US, having (along with the Chinese diaspora) once led international capital onto the Asian mainland, had now become dependent on Chinese credit. For him, this announced the greatest switching crisis of all time, as China prepared to assume the hegemonic role being reluctantly relinquished by the US, and to inaugurate a new cycle of accumulation. Such a succession might ideally yield a new commonwealth of civilisations, in which capitalism as we know it gave way to what Arrighi somewhat hazily envisaged as a non-capitalist market economy recuperating old Chinese traditions of self-centred development. One condition of this happy scenario was that the US abandon its armed imperialism and China remain committed to its ‘peaceful rise’; another, that the Chinese pioneer a green mode of growth distinct from ‘the Western, capital intensive, energy consuming path’. Otherwise inter-imperial war, the ultimate means of competitive devaluation in The Limits to Capital, loomed once more.

In the recently published Ecological Rift: Capitalism’s War on the Earth, John Bellamy Foster and his Marxist co-authors refer to the identification by a group of scientists, including the leading American climatologist James Hansen, of nine ‘planetary boundaries’ that civilisation transgresses at its peril.[4] Already three – concentrations of carbon in the atmosphere, loss of nitrogen from the soil and the extinction of other species – have been exceeded. These are impediments to endless capital accumulation that future crisis theories will have to reckon with. Harvey’s intuition of the ultimate demise of capitalism has also taken on an ecological colouring. ‘Compound growth for ever’ – historically, for capitalism at about 3 per cent a year – ‘is not possible,’ he declares in The Enigma of Capital, without much elaboration. The classical economists long ago foresaw that an economy defined by constant expansion would one day give way to what John Stuart Mill called the ‘stationary state’. The idea has gained a new currency in Marxist writing of recent years, and in its contemporary version tends to locate the limits to growth in the depletion of natural resources or in the exhaustion of productivity gains as the share of manufacturing in the world economy shrinks and that of services expands. Of course, peak oil or soil exhaustion might easily coincide with faltering productivity. Harvey doesn’t spell out why growth must have a stop, and the outlines of an ecologically stable and politically democratic future socialism remain as blurry in his later work as they do almost everywhere else. At the moment Marxism seems better prepared to interpret the world than to change it. But the first achievement is at least due wider recognition, which with the next crisis, or subsequent spasm of the present one, it may begin to receive.

Related posts:

1. What is Marx’s theory of crisis?
2. Capitalist crisis and left response
3. The crisis now, and possible futures

“There is, therefore,” he says, “no single causal theory of crisis formation as many Marxist economists like to assert.” (As anyone who has read much in Marx and his commentators will know, there are several warring schools of thought as to what is ‘the’ cause of capitalist crises according to Marx.) I like Harvey’s view here, which has the virtue of clarity as well as the effect of demystifying what have often become the needlessly arcane writings and fundamentalist viewpoints of the various schools of Marxist crisis theory.

This essay provides a much fuller exposition of Harvey’s overall view than is reflected in my notes on his recent short presentation in Chicago (see previous post, below), as well as a fuller explanation on the question of the austerity moves on the part of core capitalist states during the past year.

This paper, given at the American Sociological Association Meetings in August 2010, is here reprinted from Harvey’s website.

It could be that 2009 marks the beginning of a prolonged shake out in which the question of grand and far-reaching alternatives to capitalism will step-by-step bubble up to the surface in one part of the world or another.

The Enigma of Capital and the Crisis this Time

David Harvey

There are many explanations for the crisis of capital that began in 2007. But the one thing missing is an understanding of “systemic risks.” I was alerted to this when Her Majesty the Queen visited the London School of Economics and asked the prestigious economists there how come they had not seen the crisis coming. Being a feudal monarch rather than an ordinary mortal, the economists felt impelled to answer. After six months of reflection the economic gurus of the British Academy submitted their conclusions. The gist was that many intelligent and dedicated economists had worked assiduously and hard on understanding the micro-processes. But everyone had somehow missed “systemic risk.” A year later, a former chief economist of the International Monetary Fund said “we sort of know vaguely what systemic risk is and what factors might relate to it. But to argue that it is a well-developed science at this point is overstating the fact.” In a formal paper, the IMF described the study of systemic risk as “in its infancy.”¹ In Marxian theory (as opposed to myopic neoclassical or financial theory), “systemic risk” translates into the fundamental contradictions of capital accumulation. The IMF might save itself a lot of trouble by studying them. So how, then, can we put Marx’s theorization of the internal contradictions of capitalism to work to understand the roots of our contemporary dilemmas?

This is the task I set myself in writing The Enigma of Capital: And the Crises of Capitalism.² In writing it I found, however, that conventional versions of the Marxian theory of crisis formation were inadequate and that it was necessary to take a fresh look at the arguments on crisis formation laid out in Capital and, even more importantly, in The Grundrisse. In the latter work Marx argues that the circulation and accumulation of capital cannot abide limits. When it encounters limits it works assiduously to convert them into barriers that can be transcended or by-passed. This focuses our attention upon those points in the circulation of capital where potential limits, blockages and barriers might arise, since these can produce crises of one sort or another.

Capital, Marx insists, is a process of circulation and not a thing. It is fundamentally about putting money into circulation to make more money. There are various ways to do this. Financiers lend money in return for interest, merchants buy cheap in order to sell dear and rentiers buy up land, resources, patents, and the like, which they release to others in return for rent. Even the capitalist state can invest in infrastructures in search of an improved tax base that yields greater revenues. But the primary form of capital circulation in Marx’s view was that of production capital. This capital begins with money which is used to buy labor power and means of production which are then brought together in a labor process, under a given technological and organizational form, that results in a new commodity to be sold on the market for the initial money plus a profit.

A part of the profit, for reasons we will take up later, has to be capitalized and launched into circulation to seek even more profit. Capital is thereby committed to a compounding rate of growth. The quantity of global goods and services traded through the market (which now stands at around $55 trillion) has grown at an average rate of around 2.25 per cent since 1750 or so.³ In some places and times it has been much higher and elsewhere much lower. This fits with the conventional wisdom that a growth rate of three per cent is the minimum acceptable level at which a “healthy” capitalism can operate. The average global growth rate from 2000 to 2008 was exactly three percent (with plenty of local variation). Anything less that three percent is problematic, while zero or negative growth defines a crisis which, if prolonged, as in the 1930s, defines a depression. So the problem for capital is to find a path to a minimum compound three percent growth for ever.

There are abundant signs, however, that capital accumulation is at an historical inflexion point where sustaining a compound rate of growth is becoming increasingly problematic. In 1970 this meant finding new profitable global investment opportunities for $0.4 trillion. Resumption of three percent growth right now would mean finding profitable investment opportunities for $1.5 trillion. If that rate of growth were to be sustained by 2030 or so we would be looking at $3 trillion. Put in physical terms, when capitalism in 1750 was about everything going on around Manchester and Birmingham and a few other hot spots in the global economy then three percent compound growth posed no problem. But we are now looking at compounding growth on everything going on in North America, Europe, much of East Asia, Latin America and increasingly South Asia, the Middle East and Africa….The implications socially, politically and environmentally are nothing short of gargantuan.

Note that the operative term here is profitable investment opportunities as opposed to socially necessary and socially valuable investment opportunities. So where, then, are the potential limits to this profitability? Since capital is a process not a thing, then the continuity of the process (along with its speed and geographical adaptability and mobility) becomes a crucial feature to sustaining growth. Any slow-down or blockage in capital flow will produce a crisis. If our blood flow stops then we die. If capital flow stops then the body politic of capitalist society dies. This simple rule was most dramatically demonstrated in the wake of the events of 9/11. Normal processes of circulation were stopped dead in and around New York City with huge ramifications for the global economy. Within five days, then Mayor Guiliani was pleading with everyone to get out their credit cards and go shopping, go to the restaurants and the Broadway shows (seats are now available!) and shortly thereafter the President of the United States did an unprecedented thing: he appeared in a collective commercial for the airlines pleading with people to start flying again. When the banks stopped lending and credit froze in the wake of the Lehman collapse on September 15th, 2008, the survival of capitalism was threatened and political power went to extraordinary lengths to loosen the constrictions. It was a matter of life or death for capital as everyone in power recognized.

Inspection of the circulation of capital reveals, however a series of potential blockage points any one of which could induce a crisis by constricting capital flow. Let us consider each of these.

1) Assemblage of the Initial Capital
Capital accumulation presumes that adequate amounts of money can be brought together in the right place at the right time and in the right quantities in order to launch that money into circulation as capital. Marx for the most part treated this problem of the initial capital in terms of primitive accumulation (the robbery of moneys from the rest of the world). This is inadequate because, as Saint-Simon had earlier pointed out, the association of many capitals (eventually achieved via the corporate form, stock markets, etc) is required to undertake large scale projects such as railways, canals and even large scale industrial undertakings. It is the job of the financial system – almost invariably incorporating state powers – to assemble small-scale savings and surpluses and to redistribute the moneys so assembled across a range of potentially profitable projects. The Pereire brothers, for example, schooled in the ways of thought of Saint Simon, created new credit institutions to facilitate the rebuilding of Paris in order to mop-up surpluses of both capital and labor left dangling in the aftermath of the economic crisis of 1848. They soon found that they themselves need not engage with production, that leveraging (borrowing at 3 percent and lending out at 5 percent) could yield them hefty profits.⁴ The creation of a modern mortgage finance system in the United States dates back to the 1930s (when a third of the unemployment was attributable to depression in the construction trades) and this laid the basis for the post-war suburban boom that played such a crucial role in preventing the US sliding back into depression.

Continuous financial innovation has been crucial to the survival of capitalism. But finance and money capitalists also demand their cut of the surplus value produced. Excessive power within the financial system can itself then become a problem, generating a conflict between finance and production capital. Financial institutions, furthermore, have always integrated with the state apparatus to form what I call a “state-finance nexus.”⁵ This usually stays in the background except in a crisis, as happened in the United States in the wake of the Lehman collapse: the Secretary of the Treasury (Henry Paulson) and the Chair of the Federal Reserve (Ben Bernanke) were making all the key decisions (President Bush was rarely seen). To the degree that state power favored City of London finance over production capital in Britain after the First World War, so it contributed to the malaise of industrial production in the same way that Wall Street finance connived at the deindustrialization of the United States after the mid-1970s. Crises have frequently centered on the financial sector and associated state powers either because finance is over-regulated or not innovative enough (producing what is called “financial repression”⁶ – a term often used in the 1970s) or because it is too powerful and too uncontrollable for the good of the system (as is often argued now).

At various points Marx contemplates, as we must too, the possibility of autonomous financial or monetary crises forming from within the financial system and spreading to the rest of the economy. Financial innovation is absolutely fundamental to achieving compound growth and capital cannot do without it. But this innovation can all too easily get out of hand, go insanely speculative or simply empower excessively the financiers who often look to their own self-interest rather than to the stability of capitalism. The deregulation of the financial system, seen as a necessary step in the 1970s in order to overcome the barrier of financial repression, has played a critical role in the crisis this time. But why the necessity of that financial innovation and deregulation from the 1970s onwards?

2) The Labor Market
When labor is scarce or too well-organized, then this can check the free circulation of capital. Wages rise at the expense of profits. The long history of class struggle over wage rates, conditions of contract (length of the working day, the working week and the working life) along with struggles over levels of social provision (the social wage) is testimony to the importance of this potential limit to capital accumulation. This constriction was very marked in the core regions of capitalism in the late 1960s and early 1970s. This was the primary blockage that had to be overcome.

Labor markets (always geographically fragmented) were largely organized on a national basis in the period 1945-80 and were insulated from international competition by constraints on international capital flow. Nation states could design their own fiscal policies and these could be influenced politically by organized labor and left political parties. The social wage tended to increase at the expense of capital. The answer to this problem partly lay in the successful political assault (led by Reagan, Thatcher and military leaders in Latin America) upon organized labor and its political institutions. But the other prong of attack was to mobilize global labor surpluses through off-shoring. After the collapse of the Bretton Woods financial system in the early 1970s and the subsequent deregulation of finance, constraints to international capital flow were loosened and capital began to exercise greater discipline over nation-state fiscal policies. Welfare-states were undermined, real wages stagnated or declined and the share of wages in total GDP in the OECD countries fell. Capital gained access to a vast disposable labor reserve living under marginal conditions. By the mid-1980s, the labor problem (in the market, on the shop floor and politically in social democracies) had disappeared. Wage repression was experienced almost everywhere. Note well, however, that the labor problem could not have been overcome without the financial deregulation and innovations that dismantled barriers to cross-border capital flows. The labor problem was solved at the expense of opening up the possibility of crises within the financial system (of which there were many after 1975 or so). But what converted that possibility into a certainty?

3) The Availability of the Means of Production and Scarcities in Nature
Several technical issues arise around access to adequate means of production. Supply bottlenecks can easily occur, sometimes for systemic reasons that cannot be elaborated upon here. But beneath this lies the possibility of so-called “natural” limits to raw material supplies and to the capacity of the environment to absorb wastes. The history of capitalism is replete with many phases when “nature” is held to be an ultimate limit to growth. But the Malthusian scenario has never as yet really grabbed hold. This history is a very good example of how capital, when it encounters limits, exhibits considerable ingenuity is turning them into barriers that can be transcended or circumvented (by technological changes, opening up new resource regions and the like). Because capital has successfully done this in the past does not necessarily mean, of course, that it is destined to do so in perpetuity. Nor does it imply that past episodes of supposed natural limits were negotiated smoothly and without crises. Whether or not this is a moment when what O’Connor calls “the second contradiction of capitalism” (the relation to nature as opposed to the capital-labor relation that Marxists typically privilege) comes to the fore as the main barrier to sustained accumulation is a matter for debate.⁷

But, in exactly the same way that financiers have sometimes gained too much power and produced a general crisis by pursuing their narrow interests, so landlords and rentiers can do the same thing, as happened when the oil cartel, OPEC, added fuel (actually subtracted it!) to the crisis of the 1970s or when speculators drove up the price of oil and other raw materials such as food grains in the summer of 2008. Excessive political and price manipulation in raw materials markets, in rents on intellectual property rights or in the built environment, can threaten the continuous accumulation of capital. When the rentier is the state (as it often is in the case of oil), then geopolitical struggles can also produce barriers and limits to the release of so-called “natural” resources into the circulation of capital. I write “so-called” because resources are always technological, cultural and economic appraisals and in the form of the built environment – sometimes referred to as “second nature” – are actively produced as a new landscape for accumulation. Scarcities that threaten compound growth are largely socially produced.

