The Political Economy of Global Capitalism and Crisis

Bill Dunn

• Publisher: Routledge
• Year: 2014
• eBook ISBN: 9781317751274
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

The book provides a theoretically and historically informed analysis of the global economic crisis.

It makes original contributions to theories of value, of crisis and of the state and uses these to develop a rich empirical study of the changing character of capitalism in the twentieth century and beyond. It defends, uses and develops Marxist theory while arguing particularly against jumping too quickly from abstract concepts to a concrete understanding of the crisis. Instead, it uses what Marx described in his notebooks as an 'obvious' analytical ordering to progress from a general analysis of economy and society to a discussion of recent economic transformations and the specifics of the crisis and its aftermath.Dunn argues that appropriately reconceived, a critical Marxism can incorporate and enrich rather than rejecting insights from other traditions. He disputes general characterisations of capitalism to the crisis and theories which see finance and the contemporary financial crises as largely detached from other aspects of the economy and society.

Providing a thoroughly socialised and historically based account, this book will be vital reading for students and scholars of political economy, international political economy, Marxism, sociology, geography and development studies.

1

UNDERSTANDING THE POLITICAL ECONOMY OF GLOBAL CAPITALISM AND CRISES

Introduction

We live in turbulent times. In the years following the sub-prime crash of 2007–08, the global economy remained remarkably fragile. Protests flare up in cities and countries across the world. Some of these protests demand radical social change. Some reassert nationalism and racism. Governments push austerity and batter down what is left of welfare capitalism. A century of American pre-eminence looks precarious. Rising powers threaten the geopolitical balance. Volatility and uncertainty appear to have become the norm and it seems impossible to predict even the near future. This book ends with some comments about where we might be heading but is necessarily tentative. Fortunately, it is now possible to be more confident about how and why the crisis happened.

What follows is a Marxist account. Marxism needs some introduction and the next few pages will describe, in very general terms, how it is being understood here, before explaining what it means for the argument and structure of the book.

Existing accounts of the crisis, and for that matter of social life in general, tend to fall into one of two camps. The first camp is that of over-simplification. It is tempting to reduce complex social phenomena to a few formulae. At best, this ignores interesting people and processes. At its worst, in neo-classical economics, it tries to force a recalcitrant world to conform to facile theoretical constructs. Our models only understand free markets, so free markets there must be. On the other hand, oaths are sworn against determinism and deductivism and prohibitions made against attempting to impose analytical order on what is acknowledged as a complex social existence. We are left with unexamined prejudices; with various mixtures of intuition, insight, observation and opinion (Tabb 1999). This division is, of course, a caricature and there are many honourable exceptions, but existing accounts of the crisis do often fall somewhere close to one or other of these alternatives.

The story of the crisis is fascinating and many writers tell it well. The main plot is familiar, involving financialization, particularly the predatory character of ‘subprime’ lending in the US but also its repackaging and the speed and greed with which financiers from around the world jumped onto an ultimately unsustainable round of speculation. Important sub-plots involve ideological and political changes and issues of financial deregulation. Other narratives identify the role of imbalances in the global economy, particularly vast US trade deficits and Chinese and other surpluses and the currency recycling needed to sustain them. All this, and much else in similar vein, is important. However, without addition, identifying such features actually explains very little. Rich financiers did not only recently discover the benefits of ripping-off the poor. Legislative changes were not some whimsical folly. Nor is there anything new about trade imbalances. In each case it is necessary to go beyond the story to ask why these things happened, why they took the form they did and why they had these particular consequences at this conjuncture.

The opposite danger is that the search for underlying causes leaves us with useless sweeping generalizations. The silliest, and alas still the most influential, again come from mainstream economics. Having celebrated market efficiency and the retreat of government interference, bad policy is re-introduced as a catch-all explanation when things go wrong (Schwartz 2009). Alternatively, from a US perspective, the blame is passed to inefficient financial systems and the excess savings of foreigners (Bernanke 2005, Wolf 2010). However, simplification also seduces many critics who characterize capitalism and its problems in such broad terms that they, too, fail to capture adequately the specifics of this crisis. Some theories of financial cycles of Keynesian or Minskyian provenance do this while also sometimes reducing the crisis to one of misregulation and poor policy (Ivanova 2013). Many Marxist accounts have also tended to jump rather precipitously from what they find in Marx’s Capital, even from favourite passages in Marx’s Capital, to an explanation of economic crises in general and thence of the current crisis.

