Louis Proyect: The Unrepentant Marxist

June 25, 2021

Defy the Stranglehold of Social Media, Join the New Progressive Economists Mailing List!

Filed under: economics — louisproyect @ 10:35 pm
Michael Perelman, creator of the original PEN-L


Recently I created a mailing list called the Progressive Economist Network (PEN-L) in order to bring together academics and non-academics to exchange ideas from a left perspective. It honors the memory of Michael Perelman who created the original PEN-L in the early days of the Internet. Dying unexpectedly at the age of 81 in September 2020 before turning over moderation duties, his absence as moderator made it impossible to subscribe to the old PEN-L. It also left the list in limbo since Michael was no longer the helmsman.

When a former PEN-L subscriber asked for my help in getting resubbed, something beyond anybody’s capability, I decided to create a new list that can function as a forum for exchanges on the pressing issues of the day, such as the economic impact of the pandemic, the growing tensions between the USA and China, and prospects for Biden’s ambitious economic program. If the only result of this initiative is to make possible the kind of vigorous and productive discussions that distinguished the original PEN-L, it will have been more than worth it.

Not long after going to work at Columbia University in 1990, I noticed a daily email coming from the library (I believe) that listed dozens of mailing lists. At the time, I had no idea what a mailing list was. I strolled into the next cubicle and asked someone working in Academic Information Services what they were. He smiled at me and said, “Welcome to the Internet”. This was not only long before Facebook but long before AOL. At the time, you generally could not get on the Net unless you had a government or academic job.

As for the mailing lists, most of them were of little interest to me. Typically, they would be within the narrow confines of some academic discipline, such as clinical psychology or Jane Austen studies. Each day I scoured the lists to see if there might be something relevant to my own interests and was happy to spot PEN-L one morning. That was my introduction to the Internet and to Michael Perelman, who I considered a great friend even when I was wreaking havoc on PEN-L’s neo-Keynesians.

Michael was among the academics who helped create a culture of critical Marxist studies in the sixties. He understood that PEN-L could be part of the radical challenge to economics departments in the USA that were peddling liberal nostrums at odds with the reality of racism and imperialism. PEN-L stood arm and arm with the Union for Radical Political Economics, a group that continues to this day and that was an initial sponsor of the magazine Dollars and Sense. Other academics also helped to challenge orthodoxy, most notably those who created Science for the People. Sensing the need for a revival in a time of growing anti-science humbuggery generated by Trump and other Republicans, it began escalating its presence in 2014.

To round out this bird’s eye view of radical academics from the 1960s and their institutions, Monthly Review should be part of the mix. While Marxism and radical economics in general became more and more ingrown as the 80s and 90s wore on, MR always had its eyes on the prize. The magazine and the publishing wing always had an orientation to the working class and the Third World and will remain so as long as people like John Bellamy Foster and Michael Yates are on the editorial board. In addition to writing 19 books, Michael had a prolific presence online both through his blog and articles for various left publications. Six of them are on the Monthly Review website and well worth reading. Although Michael did not have any kind of special ties to MR, I always saw him in the same way I saw Harry Magdoff, Paul Sweezy and Leo Huberman. All such intellectuals understood exactly what Marx meant when he said, “The philosophers have only interpreted the world, in various ways. The point, however, is to change it.”

As someone who created the Marxism mailing list (aka Marxmail) in 1998, I have given a lot of thought to the value of what some might consider antediluvian when compared to social media. While I am on Facebook and Twitter (barely so), I am still committed to the value of a mailing list. Let me explain why.

To start with, to have an intelligent discussion on Twitter is impossible since there is a 280 character limit. Furthermore, the ubiquitous use of fake names cheapens an exchange since you have no idea who you are really speaking to, a contrarian leftist or someone working in a Moscow basement. I generally use Twitter to circulate my blog posts and find few other uses for it. There are some exceptions to the sterility of Twitter that are worth mentioning. Adam Tooze always has something interesting to say and so do The Nation’s Jeet Heer and New Yorker magazine film critic David Brody. But of what possible value can there be the Tweets of someone identified as “DJ Quik is a goat in human’s clothing” (an Aaron Maté follower)?

With all the knocks against Facebook, I almost feel it is overkill to offer my own thoughts on its uselessness for a serious discussion of serious ideas. But let me indulge in a bit of overkill, anyhow. To start off, it is very difficult to track down a thread that occurred even a couple of days earlier. FB does have a search capability but it is so unfocused that you end up wasting your time. Furthermore, since FB is based on the idea that we are all “friends”, you end up with people having little background in, for example, the early history of the USSR, hijacking the discussion with puerile salutes to Stalin or Trotsky. As is the case with Twitter, I use FB to provide links to my blog posts or articles in the left press, as well as to receive valuable posts from serious contributors who are the counterpart of Twitter’s Adam Tooze. For example, Jairus Banaji’s are priceless. My recommendation is to see for yourself. I am not sure if only his friends can read them but I’d give it a try nevertheless at: https://www.facebook.com/jairus.banaji

Finally, on the benefits of the old-fashion mailing list. To start with, it is much easier to deal with trolls since a moderator controls who is a subscriber or not. While undoubtedly the new PEN-L would attract libertarians just as it did in its predecessor, it would be easy to keep them on a short leash. You also get searchable archives that always make it easy to look up a discussion that took place either yesterday or ten years ago. So, if you are interested in how the left regarded the Obama administration during his two terms in order to understand how his history is being repeated today, the archived messages can be highly revealing.

To subscribe to the new PEN-L, go to https://groups.google.com/g/pen-l/.

To subscribe to Marxmail, go to https://groups.io/g/marxmail

May 27, 2020

Was Keynes a socialist?

Filed under: economics — louisproyect @ 6:22 pm

John Maynard Keynes

The latest issue of Catalyst, a journal that is published by Bhaskar Sunkara and edited by Vivek Chibber, has an article by economics professor Gary Mongiovi titled “Was Keynes a Socialist?” It is a gushing review of “Keynes Against Capitalism: His Economic Case for Liberal Socialism”, a new book by James Crotty. Crotty, a 79-year old economics professor emeritus, is a post-Keynesian just like Mongiovi. Among the left professorate, post-Keynesianism is a way of being on the left but not too far left. It puts you in the same camp as the staff of the Jerome Levy Institute at Bard College, a school well-known for its housebroken faculty. At such places, Hyman Minsky is taken in large doses and a smidgen of Karl Marx is thrown in just to add some spice to the stew. After all, you don’t want to go too far with the Marxism stuff in light of Keynes’s take, which is cited by Mongiovi:

Keynes was highly antipathetic toward Marx. He characterized Das Kapital as “an obsolete economic textbook which [is] not only scientifically erroneous but without interest or application for the modern world.” To George Bernard Shaw he wrote in 1934: “My feelings about Das Kapital are the same as my feelings about the Koran. I know that it is historically important and I know that many people, not all of whom are idiots, find it a sort of Rock of Ages and containing inspiration. Yet when I look into it, it is to me inexplicable that it can have this effect. Its dreary, out-of-date, academic controversialising seems so extraordinarily unsuitable as material for the purpose.”

Interesting that Keynes would confide in Shaw. Both of them were members of the Fabian Society, a reformist gathering of intellectuals that was sort of the equivalent of the Jacobin editorial board in the 1930s. Despite their disavowal of revolutionary politics, they absolutely doted on Joseph Stalin, whose show trials and mass executions Shaw defended:

But the top of the ladder is a very trying place for old revolutionists who have had no administrative experience, who have had no financial experience, who have been trained as penniless hunted fugitives with Karl Marx on the brain and not as statesmen. They often have to be pushed off the ladder with a rope around their necks.

Keep in mind that admiration for Stalin’s ruthlessness was widespread among the intellectual elite in the 1930s. The NY Times’s Walter Duranty defended the show trials, as well. To his credit, Keynes never fell into this trap. He called Stalin “terrifying” and guilty of eliminating every critical mind in the USSR.

That being said, Keynes never believed in the power of ordinary working people to control their own fate. Like the rest of the Fabians, he saw socialism as a project to be carried out by a modern version of Plato’s philosopher-kings who would administer a mixed-economy state. In the 1930s, the closest anything came to this ideal was the New Deal and Sweden’s social democracy, two of the Sandernista models. In a shrewd analysis of Crotty’s book, Michael Roberts identified the elitist bent:

As Crotty puts it, Keynes’ central point was that the emerging importance of the system of public and semipublic corporations and associations combined with the evolution of collusive oligopolistic relations in the private sector already provided the foundation for a qualitative increase in state control of the economy.  Crotty concludes “Keynes was unabashedly corporatist.”  Indeed – I would add that his concept of corporatism was not dissimilar to that actually being implemented in fascist Germany and Italy at the time.

And who was to run this corporate capitalist/socialist state?  According to Keynes’ biographer, Robert Skidelsky, it would be “an interconnected elite of business managers, bankers, civil servants, economists and scientists, all trained at Oxford and Cambridge and imbued with a public service ethic, would come to run these organs of state, whether private or public, and make them hum to the same tune.”

It is beyond the scope of this article to offer a critique of John Maynard Keynes or James Crotty’s new book. Given all the projects I have taken on, it would not be worth my time or that of my readers. Instead, I want to hone in on Mongiovi’s review as another indication of Sunkara and Chibber’s slow but inexorable retreat from Marxism. By implicitly endorsing Keynes’s doctrines that Mongiovi describes in the subheading of his article as “indeed more radical than commonly thought” and of “considerable relevance for the Left today”, they are repositioning themselves as Brooklyn hipster versions of Dissent magazine.

At the start of his review, Mongiovi recapitulates what most of us, including me, think of Keynes. He cites Lawrence Klein, an early champion of Keynesian economics and a future Nobel laureate: “Marx analyzed the reasons why the capitalist system did not and could not function properly, while Keynes analyzed the reasons why the capitalist system did not but could function properly. Keynes wanted to apologize and preserve, while Marx wanted to criticize and destroy.”

Apparently, Crotty’s book is a corrective to this false characterization. Instead, Keynes “Keynes was building a case to replace it [capitalism] with a form of democratic socialism in which most large-scale capital investment spending would be undertaken by the state or by quasi-public entities.” All this would unfold in a “gradual transition, through a process of trial and error, to a planned economy.” This sounds pretty much like how Jacobin described a Sanders presidency, doesn’t it?

Perhaps realizing that the grounds for calling Keynes a socialist are tissue-thin, Mongiovi takes the tack that labels are not that important:

I doubt that there is much to be gained by trying to pin a label like “liberal” or “socialist” onto Keynes — he was too exuberant a thinker to be put into a box. And inasmuch as these particular labels can mean vastly different things to different people, the exercise is doubly futile.