The importance and power of the rentier classes has always been underestimated. There is evidence that the British upper classes (the landed aristocracy in particular) accumulated far more wealth from rising rents from the mid seventeenth century onwards than they did from the exploitation of factory labor in Manchester. The power of rentiers has been growing in recent times, as we have seen in land markets, in pursuit of intellectual property rights and patents, and in speculation in commodity futures. It is significant also that during this crisis the well-healed as well as state powers (the Chinese in particular) are buying up land and resources galore in Latin America and Africa. Land and property values in combination with finance capital were at the epicenter of the current crisis and continue to constitute a dangerous potential barrier to the recovery of compound growth in the long run.

4) Technological and Organization Forms
How labor power and means of production are brought together depends upon the technological and organizational forms available to capitalists in a given time and place. The history of capitalism has been deeply affected by the ways in which productivity gains are achieved. New organizational forms such as just-in-time systems, subcontracting, the use of optimal scheduling, and the like have been just as important as new machines, robotization and automation in achieving increases in productivity and in disciplining labor on the shop floor. Two general points are important to note. Excessive innovation can generate crises by displacing labor too rapidly or rendering production systems obsolete well before investments have been amortized. Innovation can, on the other hand, lag when “the coercive laws of competition” slacken because of monopolization.⁸ The balance between monopoly and competition here is crucial. Excessive monopolization and centralization of capital can produce stagnation (as happened in the period of “stagflation” in the 1970s) whereas competition can be “ruinous” for many capitalists when it becomes too fierce and cut-throat (as became apparent in the deindustrialization of the 1980s).⁹

A low profit-margin regime arose in almost all lines of conventional production in the 1980s even as real wages stagnated. With the dismantling of capital controls over international movement, uneven geographical development and inter-territorial competition became key features in capitalist development, further undermining the fiscal autonomy of nation states. This also marked the beginnings of a shift of power towards East Asia. But it also led capital to invest more and more in control over assets – capturing rents and capital gains – rather than in production. The speculative asset bubbles that formed from the 1980s onwards were the price that was paid for unleashing the coercive laws of competition world-wide as a disciplinary force over the powers of labor and over the previously autonomous powers of the nation state with respect to fiscal and social policies.

Deregulating and empowering the most fluid and highly mobile form of capital – money capital – to reallocate capital resources globally (eventually through electronic markets and a “shadow” unregulated banking system) facilitated the deindustrialization in traditional core regions. Capital then accelerated its reliance on a series of “spatial fixes” to absorb overaccumulating capital. Cascading patterns of foreign direct investments coursed around the world fundamentally changing the geography of capitalist production, facilitating new forms of (ultra-oppressive) industrialization and natural resource and agricultural raw material extractions in emerging markets. The hegemonic shift of economic power towards East Asia, a shift that that Giovanni Arrighi had long been presciently anticipating, began to be more and more evident.¹⁰

Two corollaries then followed. One was to enhance the profitability of financial corporations relative to industrial capital and to find new ways to globalize and supposedly absorb risks through the creation of fictitious capital markets (the leveraging ratio of banks in the US rose from around three to thirty). Non-financial corporations (such as auto companies) often made more money from financial manipulations than from making things. The other impact was heightened reliance on “accumulation by dispossession” as a means to augment capitalist class power. The new rounds of primitive accumulation against indigenous and peasant populations (particularly in Asia and Latin America) were augmented by asset losses of the lower classes in the core economies, as witnessed by losses of pension and welfare rights as well as, eventually, huge asset losses in the sub-prime housing market in the US. Intensifying global competition translated into lower non-financial corporate profits.

5) The Labor Process
The labor process is where profit originates and capital is produced. What happens on the shop floor, in the fields or on the construction sites is therefore crucial. The discipline and cooperation of the worker is here essential to accumulation. Indiscipline and lack of cooperation on the part of labor is a perpetual threat that needs to be overcome either by cooptation and persuasion (the creation of quality circles, the mobilization of company loyalties and pride in work) or by coercion (threats of job loss or in some instances physical violence). The shop stewards movements, the factory councils and all manner of other forms of shop-floor organization empower labor while the capitalists have to negotiate or fight their way to achieve a modicum of labor discipline. Capital here uses differences of gender, ethnicity, race and even religion to great effect to divide and rule in the workplace if it possibly can. While such differences have obviously played a crucial role in the labor market as well, it is here at the point of production where they become all-important. Towards the end of the 1960s and well into the 1970s the problem of labor discipline loomed large in the core regions of capitalism. Off-shoring to more docile labor pastures proved helpful to capital as did the availability of immigrants and undocumented workers. As in labor markets, the power balance within the labor process shifted markedly towards capital and much of the shop-floor resistance crumbled from 1980 onwards. But, as the autonomista Marxists insist, labor discipline can never be fully assured. It is always a potential point of revolutionary resistance.¹¹

6) Demand and Effective Demand
The new commodity produced has to be sold for the original money plus a profit. Someone, somewhere, must need, want or desire the product and have enough money to pay for it. Capitalism exhibits an astonishing history of the production of new needs, wants and desires, in part through the production of new lifestyles (consider what is needed to maintain a suburban household) but also an incessant barrage of advertisements and other subliminal means to manipulate the human psyche for commercial reasons. Not all such attempts are successful (history is littered with new products that never found a market) but in a world where the consumer accounts for more than two-thirds of the driving force for capital accumulation, at least in the core regions of capital accumulation, then the human limits to wants, needs and desires constitutes a potential barrier to which capital must perpetually attend in the search for compound growth.

But the other issue here is finding consumers with sufficient money to pay. Compounding growth supposes that there is more money available at the end of the day than there was at the beginning and the big question is: where does the extra money come from? There are three basic answers. Firstly, the moneys held by non-capitalist factions can be drawn into the system. The “gold reserves” of the feudal classes played a very important role in the early years of capitalism. Sucked out by usury and other forms of indebtedness as well as through normal marketing practices, this source of effective demand has much diminished (though the Catholic Church may yet have to melt down a lot of its gold plate to pay for the sins of its priests). The second option, which Rosa Luxemburg emphasized, was the gold and silver reserves of countries largely outside of the orbit of capitalist development. Imperialism and colonialism here played a usually violent role in opening up new markets (e.g. the nineteenth century opium wars in China) thus draining wealth from the once rich regions of China, India, Africa and Latin America.¹² But with the integration of many of these regions into the full circulation of capital, these forms of effective demand are now insufficient to sustain the compound growth of capital accumulation. The third option is to produce effective demand from within the capitalist dynamic. The total wage bill is insufficient and has in any case been falling in relation to GDP over the last thirty years. Capitalist consumption, no matter how conspicuous, cannot do it either. The answer is that the money spent on the expansion of investment tomorrow forms the effective demand to mop up the expanded product created yesterday. Tomorrow’s growth creates the effective demand for yesterday’s expanded product. The effective demand problem today is thereby converted into a problem of finding profitable new investment opportunities tomorrow. This explains why compound growth is so essential to the perpetuation of capitalism.

Three issues then arise. Firstly, the time gap between yesterday’s product and tomorrow’s reinvestment has to be bridged and this entails the use of money as money of account. The finance capitalists come back in as crucial players who operate not only at the beginning of the circulation of capital sequence but also at the end. For example, financiers lend to property developers who hire labor to build houses which are then purchased by the workers with a mortgage loan often from the very same financiers. Such a system is inherently speculative and prone to produce housing bubbles of the sort already noted.
But it is not only the financiers who do this. Commercial and merchant capitalists buy from the producers and specialize in marketing to consumers. Merchant capitalists, like financiers and rentiers, extract a rate of return from their own efforts and can come to exert an independent class factional power, which has often played a significant role in crisis formation. The pressures put on producers by merchant capitalist organizations like Walmart, Carrefour and a whole host of supermarket chains along with merchant organizations like Benneton, the Gap, Nike and the like steps into the forefront of what capital circulation is about, both smoothing out potential barriers while also creating potentially dangerous concentrations of economic power. As with the landlords and rentiers, the merchant capitalist class self-interest is not necessarily concordant with that of the whole capitalist class. When we track what happens to the price of sugar, for example, as it moves from the cane fields of the Dominican Republic to the supermarkets of the USA, we see that the actual producers receive less than 5 percent of the final retail price. Most of the profit is taken by merchant intermediaries.

The third issue is less easy to identify even as it seems to be assuming more and more importance in the way capital circulation works. When capital primarily produced long-lasting things, it was always in danger of satiating markets. I am still using the silver plated forks made in Sheffield that graced my grandmother’s table. The lifetime of consumer products has therefore to be shortened if capital is to survive. This happens to some degree by resort of fashion, by planned obsolescence and making things that break down easily, by continuous innovation (from i-pods to i-pads) and so on. This pressure has, in recent years, produced a shift from the production of things to the production of spectacle – a shift that Guy Debord presciently understood when he wrote The Society of the Spectacle back in 1967.¹³ Just consider what goes into the production of the Olympic Games, not only the new physical infrastructures but the vast employment and resources entailed in opening ceremonies (remember the spectacle of Barcelona and then later the astonishing spectacle of Beijing). More and more capital therefore circulates in the production of spectacular and ephemeral events with all sorts of consequences for consumerism as well as for urban life. But productions of this sort are invariably debt financed and, as the history of the Olympics clearly demonstrates, finding the money to pay off the debts afterwards is often problematic. It is perhaps no accident that Greece, which staged the Olympics in 2004, is now in a leading crisis role because of its sovereign debt.

With real wages stagnant or falling after 1980, the deficit in effective demand was largely bridged by resort to the credit system. In the United States in particular, household debt tripled from 1980 to 2005 and much of that debt was accumulated around the housing market, particularly from 2001 onwards. All sorts of innovations in finance along with state policies that often had the effect of subsidizing or even paying people and corporations to go into debt, kept the compounding rate of growth going. This was the fictional bubble that eventually burst in 2008. But, again, notice the sequence. Wage repression produces a deficit of effective demand that is covered by increasing indebtedness that ultimately leads into a financial crisis which is resolved by state interventions which translates into a fiscal crisis of the state that can best be resolved, according to conventional economic wisdom, by further reductions in the social wage.

7) Capital Circulation as a Whole
When viewed as a whole, we see a series of potential blockage points to the circulation of capital, any one of which has the potentiality to be the source of a crisis. There is, therefore, no single causal theory of crisis formation as many Marxist economists like to assert. There is, for example, no point in trying to cram all of this fluidity and complexity into some unitary theory of, say, a falling rate of profit. In fact profit rates can fall because of the inability to overcome any one of the blockages identified here. It is the task of historical materialist analysis to wrestle with the question as to where the primary blockages are this time around. But solutions at one point have implications for what happens elsewhere. The labor problem (both in the market and on the shop floor) that was central in the late 1960s in the core regions, could not be overcome except by opening up the coercive laws of competition across a global space. This required a revolution in the architecture of the world’s financial system which increased the likelihood of “irrational exuberance” within the financial system. The consequent wage repression depressed effective demand which could be overcome only by resort to the credit system. And so on.

The fundamental theoretical conclusion is: capital never solves its crisis tendencies, it merely moves them around. This is what Marx’s analysis tells us and this is what the history of the last forty years has been about. No one now claims that the excessive power of labor is the source of the current problem as it was back in the 1970s. If anything, the problem is that capital in general and finance capital in particular are far too powerful and that the state cannot step in to re-balance affairs because it is captive – politically and economically – to capitalist class financial, rentier, producer and commercial interests. The dynamic shift from a crisis within the financial system centered on the banks to a fiscal crisis of states, is now producing a renewed assault upon labor, particularly in the public sector, as well as upon the social wage. But if purchasing power and consumer confidence then sags, then where is the market? The big intangible here is, however, whether mass resistance will arise to contest the austerity required to reduce state deficits.

THE UNEVEN GEOGRAPHICAL DEVELOPMENT OF THE CRISIS

We know that the crisis for capital (as opposed for many homeowners and workers who had long been distressed) began in the housing markets of Southern California, Arizona, Nevada and Florida in 2007. This was the primary epicenter of the crisis.¹⁴ But why there and why then? The crisis then quickly spread through the mortgage finance companies (like Countrywide in the US) to the major financial institutions (like Bear Stearns) that still held a goodly amount of what became “toxic” securitized mortgage debt. It then spread to other institutions that either held the debt (like Fannie Mae and Freddie Mac), invested in the debt (everyone that invested in collateralized debt obligations) or insured the debt or other financial transactions (like AIG). The parallel crash of Northern Rock in Britain indicated that there were problems lurking in property markets elsewhere (as ultimately became apparent in Spain and Ireland in particular). The financial institutions located in New York and London then became the epicenter of the crisis. It largely fell to the US and British Governments along with the US Federal Reserve and the Bank of England to stabilize the situation.

The crash of Lehman Brothers in September 2008 sent the contagion global (was this a deliberate move to transform the crisis from the local to global scale, a cave-in to populist pressure to punish the sinners on Wall Street, or just a huge mistake?). The crisis was probably bound to go global anyway, given the interdependency within global financial networks. Banks elsewhere (e.g. in Germany and France) had bought into the toxic debt as had municipal and state governments and pension funds from Norway to Florida. All of them felt the distress. No matter where located, the holders of the toxic debt were in difficulty. Canadian and East Asian financial institutions, on the other hand, remained unaffected because they had little exposure.

But after Lehman the whole global credit system (in which inter-bank lending is crucial) froze and this formed the immediate primary blockage to the continuity of capital flows. Perfectly good enterprises suddenly found themselves in difficulty because they could not roll over their debt. Many firms rescued themselves by laying off workers by the droves and intensifying wage repression. Debt-fuelled consumerism and effective demand was halted, consumer confidence fell off a cliff, and unemployment surged though at radically different rates both within and between countries: compare, e.g. Minnesota and Ohio in the US or Spain (20 percent) and the Netherlands (6 percent) in Europe in 2009. The major export economies then took a hit as world trade contracted by some twenty percent in early 2009, sparking huge difficulties for businesses and emphatic surges in unemployment in East Asia as well as in Germany, Brazil, and elsewhere. An earlier boom in raw material prices (oil in particular) that turned out to be largely speculative, likewise collapsed in the face of declining growth. Raw material producers were in trouble. The global economy was clearly headed towards a huge depression, unless government acted.