The interpretation here is different. As the next section elaborates, Marxism is taken to involve developing an anti-determinist and anti-teleological account which can acknowledge the specificities, from financial volatility to policy change, but which is theorized, historical and which understands the crisis in the context of broader, pre-existing or underlying dislocations of global capitalism. This book therefore becomes simultaneously an account of the recent crisis, which I will henceforth refer to as a capitalized ‘Crisis’, about political economy and crises in general, and a critique of prevailing Marxist theories. It is inspired by, and organized around, a famous passage in Marx’s Grundrisse. Marx writes that the appropriate method of political economy involves an obvious ordering of the levels of analysis:

(1) the general, abstract determinants which obtain in more or less all forms of society…(2) The categories which make up the inner structure of bourgeois society and on which the fundamental classes rise. Capital, wage labour, landed property. Their interrelation…(3) Concentration of bourgeois society in the form of the state…(4) The international relation of production. International division of labour. International exchange. Export and import. Rates of exchange. (5) The world market and crises.

(1973:108, emphasis added)

Marx’s schema immediately raises themes that seem relevant to the current situation but the ordering is rather less than ‘obvious’. Nor is anyone obliged to follow it. The Grundrisse is no sacred text, just a set of rapidly compiled notebooks never intended for publication. Rosenberg describes this passage as a ‘back-of-the-envelope’ formulation (Callinicos and Rosenberg 2008: 99) and this is right, in that its contents are never rigorously defended. Some of the detail raises significant problems, notably in relation to where it situates the state and the international system. However, there are good reasons for taking this proposed method seriously. For Marx it is more than a throwaway comment and he offers similar formulations in other places (Marx 1970, Marx and Engels 1983: 52, 57, Nicolaus 1973). Rosdolsky (1977) makes a strong case that such a method continues to inform both Capital and that work’s place in Marx’s wider project. The specific content of the particular levels is questionable and will be questioned here, but the conceptual distinctions and movement between levels of abstraction constitute an important difference between Marxism and both a crude materialist reductionism and liberal eclecticism. Crucial to the argument here is that the schema identifies several layers of mediation between Marx’s second level, which would become that of Capital, and the appearance of crises only at the fifth. Capital cannot provide, and was never intended to provide, a sufficient explanation of crises (Rosdolsky 1977).

Marx never wrote the planned books at the other levels and it would probably be foolish even to attempt to re-envisage what he might have written had he done so; let alone to try to update the ‘missing’ volumes. Nevertheless, this movement between levels of abstraction can help Marxists avoid reproducing the gap between grand theorizing and empirical commentary criticized above. Of course, existing Marxist accounts usually mention the state, international relations of production and trade, but without necessarily bridging the conceptual gulf between Capital and the specifics of things like sub-prime mortgages and the financial meltdown. For some the gap is simply too wide. The Crisis this time is a Minsky crisis not a Marx crisis in Moseley’s (2008) phrase. Others are more guarded but broadly agree. For Panitch and Gindin, the Crisis ‘was not caused by either domestic industrial “overaccumulation” or international trade and capital “imbalances”, but rather by the volatility of capitalist finance’ (2012: 311, see also Gowan 2009, Lapavitsas 2009). Before consigning Marxism to empty incantation or, once again, pronouncing it redundant, it is worth investigating how satisfactory an account can be provided by a systematic application of Marx’s own professed method.

The approach identified in the Grundrisse allows the assimilation of insights from other traditions. It is quite right, for example, to point to inherent financial volatility and to rotten policies. It is also necessary to tie these to broader economic changes and dislocations. Here again, making such connections is not an exclusively Marxist preoccupation. Many other traditions, for example, emphasize the inseparability of politics and economics, and make links between finance, trade, inequality and everyday life. The method being suggested therefore implies building bridges with other approaches and perhaps makes Marxism sound, as Anderson described, like a ‘kind of common sense’ (1988: 337). The point is nevertheless to encourage people to cross the bridges in a Marxist direction, to argue that Marxism’s analytical ordering produces the most convincing explanations. This requires a brief explication and defence of Marx’s method and means lingering a while on some rather dry theory and moving through some ‘big picture’ issues before detailing who sold how many dodgy derivatives to whom.