But these sorts of labels are used to describe an ideology, something that can be extremely difficult to pin down. Instead, it is more important to define socialist in terms of a criterion that can be applied to a state like Cuba or the former Soviet Union. This is a function of examining who owns what. Of course, it can sometimes be difficult to come to such a decision when the data itself is in transition, like Cuba in 1960 or Yugoslavia in Tito’s early years. Frankly, it matters little to me whether you want to call Keynes a liberal or a socialist. I am far more interested in what positions he takes on a particular capitalist state itself.

For Mongiovi and Crotty, Keynes was on the left. “He was not mainly preoccupied with taming the business cycle: his ultimate objective was to bring about a radical transformation of our economic system.” So, what does such a radical transformation entail? Mongiovi attempts to answer that question in a section titled “Keynes as a Theorist of Structural Change”.

After making the case that Keynes, like Marx, saw capitalist crisis as rooted in its own contradictions, Mongiovi—speaking for Crotty—refers to the measures Keynes saw as moving toward socialism:

Since the effective demand problem was fundamentally structural, Keynes advocated a structural solution: a permanent expansion of the state. The idea was that a mechanism needed to be put in place to provide a permanent stimulus to the economy. Crotty describes at considerable length Keynes’s proposal to expand public control over investment. The central institution Keynes envisioned for this function was a Board of National Investment, an idea he first put forward in the late 1920s when he helped to draft a Liberal Party report on Britain’s Industrial Future. He pushed for such a board again in the early 1930s when he served on the famous Macmillan Committee to formulate a response to the problems confronting the British economy. Crotty describes the proposed role of the board as “very ambitious indeed — to help recreate long-term boom conditions similar in vigor to those of the nineteenth century through public investment planning. This definitely was not a short-term government stimulus program designed to ‘kick-start’ a temporarily sluggish economy and then let free enterprise take over.” One significant achievement of Crotty’s book is its demonstration beyond a doubt that Keynes’s overarching objective was to make a case for a program of national economic planning. Crotty marshals all of the available evidence and sets it out in an exceedingly clear way.

What’s entirely missing from Mongiovi’s review, and presumably in Crotty’s book, is any engagement with the class struggle. This paragraph is riddled with class-neutral terms. For example, take the “permanent expansion of the state.” If this in itself was a positive good, you might ask whether there was much difference between the New Deal and the corporatist state of fascism. Indeed, Michael Roberts pointedly refers to Crotty’s admission that “Keynes was unabashedly corporatist.”

Lynn Turgeon, the heterodox economist who died in 1999, saw corporatism as a system that was not inherently progressive. Influenced by Paul Sweezey and a frequent contributor to MR, he argued that FDR’s Keynesianism and Nazi economics had something in common, namely strong state intervention, especially using a military build-up to offset the Great Depression:

Some wag has defined an economist as someone who has seen something work in practice and then proceeds to make it work in theory. In some respects, this may have applied to Keynes, who was certainly aware of the tremendous economic miracle of Adolf Hitler in reducing unemployment from over 30 percent when he took office in 1933 to 1 percent by 1936, the year in which the German edition of the General Theory appeared. In his special introduction to the German edition, Keynes recognized how “thirsty” the Germans must be for his “general theory,” which would also apply to “national socialism.”

(From “Bastard Keynesianism: The Evolution of Economic Thinking and Policymaking Since WWII”)

Is it possible that beneath the rah-rah attitude of the Democratic Party left toward a Green New Deal, there’s not much beyond the kind of formulas encapsulated in Mongiovi’s paragraph above? All this salivating over government boards has little to do with the socialism I’ve defended since 1967. On Biden’s website, there is this:

Biden believes the Green New Deal is a crucial framework for meeting the climate challenges we face. It powerfully captures two basic truths, which are at the core of his plan: (1) the United States urgently needs to embrace greater ambition on an epic scale to meet the scope of this challenge, and (2) our environment and our economy are completely and totally connected.

At the risk of sounding like an anarchist, isn’t it time to stop dwelling on how the state can be expanded into a beneficent agent of economic and ecological change? Why not figure out how to smash the fucking state that will continue to kill us, if it remains in the hands of the bourgeoisie?

There’s a cognitive dissonance in the latest Catalyst. Probably sent to the press before the pandemic kicked in, it smacks of the Fabian habits of the social democratic left and light-years away from our grim pandemic and economic free-fall realities. The sclerotic and stultifying Dissent magazine of the 1960s and 70s being the prime example. It would be a shame if Sunkara and Chibber continue traveling down this road but we can compensate for this by getting our shit together as we used to put it in the 1960s.

April 11, 2019

The deck was stacked against East Germany

Filed under: economics,Germany — louisproyect @ 10:13 pm

I will be posting a review of Victor Grossman’s “A Socialist Defector: From Harvard to Karl-Marx-Allee” to CounterPunch a week from tomorrow but couldn’t resist sharing this brief excerpt now since it is about as useful a summary of the disadvantages East Germany faced in trying to compete with West Germany. Perhaps compete is the wrong word since the goal was more modest, namely to offer its citizens what its leaders regarded as socialism. Yes, the country was burdened by secret police, bureaucracy and all the rest but there were many decent aspects that shine through in Grossman’s account. Even if Tony Cliff or Farrell Dobbs were the Prime Minister of East Germany, I doubt that they could have done much better with the cards they were dealt, including from the USSR.

I happened to land in a new republic where the factories, mines, and landed estates of those mighty guilt-ridden men had become public property and a barrier against their powerful rule as job-givers and decision makers. Their refusal to accept these losses in this divided country and city and their active hatred of the GDR demanded a choice. While socialism and capitalism were fairly abstract issues in the United States in the 1960s, chewed over in many theoretical variations, here, in my new home, the dividing line was far sharper, with echoes of fateful events in 1919, 1933, 1938, 1939, and 1945 resounding in almost every street we trod. “Which side are you on?” was not just a good union song but an almost daily decision. Until the Wall was built in August 1961, that other side was only one stop away on the subway, one step away on unchecked street borders. Many sought to evade a choice in some agreeable, unpolitical niche. But for a “political animal” like myself, this was never an option. And how in hell could I ever accept the rule of an Adenauer, Globke, Krupp, or Thyssen?

Yet how should I look upon this alternative Germany? How was it developing? What doubts and burning problems were present?

From the start, all cards were stacked against little East Germany. About the size of Ohio or Virginia, far smaller than the three zones forming the Federal Republic, close to California in size, it had neither the iron and steel industry of its Ruhr Valley nor endless tons of high-quality coal under its surface, but had to start off with one steel plant, hardly any natural resources except potassium salt mines, a little copper, and huge amounts of low-quality, damp, stinky lignite coal, its weak basis for electricity, fuel, and chemicals. Yet it was saddled with almost 95 percent of reparation costs. France, Britain, and the Benelux countries soon absolved West Germany from most payments. But Poland and the USSR, immensely demolished, desperately needed their share of reparations, which came almost exclusively from the Soviet-occupied zone. Whole factory complexes, machinery, rail tracks, and a good share of emerging new production were removed. To make matters worse, most industries in the East, like machine tools or textiles, depended on raw materials from West t Germany, supplied in varying quantities or not supplied, depending on how much pressure Bonn wished to exert in a changing political situation. Meanwhile, after 1947, West Germany was getting big investments through the Marshall Plan, a key factor in its “economic miracle.”

There was another serious drawback. Large numbers of engineering and managerial personnel, those most strongly infected with the Nazi bacillus and fearful of punishment under Soviet occupation or left-wing rule, and hating nationalization with its ousting of their beloved industry leaders, disappeared westward, before the Red Army arrived if possible but also, in later years, often at crucial moments. Many took plans, patents, and documents with them plus their know-how on running factories. Their change of address involved no new language to learn and no risk. Their former employers, soon an integral part of the “economic miracle,” were glad to offer them far higher pay than in the poorer, more egalitarian East. The young GDR economy thus faced not only wreckage, reparations (until 1953), and a cutoff from former resources but also had to rely on the thin ranks of engineers and managers willing to remain plus a new generation being trained in colleges that lacked professors and researchers who, having eagerly supported the Nazis, also had moved westward. Such luring of experts, including newly trained ones, was assiduously maintained through the years, even after the Wall made it far more difficult to “disappear.” A former manager of a big GDR shipyard told me how half of his pre-1961 class of skilled machinist apprentices were regularly lured away by West German companies, but only after they had completed their expensive training. That meant big losses in the East and big savings in West German costs.

And yet, despite myriad difficulties and highly skeptical, even cynical sectors of the population, the economy had started up again, and here and there with genuine, new enthusiasm.

March 12, 2019

The Boeing 737 Max 8: a case-study in uncreative destruction

Filed under: computers,disasters,economics,unemployment,workers — louisproyect @ 6:26 pm

Wreckage at the scene of an Ethiopian Airlines crash near Addis Ababa, Ethiopia, on Monday. (AP Photo/Mulugeta Ayene)

On October 29, 2018, a Boeing 737 Max 8 belonging to Lion Air in Indonesia crashed into the Java Sea 12 minutes after take-off. All 189 passengers and crew members were killed instantly. It is extremely unusual for planes to suffer such accidents in clear weather after having reached their cruising altitude. Flight experts concluded that the pilots were not adequately trained in the Maneuvering Characteristics Augmentation System (MCAS), a robotics technology that lowers the nose of a plane to prevent a stall. Although there is no definitive judgement on exactly what happened, it appears to be a combination of inadequate training for the pilots and a malfunctioning MCAS.

On Sunday, another 737 Max 8 owned by Ethiopian Airlines had the same kind of accident resulting in the death of 157 passengers and crew members. In the aftermath of the tragedy, this has led to Australia, China, Germany, France, Indonesia, Ireland, Malaysia, Singapore, and the United Kingdom grounding the planes.

Looking at these two horrible tragedies that will make me think twice about getting on a plane again, I keep thinking of the title of Gabriel Garcia Márquez’s classic “Chronicle of a Death Foretold”. In essence, the use of MCAS is akin to an experimental, driverless car owned by Uber killing a pedestrian who was jaywalking on a dark road in Tempe, Arizona on May 18, 2018. The back-up driver, who was supposed to keep a sharp eye on the road to prevent such an accident, was watching reruns of the reality TV show “The Voice” at the time.

Despite such incidents (there have been 4 fatalities already), the bourgeoisie is determined to push ahead since the savings in labor costs will make up for the collateral damage of dead pedestrians. While I am skeptical that completely driverless cars will ever become the norm for Uber or Lyft, I can see people with little driving experience being paid minimum wage just to be a back-up to the computer system—as long as they don’t watch TV on the job. (Fat chance with such a boring job.)