What then followed depended crucially upon the imperatives, ability and the willingness of different governments to use their powers (either individually or collectively) to confront the crisis. Given the threat of a depression on the scale of the 1930s, there was a growing initial clamor to resurrect Keynesian style solutions. The immediate response after the Lehman debacle was to rescue, stabilize and eventually reform the financial architecture (both locally and globally) and to construct a debt-financed stimulus to deal with the collapse of effective demand. The US could not, however, act alone and so the G8 was replaced by the G20, a coalition of leading states that accounted for most of the world’s market-based economic activity. The search for a systemic exit from the crisis was hindered, however, by a number of overwhelming difficulties, not least of which were the very different political ideologies, needs and the configurations of class forces and special interests within the G20 states.

The United States, for example, was already deeply in debt to the rest of the world.¹⁵ One question was whether the “safe-haven” of dollar denominated assets would sustain dollar inflows to support the debt and keep long-term interest rates down into the foreseeable future. The fact that long-term interest rates have declined since 2008 suggests there is no problem. But in the first half of 2010, foreign government were net sellers of US securities. It took rising savings rates in the US, loss of confidence in the stock market and the flight of internal savings into US treasuries to keep interest rates down. It was always dangerous for the US to attempt a stimulus on a large-enough scale (say $2 trillion rather than the $800 billion) to work internally, let alone entrain the rest of the world back onto a compound growth path (as it had done after 1945). In the US, there were also strong political objections from a Republican Party that pandered to the hysterical populist right wing fears of excessive government intervention and saw opposing further deficit financing as a means to prevent any recovery that might redound to Obama’s and the Democratic Party’s electoral advantage. Whatever stimulus could be had was also pushed, for ideological reasons, towards tax cuts to a class that might not spend as opposed to needy population groups that would. Finally, the best forms of stimulus lie in provision of social and physical infrastructures that would raise productivity and improve efficiency within the national space. But the US had no clear projects of either sort in mind. The initial refusal of the Republicans to support aid for State and local finances indicated a determination to cut social services rather than to expand them (a determination partly offset by short-term stimulus funds to education and later by a tardy but weak infusion of support for State and local governments). And the physical infrastructures had to be “shovel ready” which meant they were for the most part a continuation of investments in urban and suburban development that had led into the crisis rather than an innovative move towards a national urban development policy that would help exit the crisis in the long-term (e.g. by saving on energy rather than expanding demand for it). The only innovation was weak support for alternative energy sources. Finally, many key aspects of a full Keynesian program were kept off the table. Chief of these was the greater empowerment of labor as a way to reverse chronic income inequalities. Mitigating the huge social inequalities that had arisen in the 1920s was viewed in the 1930s as a way to stimulate effective demand. The neoliberal politics of the 1980s and 1990s had produced inequalities in wealth and income not seen since the 1920s and needed similar reversal. But the imbalance of power between capital and labor could not be addressed for fear of being dubbed and damned as “socialist” or “communist” by a powerful right wing propaganda machine. Dominant class forces (the “Party of Wall Street”) with strong influence within both political parties refused point-blank to accept a state-led re-calibration of the relative powers of capital and labor. The power imbalance that lay at the root of the crisis was to remain untouched.

After an early phase of recovery in which “green shoots” were spied all over the economic landscape, the US economy lapsed back into slow growth and high unemployment in the Spring of 2010, with little prospect of any dramatic revival. Corporate profits and the stock market began to revive, but under conditions of lower turnover and savage cost cutting, particularly with respect to wages. The revival of profits came at the expense of increasing unemployment rather than alleviating wage repression with negative effects upon consumer confidence and internal effective demand (the wage concessions taken from the auto workers in the GM bailout is a prime example). This was not a path towards sustainable growth. If it pointed anywhere, it was towards deflation. Revival of a more robust sort would have to come from elsewhere.

Possessed of huge surpluses and an untroubled banking system easily manipulated by the central government, China had the means to act in a more full-blooded Keynesian way. The crash of export-oriented industries and the threat of mass unemployment and unrest in early 2009 forced the government’s hand. The stimulus package devised had two forks. Close to $600 billion were put largely into infrastructural projects – highway building on a scale that dwarfs that of the US interstate highway system of the 1960s, new airports, vast water projects, high-speed rail lines and even whole new cities. Secondly, the central government forced the banks to loosen credit for local state and private projects.

The big question is whether these investments will increase national productivity. Given that the spatial integration of the Chinese economy is far from complete, there are reasons to believe it will do so. But whether the debts can be paid off when due or whether China will later be the epi-center of yet another global capitalist crisis is an open question. One negative effect has been a renewal of speculation in housing markets with a doubling of property prices in Shanghai in 2009. There are other troubling signs of overcapacity in manufacturing and infrastructures and many banks are rumored to be overextended. There is evidence of the emergence of an uncontrolled “shadow banking” system that is repeating some of the mistakes that occurred in the US from the 1990s on. But the Chinese have dealt with non-performing loans before, as high as 40 percent of assets in the late 1990s. They then used their foreign exchange reserves to erase non-performing loans. Unlike the TARP program in the US, which was passed by a reluctant Congress and which promoted much public resentment, the Chinese can take immediate action to re-capitalize their banking system. Whether or not they can crack down on and control shadow banking behaviors appears to be a more open question.

The Chinese eventually embraced other aspects of a Keynesian program: the stimulation of the internal market by increasing the empowerment of labor and addressing social inequality. The Central Government suddenly appeared willing to tolerate or unable to resist spontaneous strikes (not organized by the official unions controlled by the Communist Party) at major producers such as Toyota, Honda and FoxConn in the summer of 2010. These strikes resulted in significant wage increases (in the range of 20 or 30 percent or so). The politics of wage repression was being reversed. The government increased investments in health care and social services and it pushed hard on the development of environmental technologies to the point where China is now a global leader. The fear of being called a socialist or a communist that bedevils political action in the United States, obviously sounds comical to the Chinese. But there are dangerous signs of inflation and serious pressures (both internal and external) to revalue the remnimbi. The banking system may not be as sound as it appears. As wages rise so capital is moving offshore to lower-wage locations in Bangladesh, Cambodia and other parts of SouthEast Asia.

China has emerged from the crisis faster and more successfully than anywhere else with growth rates quickly reviving towards 8 or even 10 percent. The increase in internal effective demand has not only worked within China, but entrained other economies, particularly raw material producers. Australia has flourished, for example. General Motors makes more cars and profits in China than anywhere else. China had stimulated a partial revival in international trade and of demand for its own export goods (trade with Latin America has increased tenfold since 2000, for example). The export-oriented economies in general, particularly throughout much of East and SouthEast Asia along with Latin America have revived faster than others. China’s investments in US debt have helped sustain effective demand for its low-cost products there, but there are signs that it is gradually diversifying its holdings. The effect has been to alter the balance of economic power, to produce a hegemonic shift within the global economy.

The revival of the export-oriented economies has extended to Germany. But this brings us to the problem of the fractious responses to the crisis across the European Union. After an initial burst of stimulus politics, Germany took the lead, dragging a more reluctant France along with it, in turning the Eurozone to a monetary policy of deficit reduction through draconian reductions in public expenditures. This policy is now echoed by the new Conservative-led coalition in Britain. This politics coincided with the sudden deterioration in public finances elsewhere. The so-called PIGS (Portugal, Ireland, Greece and Spain) found themselves in dire financial straights, in part through their own mismanagement but even more significantly because their economies were particularly vulnerable to the credit collapse and the sudden decline in property markets and tourism. Lacking the industrial base of countries like Germany, they could not respond adequately to the fiscal crisis that threatened them.

The big question then was: has the financial crisis been stabilized at the expense of creating a fiscal crisis of the capitalist states (with California looking more and more like one of the biggest failed states in the world)? Rumors flew as to the state of Britain’s finances and the fact that many other weaker states, such as Latvia and Hungary were already on the ropes, suggested serious underlying problems in state finances that could even, at some point, focus on the sustainability of the US deficit. It was in this climate that much of the capitalist world shifted its focus to deficit reduction rather than deficit stimulus financing of the Keynesian sort. Once the crisis shifted from being a financial crisis in the banking sector to being a fiscal crisis of the state, then the political opportunity immediately arose to take another savage cut at what remained of the welfare state. The banks had been saved and it was, in classic neoliberal fashion, evidently time to sock it to the people by draconian austerity rather than stimulus measures.

As a result, the political fault-lines shifted in many places back towards the more classic forms of class struggle, as unions (particularly in the public sector) and affected populations (students, retirees, etc) fought back against the austerity from California to Greece. Why should the people pay for the errors and corruptions of a capitalist class that continued to consolidate its wealth and power?

But there were and are abundant variations both in impacts and responses. Lebanon was so busy reconstructing from the Israeli bombardment of 2006 that it scarcely noticed the onset of the global financial crisis (though it had political crises of its own galore). Brazil quickly recovered in part on the back of the China trade but also because of the surge of internal demand based on Lula’s redistributive policies towards the poor (the bolsa familia). India was relatively insulated from the crisis since its main export of services was less affected and its financial system relatively sound. Certain states, like Kerala, suffered from the loss of remittances from the Gulf States but elsewhere a gathering but questionable boom, particularly in construction, underpinned high rates of growth. The number of Indian billionaires doubled in 2009 alone. Haiti, on the other hand, suffered a serious loss of remittances from the US and then collapsed entirely as a result of the earthquake and its appalling aftermath.

The shifting of the crisis around the world in both its form and in its intensity created a dynamic of cascading geographical effects to the point where nothing could easily be predicted. From an epicenter in the US SouthWest and Florida to the collapse of Dubai World to the Greek Sovereign debt crisis, no one could easily predict or anticipate where the next aftershock would hit and how severe the shock or what the political response would be. By the same token, the rapid recovery of China, India and Brazil has been surprising. The geography of it all can, with a lot of effort, be tracked but not easily predicted. Yet the vulnerabilities within the global system are clear. A collapse of the property market and surging inflation in China, a fall in oil prices that hits Russia very hard along with Venezuela and the Gulf States, a surge of political protests from Greece to Spain, France, Britain and California, or simply a sudden further collapse of consumer confidence in the United States or of foreign investors in the viability of US debt, will likely send the whole system into either a downward tailspin or a lurch into a different configuration of global power that sees one half of the world (almost certainly Asia) grow rapidly at the expense of the other half.

THE LEFT ALTERNATIVE

Many have long dreamed that an alternative to capitalist (ir)rationality can be rationally arrived at through the mobilization of human passions in the collective search for a better life for all. These alternatives – historically called socialism or communism – have, in various times and places been tried. In former times, such as the 1930s, the vision of one or other of them provided a beacon of hope. The practices that flowed from this source arguably improved the lives of many and saved capitalism from auto-destruction after 1945. But in recent times such alternatives have lost their luster, in part because of the failure of historical experiments with communism to make good on their promises. Political protest at the crisis conditions has been spotty but in some instances vociferous (from both the left and the right) in response to the crash of 2008.

It could be that 2009 marks the beginning of a prolonged shake out in which the question of grand and far-reaching alternatives to capitalism will step-by-step bubble up to the surface in one part of the world or another. The longer the uncertainty and the misery is prolonged, the more the legitimacy of the existing way of doing business will be questioned and the more the demand to build something different will escalate.

The central problem to be addressed is clear enough: compound growth for ever is not possible: capital accumulation can no longer be the central force impelling social evolution. The troubles that have beset the world these last thirty years signal that a limit is looming that cannot be transcended. Add to this the fact that so many people in the world live in conditions of abject poverty, that environmental degradations are spiraling out of control, that human dignities are everywhere being offended even as the rich are piling up more and more wealth at the expense of everyone. Meanwhile, in most places the levers of ideological, political, institutional, judicial, military and media power are under tight political control. This serves to perpetuate the political status quo and frustrate opposition even as the economy and living standards deteriorate. “Freedom” then becomes just another word to justify repression.

A revolutionary politics that can grasp the nettle of endless compound capital accumulation and eventually shut down the class power that propels it forwards, requires an appropriate theory of social change. Marx’s account of how capitalism arose out of feudalism in fact embodies such a “co-revolutionary theory.”¹⁶ Social change arises, he argues, through the dialectical unfolding of relations between seven moments within the social body politic:

a) technological and organizational forms of production, exchange and consumption
b) relations to nature
c) social relations between people
d) mental conceptions of the world, embracing knowledges and cultural understandings and beliefs
e) labor processes and production of specific goods, geographies, services or affects
f ) institutional, legal and governmental arrangements
g) the conduct of daily life and the activities of social reproduction.

Each one of these moments is internally dynamic, marked by tensions and contradictions (just think of our diverse and contested mental conceptions of the world) but all of them are co-dependent and co-evolve in relation to each other within a totality, understood as a Gramscian or Lefebvrian “ensemble” or Deleuzian “assemblage” of moments. The transition to capitalism entailed a mutually supporting movement across all seven moments within the totality. New technologies could not be identified and applied without new mental conceptions of the world (including that of the relation to nature and of new labor processes and social relations).

Social theorists often take just one of these moments and view it as the “silver bullet” that causes all change. We have technological determinists (Tom Friedman), environmental determinists (Jared Diamond), daily life determinists (Paul Hawken), labor process determinists (the autonomistas), class struggle determinists (most Marxist political parties), institutionalists, and so on and so forth.¹⁷ From Marx’s perspective they are all wrong. It is the dialectical motion across the moments that really counts, even as there is uneven development in that motion.

When capitalism itself undergoes one of its phases of renewal, it does so precisely by co-evolving all moments, obviously not without tensions, struggles, fights and contradictions. Consider how these seven moments were configured around 1970 before the neoliberal surge and consider how they look now; all have changed in relation to each other and thereby changed the workings of capitalism as a whole.

This theory tells us that an anti-capitalist political movement can start anywhere (in labor processes, around mental conceptions, in the relation to nature, in class or other social relations, in the design of revolutionary technologies and organizational forms, out of daily life or through attempts to reform institutional and administrative structures including the reconfiguration of state powers). The trick is to keep the political movement moving from one moment to another in mutually reinforcing ways.¹⁸ This was how capitalism arose out of feudalism and this is how a radically different alternative can arise out of capitalism. Previous attempts to create a communist or socialist alternative fatally failed to keep the dialectic between the different moments in motion and failed to embrace the unpredictable and uncertain paths in the dialectical movement between them.

