Capitalism's Crisis Deepens

Essays on the Global Economic Meltdown

Richard D. Wolff

• Publisher: Haymarket Books
• Year: 2016
• Print ISBN: 9781608465958
• eBook ISBN: 9781608466559
• Topic: Social Sciences
• Subtopic: Social Classes & Economic Disparity
• Index: Social Sciences

Praise for Richard Wolff and Democracy at Work:

"Richard Wolff's constructive and innovative ideas suggest new and promising foundations for much more authentic democracy and sustainable and equitable development, ideas that can be implemented directly and carried forward. A very valuable contribution in troubled times."—Noam Chomsky

"Richard Wolff is the leading socialist economist in the country. This book is required reading for anyone concerned about a fundamental transformation of the ailing capitalist economy!"—Cornel West

"Bold, thoughtful, transformative-a powerful and challenging vision that takes us beyond both corporate capitalism and state socialism. Richard Wolff at his best!"—Gar Alperovitz

While most mainstream commentators view the crisis that provoked the Great Recession as having passed, these essays from Richard Wolff paint a far less rosy picture. Drawing attention to the extreme downturn in most of capitalism's old centers, the unequal growth in its new centers, and the resurgence of a global speculative bubble, Wolff—in his uniquely accessible style—makes the case that the crisis should be grasped not as a passing moment, but as an evolving stage in capitalism's history.

Richard Wolff is Professor of Economics Emeritus, University of Massachusetts, Amherst, and a Visiting Professor at the New School in New York. Wolff's recent work has concentrated on analyzing the causes and alternative solutions to the global economic crisis. His groundbreaking book Democracy at Work: A Cure for Capitalism inspired the creation of Democracy at Work, a nonprofit organization dedicated to showing how and why to make democratic workplaces real.

Part I: Crisis Capitalism

The ramifications of the global effects of the crisis that began in 2007 continue to unfold. Eight years into the crisis, the social and economic costs keep mounting. Levels of unemployment and poverty remain high, wealth and income inequalities worsen, and the housing market remains depressed—a significant indicator when one considers that for most Americans, their homes are their single largest asset. The only “recovery” since the massive bailout programs has been in the stock market, big corporations’ profits, and the portfolios of the top 10 percent of income earners. Recovery has bypassed the vast majority of Americans. The idea that the United States’s economic system is “exceptional” has imploded. Fading fast, the American Dream of upward mobility is giving way to an ever-harder struggle just to make ends meet.

In spite of this, business and political leaders continue to defend capitalism and rigidly restrict their debates mostly to modest reforms and the endlessly repeated arguments for more or less government intervention in the economy. Opinion shapers refuse to consider that the causes for today’s economic crisis are structural and recurring. Meanwhile, large segments of the public are beginning to understand that capitalism itself has been brought into question because of the depth and duration of the crisis since 2007.

The essays in Part I explore the depths of the crisis and specifically the interaction of economic stresses with political and cultural changes. Together, these essays sketch the contours of the major, long-term changes in capitalism that underlie this crisis and explain why it cuts so deep and has lasted so long.

Capitalist Crisis and the Return to Marx

March 18, 2010

Marxian analyses are now resurfacing in public dialogues about economy and society. A generation of marginalization is fading as a new generation discovers the diverse richness of the Marxian tradition’s insights. Just as an economic crisis in 1848 helped provoke and shape Marx’s original insights, today’s crisis helps renew interest in Marxism.

In the century before the 1970s, the victims of capitalism’s recurring crises and its critics increasingly turned toward the work of Marx and other Marxists. The Marxist tradition of social analysis therefore spread widely and deeply across the world. As it interacted with many different cultural, political, and historical contexts, the tradition developed multiple, different—and sometimes sharply contested—interpretations or versions of Marxist social theory. Marxism became the richest available accumulation of critical analyses of capitalism and of critical engagements with the theories that supported capitalism. It gathered the theoretical and practical lessons drawn from successes and failures of political movements more or less inspired by Marxism. Today it is an invaluable resource for theorists of and activists for social change beyond capitalism.

Capitalism’s defenders have mostly sought to repress, ignore, or otherwise marginalize Marxism and Marxists. While often successful, their efforts could only slow and punish Marxism’s advances in the century before 1975. Unevenly yet relentlessly, the tradition grew. From a handful of theorists and activists, Marxism spread to Marxist labor unions; political parties; newspapers; research institutes; local, regional, and national governing regimes; and internationals. It also generated internal differences, debates, and conflicts, mostly peaceful but sometimes violent, among its constituent tendencies.