This morning Donald Trump tweeted about the airline crash. “Airplanes are becoming far too complex to fly. Pilots are no longer needed, but rather computer scientists from MIT. I see it all the time in many products. Always seeking to go one unnecessary step further, when often old and simpler is far better. Split second decisions are….”

To begin with, the issue is not planes becoming too complex. It is rather that they are becoming too simple in terms of the amount of deskilling the airlines favor. As for the issue of replacing human labor with robots, he is all for it—reflecting the priorities of a ruling class bent on driving down wages.

In a US News and World Report article titled “The Race Is On After Feds Pave Way for Driverless Trucks”, we learn:

The most optimistic analysts project that trucks with empty cabs and a computer at the wheel will travel on U.S. highways in as little as two years with no escort or safety driver in sight now that the Trump administration has signaled its willingness to let tractor-trailers to become truly driverless.

The U.S. Department of Transportation this month announced that it will “no longer assume” that the driver of a commercial truck is human, and the agency will even “adapt the definitions of ‘driver’ and ‘operator’ to recognize that such terms do not refer exclusively to a human, but may in fact include an automated system.”

Already, automated truck developers such as Embark and TuSimple have made freight deliveries where the computer takes control on the highway, overseen by a human “safety driver.” Companies have also successfully tested “platooning,” where a truck with a human driver leads a convoy of as many as five computer-driven trucks following at close distance to reduce drag and save fuel.

The technologies promise big savings, with driverless trucks potentially slashing 40 percent from the cost of long-haul freight – much of it in saved labor expenses – and platooning cutting 10 to 15 percent in fuel costs.

If it is good for cars and trucks, why not airplanes?

Two years before the Indonesian 737 crash, the Guardian published an article titled “Crash: how computers are setting us up for disaster” that it clearly anticipated. Interestingly enough, it was not even a Boeing plane that was discussed in the article. It was an Airbus 330 that had the same kind of systems as the Boeing NCAS. With pilots much more used to relying on automation than manual control of the plane, they failed to override the system that was forcing the plane to plunge into the Atlantic Ocean on June 1, 2009 at about 125 miles an hour. Everyone on board, 228 passengers and crew, died instantly.

While pilots flying to major airports will continue to be highly paid, the wages of those working for regional airlines has fallen drastically. In 2010, the Guardian reported on “A pilot’s life: exhausting hours for meagre wages”. They lead a decidedly unglamorous life:

Many are forced to fly half way around the country before they even begin work. Others sleep in trailers at the back of Los Angeles airport, in airline lounges across the country or even on the floors of their own planes. Some co-pilots, who typically take home about $20,000 (£12,500) a year, hold down second jobs to make ends meet.

All that will change when airplanes go the route of driverless cars as the NY Times reported last July in an article titled “Are You Ready to Fly Without a Human Pilot?” In the same fashion that Trump backed driverless trucks, the move toward pilotless planes seems inexorable:

Regulators are already taking steps toward downsizing the role of humans on the flight deck. The bill to reauthorize the Federal Aviation Administration included language to provide funding to study single-pilot operations for cargo planes, a move that the Air Line Pilots Association opposed. Captain Canoll said that a single-pilot aircraft must be safe to fly without anyone at the controls in case the pilot takes a bathroom break or becomes incapacitated.

At the recently concluded World Economic Forum, there was a big focus on artificial intelligence and robotics. On the website, you can find breathless articles about “Meet Stan: the robot valet that parks your car at the airport” and “US companies created a record number of robot workers in 2018”. In a Washington Post article on the WEF, the title betrayed a certain unease about the replacement of human beings by robots: The aristocrats are out of touch’: Davos elites believe the answer to inequality is ‘upskilling’. It cited Blackstone CEO Stephen Schwarzman about how to keep the masses docile: “The lack of education in those areas in digital is absolutely shocking. That has to be changed. That will very much lessen the inequalities that people have in terms of job opportunities.”

What world are these people living in? Schwarzman has a 32-room penthouse in 740 Park Avenue and spent $5 million for his birthday party in 2017. He just made a gift of $1 billion to MIT to launch a new school for Artificial Intelligence. Is that supposed to create jobs? Maybe for someone with an MIT degree who will go to work writing software to replace the people working for Jeff Bezos’s slave labor-like warehouses with machines but what is someone out of a job at an Amazon warehouse then supposed to do? Apply to MIT?

The handwriting is on the wall. The USA is moving into a two-tiered system. In places like NYC, Boston, San Francisco, Seattle and Portland, you get people working in high-tech industries that in contrast to the Fordist model of the 1930s employ far fewer bodies. Meanwhile, in Detroit, Cleveland, and other places where Fordism once held sway, the jobs are there if you are willing to work at Walmarts, at local hospitals emptying bedpans or as guards in a jail or prison. Class divisions between those with advanced technology skills and those left out will only increase, leading to the kind of showdown taking place in France between the neoliberal state and the Yellow Vests.

You get a feel for the Two Americas reading a March 7th NY Times article titled “Thousands of New Millionaires Are About to Eat San Francisco Alive”:

In cities like Oakland and Berkeley and San Francisco, millennials obsess over Alexandria Ocasio-Cortez’s Twitter and attend Democratic Socialists of America meetings. But the socialist passion doesn’t seem to have impacted the city’s zeal for I.P.O. parties, which the party planning community says are going to surpass past booms.

Jay Siegan, a former live music club owner who now curates private entertainment and music, is gearing up. He has worked on events for many of the I.P.O. hopefuls, including Uber, Airbnb, Slack, Postmates and Lyft.

“We see multiple parties per I.P.O. for the company that is I.P.O.ing, as well as firms that are associated to them,” Mr. Siegan said. Budgets for start-up parties, he said, can easily go above $10 million. “They’re wanting to bring in A-list celebrities to perform at the dinner tables for the executives. They want ballet performers.”

The only comment I would add to this tale of two cities is that it would not be surprising if some of these high-flying technology workers might also plan to vote for Bernie Sanders. They probably don’t feel happy about living in a city where their wealth has driven up the cost of housing to the point that homelessness is an epidemic. Whether President Sanders can do much about these class divisions is open to debate.

The replacement of human labor by machinery has been described as “creative destruction”. The assumption is that the temporary pain is worth it since there will always be the growth of new jobs. As my seventh grade social studies put it, the invention of the automobile put the blacksmith out of work but it created far more jobs in a Ford plant.

On May 12, 2010, the New York Times ran an article by economics editor Catherine Rampell titled The New Poor: In Job Market Shift, Some Workers Are Left Behind that focused on the largely middle-aged unemployed who will probably never work again. For example, 52 year old administrative assistant Cynthia Norton has been working part-time at Walmart while sending resumes everywhere but nobody gets back to her. She is part of a much bigger picture:

Ms. Norton is one of 1.7 million Americans who were employed in clerical and administrative positions when the recession began, but were no longer working in that occupation by the end of last year. There have also been outsize job losses in other occupation categories that seem unlikely to be revived during the economic recovery. The number of printing machine operators, for example, was nearly halved from the fourth quarter of 2007 to the fourth quarter of 2009. The number of people employed as travel agents fell by 40 percent.

But Ms. Rampell finds the silver lining in this dark cloud:

This “creative destruction” in the job market can benefit the economy.

Pruning relatively less-efficient employees like clerks and travel agents, whose work can be done more cheaply by computers or workers abroad, makes American businesses more efficient. Year over year, productivity growth was at its highest level in over 50 years last quarter, pushing corporate profits to record highs and helping the economy grow.

The term “creative destruction” might ring a bell. It was coined by Werner Sombart in his 1913 book “War and Capitalism”. When he was young, Sombart considered himself a Marxist. His notion of creative destruction was obviously drawn from Karl Marx, who, according to some, saw capitalism in terms of the business cycle. With busts following booms, like night follows day, a new round of capital accumulation can begin. This interpretation is particularly associated with Volume Two of Capital that examines this process in great detail. Looking at this material, some Marxists like Eduard Bernstein drew the conclusion that capitalism is an infinitely self-sustaining system.

By 1913, Sombart had dumped the Marxist commitment to social revolution but still retained the idea that there was a basis in Karl Marx for upholding the need for “creative destruction”, a view buttressed by an overly positive interpretation of this passage in the Communist Manifesto:

The bourgeoisie cannot exist without constantly revolutionizing the instruments of production, and thereby the relations of production, and with them the whole relations of society. Conservation of the old modes of production in unaltered form, was, on the contrary, the first condition of existence for all earlier industrial classes. Constant revolutionizing of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones.

By the 1930s, Sombart had adapted himself fairly well to the Nazi system although he was not gung-ho like Martin Heidegger or Carl Schmitt. The wiki on Sombart notes:

In 1934 he published Deutscher Sozialismus where he claimed a “new spirit” was beginning to “rule mankind”. The age of capitalism and proletarian socialism was over and with “German socialism” (National-Socialism) taking over.

But despite this, he remained critical. In 1938 he wrote an anthropology text that found fault with the Nazi system and many of his Jewish students remained fond of him.

I suspect, however, that Rampell is familiar with Joseph Schumpeter’s use of the term rather than Sombart since Schumpeter was an economist, her chosen discipline. In 1942, he wrote a book titled Capitalism, Socialism and Democracy that, like Sombart, retained much of Karl Marx’s methodology but without the political imperative to destroy the system that utilized “creative destruction”. He wrote:

The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as U.S. Steel illustrate the same process of industrial mutation–if I may use that biological term–that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in. . . .

The wiki on Schumpeter claims that this theory is wedded to Nikolai Kondratiev’s “long wave” hypothesis that rests on the idea that there are 50 year cycles in which capitalism grows, decays and enters a crisis until a new round of capital accumulation opens up. Not only was the idea attractive to Schumpeter, it was a key part of Ernest Mandel’s economic theories. Unlike Schumpeter, Mandel was on the lookout for social agencies that could break the cycle and put development on a new footing, one based on human need rather than private profit.

Returning to Rampell’s article, there is one dimension entirely missing. She assumes that “creative destruction” will operate once again in order to foster a new upswing in the capitalist business cycle. But how exactly will that manifest itself? All the signs point to a general decline in business activity unless there is some kind of technological breakthrough equivalent to the computer revolution that fueled growth for decades. Does anybody believe that “green manufacturing” will play the same role? I don’t myself.

One thing does occur to me. Sombart’s book was written in 1913, one year before WWI and was even titled eerily enough “War and Capitalism”. One wonders if the Great War would be seen as part and parcel of “creative destruction”. War, after all, does have a knack for clearing the playing field with even more finality than layoffs. Schumpeter wrote his book in 1942, one year into WWII. My guess is that he did not theorize war as the ultimate (and necessary?) instrument of creative destruction but history will record that WWII did introduce a whole rafter of new technology, including aluminum, radar, nuclear power, etc., while bombing old modes of production into oblivion. What a great opportunity it was for capitalism to rebuild Japan, especially after firebombing and atomic bombs did their lovely work.