The problem for the anti-capitalist left is to build organizational forms and to unleash a co-revolutionary dynamic that can replace the present system of compounding accumulation of capital with some other forms of social coordination, exchange and control that can deliver an adequate style and standard of living for the 6.8 billion people living on planet earth. This is no easy task and I do not pretend to have any immediate answers (though I do have some ideas) as to how this might be done. But I do think it imperative that the organizational forms and political strategies match the diagnoses and descriptions of how contemporary capitalism is actually working. Unfortunately, the fierce attachment of many movements to what can best be termed a “fetishism of organizational form” gets in the way of any broad revolutionary movement that can address this problem. Anarchists, autonomists, environmentalists, solidarity economy groups, traditional left revolutionary parties, reformist NGO’s and social democrats, trade unions, institutionalists, social movements of many different stripes, all have their favored and exclusionary rules of organization often derived from abstract principles and sometime exclusionary views as to who might be the principle agent sparking social revolution. There is some serious barrier to the creation of some overarching umbrella organization on the left that can internalize difference but take on the global problems that confront use. Some groups, for example, abjure any form of organization that smacks of hierarchy. But Elinor Ostrom’s study of common property practices shows that the only form of democratic management that works when populations of more than a few hundred people are involved, is a nested hierarchy of decision making. Groups that rule out all forms of hierarchy thereby give up on any prospect whatsoever for democratic response not only to the problem of the global commons but also to the problem of continous capital accumulation.¹⁹ The strong connection between diagnosis and political action cannot be ignored.²⁰ This is a good moment, therefore, for all movements to take a step back and examine how their preferred methods and organizational forms relate to the revolutionary tasks posed in the present conjuncture of capitalist development.

Notes

Related posts:

1. Capitalist crisis and left response

“Understanding the Crisis Historically,” the opening session (and the one I attended), featured David Harvey, Duncan Foley, Beverly Silver, and Immanuel Wallerstein as speakers — a distinguished lineup, and one that divided neatly between Marxist (Harvey and Foley) and World Systems (Silver and Wallerstein) analysts. I’ll go through their talks from my notes, adding some comments and impressions as I go. I don’t claim to give a complete report of all that was said – for that, the 3CT promises a video of the proceedings in a couple of weeks – but merely some facets that I found of particular interest.

David Harvey: Moving the Crisis Around: from Economics to Politics and Back Again

Harvey’s talk – one of the best, I thought – did not contain much that would surprise readers of his recent Enigma of Capital (a book on which I hope to write something soon), although he did bring out some aspects of the developing crisis which have surfaced since he wrote that. Over the past year, for example, the crisis has lifted in some areas of the world – it is long gone in Argentina, Chile, Brazil, and Australia – while hanging on stubbornly in others: much of Europe and especially the US has seen deep and continuing job losses. (“In this country today,” he said, “it’s not even a jobless recovery, but joblessness creating recovery.”)

Latin America does well because of its connection as supplier to the Chinese economic locomotive. In the US and Britain, though, the crisis has moved from pure economic emergency to the plane of political choices, raising the question: Why the political choice of austerity in Britain and the US?

Given that virtually no economist believes that cutting state deficits is a route to either cutting unemployment or real economic growth in these core economies, it is a real question why this has emerged as the course of choice for ruling classes on both sides of the Atlantic over the past year. It’s a question we’ve raised here without being able to resolve it, and I was glad to see it brought to the fore by Harvey. To resume with what he said:

Capital has been on a long-term thrust to rid itself of social costs, and we can see how deficits have been used as a weapon to do this, all the way back to Reagan. Essentially the US is going through the standard neoliberal IMF program. We saw how Clinton in the US and Blair in Britain completed the neoliberal programs begun by Reagan and Thatcher, so here we have Obama and Cameron playing similar roles.

Compare the deficit-cutting austerity approach here with the way in which China has been dealing with the crisis: to some extent China is acting as the US did in the 2000s, and is building up a concomitant asset bubble, but wage levels have also been increasing by about 25%. The question here is how far (or smoothly) this sort of approach can go, because it also builds instabilities.

In the US the crisis has been resolved (for now) for capital. Profit rates are back up.

Individual capitals, or factions of capital, in their anarchic thrusts, cannot govern their own profit rates, and whereas their destructive tendencies are restrained by other classes politically, they do not have the power to do so on their own, nor to prevent their own après nous le déluge course.

In other words: If capital is to build an overall healthy capitalist economy, its own anarchic and destructive tendencies must be moderated and restrained by other classes. But neoliberalism, regnant now for three decades, has been all about breaking the independent power of other classes, especially of course the working class. In this situation, as we see at present, capital’s destructive après nous… mentality has nothing to limit and restrain it. Now, with profit rates restored, but with deep and continuing unemployment making robust growth and an overall healthy (capitalist) economy impossible, capital is unable to act on its own in any but a short-term maximize-profits manner.

Harvey’s political-strategic thinking in a sense follows from this analysis, or at least it seems that he believes it does. His thinking, politically, is that the first task is to make capitalism healthy, and then to go beyond it.

I imagine that many of us may have some different ideas here. It would be good if we could have some discussion, not only on this strategy (and, as we’ll see, Wallerstein also puts forward a variant of it), but also on his analysis.

Duncan Foley: The Political Economy of Post-Crisis Global Capitalism

Foley began by outlining his theory of two types of capitalist crisis: those whose mechanism is a falling rate of profit (characterized by rising wages and inflation), and those caused by a rising rate of exploitation (which are deflationary in character). Of the four great crises of the past 150 years, those of the 1890s and the 1970s were of the former type, while those of the 1930s and today are of the latter.

1970s stagflation was caused by class struggle about the upward pressure of wages. Globalization had the effect of stopping this upward pressure; this also meant that capitalist escape from the crisis of the 1970s was not effected by increasing the organic composition of capital.

Foley outlined what he termed four issues for the future: First, the unevenness of the present crisis. It is not, he holds (based on similar considerations as Harvey brought forward) a world crisis. (And the same was true in the 1930s.) Second is the question of the distribution of aggregate demand.

Third, there is the dollar dilemma. On the one hand the centrality of the dollar in the world economy, the fact that it functions as the world reserve currency, is a feature of US hegemony and allows this country to borrow from the rest of the world and run up deficits without end. But on the other, this also means that the US is the one country in the world which is powerless to control its own exchange rate.

And finally, there is the US hegemonic role itself. Is it possible for a world capitalist economy to function without a hegemonic power, as has always been the case? And whether this is so or not, how long can the US continue to play this role?

Beverley Silver: Crisis of Capital, Crisis of Labor: a Global View from the End of the American Century

Silver, in common with most other world systems theorists, sees systems operating or going through cycles over both the long durée and shorter term (100 years). The end of the 20^th century has brought the US-dominated cycle. The US decline began in the crisis of the 1970s,which she sees as caused by a profit squeeze, which subsequently became a continuing crisis of underconsumption. (For those who may be unfamiliar with the terminology, this Silver is referencing some standard Marxist explanations, and debates, on the origins of capitalist crises, and of the crisis of the 1970s in particular.)

The question now is: will there be the emergence of a new cycle of accumulation? Or are we on the eve of the emergence of a new system?

If we are to move beyond the present (and past) crises, we have to find a way of internalizing the costs of reproduction of both nature and of people, which capitalism has never done.

I have to admit my notes on Silver’s talk are scanty, but it’s also true that her talk was scattered and not well developed. My impression was that she has a more substantial theory in her head than she was able or ready to articulate here, perhaps due to insufficient preparation. At any rate, my notes reflect what I found most important, both here and in the case of the other speakers.

Immanuel Wallerstein: Structural Crisis in the World-System: Where Do We Go from Here?

Wallerstein, very clear and systematic as always, said that he would first lay out his general position or premises, and then go into the political questions.

His premises, as he put it, will be familiar to those who have read even some of his extensive writings. He spelled them out as follows.

1)      All systems have lives, going through the stages of birth, establishing equilibrium, loss of equilibrium, systemic crisis, and death. In these latter stages, a system reaches or points to a bifurcation: a chaotic state, with two possible ways of establishing a new equilibrium.

2)      Capitalism is a system of endless accumulation of capital. There is a need for the establishment of quasi-monopoly, with certain leading industries; this, however, is self-liquidating over time, and requires the support of the state. Accumulation goes through long waves, lasting 50-60 years. Within the interstate system there are successive periods of hegemony of particular states; this is also self-liquidating.

3)      Between 1945 and 1970 there was a large expansion of capitalism under US hegemony. From the 1970s until the present has been a period characterized by financialization, bubbles, and US hegemonic decline, which was accelerated during the Bush years. 1968 saw an eruption on a world scale, whose consequences have been the end of centrist liberalism; the end of the hegemony of the “old left” within the left; a vigorous and successful assertion of the right on a world scale; and, since the mid-1990s, the rise of an opposition to the rise of the right.

4)      A structural crisis is primarily characterized by chaos, which means the rapid fluctuation  of all parameters of the system. This makes prognosis very chancey. It is clear, though, that the capitalist world-system is (and has been) in the midst of a structural crisis, out of which will emerge (nondeterministically) a new system.

Moving to the political questions, Wallerstein first characterized the actors, as he has before, as “the spirit of Davos” and “the spirit of Porto Alegre,” symbolizing the two sides he sees shaping up, and the two alternatives of this bifurcation, by the names of the cities in which wellknown annual global gatherings have been held. (The World Economic Forum, a conference of the rich and powerful, has met yearly since 1971 in Davos, Switzerland, while the World Social Forum, a broad-based gathering of oppositional forces, began meeting in Porto Alegre, Brazil, in 2001.) It is, in short, the difference between those whose aim is to move toward another exploitative and hierarchical (but, according to Wallerstein, noncapitalist) system, and those who want to create a system not seen hitherto, which would be egalitarian and nonexploitative.

Within each of these, in turn, there is a division or further bifurcation having to do with method and means: On the Davos side, it is between the iron-fist-repression approach and one which is more cooptative. For the Porto Alegre pole, the question is horizontal or vertical modes of organization.

Strategically Wallerstein differentiated between the short and medium-term. The short term offers lesser-evil choices. We are moving in or into a time of chaos and disruption and the goal here should be to minimize the pain. In the medium term, it is just the opposite. Here the choice is either “Davos” or “Porto Alegre,” with no middle ground.

To deal with medium term prospects and choices, we need serious intellectual analysis with great openness of spirit, among large swathes of the population. The basic goal must be to reject economic growth in favor of de-commodification. As to how this can be done, we need experimentation. To this end, he envisions attempts to establish local or regional self-sufficiencies. Basic hallmarks of any new world, in any case, must be an end to the existence of all foreign military bases; and an end to basic inequalities based on gender, race, sexuality, etc.

This is not pie-in-the-sky utopian thinking. A chaotic situation multiplies the force of inputs; a small input can produce a very large effect.

Discussion

There were of course questions from the audience (which comprised probably 200+ people), as well as some prior comments on the papers from Moishe Postone, listed as “discussant.” I won’t attempt to reproduce all of this, even partially, but simply mention a few points that I found salient or important.

On bifurcation: Postone put forward that there are actually three possible future paths: besides those sketched by Wallerstein there is also the xenophobic-fundmentalist-populist path. And I later asked, in a question from the floor, what would constitute a noncapitalist exploitative system which could succeed capitalism as a world system.

Wallerstein seemed to reply that extreme rightism in all its varieties was an aspect of the Davos path, and that while the actual contours of a system which might emerge were impossible to predict, an exploitative but non-market-based system was perfectly possible.

Transnational capital and the formation of a transnational capitalist class (TNC) was also raised, but none of the panelists seemed to see this as an actuality or tendency. Harvey said that he didn’t see much difference now as compared with previously. There has been a restructuring of the capitalist class, but this is a constant occurrence, and at present has to do with different factions of capital vying with each other. Merchant capital (Walmart, e.g.) has become more prominent, and the rentier faction has been coming more to the fore (he referenced the drive to commodify and monopolize intellectual property as well as land rights in Africa).

In contrast with Wallerstein’s analysis, others did not consider this to be a final crisis of capitalism (not that Wallerstein ever used this phrase). Foley: capitalism is always evolving. Harvey: although this is not the final crisis, it is an inflexion point.

The question of ethics and Marxist analysis was raised as part of a long, involved, graduate-student sort of question. Harvey said that you have to look at what Marx does and not just the one-liners (“all history is the history of class struggle,” etc.). Marx emphasizes the dialectical transformation of social life, which is a movement across all its dimensions: daily life, the labor process, relation to nature, and so forth. (This is a prominent theme in Harvey’s book.) It is a mistake to isolate any particular dimension, and the same is true of the ethical aspect.

Wallerstein said that he agreed with all of this, except that: it is precisely the ethical question that we need to take up.

Related posts:

1. Capitalist crisis and left response

David Harvey on ‘The Enigma of Capital’

What are the limits to capital, and how does it overcome those limits? This is a pressing issue given the global crisis. We need, at the very least, to understand the he prospects for getting any half-way decent settlement out of it for the working class. Capitalism is a perpetual expansion machine and, as Marx noted, it cannot abide limits. It has to conquer all social and spatial barriers, and “annihilate space with time”. A simple way to see this is to describe the capitalist transaction: one starts the day with some value (money), purchases labour power and some means of production and – if one has a good day – generates a surplus which is realised in the market. What then happens at the other end of the transaction? A reasonable person would spend the money on a good time, but a capitalist is coerced by competition to reinvest some of the surplus in expanding and generating even more surplus. Expansion is a structural imperative of the system: capitalism requires compound growth.

Angus Maddison has provided some figures which give a sense of the scale of this. In 1820, $694bn [billions] circulated through world markets (on 1990 dollar values). In 1913, it had risen to $2.7tn [trillions] dollars. By 1950, it was $5.3tn. By 1973, it was $16tn. By 2003, it was $41tn. The current World Bank report puts total world output in current dollar values at $56.2tn. The average compound growth rate has been around 2.2% per annum since 1770.

The current position of Gordon Brown and Barack Obama is that they want to restore the world economy to a growth rate of roughly 3%. But while 3% growth may seem feasible when you’re talking about a productive system thriving in a few industrial centres of the UK and a few places beyond in 1750, it looks like a different bargain altogether when you have a capitalist system operative in the Middle East, Asia, Latin America, Africa, North America, and all of Europe.

Three per cent growth on current output means that the system needs to find profitable investment opportunities for $1.5tn. In twenty years time, the system will have to find profitable investment opportunities for $3tn. This leads to the “capital surplus absorption problem“. Where will all this capital go?