However, the 1970s changed the conditions of the social prospects for Marxism. Capitalism had recovered from much of the damage to its support and reputation caused by the Great Depression of the 1930s. Post–World War II reconstructions, time, and hope had all helped weaken memories of that Depression. Economic, political, and cultural conditions had ripened enough by the 1970s to enable a major, sustained counterattack against reforms, regulations, and other Depression-era state interventions imposed upon capitalists. The deepening internal contradictions of the “actually existing socialist countries” that officially celebrated Marx and Marxism facilitated the global campaigns against them by leading capitalist nations. That program targeted those countries, but also Marx, Marxism, and communism everywhere as synonyms and as the dangerous end point toward which social democratic state intervention led.

A resurgent capitalism celebrated its renewed strength and the weaknesses of its enemies. In the United States, the New Deal, already compromised from 1945 to 1970, was afterward systematically undermined. Unions’ social influence was greatly reduced. Labor market conditions shifted to allow a permanent end to the pre-1970s record of rising real wages for 100 years. The Reagan election of 1980 sealed the change. Economics, politics, and culture shifted rightward markedly in the Anglo-American spheres but beyond as well. An era of neoliberalism was promoted that took the form of privatization, deregulated markets, getting-rich-quick schemes, and a pervasive individualism that suspected and dismissed most collective efforts and values.

In the 1970s, a new world of investment opportunities also opened up for multinational capitalist enterprises. Technological changes in internal enterprise controls (computers), transportation (jet aviation), and communication (the Internet) enabled greatly enhanced global coordination within and among capitalist corporations. Producing, installing, maintaining, and improving those technological changes became extremely profitable investment opportunities as well. Most important was the global opening up of vast new sources of relatively cheap labor (especially in and also immigrating from the former “second” and “third” worlds). Just as technological changes drove up the productivity of labor, real wages were prevented from rising. Whenever productivity rises while real wages stagnate, the result is an explosion of the capitalist surplus. In the thirty years before 2008 the United States experienced one of the greatest profit booms in capitalist history.

Capitalism’s admirers celebrated, as labor, socialism, and Marxism weakened and shrank, unevenly but nearly everywhere. Capitalism’s apologists insisted yet again that capitalism had “overcome its crisis tendencies.” Thus Alan Greenspan, former chairman of the US Federal Reserve, said in the late 1990s that we live in a “new economy.” Once the former Soviet Union had officially imploded, Marxism’s enemies changed their way of marginalizing if not eliminating the tradition. Where before they had portrayed Marxism as an erroneous theory informing a failed and also treasonably dangerous practice, over the last thirty years they treated it more as a fading historic relic that no modern person need consider, let alone study. Capitalism, they repeated, had won the struggle with socialism and emerged as the system to which there is no alternative. The United States was its appropriate superpower champion.

Adjusted rationales were correspondingly developed to continue to exclude Marxist analyses from the mass media and Marxists from academic and political positions. There was no need for them; history had rendered them anachronistic. The world had moved on. Not a few Marxists found it difficult to sustain their beliefs in so changed an environment; they therefore modified their positions or abandoned Marxism altogether.

Once Greenspan’s “new economy” had collapsed in 2008 and been exposed as the same old crisis-prone capitalism, Marx and Marxism began to be rediscovered again. People are turning to the Marxian tradition for help in understanding the crisis’s causes and finding solutions. They soon encounter the tradition’s crisis-focused debate over reform versus revolution: how should the capitalist economy and society be changed in response to the crisis? In this classic form of the debate, some Marxists—reformers—propose diverse sorts of “transitions to socialism” while others—revolutionaries—attack such socialisms in the name of “communism.” Still other Marxists criticize both socialism and communism as theorized and actualized over the last century. It turns out that the anticapitalist impulses shared by nearly all Marxists inform multiple, different, and sometimes incompatible theories and arguments. While this yields a rich tradition of critical social analysis, it obliges every writer within the tradition to identify and justify whichever particular kind(s) of Marxian theory inform(s) that writer’s analyses.