In my view, there’s something disgusting about this “creative destruction” business especially when it is articulated by a young, pro-capitalist Princeton graduate like Catherine Rampell who wrote for Slate, the Village Voice and other such b-list publications before crawling her way up into an editorial job at the NYT. She clearly has learned how to cater her reporting to the ideological needs of the newspaper of record, growing more and more reactionary as the crisis of capitalism deepens.

July 3, 2018

Recommended Reading

Filed under: economics — louisproyect @ 7:23 pm

An excerpt from “Capitalism vs. Freedom: the Toll Road to Serfdom“:

Labor’s Loves Lost

Having reviewed the strong concentration of capital ownership, both in household fortunes as well as market consolidation, what about labor? The Right’s take on the freedom of the labor market is that it leaves us free to choose among multiple uses for our labor, protecting you from power plays by a tyrannical boss, as when Milton Friedman wrote:

The most reliable and effective protection for most workers is provided by the existence of many employers…The employers who protect a worker are those who would like to hire him. Their demand for his services makes it in the self-interest of his own employer to pay him the full value of his work. If his own employer doesn’t, someone else may be ready to do so. Competition for his services—that is the worker’s real protection.

The first serious problem with these rosy reviews of the market is that after the previous section, it must be admitted that the “many employers” the Friedmans are expecting may never arrive to the job fair. And they do quietly concede that “Two classes or workers are not protected by anyone: workers who have only one possible employer, and workers who have no possible employer,” which makes consolidation and outsourcing very relevant for freedom.

The second great problem is that, fundamentally, people are in fact not commodities. A seller of non-perishable goods can store them until market conditions are favorable. This patience is unavailable for owners of mere labor power, who stubbornly require food and water at regular intervals. The kid can’t skip eating this quarter and eat more next quarter instead. Treating labor as an asset priced by supply and demand, like toasters or toothbrushes, is a gross insult to the human spirit and indeed, is responsible for some of the gravest crimes committed against humanity in our history.

A further problem is that this traditional claim that the labor market is “free” is based on another assumption, that if you don’t find an employer you want to work for, you can just produce goods on your own. Friedman: “Since the household always has the alternative of producing directly for itself, it need not enter into any exchange unless it benefits from it. Hence, no exchange will take place unless both parties do benefit from it.” This would indeed grant a good deal of freedom to the man on the street, but “producing for itself” implies access to productive resources, including what we call “capital,” which as we’ve seen is so highly concentrated that a very large part of global society has essentially none. This means that since we have no “positive freedom” to use or decide on how to use the capital stock, the typical working person is also left with diminished “negative freedom,” since employers who own the concentrated capital have dramatic power over employees in the market.

Order book here

June 27, 2018

Defending Karl Marx in Foreign Affairs…What’s that about?

Filed under: economics,social democracy — louisproyect @ 10:08 pm

On June 14th, Foreign Affairs, the journal of the Council of Foreign Relations that was formed in 1918 to develop strategies for the ruling class, published an article titled “Marxist World: What Did You Expect From Capitalism?”. (The article, which is behind a paywall, can be read below) The author was Robin Varghese, the Associate Director of Engagement at the Economic Advancement Program of the Open Society Foundations and an Editor at 3 Quarks Daily. In addition to those affiliations identified by Foreign Affairs, Varghese is also the Chairman of the Board of the Brooklyn Institute for Social Research, a kind of updated version of the Learning Annex modeled after the Frankfurt School. The roost for Max Horkheimer et al was actually called the Institute for Social Research at Goethe University. The knock-off is a place where hipsters can attend classes of the sort you might take in Duke University’s literature department but at a much lower cost.

So why would Foreign Affairs, the journal where George Kennan’s blueprint for the Cold War domination titled “Containment” appeared, be publishing something favorable to Karl Marx? Let me take a stab at answering that question.

To start with, it is necessary to say a few words about George Soros’s Economic Advancement Program. The Open Society website states its goal: “Because economic systems are complex, we deploy a mix of interventions. We make private sector investments through the program’s investment vehicle, the Soros Economic Development Fund, to yield social impact, we support civil society actors advancing economic justice, we advise governments on economic policy, and we build coalitions to foment progressive change.” Basically, this is a vehicle for microfinance of the sort pioneered by the Grameen Bank. In 2009, Soros teamed up with Pierre Omidyar, the eBay billionaire who funds Intercept, and Google to serve small businesses in India. Omidyar’s website described its aim:

“With this investment, we will meet the huge demand to serve smaller businesses in India that have little access to finance,” said Neal DeLaurentis, Vice President of Soros Economic Development Fund. “Long ignored by commercial capital markets, small and medium businesses are an attractive investment opportunity as well as an engine for economic growth for India.”

It is beyond the scope of this article to detail the failings of microfinance but I would advise reading this for a useful critique.

Turning now to Varghese’s article, it can easily be understood as just another in the series of articles that appeared immediately after the 2008 meltdown, crediting Karl Marx for diagnosing the contradictions of the capitalist economy but stopping short at his prescription for moving beyond it through socialist revolution. He writes:

Better than most, Marx understood the mechanisms that produce capitalism’s downsides and the problems that develop when governments do not actively combat them, as they have not for the past 40 years. As a result, Marxism, far from being outdated, is crucial for making sense of the world today.

As I pointed out in a 2016 article, this sort of testimony to Marx’s wisdom went viral a decade ago:

After 2008 there were deep worries in the financial punditocracy. You might remember that scene in China Syndrome when the first shudders took place in the nuclear reactor. Was this going to be the “Big One”? That is how Nouriel Roubini must have felt on August 11, 2011 when he told a Wall Street Journal interviewer:

Karl Marx had it right. At some point, Capitalism can self-destroy itself because you cannot keep on shifting income from labor to Capital without having an excess capacity and a lack of aggregate demand. That’s what has happened. We thought that markets worked. They’re not working. The individual can be rational. The firm, to survive and thrive, can push labor costs more and more down, but labor costs are someone else’s income and consumption. That’s why it’s a self-destructive process.

Even more shockingly, George Magnus, an economist with the UBS investment bank, advised Bloomberg News readers to Give Karl Marx a Chance to Save the World Economy just 18 days after Roubini’s interview appeared. Magnus quoted Marx’s Capital: “The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses.” But his solutions had more to do with Keynes than Marx, such as this one: “Governments and central banks could engage in direct spending on or indirect financing of national investment or infrastructure programs.” If Karl Marx confronted a crisis as deep as the one we faced in 2008, his advice would have been to nationalize the banks not use them as tools for fiscal pump-priming.

However, Umair Haque probably spoke for most of these commentators—including Sean McElwee, I imagine—when after posing the question Was Marx Right? in the Harvard Business Review he came down squarely on the side of capitalism. After giving Marx his due (“Marx’s critiques seem, today, more resonant than we might have guessed”), Haque sides with McElwee on the “recipe” question: “Now, here’s what I’m not suggesting: that Marx’s prescriptions (you know the score: overthrow, communalize, high-five, live happily ever after) for what to do about the maladies above were desirable, good, or just. History, I’d argue, suggests they were anything but.”

Using a combination of common sense and what he has absorbed from reading Marx, Varghese describes the current epoch as one consisting of chronic stagnation even if it is producing billionaires by the wheelbarrow full:

Since the 1970s, businesses across the developed world have been cutting their wage bills not only through labor-saving technological innovations but also by pushing for regulatory changes and developing new forms of employment. These include just-in-time contracts, which shift risk to workers; noncompete clauses, which reduce bargaining power; and freelance arrangements, which exempt businesses from providing employees with benefits such as health insurance. The result has been that since the beginning of the twenty-first century, labor’s share of GDP has fallen steadily in many developed economies.

There’s not much to quibble with in the middle section of his article that describes the growing inequality in the USA and other advanced capitalist countries. It cites Thomas Piketty and Branko Milanovic who have produced outstanding work even if their analysis is not necessarily grounded in Marxist theory.

In a section titled “The Keynesian Challenge”, he sounds skeptical at first blush about the possibility of a new New Deal, a “Swedish model” or any of the other solutions proposed by the Sanders wing of the Democratic Party:

Under capitalism, Marx predicted, the demands imposed by capital accumulation and profitability would always severely limit the choices available to governments and undermine the long-term viability of any reforms. The history of the developed world since the 1970s seems to have borne out that prediction. Despite the achievements of the postwar era, governments ultimately found themselves unable to overcome the limits imposed by capitalism, as full employment, and the labor power that came with it, reduced profitability. Faced with the competing demands of capitalists, who sought to undo the postwar settlement between capital and labor, and the people, who sought to keep it, states gave in to the former. In the long run, it was the economic interests of capital that won out over the political organization of the people.

But the last three paragraphs are a dead giveaway that Varghese is for Marx’s economic analysis but not his life-long goal to “change it”. The only thing he seems bent on changing is the sort of neoliberal austerity that Sanderistas find so loathsome. However, forming revolutionary parties and overthrowing capitalism is even more loathsome apparently as indicated from the reformist pap below:

The challenge today is to identify the contours of a mixed economy that can successfully deliver what the golden age did, this time with greater gender and racial equality to boot. This requires adopting Marx’s spirit, if not every aspect of his theories—that is, recognizing that capitalist markets, indeed capitalism itself, may be the most dynamic social arrangement ever produced by human beings. The normal state of capitalism is one in which, as Marx and Engels wrote in The Communist Manifesto, “all that is solid melts into air.” This dynamism means that achieving egalitarian goals will require new institutional configurations backed by new forms of politics.

As the crisis of the golden age was ramping up in the 1970s, the economist James Meade wondered what sorts of policies could save egalitarian, social democratic capitalism, recognizing that any realistic answer would have to involve moving beyond the limits of Keynesianism. His solution was to buttress the welfare state’s redistribution of income with a redistribution of capital assets, so that capital worked for everyone. Meade’s vision was not state ownership but a broad property-owning democracy in which wealth was more equally distributed because the distribution of productive capacity was more equal.

The point is not that broader capital ownership is a solution to the ills of capitalism in the present day, although it could be part of one. Rather, it is to suggest that if today’s egalitarian politicians, including Bernie Sanders in the United States and Jeremy Corbyn in the United Kingdom, are to succeed in their projects of taming markets and revitalizing social democracy for the twenty-first century, it will not be with the politics of the past. As Marx recognized, under capitalism there is no going back.

Let’s take apart this pile of crap that probably is first cousin to the Vivek Chibber Catalyst article that Robert Brenner objected to. It is the sort of thing you routinely hear from Jacobin, the DSA old guard, Dissent Magazine and The Nation.