In order to circumvent existing barriers and find new avenues for investment, financial innovation is necessary. The savings and investments of capitalists have to be deployed in a new way to perform specific functions, and the history of capitalism is a history of such innovations. If capital is unable to adapt in this way, a new barrier is erected, the circulatory system of capital is obstructed, and investment dries up. Another barrier might be that the inputs necessary for the means of production to produce your desired outputs are not available. This is a point discussed in Capital Volume II.

Another problem that might freeze circulation could be excessively well-organised labour, so driving up wages that there is insufficient profit to be had in any major investment. There is also the question of whether capitalists will find the right organisational form and the right disciplinary structure for managing labour, both of which can provide blockages to the system of accumulation. Then there is the problem of effective demand: will there be enough need backed by purchasing power to absorbe your product? If not, yet another blockage is created.

Perhaps the largest barrier is that provided by nature, and its inability to sustain the kinds of growth that capitalism requires, both in terms of the shortage of necessary raw materials and in terms of the threat of ecological collapse as the natural system reaches the limits of its tolerance for capitalist production.

If these blockage points are not successfully negotiated, the system slows down and capital is de-valued. Reviewing this, we might conclude that the theory of crisis needs to be updated. Any one of these single points can produce a blockage and a crisis in the ability of capitalism to reproduce itself.

The neoliberal strategy of accumulation arose from several crises in the system in the late 1960s and early 1970s. Strong unions and social democratic parties enhanced labour’s bargaining power. One way to transcend this limit was initially to encourage immigration. The French relied on Maghrebian labour, the British drew on its empire, the US threw out anti-immigrant legislation in 1965. This strategy didn’t work. The other idea was to off-shore, but to achieve this it was necessary to restructure capital accumulation, so that parts production and so on could be moved offshore, which meant reshaping spatial relations with containerisation and new transport technologies. This didn’t really take off until the late 1970s.

Another idea was to ‘invent’ Reagan, Thatcher, and Pinochet, people who would really bust up organised labour, destroy its bargaining power and depress wages.

The last solution was to turn to technological innovation, producing technologically induced unemployment. This could only come about effectively if the monopoly capital that characterised the fifties and sixties was broken down to some extent and exposed to competition. Monopoly capital – big auto companies, for example – had been able to meet labour demands and offset it somewhat by raising prices. That was part of the social compromise between capital and labour. This had to be broken for capitalism to repair itself.

But to introduce competition, one could no more rely on start-up firms than one could expect a small internet venture capitalist to destroy the Bill Gates oligopoly. It meant opening up the US to foreign competition from rising German and Japanese firms. Detroit has experienced several crises, each worse than the last, as a result of this. But because American capital has preferential access to the American state, each crisis has resulted in a bail-out for US firms, but not their overseas competitors.

Heightened competition had another interesting effect – it reduced the profitability of investment in productive industry. It also reduced prices, so that price growth stabilised in the 1980s. Overall, then, low wages, low prices and technological dynamism looked like a satisfactory way for the system to survive.

But then, at the other end of the capital cycle, a new problem arose. The US economy and culture was dependent on conspicuous consumption. Consumption accounted for 70% of the dynamism of the US economy (I don’t know how Harvey measured this), but where would consumerism come from if wages stagnated? The society became dependent on speculation and debt.

A new set of financial innovations had to be developed to resolve not only the problem of allocating capital efficiently, but also ensuring that at the other end, the problem of effective demand was dealt with. Thus, financial institutions would lend money to developers at the same time as they lent money to house-buyers, therefore controlling both the demand for and the supply of housing. But even if buyers’ credit-ratings were poor, the financial institutions still had to lend to them in order to realise the investment they’d made in the developers. This partially accounts for the drive toward deregulation and the subsequent ‘subprime crisis’.

There is also the question of upper class income. Wages are depressed, but this means that more wealth is accumulated by the rich. Not only that, but successive governments from Reagan to Bush II engaged in a sort of ruling class Keynesianism, slashing taxes for the rich and financing it through debt. The question, then, is what do the rich do with their money. They invest it, of course, but increasingly not in productive industry which, as mentioned before, yields poorer profits these days. Instead they invest it in ‘asset values’, which are ponzi-like in the sense that any investment automatically raises the value of of the asset being invested in, and thus they have a propensity to produce stock market bubbles. These investment strategies require yet more financial innovation.

This has naturally produced several financial crises, variously annotated as ‘Black Monday’, ‘Oh Shit Tuesday’ and ‘Dead Bankers Wednesday’. It has led to the collapse of major financial institutions long before 2008, notably the Savings and Loans crisis in the 1980s. Between 1987 and 2002, over 1000 banks went under in the US, and the total bailout cost $2bn. Noticeably the worst crises over the last few decades have been property-led, as capitalists have preferred to invest in property rather than productive capital as such, and this has certainly been true of the latest crash and recession. The one thing that is different this time is that the crisis started in the US and went global this time.

This leaves the question of what the ruling class can do now to save its position. One option is to hang in there, defend their assets, and hope to restore something like their previous condition of profitability with the same basic structures of accumulation. Those who have preserved themselves and kept enough money are now in a position to buy up assets very cheap, and this new, narrower class is in formation, a ‘bankocracy’ based on a set of boutique investment banks which will take the place of Lehman Brothers et al.

The assets being given to the banks by various states are not by and large being used to restore lending, but to shore up the existing banks, enable them to buy up others, and consolidate existing class power. They will try to come out of the current crisis with a slicker and more careful mode of control, and are increasingly centralising credit, integrated into the state, but under the control of central bankers. Politically, this class will have tremendous power. They can, if they want, push for the clobbering of labour and the evisceration of remaining social democratic protections, especially if this is necessary to restore the position of financial institutions.

There is one serious difficulty for this solution. If there is going to be high unemployment – currently 10% in the US, probably 15% by the year end – then where will effective demand come from? The credit system can no longer back it up. This leads to other forces coming to the fore, arguing for a real Keynesian programme of deficit-financing that is not the same as bailing out the banks, a stimulus programme intended to create full employment and redistribute wealth and incomes. But if this is the only way out of the problem, the US has a problem – they have an enormous debt problem before they start, and politically it is very difficult to defend the redistribution of wealth, even the modest kind that Obama supports.

Moreover, for the new phase of accumulation to be viable, it has to involve a total re-design of urban structures so that city life is commensurate with ecological survival. But neither capital nor its political leadership has the foresight and imagination to engage in such a plan. Instead, politicians look for technological fixes to the environmental problem. Interestingly, those who can afford the Keynesian solution are states like China and nearby south-east Asian economies. So, China could potentially lead the system out of the mess.

There are thus two prospects facing the working class. If there is to be a neo-neoliberal solution, then it will so immiserate most workers that some sort of popular uprising is surely indicated. Such a concentration and centralisation of wealth and power is full of peril for us. If there is to be a Keynesian solution, then we have to intervene to see what we can get out of it, and how far it can be radicalised. Keynes supported full employment, a shortening of the working day, the redistribution of income, and it may well be that the adoption of a Keynesian solution will open up opportunities for us to demand these things. There don’t appear to be any other options for capital at the moment.

Related posts:

1. Transnational capital and the current crisis

David Harvey has recently published two notable books. One, A Companion to Marx’s Capital, is essentially a text version of his introductory course of lectures on Capital. (The book is not a transcription of the lectures, but a written work encompassing the same territory.) The other is an approach to the analysis of the current crisis: The Enigma of Capital and the Crises of Capital. While without having had the time to give either book more than a cursory read, I think they can both be highly recommended. The Enigma of Capital, in particular, will certainly be receiving some more extended attention on this site.

In the meantime, the following is Harvey’s Introduction to the 2008 Pluto Press edition of the Communist Manifesto. As in the above-mentioned works, his concern is to relate Marx’s analysis to present conditions in service of a broadly political task.

For our times, it becomes necessary to pay attention to those processes of class formation and re-formation occurring with such dramatic force in China, Indonesia, India, Vietnam, the ex-Soviet Bloc as well as throughout Latin America, the Middle East and Africa. Nor should we presume these days, if we ever should have, that class formation is confined within nation states, since cross-border and  even transnational relations among workers moving within migration streams and forming diasporas are every bit as intricate as those to be found within a capitalist class that many now regard as being almost by definition transnational.

We have come to accept unthinkingly that a healthy economy grows and that growth is therefore normal and good, no matter what the social, political or environmental consequences. But it boggles the mind to imagine what the world will be like after another hundred years of compound growth at, say, 2–3 per cent per year. Plainly, some other way must be found to organise the social order if humanity is to survive.

Communists are all those who work incessantly to produce a different future to that which capitalism portends. While institutionalised communism may be dead, there are by this measure millions of communists among us…. We communists are the persistent spectral presence….

Introduction to the Communist Manifesto

David Harvey

The Communist Manifesto of 1848 is an extraordinary document, full of insights, rich in meanings and bursting with political possibilities. Millions of people all around the world – peasants, workers, soldiers, intellectuals as well as professionals of all sorts – have, over the years, been touched and inspired by it. Not only did it render the dynamic political-economic world of capitalism more readily understandable, it moved millions from all walks of life to participate actively in the long, difficult and seemingly endless political struggle to alter the path of history, to make the world a better place through their collective endeavours. But why re-publish the Manifesto now? Does its rhetoric still work the old magic it once did? In what ways can this voice from the past speak to us now? Does its siren call to engage in class struggle still make sense?

While we may not have the right, as Marx and Engels wrote in their Preface to the 1872 edition, to alter what had even by then become a key historical document, we do have both the right and the political obligation to refl ect upon and if necessary re-interpret its meanings, to interrogate its proposals, and, above all, to act upon the insights we derive from it. Of course, as Marx and Engels warn, ‘the practical application of the principles will depend as the Manifesto itself states everywhere and at all times, on the historical’ (and, I would add, geographical) ‘conditions for the time-being existing’. We are certainly now, as of 2008, in the midst of one of those periodic commercial crises ‘that put on trial’, as the Manifesto notes, ‘each time more threateningly, the existence of the entire bourgeois society’. And food riots are breaking out all over, particularly in many poorer nations, as food prices rise uncontrollably. So conditions seem propitious for a re-evaluation of the Manifesto’s relevance. Interestingly, one of its modest proposals for reform – the centralisation of credit in the hands of the state – seems to be well on the way to realisation, thanks to the collective actions of the US Federal Reserve, the European Central Bank and the central banks of the other leading capitalist powers in bailing out the world’s financial system (the British ended up nationalising their leading ailing bank, Northern Rock). So why not take up some of the other equally modest but wholly sensible proposals – such as free (and good) education for all children in public schools; equal liability of all to labour; a heavy progressive or graduated income tax to rid ourselves of the appalling social and economic inequalities that now surround us? And maybe if we followed the proposal to curb the inheritance of personal wealth, then we might pay far more attention to the collective inheritance we – such as free (and good) education for all children in public schools; equal liability of all to labour; a heavy progressive or graduated income tax to rid ourselves of the appalling social and economic inequalities that now surround us? And maybe if we followed the proposal to curb the inheritance of personal wealth, then we might pay far more attention to the collective inheritance we pass on to our kids of a decent living and working environment as well as a natural world that maintains both its fecundity and charm.

So let us take this text, fashioned in the gloomy days of January 1848 in Brussels and focus its laser gaze upon on our own actually existing situation in London and Leeds, Los Angeles and New Orleans, Shanghai and Shenzhen, Buenos Aires and Cordoba, Johannesburg and Durban…. Here I am in a brilliantly lit New York City on 31 January 2008 – 160 years almost to the day after Marx put the final touches to the Manifesto – sitting down to write a new introduction to this well-thumbed text. I do so knowing that there are plenty of other past and present splendidly learned introductions available. But too many of the recent ones, in my judgement, view the Manifesto as a mere historical document whose time has passed, whose vision was either faulty or at least so deeply questionable as to make it irrelevant to our more complicated if not sophisticated times. The best we can do, when not cavilling at the text’s obvious omissions and its equally obvious lapses with respect to what is now considered politically correct, is to admire the prose, annotate the references, trace the infl uences it encapsulated and projected, and bury the central political message either under a blanket of wistful leftist nostalgia or under a mass of academic footnotes. The collapse after 1989 of actually existing communisms and the conversion of those communist parties that do remain in power, as in China and West Bengal, into agents for a ruthlessly exploitative capitalism, have indeed cast a heavy pall over the political tradition that the Manifesto spawned. Who needs a communist manifesto after all of that burdened history?

But look around us and what do we see? Here in New York City the Wall Street bonuses have just been added up – a cool $33.2 billion (only a little less than the year before) for investment bankers who made a mess of the world’s financial system and piled up fi nancial losses now estimated to be at least $200 billion and daily mounting (some, like the International Monetary Fund, say it will be a trillion dollars lost before it is all over). When the bankers (with venerable names such as Merrill Lynch, Citicorp and the now defunct Bear Stearns) were first confronted with their diffi culties in the summer of 2007, the world’s central banks (led by the US Federal Reserve) rushed in with massive amounts of short-term credit and then cut interest rates to bail them out. Meanwhile at the source of the trouble lies a sub-prime mortgage crisis in the US in which close to 2 million people have already lost their homes to foreclosure (with many more in waiting) without any help forthcoming from anywhere (apart from a few tardy and largely symbolic gestures of support in Congress and a few band aids from fi nancial institutions and understandably concerned local governments). The initial foreclosures were heavily concentrated among low-income African-Americans and women (particularly single-headed households) in the poorer sections of US cities where they leave a trail of boarded up and vandalised houses in totally devastated neighbourhoods. It begins to look as if a ‘fi nancial Katrina’ has battered multiple cities around the USA. The society of ‘the too much’, of ‘overproduction’ and excessive speculation, has plainly broken down and reverted, as it always does, to ‘a state of momentary barbarism’. Some of the corporate heads that innovated us into this mess have lost their jobs. But they had to pay nothing back of the many millions they earned in the halcyon years and some received incredibly generous golden handshakes when they stepped down – $161 million in the case of Stan O’Neal of Merrill Lynch and $40 million for Charles Prince of Citicorp (the head of the failed British bank Northern Rock departed with £750,000). Those foreclosed upon merely receive an extra tax bill, because
forgiveness of a debt is assessed as income. And just to add insult to class injury, those companies and lawyers employed in the ‘foreclosure mill’, as it is now called, are reaping the handsomest of profits. Who said class differences (neatly intertwined, as is all too often the case, with race and gender) are irrelevant to the sociality of our postmodern times?

