The extract below from Charles Hugh Smith, a blogger at oftwominds.com, applies Marxist analysis to the contemporary economic crisis. Everyone was taught back in the day (certainly I was taught and believed) that Marx got a lot wrong in his analysis. Capitalism did not collapse, but thrived. Socialism, the wave of the future, proved a moral and material dead-end. The masses were not increasingly impoverished but rather enjoyed rising standards of living. The emphasis on material forces ignored the independent role of ideas in shaping political and economic reality. Revolution, when it did occur, arose in the most economically backward states (Russia and China), not in the economically advanced West. The dictatorship of the proletariat, which Marx enthusiastically welcomed, ignored the necessity of constitutional checks on political power.
One could go on this vein, but the analysis that Smith sets forth below suggests that Marx also saw some important things. I resist Smith’s conclusion—“the final crisis of finance-based advanced Capitalism is finally at hand”—but the set of changes he takes note of fits within a Marxist framework and rings true in vital respects: the dominance of finance capital, eroding shares to labor of the fruits of economic output due to globalization and technology, the explosion of debt masking declines in real wealth, the exhaustion of conventional remedies in the form of economic stimulus and ever higher debt-to-GDP ratios. (See Smith's original post and here for some supporting charts.)
* * *
Marx predicted a crisis of advanced Capitalism based on the rising imbalance of capital and labor in finance-dominated Capitalism. The basic Marxist context is history, not morality, and so the Marxist critique is light on blaming the rich for Capitalism's core ills and heavy on the inevitability of larger historic forces.
In other words, what's wrong with advanced Capitalism cannot be fixed by taxing the super-wealthy at the same rate we self-employed pay (40% basic Federal rate), though that would certainly be a fair and just step in the right direction. Advanced Capitalism's ills run much deeper than superficial "class warfare" models in which the "solution" is to redistribute wealth from the top down the pyramid.
This redistributive "socialist" flavor of advanced Capitalism has bought time--the crisis of the 1930s was staved off for 70 years--but now redistribution as a saving strategy has reached its limits.
The other political-economic strategy that has been used to stave off the crisis is consumer credit: as labor's share of the economy shrank, the middle class workforce was given massive quantities of credit, based on their earnings and on the equity of the family home.
The credit model of boosting consumption has also run its course, though the Keynesian cargo cult is still busily painting radio dials on rocks and hectoring the Economic Gods to unleash their magic "animal spirits."
The third strategy to stave off advanced Capitalism's crisis was to greatly expand the workforce to compensate for labor's dwindling share of the economy. Simply put, Mom, Aunty and Sis entered the workforce en masse in the 1970s, and their earning power boosted household income enough to maintain consumption.
That gambit has run out of steam as the labor force is now shrinking for structural reasons. Though the system is eager to put Grandpa to work as a Wal-Mart greeter and Grandma to work as a retail clerk, the total number of jobs is declining, and so older workers are simply displacing younger workers. The gambit of expanding the workforce to keep finance-based Capitalism going has entered the final end-game. Moving the pawns of tax rates and fiscal stimulus around may be distracting, but neither will fix advanced finance-based Capitalism's basic ills.
The fourth and final strategy was to exploit speculation's ability to create phantom wealth. By unleashing the dogs of speculation via a vast expansion of credit, leverage and proxies for actual capital, i.e. derivatives, advanced finance-based Capitalism enabled the expansion of serial speculative bubbles, each of which created the illusion of systemically rising wealth, and each of which led to a rise in consumption as the "winners" in the speculative game spent some of their gains.
This strategy has also run its course, as the public at last grasps that bubbles must burst and the aftermath damages everyone, not just those who gambled and lost.
Two other essential conditions have also peaked: cheap energy and globalization, which opened vast new markets for both cheap labor and new consumption. As inflation explodes in China and its speculative credit-based bubbles burst, and as oil exporters increasingly consume their resources domestically, those drivers are now reversing.
Advanced Capitalism is broken for reasons conventional economics cannot dare recognize, because it would spell the end of its intellectual dominance and the end of the entire post-war political-economic paradigm that feeds it. . . .
Marx identified two critical drivers of advanced Capitalism's final crisis:
1. Global Capital has the means and incentive to keep labor in surplus and capital scarce, which means that capital has pricing power and labor has none. The inevitable result of this is that wages, as measured in purchasing power, fall while the returns earned on capital rise.
This establishes a self-reinforcing, inevitably destructive dynamic: once labor's share of the national income falls below a critical threshold, labor can no longer consume enough or borrow enough to keep the economy afloat with its cash and credit-based consumption.
We are at that point, but massive Federal borrowing and transfers are masking that reality for the time being.
2. The dual forces of competition and technology inevitably drive down the labor component of all manufactured goods and technology-based services. Mechanization, robotics and software have lowered the labor component of everything from running shoes to computer chips from $20 per item to $2 per item, and that process cannot be reversed. While the wage paid to the workforce designing and manufacturing the products and providing the services may actually rise, the slice of revenues given over to all labor continues shrinking.
This is what I have constantly referred to (using Jeremy Rifkin's excellent phrase) as "the end of work."
Put another way: the return on capital invested in technology greatly exceeds the return on labor. Industries and enterprises which fail to leverage capital invested in technology that lowers the labor component of their good/service eventually undergo rapid and inevitable creative destruction.
We are about to witness this creative destruction in the labor-heavy industries of government, education and healthcare.
Marx's genius was to recognize the historical inevitability of these internal forces within advanced Capitalism. He also recognized the inevitability of finance-capital's dominance of industrial capital--something we have witnessed in full flower over the past 30 years.
Finance capital now dominates not just industrial capital but the machinery of governance, rendering real reform impossible. Instead, the Status Quo delivers up simulacrum "reform" which change nothing but the packaging of the Central State/Cartel Capitalism's exploitation and predation.
Add all this up and you have to conclude the final crisis of finance-based advanced Capitalism is finally at hand. All the "fixes" that extended its run over the past 70 years have run their course. Life will go on, of course, after the Status Quo devolves, and in my view, ridding the globe of financial predation and parasitism will be a positive step forward.
No comments:
Post a Comment