To start with, let’s examine: “This requires adopting Marx’s spirit, if not every aspect of his theories—that is, recognizing that capitalist markets, indeed capitalism itself, may be the most dynamic social arrangement ever produced by human beings.”

The most dynamic social arrangement? Is this guy serious? Capitalism is not primarily about markets. It is about coercion. Slavery, debt peonage, child labor, union busting and other forms of extra-market forces were midwives to capitalism and continue to this day. Books like Michele Alexander’s “The New Jim Crow” and Douglas Blackmon’s “Slavery by Another Name” offer ample evidence of how racialized capitalism retains many of the coercive features that were present in its infancy. All you need to do is go to your local grocery store and make a list of all the different imported agricultural products, especially from Mexico. A 2014 LA Times article describes anything but a “dynamic social arrangement”:

Ricardo Martinez and Eugenia Santiago were desperate.

At the labor camp for Bioparques de Occidente, they and other farmworkers slept sprawled head to toe on concrete floors. Their rooms crawled with scorpions and bedbugs. Meals were skimpy, hunger a constant. Camp bosses kept people in line with threats and, when that failed, with their fists.

Escape was tempting but risky. The compound was fenced with barbed wire and patrolled by bosses on all-terrain vehicles. If the couple got beyond the gates, local police could arrest them and bring them back. Then they would be stripped of their shoes.

Martinez, 28, and Santiago, 23, decided to chance it. Bioparques was one of Mexico’s biggest tomato exporters, a supplier for Wal-Mart and major supermarket chains. But conditions at the company’s Bioparques 4 camp had become unbearable.

They left their backpacks behind to avoid suspicion and walked out the main gate. As they approached the highway, a car screeched up. Four camp bosses jumped out. One waved a stick at them.

“You’re trying to leave,” he said, after spotting a change of clothing in a plastic bag Martinez was carrying.

“I’m just going for a walk,” Martinez said.

“Get in the car or I’ll break you,” the boss replied.

The next day, Martinez and Santiago were back at work in the tomato fields.

Varghese endorses James Meade’s solution to saving “egalitarian, social democratic capitalism”, namely to redistribute capital assets, so that capital worked for everyone. This “broad property-owning democracy” would supposedly insure that both you and the Koch brothers would have about the same amount of “capital assets”, including land, machinery, securities, etc. Fat chance of that, I’d say. I don’t have much time or motivation to plumb the profundities of Meade’s economic ideas but suffice it to say that Wikipedia describes them as based on neo-Classical assumptions such as: (1) The economy in question is a closed economy with no relationship with the outside world. (2) There is no government activity involving taxation and expenditure. (3) Perfect competition exists in the market.

Am I that surprised that someone who is paid by George Soros recommends the economic ideas of James Meade? Commentary Magazine, the leading voice of neo-Conservatism, wrote a rave review of Meade’s 1975 “The Intelligent Radical’s Guide to Economic Policy: The Mixed Economy”:

James Meade, a former president of the Royal Economic Society, has published (in England) one of those rare economics books that one can recommend to every thoughtful person who takes an interest in the fundamental problems of contemporary societies. Some enterprising publisher should bring it out also in the United States. So far as my acquaintance extends, nothing of this character, scope, and quality has been published on our side of the Atlantic.

Starting to get the picture? Varghese’s article found exactly the right outlet in Foreign Affairs.

The final paragraph makes it clear that his project is to breathe life into social democracy. Bernie Sanders and Jeremy Corbyn must succeed in taming markets and revitalizing social democracy for the twenty-first century. However, it will not be with the politics of the past. Of course, you know what the “politics of the past” is about—socialist revolution and all that other utopian nonsense.

Let me conclude with a few words about the Brooklyn Institute for Social Research. A 2012 New Yorker Magazine article looked in on a class given by its founder Ajay Singh Chaudhary, who has a Columbia University PhD, and Abby Kluchin, another Columbia PhD. For people in their shoes, the teaching jobs at the Institute are about the same as what adjuncts earn. Courses are held at night and cost a few hundred dollars. Faculty members receive eighty per cent of tuition, which amounts to more than they would make at a major university—at least if they are adjuncts.

Most of the classes are geared to the kinds of people who would find MLA conferences worth attending, such as “Jane Austen and the Problem of Other Minds” but they do have one on “Crisis and Capitalism” that sounds like the sort of thing you might have taken at the Brecht Forum but for a lot less than the $315 the Brooklyn Institute charges. The class was given by Raphaële Chappe, who used to be a Goldman Sachs Vice President in the Tax Department. So I guess she knows something about capitalism.

A while back she was interviewed by Laura Flanders in a show titled “Eat the Rich?”. Laura asked her about whether finance capital could be used to redistribute power and resources. If this sounds a bit like the microfinance and James Meade type strategies indicated above, you are on the right track. It turns out that Chappe had started what she called a Robin Hood Hedge Fund that incorporated this redistribution agenda. She explained what made it tick:

We have an algorithm, we call it the parasite. What it does is, it replicates the investments of what we consider to be insiders in Wall Street. We form a portfolio that replicates those investments, and so far we’ve gotten great returns. I think last year was 40% return, which made it the second hedge fund in the world. Of course, it’s a little bit of impertinence. We’re trying to hack it, derail it…I think that it’s just a very small dent if you think about all the types of strategies out there that hedge funds are using to make investments. We’re basically mimicking a very small segment. There are things that we cannot track, or trace. High frequency trading, for example. You have hundreds of trades happening every minute, we wouldn’t be able to do that. We do our best to hack it with the tools we have.

I wouldn’t want to discourage anybody from taking her course. After all, night school is a good way to develop social relationships in a very lonely city but if I had $315 to invest and if I was single, I’d sign up for a salsa dancing class instead.

Foreign Affairs, July/August 2018 Issue
Marxist World
What Did You Expect From Capitalism?
By Robin Varghese

After nearly every economic downturn, voices appear suggesting that Marx was right to predict that the system would eventually destroy itself. Today, however, the problem is not a sudden crisis of capitalism but its normal workings, which in recent decades have revived pathologies that the developed world seemed to have left behind.

Since 1967, median household income in the United States, adjusted for inflation, has stagnated for the bottom 60 percent of the population, even as wealth and income for the richest Americans have soared. Changes in Europe, although less stark, point in the same direction. Corporate profits are at their highest levels since the 1960s, yet corporations are increasingly choosing to save those profits rather than invest them, further hurting productivity and wages. And recently, these changes have been accompanied by a hollowing out of democracy and its replacement with technocratic rule by globalized elites.

Mainstream theorists tend to see these developments as a puzzling departure from the promises of capitalism, but they would not have surprised Marx. He predicted that capitalism’s internal logic would over time lead to rising inequality, chronic unemployment and underemployment, stagnant wages, the dominance of large, powerful firms, and the creation of an entrenched elite whose power would act as a barrier to social progress. Eventually, the combined weight of these problems would spark a general crisis, ending in revolution.

Marx believed the revolution would come in the most advanced capitalist economies. Instead, it came in less developed ones, such as Russia and China, where communism ushered in authoritarian government and economic stagnation. During the middle of the twentieth century, meanwhile, the rich countries of Western Europe and the United States learned to manage, for a time, the instability and inequality that had characterized capitalism in Marx’s day. Together, these trends discredited Marx’s ideas in the eyes of many.

Yet despite the disasters of the Soviet Union and the countries that followed its model, Marx’s theory remains one of the most perceptive critiques of capitalism ever offered. Better than most, Marx understood the mechanisms that produce capitalism’s downsides and the problems that develop when governments do not actively combat them, as they have not for the past 40 years. As a result, Marxism, far from being outdated, is crucial for making sense of the world today.


The corpus of Marx’s work and the breadth of his concerns are vast, and many of his ideas on topics such as human development, ideology, and the state have been of perennial interest since he wrote them down. What makes Marx acutely relevant today is his economic theory, which he intended, as he wrote in Capital, “to lay bare the economic law of motion of modern society.” And although Marx, like the economist David Ricardo, relied on the flawed labor theory of value for some of his economic thinking, his remarkable insights remain.

Marx believed that under capitalism, the pressure on entrepreneurs to accumulate capital under conditions of market competition would lead to outcomes that are palpably familiar today. First, he argued that improvements in labor productivity created by technological innovation would largely be captured by the owners of capital. “Even when the real wages are rising,” he wrote, they “never rise proportionally to the productive power of labor.” Put simply, workers would always receive less than what they added to output, leading to inequality and relative immiseration.

Second, Marx predicted that competition among capitalists to reduce wages would compel them to introduce labor-saving technology. Over time, this technology would eliminate jobs, creating a permanently unemployed and underemployed portion of the population. Third, Marx thought that competition would lead to greater concentration in and among industries, as larger, more profitable firms drove smaller ones out of business. Since these larger firms would, by definition, be more competitive and technologically advanced, they would enjoy ever-increasing surpluses. Yet these surpluses would also be unequally distributed, compounding the first two dynamics.

Marx made plenty of mistakes, especially when it came to politics. Because he believed that the state was a tool of the capitalist class, he underestimated the power of collective efforts to reform capitalism. In the advanced economies of the West, from 1945 to around 1975, voters showed how politics could tame markets, putting officials in power who pursued a range of social democratic policies without damaging the economy. This period, which the French call “les Trente Glorieuses” (the Glorious Thirty), saw a historically unique combination of high growth, increasing productivity, rising real wages, technological innovation, and expanding systems of social insurance in Western Europe, North America, and Japan. For a while, it seemed that Marx was wrong about the ability of capitalist economies to satisfy human needs, at least material ones.


The postwar boom, it appears, was not built to last. It ultimately came to an end with the stagflationary crisis of the 1970s, when the preferred economic policy of Western social democracies—Keynesian state management of demand—seemed incapable of restoring full employment and profitability without provoking high levels of inflation. In response, leaders across the West, starting with French Prime Minister Raymond Barre, British Prime Minister Margaret Thatcher, and U.S. President Ronald Reagan, enacted policies to restore profitability by curbing inflation, weakening organized labor, and accommodating unemployment.

That crisis, and the recessions that followed, was the beginning of the end for the mixed economies of the West. Believing that government interference had begun to impede economic efficiency, elites in country after country sought to unleash the forces of the market by deregulating industries and paring back the welfare state. Combined with conservative monetary policies, independent central banks, and the effects of the information revolution, these measures were able to deliver low volatility and, beginning in the 1990s, higher profits. In the United States, corporate profits after tax (adjusted for inventory valuation and capital consumption) went from an average of 4.5 percent in the 25 years before President Bill Clinton took office, in 1993, to 5.6 percent from 1993 to 2017.