This is what makes a contemporary reading of the Manifesto so astonishing, because the world the Manifesto describes has in no way disappeared. Do we not, after all, live in a world of turbocharged capitalism where greed, selfishness, competitive individualism and the lust for loot from any short-term gain at no matter whose or what else’s expense surrounds us at every turn? Capitalism, Marx and Engels observe, ‘cannot exist without perpetually revolutionising the instruments of production, and thereby the relations of production, and with them the whole relations of society’ (including those of consumption). The resultant perpetual ‘uninterrupted disturbance of social conditions’, accompanied by ‘everlasting uncertainty and agitation’ generates incredible volatility in personal and local economic fortunes (to say nothing of endemic financial crises and dizzying gyrations in stock values). With wages ‘ever more fl uctuating’ and livelihoods ‘more and more precarious’, personal insecurities (over jobs, social provision, pensions) and collective anxieties (over others who seem to threaten us) proliferate, militating against the civilised treatment of immigrants, dissidents and all those others who look or behave in a mode of difference. No wonder ‘all that is solid’ seems to be perpetually ‘melting into air’. And does not the pervasive power and influence of corporate capital continue to strip ‘of its halo every occupation’ hitherto trusted to tell us the truth – ‘the physician, the lawyer, the priest, the poet, the man of science’ as well as the professors, pundits and media gurus to say nothing of all those bought politicians who do the bidding of moneyed interests? Is it not sad to note how much of what we call culture is ‘a mere training to act as’ (or attach oneself to) ‘a machine’ (or in our times an electronic device) and that the family, held up to us by sentimentalists as the solid rock of a civilised society, is ‘reduced to a mere money relation’, even when it is not mired in myriad hypocrisies? Do we not also feel more than a little alienated in a world where ‘no other nexus between man and man’ exists ‘than naked self-interest, than callous cash payment’, where people are viewed merely as objects and commodities in the market place, and where most of us work to create the wealth of others? What can we say about a world in which most labour has ‘lost its charm’ and relations of production have become merely ‘despotic’, and where all of us, from janitor to banker, are increasingly positioned as mere appendages to an ever-expanding and constantly accelerating capitalist accumulation machine that blindly continues on its path without the least concern for social or environmental consequences? Is it not perplexing that all of this is to be found in the midst of the greatest productive capacity, wondrous powers of transport and communications, and scientifi c-technical understandings that could surely be harnessed to permit a decent life and a safer future for all? And is it not, finally, deeply troubling to realise that the freedom and liberty promised again and again by the apologists and politicians mean nothing more than the freedom of the market and of market choice (dependent upon ability to pay) coupled with that ‘single, unconscionable freedom – free trade’?

Communism may be declared dead, but a violent, brutalising, and perpetually revolutionising capitalism still flourishes. Marx and Engels in the Manifesto found a brilliant way to reveal to us what that capitalism was and is fundamentally about and how it came to be. In so doing they found an inspirational language with which not only to resist capitalism’s class oppressions and penchant for creative destruction, but also to illuminate the way to transform capitalism, with all of its remarkable achievements (achievements that Marx and Engels freely acknowledged in their own time as we must surely do, even more so, in ours), into something radically different and far more humane. Given the class character of this monstrous system, they also took the clear, logical and obvious step of insisting that the only way to engage in this transformative project was to wage a politics of class struggle. To the degree that the circumstances of their dystopian account have been ameliorated over the years, and the conditions they describe do not fully pertain, then it is to the grand history of popular resistance and class struggle since 1848 that we must bend a knee.

Imagine, furthermore, the shock of recognition with which the laid-off steelworkers in Pittsburgh, Sheffi eld and Essen, or the once solidly employed textile workers in the mills of Manchester, Mumbai, Mulhouse and South Carolina, would read the following passage:

All old-established national industries have been destroyed or are daily being destroyed. They are dislodged by new industries, whose introduction becomes a life and death question for all civilised nations, by industries that no longer work up indigenous raw material, but raw material drawn from the remotest zones; industries whose products are consumed, not only at home, but in every quarter of the globe. In place of the old wants, satisfi ed by the production of the country, we find new wants, requiring for their satisfaction the products of distant lands and climes. In place of the old local and national seclusion and self-sufficiency, we have intercourse in every direction, universal inter-dependence of nations.…

The bourgeoisie, by the rapid improvement of all instruments of production, by the immensely facilitated means of communication, draws all, even the most barbarian, nations into civilisation. The cheap prices of commodities are the heavy artillery with which it batters down all Chinese walls, with which it forces the barbarians’ intensely obstinate hatred of foreigners to capitulate. It compels all nations, on pain of extinction, to adopt the bourgeois mode of production; it compels them to introduce what it calls civilisation into their midst, i.e., to become bourgeois themselves. In one word, it creates a world after its own image.

Nowadays, of course, it is goods from China that are battering down our walls, as we go off to shop in the Wal-Mart store (where ‘Made in China’ predominates) to seek satisfaction for all those new wants for products drawn from distant lands and climes. The Manifesto’s prescient description of what we now call globalisation (with its cognates of off-shoring and deindustrialisation and global interdependence) suggests a certain continuity within the historical geography of capitalism from 1848 until today. Meanwhile nation states, facing an increasing centralisation of corporate capitalist power and expanding populations, become even more enmeshed in capitalist rules of the game through international agreements like the World Trade Organisation, NAFTA and the European Union, backed up by powerful international institutions (such as the International Monetary Fund). These forces all connive at the breaking down of trade barriers while consolidating a rule of law in which the rights of private property and the profit rate trump all other forms of human right you can think of. Competition between states and industrial regions (Bavaria, Silicon Valley, the Pearl River delta, Bangalore) re-enforces this capitalist logic of exploitation and imprints capitalist, and in these times distinctively neoliberal, values ever deeper in our psyches. Failing all this, the powers of the leading imperialist states are deployed to violently inflict the corporate agenda (check out the constitution imposed on Iraq in the first phases of US occupation) upon the world. And lest we think such violence is new or idiosyncratic to George W. Bush and his now notso-merry crew of disgraced neoconservative theorists, consider what that archetypal liberal President Wilson of the United States had to say in 1919:

Since trade ignores national boundaries and the manufacturer insists on having the world as a market, the flag of his nation must follow him, and the doors of the nations which are closed against him must be battered down. Concessions obtained by financiers must be safeguarded by ministers of state, even if the sovereignty of unwilling nations be outraged in the process. Colonies must be obtained or planted, in order that no useful corner of the world may be overlooked or left unused.1

How far capitalism had advanced down the path of globalisation and construction of the world market by 1848 was, of course, miniscule compared to the enormous strides made since then. So how was it that Marx and Engels could produce such a prophetic document? All too aware of the storm clouds of capitalist crisis and social revolution then gathering across Europe, they were charged with writing a manifesto for a pan-European and mainly clandestine movement of those who called themselves communists. Since nobody at that time had any clear idea of what communism might mean, the door was open for a creative shot at defining the nascent movement’s mission. Marx’s critical studies of political economy (mainly British) and of the revelatory writings of the utopian socialists (mainly French though Robert Owen was also important) had alerted him to the nature of the fundamental driving forces behind capitalist development, and this, coupled with Engels’ first-hand knowledge of Manchester industrialism (set out in 1844 in The Condition of the Working Classes in England), allowed them both to glimpse a vision of what the world would be like if it all became like Manchester, as it surely would if there were no resistance.

Marx (for it was he who, by Engels’ account, did the final writing) produced a brilliant synthesis of insights, a succinct description, in immediately recognisable and the simplest of terms, of what capitalism was and still is fundamentally about, where it had come from, what its potentialities were, and where it was likely to go to in the absence of coherent opposition on the part of those who created the wealth, the working classes. Go now to the Pearl River delta (with factories employing as many as 40,000 workers), the maquila zones of Mexico, the clothing factories in Bangladesh, the sewing shops of the Philippines, the shoe producers in Vietnam, the mines of Brazil and Orissa, and dare to say they were wrong!! Two billion proletarians have been added to the global wage labour force over the last 20 years – the opening of China, the collapse of the erstwhile Communist Bloc and the incorporation of formerly independent peasant populations in India and Indonesia as well as throughout Latin America and Africa playing a crucial role. A no-holds-barred corporate capitalism has re-emerged over the last 30 years to take advantage of this situation. In China, Bangladesh, Indonesia, Guatemala and Vietnam, contemporary descriptions of the catastrophic conditions of labouring could be inserted into Marx’s chapter on ‘the Working Day’ in Capital without anyone being able to tell the difference. And the most rabid forms of exploitation rest, as is so often the case, on the backs of women and people of colour. Meanwhile, in the advanced capitalist countries, those who once had proud positions as unionised workers in powerful industries find themselves living in the midst of the wreckage of processes of deindustrialisation
that have destroyed whole communities and left cities like Detroit, Baltimore, Sheffield and Essen, as well as a once thriving textile industry in Mumbai, a legacy of empty factories and warehouses awaiting hopeful conversion into condominiums, casinos or shopping malls with perhaps a museum of industrial history to house memories, both brutal and triumphant, of the class war once waged with that particular form of industrial capitalism.

So what do we make today of the obvious inference that the only way to resist these depredations is to wage class struggle and that to do so workers of the world must unite? ‘Class struggle’ is, admittedly, a blanket term that conceals myriad variations. To simply parrot the phrase without doing the requisite analysis as to exactly what it means in different places and times is to disrespect the analytic tradition of historical materialism that Marx and Engels bequeathed us. Classes are always in the process of formation and re-formation and while on the one hand Marx and Engels thought they detected a tendency towards a grand polarisation between bourgeoisie and proletariat emerging, they also recognised forces of fragmentation and slow dissolution of past class forms. Western Marxists these days, of course, are wont to complain that the working class has disappeared. But what has simply happened is that technological changes, the shift towards a service economy and widespread deindustrialisation have seriously weakened traditional working-class institutions in those countries where Western Marxists dwell, while massive processes of proletarianisation have gone on elsewhere. For our times, therefore, it becomes necessary to pay attention to those processes of class formation and re-formation occurring with such dramatic force in China, Indonesia, India, Vietnam, the ex-Soviet Bloc as well as throughout Latin America, the Middle East and Africa. Nor should we presume these days, if we ever should have, that class formation is confined within nation states, since cross-border and  even transnational relations among workers moving within migration streams and forming diasporas are every bit as intricate as those to be found within a capitalist class that many now regard as being almost by definition transnational. These are the sorts of situations and processes we need to analyse with the greatest care if we are to accurately gauge the economic situation and calculate the political possibilities of our time.

Marx and Engels also liked to argue that the working classes could (or should?) claim no country since they had long been deprived of access to and control over the means of production. But even in their time, as they recognised towards the end of the Manifesto, national differences clearly mattered. They recognised that uneven geographical development of both bourgeois and working-class power were creating different conditions of political struggle in, for example, England, France, Poland, Switzerland and Germany. And so it is today. Nations are pitted against nations, regions against regions, cities against cities, if only in the competitive struggle to attract investment, and workers, desperate for jobs, are corralled into supporting local alliances to promote development packages and projects that offer sweet subsidies to highly mobile multinational capital to come to or stay in town. And to the degree that capitalists can distract attention from their own perfidious role in the ruthless exploitation of labour power in the workshops of production, by blaming immigrants, foreign competition and the ‘uncivilised’ habits of despised others for all the problems that local workers face, so the prospective unity of the working classes is rendered far more difficult. The divide and rule tactics of exploiting not only national but also ethnic, gender and religious differences within the working classes take an inevitable toll and all too often end up fomenting and even entrenching a politics of exclusions rather than of incorporation into a global dynamic of class struggle.

Furthermore, as the example of the Wall Street bonuses and the home foreclosures with which I began demonstrates, the field of class struggle stretches way beyond the factory and into the nether corners of everyone’s daily lives. The class violence (articulated through racism and sexism) entailed in the foreclosure wave could not be clearer. As the Manifesto concedes, workers, having hopefully earned a living wage, are then ‘set upon by other portions of the bourgeoisie, the landlord, the shopkeeper, the pawnbroker’ and, we should add, the masters of credit, for yet another round of exploitation. Predatory activities of this sort played, however, a primary role in the historical emergence of capitalism. It was the merchant capitalists who robbed much of the world not only of silver and precious metals but also of the products of labour produced under all manner of other social conditions in ‘distant lands and climes’. It was the usurers who helped undermine feudal power and thereby release a huge army of retainers into the wage labour force. This ‘primitive accumulation’ did not stop, however, with the rise of industrial capitalism. The depredations of imperialism, colonialism and neo-colonialism continue to this day to rob much of the rest of the world of value, of cultural and natural resources in order to support the ever-escalating affluence of the capitalist classes, particularly in the core regions of global capitalism (though now countries like Mexico, China, Russia and India have their aliquot share of billionaires). Not content with robbery in the nether regions of the world, corporate capitalists and financiers, as the foreclosure example demonstrates, are all too willing to cannibalise wealth from within their own territories (just look at what has been happening as workers lose not only their houses but also their hard-won pension and healthcare rights in the US and Europe). These on-going predatory practices of what I call ‘accumulation by dispossession’ are everywhere apparent and spark an enormous variety of struggles against the loss of assets here, environmental and resource degradations there and outright thievery, fraud and violent robbery somewhere else.2

While the differences and varieties of struggle are palpable, we must perforce recognise, Marx and Engels insist, the commonalities underlying our diverse fates and fortunes. It is crucial that we become politically aware as to the fundamental nature of capitalism and the possibilities for transformation latent within it. This is the political task that the Manifesto so cogently addresses. And if Marx and Engels return to the proletariat again and again as the central agent of radical and transformative change it is for two very specific analytic reasons that hold as powerfully true today as they did in 1848. The first lies in the simple fact that the profit that capitalists perpetually seek ultimately rests on the production of a surplus product and of surplus value (profit) through the exploitation of living labour in the act of production. But by virtue of this pivotal position, workers also have the potential power to bring the capitalist system to a halt and thereby
radically transform it because it is their labour and their labour alone that powers the system onwards.