Marx’s method and the crisis

Social life is complex. Marx employed different methods and insisted there was ‘no royal road to science’ (1976: 104). Of course, everything influences everything else but, recognizing this, it is easy to slip into a facile ‘dialectic balancing of concepts and not the grasping of real relations’ (Marx 1973: 90). Those who learn Marx from hostile critics might reasonably imagine that Marxism then falls back into an economic or structural determinism. Marx uses some unfortunate phrases but there is now such a substantial literature contesting accusations of determinism that the suspicion must be that those who continue to make them are either profoundly ignorant or deeply mischievous. A particularly common mischief is to posit determinism as a demon from which we can only be rescued by running into the arms of a complete indeterminism or lazy eclecticism. Alternatively, we resist arbitrary prioritization by insisting on analytical symmetry (Germain 2011). Marxists, on the contrary, have little confidence in a formal democracy of determinants and search for analytical priorities (Foley 1986). The important questions are often ones of relation and of relative importance. Social structures, existing institutions and practices, shape and limit human action but in ways that are highly mediated, dependent on all sorts of contingencies and particularities. We may be more or less able or willing to resist. Clearly, different things vary in their importance over time and space. However, questions of priority, of the relations between structure and agency, between politics and economics and so on are ones with which it is worth grappling.

How then is it possible to identify and justify conceptual priorities, where to start and how to proceed (Arthur 1997)? Marxists, like everybody else, first experience the world concretely or immediately. However, were our sensory perceptions sufficient, there would be no need for science (Marx 1981: 956). Almost all science involves some process of abstraction. However, to make matters worse, within capitalism, processes variously described as alienation or fetishism actively mask the underlying reality. In particular, everything seems to hang on money and the market, obscuring underlying social relations. For Marx, mainstream economics is ‘vulgar’ precisely in apologetically accepting capitalism’s visible forms. It operates in a superficial realm of ‘Freedom, Equality, Property and Bentham’ (Marx 1976: 280), unable to see beneath money and the market to the exploitative production relations on which capitalist exchange is built. This in turn justifies and naturalizes existing relations. It is necessary to pierce beyond the phenomenal forms.

At the same time, Marx (1968: 437) criticized what he regarded as the ‘forced abstractions’ that characterized Ricardo’s method. Just before the five-part plan from the Grundrisse cited above, Marx makes clear his method involved both a ‘forwards’ and ‘backwards’ ordering (Marx 1973, Arthur 2004). The first step develops the more simple, abstract concepts from the more complex, real phenomena. They are more like propositions that require investigating, than truths to which the world can be reduced. The method described in the Grundrisse is then a secondary process of movement back to the concrete. It implies testing the results at any one level as they are applied to progressively more concrete determinations (Sayer 1987, Fine and Harris 1979).

The social world is increasingly complex in its concreteness and never fully predictable. Therefore, we should beware a naïve falsificationism, where a single mistaken prediction invalidates the whole theory. However, the method implies that each move from one level of abstraction to the next applies and tests the earlier results (Rosdolsky 1977, Sayer 1983). It leads to the production of deeper explanations of the phenomena. Conversely, if enough evidence contradicts what has gone before, the theory needs to be jettisoned or at least substantially revised. Here it seems useful to invoke Lakatos’s (1970) arguments about research programmes. An irrefutable ‘hard core’ of theory should generate auxiliary hypotheses. He then uses the term ‘degenerating research programme’ to describe situations where a growing number of auxiliary hypotheses are needed to explain (away) predictive failures. He contrasts this with a ‘progressive research programme’ in which new theoretical explanations are introduced to enhance the explanatory power of the hard core. The ‘positive heuristic’ of science accounted for novel attempts to explain anomalies in ways that were logically and theoretically consistent with the hard core. ‘In other words, a progressive defence of the hard core takes the form of an expanding belt of theories that increase the corroborated empirical content and solve successive puzzles’ (Burawoy 1989: 761). This implies an ongoing mutual interrogation of theory and evidence and that we should be cautious about jumping too far or too fast between the abstract and general and the concrete and specific.