This sharp divergence in fortunes has been driven by, among other things, the fact that increases in productivity no longer lead to increases in wages in most advanced economies.

Yet in advanced democracies, the long recovery since the 1970s has proved incapable of replicating the broad-based prosperity of the mid-twentieth century. It has been marked instead by unevenness, sluggishness, and inequality. This sharp divergence in fortunes has been driven by, among other things, the fact that increases in productivity no longer lead to increases in wages in most advanced economies. Indeed, a major response to the profitability crisis of the 1970s was to nullify the postwar bargain between business and organized labor, whereby management agreed to raise wages in line with productivity increases. Between 1948 and 1973, wages rose in tandem with productivity across the developed world. Since then, they have become decoupled in much of the West. This decoupling has been particularly acute in the United States, where, in the four decades since 1973, productivity increased by nearly 75 percent, while real wages rose by less than ten percent. For the bottom 60 percent of households, wages have barely moved at all.

If the postwar boom made Marx seem obsolete, recent decades have confirmed his prescience. Marx argued that the long-run tendency of capitalism was to form a system in which real wages did not keep up with increases in productivity. This insight mirrors the economist Thomas Piketty’s observation that the rate of return on capital is higher than the rate of economic growth, ensuring that the gap between those whose incomes derive from capital assets and those whose incomes derive from labor will grow over time.

Marx’s basis for the condemnation of capitalism was not that it made workers materially worse off per se. Rather, his critique was that capitalism put arbitrary limits on the productive capacity it unleashed. Capitalism was, no doubt, an upgrade over what came before. But the new software came with a bug. Although capitalism had led to previously unimaginable levels of wealth and technological progress, it was incapable of using them to meet the needs of all. This, Marx contended, was due not to material limitations but to social and political ones: namely, the fact that production is organized in the interests of the capitalist class rather than those of society as a whole. Even if individual capitalists and workers are rational, the system as a whole is irrational.

To be sure, the question of whether any democratically planned alternative to capitalism can do better remains open. Undemocratic alternatives, such as the state socialism practiced by the Soviet Union and Maoist China, clearly did not. One need not buy Marx’s thesis that communism is inevitable to accept the utility of his analysis.

Marx predicted that competition among capitalists to reduce wages would compel them to introduce labor-saving technology. Over time, this technology would eliminate jobs, creating a permanently unemployed and underemployed portion of the population. NOAH BERGER / REUTERS A Kiva robot moves inventory at an Amazon fulfillment center in Tracy, California December 1, 2014.


Marx did not just predict that capitalism would lead to rising inequality and relative immiseration. Perhaps more important, he identified the structural mechanisms that would produce them. For Marx, competition between businesses would force them to pay workers less and less in relative terms as productivity rose in order to cut the costs of labor. As Western countries have embraced the market in recent decades, this tendency has begun to reassert itself.

Since the 1970s, businesses across the developed world have been cutting their wage bills not only through labor-saving technological innovations but also by pushing for regulatory changes and developing new forms of employment. These include just-in-time contracts, which shift risk to workers; noncompete clauses, which reduce bargaining power; and freelance arrangements, which exempt businesses from providing employees with benefits such as health insurance. The result has been that since the beginning of the twenty-first century, labor’s share of GDP has fallen steadily in many developed economies.

Competition also drives down labor’s share of compensation by creating segments of the labor force with an increasingly weak relationship to the productive parts of the economy—segments that Marx called “the reserve army of labor,” referring to the unemployed and underemployed. Marx thought of this reserve army as a byproduct of innovations that displaced labor. When production expanded, demand for labor would increase, drawing elements of the reserve army into new factories. This would cause wages to rise, incentivizing firms to substitute capital for labor by investing in new technologies, thus displacing workers, driving down wages, and swelling the ranks of the reserve army. As a result, wages would tend toward a “subsistence” standard of living, meaning that wage growth over the long run would be low to nonexistent. As Marx put it, competition drives businesses to cut labor costs, given the market’s “peculiarity that the battles in it are won less by recruiting than by discharging the army of workers.”

The United States has been living this reality for nearly 20 years. For five decades, the labor-force participation rate for men has been stagnant or falling, and since 2000, it has been declining for women, as well. And for more unskilled groups, such as those with less than a high school diploma, the rate of participation stands at below 50 percent and has for quite some time. Again, as Marx anticipated, technology amplifies these effects, and today, economists are once again discussing the prospect of the large-scale displacement of labor through automation. On the low end, the Organization for Economic Cooperation and Development estimates that 14 percent of jobs in member countries, approximately 60 million in total, are “highly automatable.” On the high end, the consulting company McKinsey estimates that 30 percent of the hours worked globally could be automated. These losses are expected to be concentrated among unskilled segments of the labor force.

Whether these workers can or will be reabsorbed remains an open question, and fear of automation’s potential to dislocate workers should avoid the so-called lump of labor fallacy, which assumes that there is only a fixed amount of work to be done and that once it is automated, there will be none left for humans. But the steady decline in the labor-force participation rate of working-age men over the last 50 years suggests that many dislocated workers will not be reabsorbed into the labor force if their fate is left to the market.

The same process that dislocates workers—technological change driven by competition—also produces market concentration, with larger and larger firms coming to dominate production. Marx predicted a world not of monopolies but of oligopolistic competition, in which incumbents enjoy monopolistic profits, smaller firms struggle to scrape by, and new entrants try to innovate in order to gain market share. This, too, resembles the present. Today, so-called superstar firms, which include companies such as Amazon, Apple, and FedEx, have come to dominate entire sectors, leaving new entrants attempting to break in through innovation. Large firms outcompete their opponents through innovation and network effects, but also by either buying them up or discharging their own reserve armies—that is, laying off workers.

Research by the economist David Autor and his colleagues suggests that the rise of superstar firms may indeed help explain labor’s declining share of national income across advanced economies. Because superstar firms are far more productive and efficient than their competitors, labor is a significantly lower share of their costs. Since 1982, concentration has been increasing in the six economic sectors that account for 80 percent of employment in the United States: finance, manufacturing, retail trade, services, wholesale trade, and utilities and transportation. And the more this concentration has increased, the more labor’s share of income has declined. In U.S. manufacturing, for example, labor compensation has declined from almost one-half of the value added in 1982 to about one-third in 2012. As these superstar firms have become more important to Western economies, workers have suffered across the board.


In 1957, at the height of Western Europe’s postwar boom, the economist Ludwig Erhard (who later became chancellor of West Germany) declared that “prosperity for all and prosperity through competition are inseparably connected; the first postulate identifies the goal, the second the path that leads to it.” Marx, however, seems to have been closer to the mark with his prediction that instead of prosperity for all, competition would create winners and losers, with the winners being those who could innovate and become efficient.

Innovation can lead to the development of new economic sectors, as well as new lines of goods and services in older ones. These can in principle absorb labor, reducing the ranks of the reserve army and increasing wages. Indeed, capitalism’s ability to expand and meet people’s wants and needs amazed Marx, even as he condemned the system’s wastefulness and the deformities it engendered in individuals.

For a period, it seemed that the children of the middle class had a fair shot at swapping places with the children of the top quintile. But as inequality rises, social mobility declines.

Defenders of the current order, especially in the United States, often argue that a focus on static inequality (the distribution of resources at a given time) obscures the dynamic equality of social mobility. Marx, by contrast, assumed that classes reproduce themselves, that wealth is transferred effectively between generations, and that the children of capitalists will exploit the children of workers when their time comes. For a period, it seemed that the children of the middle class had a fair shot at swapping places with the children of the top quintile. But as inequality rises, social mobility declines. Recent research by the economists Branko Milanovic and Roy van der Weide, for instance, has found that inequality hurts the income growth of the poor but not the rich. Piketty, meanwhile, has speculated that if current trends continue, capitalism could develop into a new “patrimonial” model of accumulation, in which family wealth trumps any amount of merit.


Marx’s overall worldview left little room for politics to mitigate the downsides of capitalism. As he and his collaborator Friedrich Engels famously stated in The Communist Manifesto, “The executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie.”

Until recently, governments in the West seemed to be defying this claim. The greatest challenge to Marx’s view came from the creation and expansion of welfare states in the West during the mid-twentieth century, often (but not only) by social democratic parties representing the working class. The intellectual architect of these developments was the economist John Maynard Keynes, who argued that economic activity was driven not by the investment decisions of capitalists but by the consumption decisions of ordinary people. If governments could use policy levers to increase overall demand, then the capitalist class would invest in production. Under the banner of Keynesianism, parties of both the center-left and the center-right achieved something that Marx thought was impossible: efficiency, equality, and full employment, all at the same time. Politics and policy had a degree of independence from economic structures, which in turn gave them an ability to reform those structures.

Marx believed in the independence of politics but thought that it lay only in the ability to choose between capitalism and another system altogether. He largely believed that it was folly to try to tame capitalist markets permanently through democratic politics. (In this, he ironically stands in agreement with the pro-capitalist economist Milton Friedman.)

Under capitalism, Marx predicted, the demands imposed by capital accumulation and profitability would always severely limit the choices available to governments and undermine the long-term viability of any reforms. The history of the developed world since the 1970s seems to have borne out that prediction. Despite the achievements of the postwar era, governments ultimately found themselves unable to overcome the limits imposed by capitalism, as full employment, and the labor power that came with it, reduced profitability. Faced with the competing demands of capitalists, who sought to undo the postwar settlement between capital and labor, and the people, who sought to keep it, states gave in to the former. In the long run, it was the economic interests of capital that won out over the political organization of the people.


Today, the question of whether politics can tame markets remains open. One reading of the changes in advanced economies since the 1970s is that they are the result capitalism’s natural tendency to overwhelm politics, democratic or otherwise. In this narrative, les Trente Glorieuses were a fluke. Under normal conditions, efficiency, full employment, and an egalitarian distribution of income cannot simultaneously obtain. Any arrangement in which they do is fleeting and, over the long run, a threat to market efficiency.

Yet this is not the only narrative. An alternative one would start with the recognition that the politics of capitalism’s golden age, which combined strong unions, Keynesian demand management, loose monetary policy, and capital controls, could not deliver an egalitarian form of capitalism forever. But it would not conclude that no other form of politics can ever do so.

The challenge today is to identify the contours of a mixed economy that can successfully deliver what the golden age did, this time with greater gender and racial equality to boot. This requires adopting Marx’s spirit, if not every aspect of his theories—that is, recognizing that capitalist markets, indeed capitalism itself, may be the most dynamic social arrangement ever produced by human beings. The normal state of capitalism is one in which, as Marx and Engels wrote in The Communist Manifesto, “all that is solid melts into air.” This dynamism means that achieving egalitarian goals will require new institutional configurations backed by new forms of politics.