To be sure, there are all sorts of other struggles going on around us that distract attention from this central point of struggle. There is persistent tension within the capitalist class as to how the surplus might be distributed, for example, between fi nanciers, merchants, industrialists, landlords, service providers, the state, and the like. From time to time major reforms have to be instituted to curb the excesses of this or that faction (e.g. the financiers in the present conjuncture  clearly need to be reined in by regulation). And there are similar struggles between factions within the working classes, pitting industrial, agricultural, service and state employees against each other, to say nothing of the fomented nationalist and ethnic differences that pit, for example, US against Chinese workers in the desperate search to procure and protect jobs. Geo-economic and geopolitical conflicts between the different geographical regions of capital accumulation (everything from inter-urban competition to regional class alliances and transnational groupings such as the European Union, East Asia, NAFTA and Mercosur) also periodically erupt to obscure other dimensions of struggle. But at the end of the day, Marx and Engels logically conclude, the only form of class struggle that can radically change the system is one that is led by all those who produce the wealth of others in general and the capitalist class in particular, and that is defi ned as the proletariat.

This then poses a difficult organisational question: how can all these proletarians located all around the world and working under the most disparate of circumstances come together to change the world? On this point the Manifesto has some interesting ideas. Struggle, Marx and Engels suggest, begins with the alienated individual who understands precisely how, to cite the slogan made famous by contemporary feminists, the personal is political. Passivity in the face of thievery, domination and exploitation is no option. Assembled together in factories, fields, offices and institutions, individuals come together and develop a collective understanding of the common sources of their discontents and frustrations. From this they begin to sense the class identity implicit in their varied  experiences and on that common basis start to articulate collective arguments and demands. And as they build collective organisations to agitate for satisfaction of their wants, needs and creative desires, they construct territorial groupings – in neighbourhoods, cities, metropolitan regions – within and from which a  broader political and cultural commonality arises. This new sociality, when linked together with other distinctive regions by the ever-more sophisticated means of transport and communications that capitalism constructs to facilitate commodity exchange and the circulation of capital, opens up the prospect to conquer the nation state as a dominant container of power. But political agitation cannot stop at that geographical scale either, for only when workers of the world can unite around a common vision (albeit one that rests on enormous differences) can capitalism be tamed and the communist vision of an alternative come to fruition. The organisational form of the class struggle has to be prepared, in short, to ‘jump geographical scales’ and move smoothly from the local to the global and back again.

The history of communist movements demonstrates all too tragically what happens when the movement forgets that these different moments and geographical scales of political struggle are dialectically integrated and mutually constitutive of each other. If the way the personal is political fails to build towards an open dynamics of regional cultural consciousness formation, then the organisational schema proposed in the Manifesto fails. Even more importantly, if the actions taken in the name of the nation state, once captured by proletarian powers, do not resolve the alienations and frustrations of individuals, then the local and regional organisational forms painstakingly and lovingly built in a spirit of revolutionary hope become hollowed out, static and unresponsive bureaucratic shells. The necessity for both progressive and permanent revolutions (of the sort that capitalism so successfully and vigorously prosecutes through its own dynamism) cannot be neglected. Failing this, the revolutionary movement relapses into stasis (as it did in the ex-Soviet Union) and becomes an all-too easy target for capitalist counter-revolution. The dialectics of organisational form outlined in the Manifesto require careful elaboration and application if the revolutionary movement is to succeed.

But there is a further lesson to be learned from the Manifesto’s form of analysis. Consider, for example, how the bourgeoisie came to power. Merchant capital went outside of the constraints of feudal power in its explorations and exploitation of the world market. In effect this was a geographical strategy that gained power from outside of the bastions of feudalism and then, having surrounded the latter, forced them to surrender to bourgeois power. The state that protected feudal interests was captured and transformed and put to bourgeois uses (is the US state as currently constituted anything other than an executive committee for the protection of corporate interests?). The lesson for any revolutionary movement is that the territorialisation of political struggle, the occupation of this or that region or nation state as a staging ground for broader assaults upon the political power of capitalist elites, is important. While socialism in one country (let alone city) may be impossible, this does not mean that the territorialisation of political struggle, the occupation of this or that city, region or nation state as a staging ground for broader assaults upon the political power of capitalist elites, is irrelevant. But there were many other elements in the situation that permitted the bourgeois rise to power – the existence of a landless labour force, a rising market demand, an influx of money and gold – and it was into this situation that those armed with a certain money power could step and position themselves as full- fledged capitalists. As Marx notes elsewhere, radical social transformations such as the rise of capitalism or the transition to communism, do not occur in empty space but depend crucially on the prior construction of the conditions that make such transformations possible. While Marx and Engels do not go on to make the point specifically, the advantages Britain possessed in all these respects undoubtedly played a crucial role in explaining why a nascent capitalism everywhere could most easily take root in that particular part of the world from the sixteenth century onwards. Furthermore, capitalists when hit with crises of overproduction and over- accumulation, as they inevitably are, once again ‘go geographical’ in expanding their geographical range of market and investment possibilities. This tendency to look for what I call ‘a spatial fix’ to problems of overproduction has played an incredibly important role in the perpetuation of the globalisation processes that Marx and Engels so succinctly described in 1848.3

The implication is that communism has to emerge from within the nexus of possibilities that capitalism inevitably creates. It has to be alert to those moves that the bourgeoisie makes to deal with the crises it foments – such as the current moves to centralise credit in the hands of the state apparatuses in order to control the financial crisis – and treat these moves as political opportunities to seize hold of new powers and to define new trajectories of social change. Furthermore, communism has to take root in those regions where the conditions are most favourable for its development. It then has to pursue a territorial and geographical strategy to surround and undermine the central loci of capitalist power. Unfortunately, in the class struggles that have been waged across the world these last 200 years, capitalists have again and again used their superior command over space as a way to beat down revolutionary movements in particular places (Chile, Portugal and Mozambique in the 1970s come immediately to mind). Workers of the world must not only unite to pursue their revolutionary claims: they must also devise sophisticated political and geopolitical strategies to win the right to construct a different kind of world order.

But to what, exactly, should the workers’ movement lay claim? Let us look more closely at what capitalists actually do. They begin the day with a certain amount of money, they go into the market place and buy labour power and means of production, they select (purchase) a technology, set these all to work to produce a new commodity and then sell that commodity for the original money plus a profit (a surplus value). The next day they wake up and have to decide what to do with the surplus money they gained the day before. They face a Faustian dilemma: reinvest to get even more money or consume their surplus away in pleasures. The coercive laws of competition force them to reinvest because if one does not reinvest then another surely will. To remain a capitalist, some surplus must be reinvested to make even more surplus. Successful capitalists usually make more than enough surplus to reinvest in expansion and satisfy their desire for pleasure. But the result of perpetual reinvestment is the expansion of surplus production at a compound rate – hence all the logistical growth curves (money, capital, output and population) that attach to the history of capital accumulation.

The politics of capitalism are affected by the perpetual need to find profitable terrains for capital surplus production and absorption. In this the capitalist faces a number of obstacles to continuous and trouble-free expansion. If there is a scarcity of labour and wages are too high then either existing labour has to be disciplined (technologically induced unemployment or an assault on organised working class power – such as that set in motion by Thatcher and Reagan in the 1980s – are two prime methods) or fresh labour forces must be found (by immigration, export of capital or proletarianisation of hitherto independent elements in the population). New means of production in general and new natural resources in particular must be found. This puts increasing pressure on the natural environment to yield up the necessary raw materials and absorb the inevitable wastes. The coercive laws of competition also force new technologies and organisational forms to come on line all the time, since capitalists with higher productivity can out-compete those using inferior methods. The perpetual revolutions in technologies that the Manifesto describes are destabilising to the point where they can threaten profitability. Innovations also defi ne new wants and needs, reduce the turnover time of capital and the friction of distance. This last effect extends the geographical range over which the capitalist is free to search for expanded labour supplies and raw materials. If there is not enough purchasing power in the market then new markets must be found by expanding foreign trade, promoting new products and lifestyles, creating new credit instruments and debt-fi nanced state and personal expenditures. If, finally, the profit rate is too low, then state regulation of ‘ruinous competition’, monopolisation (mergers and acquisitions) and capital exports to fresh pastures provide ways out.

If any one of the above barriers to continuous capital circulation and expansion becomes impossible to circumvent, then capital accumulation is blocked and capitalists face a crisis: capital cannot be profi tably reinvested, accumulation stagnates or ceases and capital is devalued (lost) and in some instances even physically destroyed. Failure to negotiate the labour barrier produces a profit squeeze crisis because higher wages cut into profits; the failure to find ways to  negotiate natural resource and waste disposal barriers produces environmental crises (sometimes referred to as ‘the second contradiction of capitalism’); rapid technological changes produce a falling rate of profi t problem; lack of (usually credit-fuelled) effective demand generates a crisis of underconsumption. There is no singular theory of crisis formation within capitalism, just a series of barriers that throw up multiple possibilities for different kinds of crises. At one particular historical moment conditions may lead to one kind of crisis dominating, but on other occasions several forms can combine and on still others the crisis  tendencies get displaced spatially (into geopolitical and geo-economic crises) or temporally (as fi nancial crises). The effect, however, is always one of the devaluation of capital. Devaluation can take a number of forms. Surplus commodities can be devalued or destroyed, productive capacity and the assets can be written down in value and left unemployed, or money itself can be devalued through infl ation. And in a major crisis, of course, labour stands to be devalued through massive unemployment.

Once the barriers are circumvented or dissolve, accumulation typically revives at its compound rate. We have come to accept unthinkingly that a healthy economy grows and that growth is therefore normal and good, no matter what the social, political or environmental consequences. But it boggles the mind to imagine what the world will be like after another hundred years of compound growth at, say, 2–3 per cent per year. Plainly, some other way must be found to organise the social order if humanity is to survive.

So what, then, should a revolutionary movement demand? The answer is simple enough in principle: greater collective and democratic control over what is produced, how and by whom as well as strong command over the use of whatever surpluses are produced. To have a surplus product is not a bad thing: indeed, in many situations a surplus is crucial to adequate survival and it is only with an adequate surplus that many of the good things in life can be provided (cities, for example, could not exist without the mobilisation and concentration of a surplus product). Throughout capitalist history, some of the surplus value created has been taxed away by the state and in social democratic phases that proportion rose significantly putting much of the surplus under state control. At least some of it went to purposes (such as universal healthcare, social housing and education) that benefited hitherto oppressed, marginalised and excluded populations. The whole neoliberal project over the last 30 years has been oriented towards rolling back those benefits and establishing private control over the use of the surplus. The data for all OECD countries show, however, that the share of gross output taken by the state has been roughly constant since the 1970s. The main achievement of the neoliberal assault, then, has been to prevent the state share expanding in the way it did in the 1950s and 1960s in the leading capitalist countries (even including the United States). One further response on the part of the capitalist class has been to create new systems of governance that integrate state and corporate interests and, through the application of money power, assure that control over the disbursement of the surplus through the state apparatus favours corporate capital (like Halliburton and the pharmaceutical companies) and the upper classes. Increasing the share of the surplus under state control will only work if the state apparatus itself is brought back under collective democratic control.

How the surplus is distributed and used is only one of the several pressing political issues for our times. We live on a planet of burgeoning slums, sites of teeming human possibilities and innovative activities in the midst of total degradation, violence, criminality and despair, alongside a rising tide of unconstrained and in some instances criminally profl igate consumerism that seemingly knows no bounds. The astonishing inequalities that now exist clearly need to be rectifi ed. But the fragmentations encountered make it more and more difficult to imagine a collective politics of hope let alone a well-organised class struggle. In the rapidly urbanising developing world in particular, the city

is splitting into different separated parts, with the apparent formation of many “microstates”. Wealthy neighborhoods provided with all kinds of services, such as exclusive schools, golf courses, tennis courts and private police patrolling the area around the clock intertwine with illegal settlements where water is available only at public fountains, no sanitation system exists, electricity is pirated by a privileged few, the roads become mud streams whenever it rains, and where house-sharing is the norm. Each fragment appears to live and function autonomously, sticking firmly to what it has been able to grab in the daily fi ght for survival.4

But important though the politics of redistribution of wealth may be, it is, in Marx and Engels’ judgement, far too limiting as a political project. What distinguishes distributive socialism from communism is that the communists focus on the organisation and politics of production in general via a critique of the manner of capitalist production of surplus value and surplus product in particular. In Marx and Engels’ time, simple acquaintance with what life was like in the factories, fields and workshops of the world, as well as in the living spaces of an inadequately remunerated working class, was enough to provoke the outrage of the bourgeois factory and public health inspectors as well as the general public once these conditions were revealed for all to see. And this is the fundamental condition that communists seek to change. Those who controlled and used the means of production and used them for their own exclusive benefit were plainly at fault and it was therefore the mission of the communist movement to eradicate that class privilege and organise production through the association of workers  backed by democratic control of the state apparatus (this is as far as the Manifesto goes). We now know that such a general alternative plan was not and is not so easy to devise and implement. But the conditions of labouring and living in much of the world are now in such a parlous state as to suggest that the communist imperative to revolutionise the organisation of production and consumption on non-capitalist lines is more crucial now than it ever was in 1848. But to this there is now an added urgency. The compound rates of growth implied by the capitalist requirement to produce surplus value ad infi nitum via the production of a surplus product, are daily growing more threatening to planetary ecosystems and to the provision of basic requirements for energy, water and clean air. The compounding rates of capitalist growth cannot last for ever and something new – a steady state economy, for example, which would be totally incompatible with capitalism – has to be devised and that will require, whether we regard ourselves as communists or not, addressing the fundamental question of how to organise both production and consumption on more rational, equitable and sane lines. The warning signs of trouble in the bourgeois construction of paradise are all around us. Even a casual reading of them surely suggests that Marx and Engels were right to stress then as we should even more so now, that it is high time for capitalism to be gone, to make way for some superior mode of production.

It is imperative, therefore, that we re-ignite the political passions that suffuse The Communist Manifesto. Communists, Marx and Engels aver, have no political party. They simply constitute themselves at all times and in all places as those who understand the limits, failings and destructive tendencies of the capitalist order as well as the innumerable ideological masks and false legitimations that capitalists and their apologists produce in order to perpetuate their singular class power. Communists are all those who work incessantly to produce a different future to that which capitalism portends. While institutionalised communism may be dead, there are by this measure millions of communists among us, willing to act upon their understandings, ready to creatively pursue to the political imperatives that the Manifesto defi nes, and, above all, ready to open their hearts and minds to this inspirational message that echoes down to us from the doleful days of 1848. We communists are the persistent spectral presence, conjured up by the bourgeoisie out of the nether world, the sorcerers who can weave our own distinctive magic, our own sense of class destiny, into the woof and weft of our historical geography. ‘Change the world’, said Marx: ‘Change Life’, said Rimbaud; ‘for us’, said André Breton, ‘these two projects are the same’. The struggle continues.