So let me be clear here. In this essay, I use a particular interpretation of Marxian theory to provide a unique explanation of the current capitalist crisis’s multiple causes with emphasis on the United States. I also use that interpretation to criticize both sides in the classic reform versus revolution debate that is resurfacing among Marxists and many others. On the bases of this interpretation and criticism, I offer a Marxian argument for a different sort of revolutionary response to capitalist crises. My intervention, together with those of other Marxists, demonstrates again that Marxism represents capitalism’s most persistent, most developed, and most profound self-criticism.

Oscillating Capitalist Forms and Theories

Capitalist economies everywhere display a recurring pattern of oscillation. Periods of relatively limited state regulatory and other interventions in markets and private property repeatedly encounter and manage crises until one arrives that cannot be managed. Then, transition occurs to a period with relatively more state economic interventions. Crises continue to erupt and are managed until a crisis appears that cannot be managed. Then a transition occurs back to a period of relatively less state economic intervention. What remains the same across both periods (in my interpretation of Marxian theory) is the capitalist structure of production. In that particular structure of production, a small group of people—typically a corporate board of directors—appropriates the surplus produced by a large, different group of hired laborers.

We shall use the names “private” and “state” to differentiate these alternating periods or forms of capitalist economy. Thus, for example, the 1929 crisis of a private capitalism in the United States ushered in a state capitalism, Roosevelt’s New Deal. Then, in the 1970s, that state capitalism encountered a crisis serious enough to provoke a transition back to private capitalism. When the latter experienced a meltdown in 2008, that crisis produced yet another oscillation back to a form of state capitalism. Comparable oscillations characterize all capitalisms.

Two different and contending mainstream (i.e., non-Marxian) theories have also explained capitalism’s repeated crises over the last century. For each crisis, those theories proposed correspondingly different solutions. Today’s crisis is no exception. Ideological hegemony has oscillated between those two theories just as capitalism has oscillated between its two forms.

One theory—called, after one of its founders, “Keynesian economics”—claims that unregulated private markets have limits and imperfections that periodically push capitalist economies into inflations, recessions, or even depressions. Without intervention from outside, private capitalism may remain depressed or inflated long enough to threaten capitalism itself. Keynesian economics identifies the key mechanisms that produce crises in private capitalisms and recommends various state interventions (regulations and monetary and fiscal policies) to prevent or offset private capitalist crises.

The other mainstream theory is associated with Adam Smith, the classical “founder of modern economics” who celebrated private capitalism (free markets plus private property) as the economic system that generated the maximum possible wealth. In its evolved form, “neoclassical” economics emphasizes how and why private capitalism yields the best (“optimum”) of all possible economic outcomes. For neoclassical economists, if a nonoptimal outcome occurs, the best solution is to let private capitalism heal itself through the internal mechanisms of private property and free markets. They denounce Keynesian-inspired state interventions as inevitably yielding regulators’ mistakes; politically manipulated markets; and such resulting inefficiencies as inflation, stagnation, and stagflation. State officials cannot replace, let alone improve upon, the unregulated (“free”) market mechanism. Neoclassical economists insist that free markets accommodate the infinity of different demands and supplies and communicate the infinity of information more efficiently that any state could.

As today’s global capitalist crisis unfolds, Keynesian state interventions are suddenly on the rise in the United States after hibernating for more than thirty years. Since the 1970s, as part of global campaigns for neoliberalism, neoclassical economists had widely reversed and suppressed Keynesian interventions. They had overthrown the domination of Keynesians and Keynesian macroeconomics that emerged from the Great Depression of the 1930s. Neoclassical economists had always attacked the Keynesian economics associated with Roosevelt’s New Deal for seriously distorting and slowing economic growth and promoting social conflict (sometimes dubbed “class war”). They sought to reinstitute the neoclassical utopia: private and competitive markets lifting the incomes of both labor and capital and thereby avoiding class conflicts by means of growth.

After the 1970s, market deregulation and privatization became the official and prevailing principles of business, politics, journalism, and academia. Neoclassical economics became once again, as before the Great Depression, the modern economics. It banished Keynesian economics as a theoretical mistake; only neoclassical economics was “correct.” Unrepentant Keynesians found their professional advances blocked and their careers often ended. Such extreme intolerance of differences between neoclassical and Keynesian economi...

Table of contents

• Capitalism's Crisis Deepens
• Preface
• Part I: Crisis Capitalism
• Part II: Crisis economics
• Part III: Crisis politics
• Part IV: Crisis responses, Going Beyond Capitalism
• About the Author