As the crisis of the golden age was ramping up in the 1970s, the economist James Meade wondered what sorts of policies could save egalitarian, social democratic capitalism, recognizing that any realistic answer would have to involve moving beyond the limits of Keynesianism. His solution was to buttress the welfare state’s redistribution of income with a redistribution of capital assets, so that capital worked for everyone. Meade’s vision was not state ownership but a broad property-owning democracy in which wealth was more equally distributed because the distribution of productive capacity was more equal.

The point is not that broader capital ownership is a solution to the ills of capitalism in the present day, although it could be part of one. Rather, it is to suggest that if today’s egalitarian politicians, including Bernie Sanders in the United States and Jeremy Corbyn in the United Kingdom, are to succeed in their projects of taming markets and revitalizing social democracy for the twenty-first century, it will not be with the politics of the past. As Marx recognized, under capitalism there is no going back.

June 11, 2018

Is China Socialist?

Filed under: China,economics — louisproyect @ 9:04 pm

Donald Trump asking Xi Jinping for Karl Marx reading recommendations, especially anything on “spiritual pursuit”

Four days ago Michael Roberts posted an article titled “China workshop: challenging the misconceptions” that raised a number of interesting questions:

What are the reasons for China’s phenomenal growth in the last 40 years and can it last? What is the nature of the Chinese economy: is it capitalist or not? What explains under Xi the new emphasis on studying Marxism in China’s universities? Is China’s export and investment expansion abroad imperialist or not? How will the trade war between the US and China pan out?

The workshop invited Roberts and a number of Chinese economists to speak on these questions, all of whom—including Roberts—denied that China was capitalist. It was sponsored by the School of Oriental and African Studies at the University of London, universally referred to nowadays as SOAS ostensibly because of the stigma attached to a word like Oriental. In the first session, Professor Dic Lo, an economist at SOAS who was the moving force behind this gathering, spoke alongside one Zhu Andong,  who is the Vice Dean at the School of Marxism at Tsinghua University. School of Marxism? Jeez, if I had kids, that’s where I’d want to them to study.

Or maybe not.

Dic Lo chastised people like Martin Hart-Landsberg, Paul Burkett, David Harvey, and Minqi Li for describing China as “neoliberal capitalist”, where growth is based on the “Foxconn” model—you know, the immense factory that turns out electronic parts and that is so oppressive that there was an epidemic of suicides.

For his part, the Vice Dean of the School of Marxism concurred with Dic Lo and offered supporting evidence for the country’s anticapitalist bona fides–the official support for the study of Marxism in Chinese universities like his. Well, only last month Xi Jinping stated that Marxism is “totally correct” for China so who are we to question that? He told all party members at a big gathering celebrating the 200th anniversary of Marx’s birth to study his writings as a “way of life” and “spiritual pursuit”.

Ironically, the Vice Dean of the School of Marxism had a different take on Minqi Li at one time. In 2005, they co-authored a paper titled “Neoliberalism, Global Imbalances, and Stages of Capitalist Development” that described the U.S. and China as the two main engines of neoliberal growth. Could it be possible that such a paper might have reflected youthful radicalism that has been tamed through the inevitable process of a career path in the Chinese academy, even if the top roosts are emblazoned with the image of Karl Marx?

Dic Lo got in the face of those ultra-leftists like Martin Hart-Landsberg, throwing down the gauntlet:

All the talk from the left, said Lo, was about political repression, labour exploitation, inequality or Chinese ‘imperialism’. But then how to explain China’s phenomenal growth and success in taking over 850m people out of poverty (as defined by the World Bank) and reaching national output second only to the US. China doubles real living standards every 13 years. It now takes the US and Europe 50 years and Japan even longer. Is this just fake or illusory and if not, how can this ‘capitalist’ and ‘imperialist’ economy have bucked the trend, when the record of all other capitalist economies (advanced or ‘emerging’) can show no such success? “How can it be possible, in our times, for a late-developing nation to move up the world political-economic hierarchy to become imperialist? Can anyone on the left answer this question?”

Probably without realizing it, Lo answered his own question by asking us to “explain China’s phenomenal growth and success in taking over 850m people out of poverty.” It should be obvious that this phenomenal growth comes from the massive capitalist development along the southeastern coast in cities like Guangzhou (formerly known as Canton). By opening up such cities to foreign investment and drawing in people from the countryside through land privatization, the country became a showcase for capitalist modernization.

In fact, the country that was a counter-revolutionary dagger aimed at China enjoyed the same kind of “take-off”. I speak of Taiwan that was home to Chiang Kai-shek’s KMT that dreamt of overthrowing communism on the mainland. This chart should give you an idea of how dramatic the poverty reduction was.

It appeared in an article titled “Openness, Growth and Poverty: The Case of Taiwan” that appeared in the 2007 World Development journal. It makes one wonder whether, despite all the hostility between Taiwan and the mainland, that perhaps Deng Xiaoping consciously emulated its success. The article states:

Like many developing countries, poverty was widespread in Taiwan during the early postwar years. After the government decisively reoriented its development strategy from import substitution toward export promotion at the end of the 1950s, the exceptional economic growth has not only brought with it the well-known record of income distribution, but has also resulted in rapid poverty reduction. What Taiwan has experienced in the past four decades suggests that there is a close link between openness, economic growth and poverty reduction, and thus constitutes an ideal case for a country-specific study …

But does rapid capitalist growth, even when combined with generous social services as is the case in both China and Taiwan, serve as a benchmark for progress toward socialism? In China, there is lots of personal freedom. Unlike Iran, nobody gives a crap what clothes you wear or whether you walk down the street like a drunken sailor on shore leave. But like Iran, China will brook no challenge to the ruling party, which is closely tied to what Bernie Sanders calls the “billionaire class”. If workers want to press for higher wages and a relaxation of the killing pace at Foxconn, what happens? I recommend China Labor Bulletin to keep track of these encounters, especially the article titled “Swimming against the Tide: A short history of labour conflict in China and the government’s attempts to control it.” Among the findings:

Another report in 2009 by Hong Kong activist group Students and Scholars Against Corporate Misbehaviour (SACOM) showed that the 6,000 employees of the Tianyu Toy Company in Dongguan typically worked three hours overtime each day. During peak production times they worked four hours overtime a day and some workers complained they sometimes had to work through the night, with the longest continuous shift lasting 28 hours. Worse still, if the shift went past 9:30 pm, the company refused to pay overtime. And if employees refused to do overtime, they were fined 50 yuan. To prevent workers from walking out, the company held back a month and a half’s wages and, if workers resigned without their manager’s approval, they would lose one month’s wages.

Naturally, this kind of super-exploitation produces investment capital that can continue to build new factories that act as a magnet for the rural poor. When a peasant who earns about $100 per year loses his land due to modern day primitive accumulation, he could get a job at Tianyu Toy Company making $100 per month. Is this dramatic increase in wealth a step on the road to socialism?

Dic Lo’s articles are mostly written in non-Marxist journals and are meant to refute his neoliberal adversaries, who—compared to him—would accelerate the economic practices so that they would be line with those that prevail in India or Russia today. Basically, he is arguing from the standpoint of what used to be called a “mixed economy”.

You have to go back to Historical Materialism in 2001 for the one article he submitted to a Marxist journal, in this instance a special issue on the Asian financial crisis that began in Thailand in 1997. You can find an article in the same issue by the notorious ultra-leftist Paul Burkett titled “Crisis and Recovery in East Asia: The Limits of Capitalist Development”.

Lo’s article is titled “China After East Asian Developmentalism” and is much less technical that those written by him for a-list economics journals. In contrast to the smoking rubble of Thailand, Indonesia et al, China was barely impacted in the early 2000s. While he acknowledges that China shared some of the same “marketization” features as the Asian Tigers, it was protected from the financial superstorm by policies unique to China. Neither, however, have much to do with socialism.

The first was plain vanilla Keynsianism:

The East Asian financial and economic crisis, in conjunction with the steadily slowing down of economic growth in the domestic front, prompted the Chinese state leadership to adopt four major categories of anti-crisis policies from early 1998. The first was a range of welfare-state policies, which included raising the benefits for the retired and the unemployed, raising the pay of public-sector employees, and lengthening the paid holidays of workers. All these were aimed at reversing the trend of stagnant consumption expansion. The second category encompassed several Keynesian-type fiscal packages for expanding investment demand. These packages were financed by debt issuing on unprecedented scales. The third category encompassed policy measures to revitalise the state sector.

The revitalized state sector was embodied in the State-Owned Enterprises (SOEs) that for Michael Roberts, Dic Lo and all the other speakers at the SOAS workshop see as constituting the all-important socialist sector.

Let’s take a look at one of these socialistic SOE’s, the Anbang Insurance Group that attracted a lot of publicity this year for its bid to invest millions of dollars in a building owned by Jared Kushner. The largest shareholders are state-owned car maker Shanghai Automotive Industries Corp and Sinopec, a state-owned oil company Sinopec.

Of course, trying to figure out who exactly “owns” Anbang is not easy. Like many huge Chinese firms, they make discovery difficult as an American trade union found out when pressing charges against it for unfair labor practices as the Times reported in September 2016.

The Anbang shareholders in the Pingyang County area hold their stakes through a byzantine collection of holding companies. But according to dozens of interviews and a review of thousands of pages of Anbang filings by The New York Times, many of them have something in common: They are family members and acquaintances of Wu Xiaohui, Anbang’s chairman, a native of the county who married into the family of Deng Xiaoping, China’s paramount leader in the 1980s and ’90s.

You remember who Deng Xiaoping was, right? He was Mao Zedong’s successor who took “the capitalist road” in the first place. I guess his friends and relatives were quite happy with the NEP-type reforms since it put them in the position of buying the Waldorf Astoria and coming close to bailing out Trump’s son-in-law who will hopefully be arrested this week.

As should be obvious at this point, “state ownership” is a convenient fiction in China, especially since anybody can buy shares in such companies, including Western investors. For example, Roberts is impressed with the fact that the state-owned China General Nuclear Power Corp has begun to incorporate Western technologies, However, it is traded publicly on the Hong Kong Stock Exchange, as is the case with the largest Chinese SOE’s, and thus no different from any other capitalist firm. In the final analysis, it is the class character of those who own the means of production that determines their social role. While the number of shares available to outside investors has been relatively small, “reforms” enacted in 2015 to transform SOE’s into mixed enterprises will likely increase their numbers as indicated by the transformation of the second largest mobile carrier.

Unlike China today, Soviet Russia never had a stock exchange. The children of Soviet bureaucrats could never look forward to inheriting their daddy’s holdings like Donald Trump did from his father. That is true state ownership.