Acknowledgement

I thank Fernando Coronil for perceptive comments on an early draft.

Notes

1. Cited in N. Chomsky, On Power and Ideology, Boston, South End Press, 1990, p. 14.
2. D. Harvey, A Brief History of Neoliberalism, Oxford, Oxford University Press, 2005.
3. D. Harvey, Spaces of Global Capitalism: Towards a Theory of Uneven Geographical Development, London, Verso, 2006.
4. M. Balbo cited in National Research Council, Cities Transformed: Demographic Change and Its Implications in the Developing World, Washington, DC, The National Academies Press, 2003, p. 379; M. Davis, Planet of Slums, London, Verso, 2006.

Related posts:

1. Could the present crisis be an opening to communism?

I don’t see a unified analysis of what the nature of the problem is on the left. I think right now, to the degree that the nature of the crisis is shifting toward public sector unions, we are likely to see a more classic class struggle response to the situation than occurred when the crisis was located in the banking system. What that will lead to is a convergence of many forces on the left.

I thought it interesting that in the last book by Hardt and Negri, they did not oppose taking state power, which is very unusual from that sphere, so maybe that idea will shift. I think that the classic left-wing configurations, and I am not talking about the social democratic, I’m talking more about the Marxist and communist configurations, I think they have a problem, and I’m making a caricature here. Their notion of the factory worker as the vanguard proletarian figure that is going to make the revolution, I don’t think that works; I don’t think it ever really worked very well. You have to have a broader notion of an alliance of forces in which the conventional proletariat is an important element, but not necessarily an element that has a leadership role.

A leadership configuration has to evolve around all those people who are involved. Right now, to the degree that the struggle is likely to be between public sector workers and the state apparatus, this is a very specific form of struggle, which is not based in the factories. It’s going to be the teachers unions and these [types of] groups that are likely to be pushed into a more vanguard role. So I think the left groups need to sit back and ask themselves who is likely to play a vanguard role in the current situation and what should the politics be in relationship to state governments and to corporate forms as well.

I think that Marxism as a revolutionary theory and as a revolutionary practice has much to teach. There is a tremendous historical record, but we have to approach that historical record with some critical perspectives on what we did wrong as well as what we did right, and I think that is why right now this is a tremendous moment to re-present if you like, what the Marxian argument is about.

Explaining the crisis

David Harvey, interviewed by Hector Agredano

IN THE Enigma of Capital you attack mainstream economists for failing to anticipate the crisis. Can you talk about why bourgeois economists missed the coming crisis, which many Marxists predicted? How is Marxism superior to bourgeois economics in this respect?

I THINK the central idea in Marxism is of course one of contradiction, that the capitalist system is seen in its very foundation as containing a series of contradictions that clash with each other and therefore produce a society always founded on tensions of various sorts. For example, the tension between capital and labor is the obvious one that every Marxist would pay attention to—the nature of the class struggle. But there are other tensions too between production and consumption, between use value and exchange value. All of these tensions are there.

What is a house for? Is it a use value where people can live their lives or is it an exchange value? What we saw for example in the recent crisis is the way in which that tension between use value and exchange value of a house erupts into a macro crisis. So from a Marxist perspective there are always tensions. The only interesting question therefore from a Marxist perspective is when those tensions erupt into a major crisis of instability and therefore have to get resolved by the emergence of a different configuration of capitalist forces if the crisis is going to be resolved internal to capitalism.

Now, there is a joke about Marxists, that they have predicted correctly the last twelve of the last three crises. So you always have to be careful about saying that a contradiction is going to erupt in a crisis or that there’s going to be a final crisis. But what Marxian theory tells us is that there is no such thing as a stable capitalist system. So for instance, when economists from Ben Bernanke to Paul Krugman start talking about the 1990s as the period of “great moderation,” or when they start to say that crisis tendencies have been resolved, from a Marxist perspective you know that is never going to be the case.

As recently as 2004–2005, even before he became chairman of the United States Federal Reserve, Bernanke was talking about the tendencies toward instability as muted and as nothing to worry about. Conventional economists have an understanding of society that is about what they would regard as a tendency toward equilibrium, that when the market is operating properly within the right institutional framework—which includes some degree of regulation of contracts and private property rights—it should produce a condition of equilibrium. So conventional economics is always talking about the tendency toward convergence, toward equilibrium, and that equilibrium is possible provided the right mix of policies and as long as there isn’t anything external that disrupts the whole system. External problems would be so-called natural disasters, wars, geopolitical conflicts, and protectionism. Crisis would then arise because of these external interventions, which take us away from the path to equilibrium, which is always possible.

From a Marxist perspective, equilibrium is an unusual condition. There are always forces taking us away that are internal to the dynamics of the system. So the Marxian framework would look at it in a very different way. But, again, I go back to this—you always have to be careful from a Marxist perspective not to say, “Here is the next crisis and it’s the final crisis.” What I try to do for instance in The Enigma of Capital, is to talk very specifically about what the nature of the internal contradictions of capitalism are and why the resolution of the crisis of the 1970s created a configuration that was likely to produce the sort of crisis we’ve finally seen erupting around us over the last two or three years. That then leads to the big question: What kind of adjustments are likely to occur within the capitalist dynamic to create the foundations for a new crisis further down the way?

DO YOU think that this economic crisis also represents a crisis in bourgeois neoliberal ideology?

I THINK there’s no doubt that the legitimacy of neoliberal theory has been called into question. Many people who were once firm believers in the efficient market hypothesis now recognize that they were wrong. There is the emergence of a consensus among many economists that stronger forms of intervention in the economy are really required in order to get out of this crisis and in order to stabilize the system. The typical neoliberal arguments that were used back in the 1970s to 1980s as a way to get us out of the crisis can’t be used anymore—including, of course, the argument that the crisis is due to greedy trade unions, greedy labor, and that labor is too well remunerated. You can’t make that argument in these times. In fact if any argument can be made at all, is that labor is too weak in the present circumstances. Of course ideologically it is very difficult to get the Republican Party or the right wing of the Democratic Party to say that the answer is to re-empower labor in the current circumstances.

The one place where you are beginning to see signs of that happening is of course China. The Chinese central government has for the first time allowed a major strike to unfold that was not organized by the communist-led trade union but was a spontaneous strike. We’ve seen the Honda strike, which has led to the 30–40 percent increase in wages at Honda. There’s the Foxconn conflict, which is going to double wages there. The Chinese government seems to be empowering labor right now in ways that we don’t see happening throughout the rest of the advanced capitalist world like Europe and the United States.

BASED on what is being done by governments and mainstream economists at the moment, what is replacing neoliberal ideology?

THERE’S a theory of neoliberalism that actually never worked. Margaret Thatcher tried it and failed in three to four years. Then there’s the pragmatic form of neoliberalism, which is constantly advocating for free markets and the withdrawal of state intervention. But in practice this was always about supporting financial institutions. In the Mexican debt crisis for example, the Treasury and a revived International Monetary Fund bailed out Mexico in order to save the New York bankers. What happened there was the introduction of moral hazard into the system. So this last system was based on always deciding to bail out the financial institutions at all costs.

This is not consistent with neoliberal ideology at all. Neoliberal ideology, pure ideology, would say, “You make your bed, you lie on it. If you make a bad investment and you go bankrupt, too bad.” Right now what we see is a problem with the formal ideology that wants to keep the state out of everything but an embrace by political power, overtly, of the requirement that they bail out financial institutions at the expense of the population. There is a bit of a struggle emerging over that because both on the right and the left of the political spectrum there are people who don’t agree with that.

As I see it right now, there is no inclination whatsoever to change that thesis, that that is what you have to do. But then the problem arises that you shift the crisis. Again, one of the theses very important to me in The Enigma of Capital is that capital doesn’t solve its crisis tendencies but moves them around. So we’ve sort of solved the banking crisis, but now we’ve got a sovereign debt crisis of the finances of states. You see this of course in southern Europe, Greece, Spain, and Portugal. But internally in the United States we also have a fiscal crisis emerging with California for example, being one of the largest public budgets in the world, which is in serious difficulty. So we’ve shifted the locus of the crisis from the financial institutions to state finance.

Then there is a big question of how that is going to be addressed and that is the big question that is on the agenda right now. Whereas this time last year it was how to stabilize the banks, it’s now how to stabilize state finances and this is a question that is not going away easily; it’s one we’re going to have to be concerned with over the next ten or fifteen years. Alongside of that, as they attempt to stabilize state finances through austerity they’re going to stabilize high unemployment. That is the question emerging now, they shifted it from the financial institutions, then to state finances, and then to the people in terms of austerity and unemployment. The big question then is how are the people going to respond?

We see this in some degree with the strikes in Greece and Spain and some of the agitation that’s been going on in the University of California system where we actually see popular resistance beginning to build against the way in which state finances are being stabilized at the expense of the people. The state finances of course, got into a mess because they stabilized the financial institutions as a sort of chain effect. So how it’s going to turn out is going to depend very much, it seems to me, on the way in which the class struggle evolves. But this is going to be a class struggle vis-à-vis the state apparatus and state power trying to say, “You are the people that are going have to bear the costs of this crisis,” and many people saying, “No, we should not bear the cost of it. The people who bear the cost of it should be the bankers, the financiers, and the upper classes,” who by and large—some of them have taken a hit—but most are coming out of it OK at this point. So we see this dynamic of class struggle unfolding.

AS YOU have mentioned, here in the United States and in Europe austerity measures are being introduced. Do you think that the austerity measures are going to resolve the crisis?

THE AUSTERITY measures could help resolve the fiscal crisis of the state, but in the same way that that crisis arose out of resolving the [crisis of the] banks. So the big question is what kind of crisis will that promote? And of course this creates a crisis of unemployment. If states start introducing austerity—like Cameron in Britain is talking about major cuts and that’s going to cause major unemployment. Here in New York State there’s talk of massive budget cuts and massive unemployment in the public sector. So what that launches then is a huge struggle between the state and the public sector unions in particular. So we are likely to see, as we have seen in Greece and Spain, is a widespread struggle because the crisis is being displaced and this again comes back to my thesis that crises don’t get resolved, they simply get displaced from one sphere to another.

WHAT DO you think about the response of the left to the budget cuts and what do you think would be the way forward for the left?

WELL, IT depends who you call the left. There are many groupings on the left that are discontent with the situation, but I don’t see a unified analysis of what the nature of the problem is on the left. To many degrees I see many kinds of solutions and different configurations of organization. So I think the left has not been together in terms of its response. I think right now, to the degree that the nature of the crisis is shifting toward public sector unions, we are likely to see a more classic class struggle response to the situation than occurred when the crisis was located in the banking system. What that will lead to is a convergence of many forces on the left around the idea that we have to protect the population in general against these austerity measures that are coming from the state. I think the objective circumstances under which the crisis is unfolding are likely to lead to a more unified politics on the left, but there are many different factions on the left.

Sometimes I get in trouble for saying this, but for example, the anarchist autonomist line does not want to take state power and does not believe in taking state power, although there are some shifts now among some of the major theorists in that area. I thought it interesting that in the last book by Hardt and Negri, they did not oppose taking state power, which is very unusual from that sphere, so maybe that idea will shift. I think that the classic left-wing configurations, and I am not talking about the social democratic, I’m talking more about the Marxist and communist configurations, I think they have a problem, and I’m making a caricature here. Their notion of the factory worker as the vanguard proletarian figure that is going to make the revolution, I don’t think that works; I don’t think it ever really worked very well. You have to have a broader notion of an alliance of forces in which the conventional proletariat is an important element, but not necessarily an element that has a leadership role.

A leadership configuration has to evolve around all those people who are involved. For example, one of my areas of interest would be those who are involved in the production of urbanization, the people who produce cities and the people producing city life. Right now, to the degree that the struggle is likely to be between public sector workers and the state apparatus, this is a very specific form of struggle, which is not based in the factories. It’s going to be the teachers unions and these [types of] groups that are likely to be pushed into a more vanguard role. So I think the left groups need to sit back and ask themselves who is likely to play a vanguard role in the current situation and what should the politics be in relationship to state governments and to corporate forms as well.

MARXISM HAS always been about both explaining and changing society. What role do you think Marxism should play in building a new resistance with a goal of transforming society?

I THINK it plays a key role. From my perspective, the failure of other forms of understanding of political economy is now so obvious and the possibility now exists to push really hard for a clearer Marxian understanding of how political economy works so I think at that level of critique Marxism has a very important role to play. But I think also that the history of Marxism and its constructive side is a collective memory that can be drawn upon politically, and I think the argument has to be made very directly that the degree of standards of living we did achieve by the 1970s had everything to do with the dynamics of class struggle as it occurred after 1917, and as it occurred even in this country during the 1930s.

There is a kind of story line that says that Marxism failed—well, it didn’t. Actually it had a very constructive role to play. Now at the same time, within Marxism we also have to look back and be very critical of what I see as some very conservative, rather dogmatic understandings of the world. For example, we can’t simply go back and cite Lenin as if somehow this is the solution. What a good Marxist does is to look at the conventional situation and do an analysis all over again given Marx’s method to try and understand the dynamics of the situation and therefore try to intervene in a way which is going to push society toward more democratic and more egalitarian solutions, and ultimately to solutions that are entirely non-capitalistic. I think that Marxism as a revolutionary theory and as a revolutionary practice has much to teach. There is a tremendous historical record, but we have to approach that historical record with some critical perspectives on what we did wrong as well as what we did right, and I think that is why right now this is a tremendous moment to re-present if you like, what the Marxian argument is about, and I think that a lot more people are willing to listen.

There is this wonderful poll that came out from the Pew Research Center that said only 43 percent of the people in this country actually think capitalism is good, and I think particularly among a younger group from [ages] eighteen to thirty, 43 percent thought socialism was better. So even in this country with the likes of Glenn Beck, I think they are getting so upset precisely because there is a quiet revolution going on in terms of attitudes, and we can support that by producing arguments. My own contribution was to write The Enigma of Capital, which is accessible to people, so they could get a good sense of what the Marxian argument is without being too dogmatic or arrogant about it. So I think that should be where we position ourselves right now.

Related posts:

1. The crisis of the capitalist state and the crisis of the left
2. Causes of capitalist crises — and this one
3. The crisis now, and possible futures