All this requires concepts that are inherently approximate and flexible rather than scholastically accurate, susceptible to the process of progressive elaboration (Thompson 1978, Arthur 2004). This is a theoretically risky business, which can lead to all sorts of more or less conscious slippages in meaning. But the problems really only become intractable if the analysis stays strictly theoretical. Murray suggests a ‘redoubled empiricism’ involving ‘the empirical scrutiny and fixing of concepts in relation to other concepts’ (1997: 42). Some of the problems with Marx’s schema in the Grundrisse will be discussed below but this conceptual flexibility also means that any prior insistence on the particular content at the different levels of abstraction would itself reify Marx’s method. We understand the progressively more concrete and complex in the light of what is already established more generally, but this often requires us to reflect on and return to the prior levels. Each level does have a moment of its own. More complex, real world, phenomena can be informed by but are not simply determined by, and cannot simply be deduced from, abstract general theory.

Sometimes translated as ‘sublate’, Hegel identifies a double meaning in the ‘German word aufheben (to put by, or set aside). We mean by it (1) to clear away, or annul…(2) to keep, or preserve: in which sense we use it when we say: something is well put by’ (1975: 142). What is true at one level remains true at the next, gets inside it as it were, yet each level has a specific moment of its own, irreducible to the prior levels. Meszaros (1994) differentiates this from methods affording degrees of ‘autonomy’. People are not ‘autonomous’ of the air they breathe but nor are they reducible to their atmosphere. Each level ‘sublates’ the previous one (T. Smith 1997). We need to remember, as Bruff warns, with reference to Gramsci, that the distinctions are ‘methodological and not ontological or “real”’ (2011: 82). Marx’s method is not about gluing together separate components but a way of establishing and testing conceptual priorities to analyse the mutual constitution of the complex social whole.

This leaves room for accident and contingency. It also means that Marx’s method cannot explain everything. We would not, as Eagleton (2003) memorably insists, expect it to tell us how to delouse a cocker spaniel. Any particular crisis could have entirely specific causes. However, the subject of economic crises is something more obviously within Marxism’s usual remit than canine hygiene. And accidents should not be confused with miracles. Accidents are more likely to occur and to have significant effects in some situations than others. However, the relative uncertainty again warns against reading the suggested ordering deductively. Between some of the levels this is probably obvious. Nobody would imagine we could simply deduce Capital from the prior ‘general, abstract determinants’. Nor should we risk the direct jump from Capital to the Crisis. However, it seems at least plausible that an investigation of the general characteristics of capitalism can inform concrete investigations, including concrete investigations of the current situation.

The book’s argument and the structure

This section summarizes the argument and describes the structure of the book, outlining how it applies the method outlined above and some of the problems involved. The book has ten further chapters. These are informed by Marx’s ordering, without following it rigidly.

Chapter 2 discusses ‘the general, abstract determinants which obtain in more or less all forms of society’ (1973: 108). It begins by defending the inclusion of this level, which Marx drops from some alternative formulations (Marx 1970, Marx and Engels 1983). Many later Marxists have also played down these social generalities. They oppose tendencies to perceive social processes as natural, whether in eternal laws of economic competitiveness, power seeking states, or ethnic incompatibilities. Such things are recent arrivals, often at least roughly concurrent with capitalism. The very generality of this level, it is suggested, makes it unable to offer critical purchase to specifically capitalist processes (Sayer 1987, Ashman 2009). However, while there may be fewer general determinants than popularly presumed, appreciating what is common to all human societies is necessary to justify the methodological starting points and actually helps to avoid reifying what is specific to capitalism. As Holloway and Picciotto write ‘it makes little sense to talk of the capitalist “forms” of social relations at all unless one has other forms in mind, unless one regar...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• List of illustrations
• Acknowledgements
• 1 Understanding the political economy of global capitalism and crises
• 2 Capitalism and other social orders
• 3 Value theory in an incompletely capitalist society
• 4 The heterogeneity of capital
• 5 A contribution to a theory of crisis and recovery
• 6 States and global capitalism
• 7 The Keynesian moment and its contradictions
• 8 Global restructuring: extensive accumulation and financialization
• 9 The world market and the crisis
• 10 Recession or renewal?
• 11 Re-locating capital?
• References
• Index