Although ownership data is difficult to come by, you can read an article co-authored by Curtis J. Milhaupt and Wentong Zheng titled “Beyond Ownership: State Capitalism and the Chinese Firm” on the Columbia University Law School website. It hones in on Ping An, another insurance company. The largest block of shares is owned by HSBC Ltd., a multinational bank that originated in Hong Kong even though most shares are owned by other SOE’s. In 2016, Mexican families sued the bank for money-laundering the drug proceeds of the Sinaloa Cartel that had killed members of their families, just the sort of outfit you’d want to help overcome the law of value, as Roberts put it.

Milhaupt and Zheng refer to the “blurred boundaries” between private and state-owned firms in China, as I have tried to establish. To get an idea of how tangled things can get, this is how they describe ZTE, China’s second-largest telecom:

According to the website of ZTE Holdings, it is one of the “national key SOEs” designated by the State Council. The third shareholder of ZTE Holdings, Zhongxing WXT (also known as Zhongxingweixiantong), is a private firm owned by a group of individuals, of whom the founder, Hou Weigui, holds the largest percentage (18%). According to the website of ZTE Holdings, it was the first firm in China to adopt a “state owned, privately managed” model in 1993. Under this so-called “ZTE model,” the majority state shareholders contractually authorize the minority private shareholders to assume sole responsibility for managing the firm, subject only to the requirement that the state shareholders be guaranteed a minimum rate of return. Under the ZTE model, therefore, a firm is an SOE from the standpoint of ownership, but a POE [privately owned] from the standpoint of management.

ZTE? Doesn’t that ring a bell?

Trump hammered it with sanctions Trump after it was discovered that they were selling their smartphones to Iran and North Korea. But lately Trump seems to be in a forgiving mood. First it was Jack Johnson, now it is ZTE.

All ZTE had to do was pay a $1 billion fine and let bygones be bygones. Those of good faith might think there was a quid pro quo since the Chinese government approved Ivanka Trump’s application for five trademark applications related to her fashion and homeware business just days before forgiving ZTE.

At the same time, according to Vanity Fair, the theme park developer MNC Lido City has partnered with the Trump Organization to land $500 million in Chinese government loans, with another $500 million from government banks. The Trump Organization will take in almost $3.7 million in licensing and consulting payments from Lido, along with another project in Bali. The company will also earn management fees, and be “eligible for additional unspecified incentives.” You see, this is not graft since Donald Trump turned over the reins of managing the Trump Organization Donny Jr. and Eric, but chose not to divest himself financially from the company.

This is how the capitalist state operates in China and the USA. Even Donald Trump understands that Xi Jinping’s Marxism is a con. After Xi tightened his control of the state in the same fashion as Modi, Erdogan, Assad and all these other scumbags, Trump mused: “He’s now president for life. President for life. No, he’s great. And look, he was able to do that. I think it’s great. Maybe we’ll have to give that a shot some day.”

May 11, 2018

Capitalism: a Horror Movie

Filed under: Counterpunch,economics,Film — louisproyect @ 4:46 pm

As part of its special series celebrating the 200thbirthday of Karl Marx between May 18-22, the Anthology Film Archives will be screening “Capitalism”, a 320-minute, six-part documentary that is both supremely intelligent and briskly entertaining, on May 20th at 3:45. Directed by Ilan Ziv, the founder of Icarus Films, it is like no other film I have ever seen about the horror we face in our daily lives that is much more frightening than slasher movies like Halloween or Friday the Thirteenth. After all, the idea of nuclear holocaust or global warming—just two of the threats we face from an economic system gone mad—are not something a plucky hero or heroine in a John Carpenter movie can stave off.

The film operates on two levels. It is both a history of how this system came into existence as well as a profile of the men who have put themselves at its service ideologically (Hayek) and those who either fought against its worst abuses (Keynes) or hoped to abolish it altogether (Marx).

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March 5, 2018

Millionaire leftist Bard professors removed from Alexis Tsipras’s cabinet

Filed under: Academia,bard college,economics,Greece — louisproyect @ 5:03 pm

Dimitris Papadimitriou

Rania Antonopoulos

Husband and wife Dimitris Papadimitriou and Rania Antonopoulos are big-time post-Keynesian economists at Bard College who just resigned from Alexis Tsipras’s cabinet. It seems that Antonopoulos was receiving a 1000 euro per month housing subsidy for her rental apartment in the swanky Kolonaki neighborhood in Athens even though the couple were multimillionaires. Apparently this did not sit well with ordinary working people suffering through a terrible austerity.

The right-wing press in Greece dug up the dirt on the couple and used it to scandalize Syriza since it is perceived as not serving the bourgeoisie adequately. Think of Fox News going after Obama and you’ll get what has been taking place. Neos Kosmos, a newspaper based in Melbourne, Australian with no discernible ties to the right-wing as far as I can tell, supplied the economic data on the two economists:

According to their tax records, the couple declare an annual income of more than half a million dollars, while their assets and property portfolios are valued in the millions. The Greek media report that the couple owns a luxury villa of 300 sq.m. plus 180 sq.m. supplementary space, 80 sq.m. swimming pool on the island of Syros; a 110-square-meter apartment in New York; a 31.6 sqm apartment in Glyfada, Athens; assets in stocks and bank deposits worth of more than 3,000,000 euros.

The last time I saw such opulence married to “socialist” pretensions was back in 2007 when Jared Kushner’s newspaper—the NY Observer—reported that Trotskyist chieftain Jack Barnes had just sold his West Village condo for a cool $1.87 million.

Interestingly enough, despite her wealth, Antonopoulos went out of her way to file for the housing subsidy as she indicated in a statement to the press:

According to Law 4366/2015 which entitles non-parliamentary members of the government to receive a residence subsidy, since they do not own a home in Athens, I have requested and received a significant amount as a rent subsidy. This provision of the legislator has been enjoyed since 1994 by all non-Athens deputies without any other income conditions.

Many months after its institutionalization I was informed that as a non-parliamentary member of the government I am entitled to a subsidy, and indeed by my colleagues. So I filed an application and since then I have received a total of 23,000 euros for two years.

What a little piggy. She and her husband have a joint income of $520,000 per year and still she applies for a housing subsidy as if she were a single mom working at Walmarts with 3 kids to support. Even after she got caught with her grubby fingers in the till, she  refused at first to resign as the Greek Reporter indicated on February 26th.

Dimitris Papadimitriou and Rania Antonopoulos came to Greece with ambitious plans to rescue the country from the hole that German bankers had dug. He ran the Jerome Levy Institute at Bard, a think-tank devoted to post-Keynesian wisdom, and was a Hyman Minsky scholar. Minsky is a big favorite with “progressive” economists, especially after the 2007 mortgage-backed securities meltdown. He writes all about the instability that plagues the capitalist system through chronic boom and bust cycles.

For Minskyian theory to work, it has to focus almost exclusively on the financial sector, which of course economists like Paul Krugman tended to do. Ooh, those dirty, rotten banks. However, it misses out on the real problem facing American capitalism, namely the declining rate of profit that is a function of the system’s need to replace people with machinery—and hence reduce the amount of surplus value that can be wrung from their muscles. Anwar Shaikh, who happened to have been on the staff of Jerome Levy Institute at one point, just came out with a massive study of this process. Papadimitriou’s dissertation at the New School was about the measurement of the rate of surplus value in Greece. I guess studying it helped him to extract it later on in life.

Needless to say, bourgeois economists, like the inner cadre at Jerome Levy Institute, step gingerly around the question of capitalism itself since they are far too wedded to the system on a material basis and understand as well that Keynesianism still has plenty of purchase in elite circles. Who wants to hear from an annoying Marxist, especially when his or her ideas clash with owning mansions, yachts, and million-dollar paintings. In other words, like all of the people serving on the Bard College Board of Trustees.

Bard College and its president-for-life Leon Botstein embody a culture in which people like Dimitris Papadimitriou and Rania Antonopoulos can flourish. Back in 1995, I came into contact with a union organizer from Local 100 of the Restaurant Workers Union named Brook Bitterman who was trying to apply pressure on Jerome Levy to come to terms with the workers Bitterman represented at Smith and Wollensky, one of Levy’s businesses. I gave Bitterman a copy of the Bard College alumni directory that he used for a direct mail campaign to get the mostly pinko graduates to demand justice for the workers as enunciated in a letter the union sent to Dimitris Papadimitriou:

Dear Dr. Papadimitriou

We are writing to express our concern about what we perceive to be a striking contradiction between the goals and work of the Jerome Levy Institute of Economics and the private business affairs of its founder and chief supporter, Leon Levy, who also serves as a Trustee of Bard College.

Over the past several years, the Jerome Levy Institute – Bard College’s first post-graduate institution – has become a respected outlet for academics and policy analysts concerned with growing income inequality and crisis-prone financial markets. As a union of low wage, mostly immigrant and minority restaurant workers, Local 100 is very familiar with the growing inequality in the American labor market. Many of our members and their families have also seen firsthand how financial market developments, such as the leveraged buyout frenzy of the 1980s, can have a profoundly negative impact on the quality of their lives.

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Not long after this campaign began, I received a letter from the president of the Board of Governors of the Bard Alumni Association taking great umbrage at Local 100’s campaign. It stated: “Many of our trustees, overseers, advisory board members, donors, alumni/ae, faculty, administrators, parents of students and students, have business relationships — some of which may be deemed by you or others as ‘controversial’ — unrelated to their relationship with the College. It would hardly be appropriate for us to inject ourselves into those relationships. Such is the case with the alleged relationship between Leon Levy and Smith & Wollensky.”

Yeah, who the hell would want a Bard College alumnus like me poking around in the private affairs of Leon Levy or Rania Antonopoulos? Maybe that’s the reason I’ve been removed from the Bard College alumni database and no longer receive communications from the school, either in the mail or electronically.

January 1, 2018

Why did liberal Republicans go the way of the dodo?

Filed under: economics — louisproyect @ 8:40 pm

“Should any political party attempt to abolish social security, unemployment insurance and eliminate labor laws and farm programs, you would not hear of that party again in our political history.”

Crooked Timber is a group blog of left-leaning academics that I have been following for nearly 20 years. I read it mostly to get a sense of what Keynesian, social democratic, and liberal professors are thinking. Yesterday John Holbo, an Associate Professor of Philosophy at the National University of Singapore, posted an article titled “Why Does The US Lack A Major Center-Right Party?”  that grappled with the question “Why do we have the Trump-headed, extreme right-tilted thing we’ve got?” Why didn’t the Republicans adopt a center-right program? Wouldn’t “the super-wealthy wouldn’t be better off under a plausibly dominant, moderate right-wing Republican Party” especially since “Extremist chaos is kind of costly, not to mention risky.” Looking back at the party’s history, Holbo wonders why “around 1964 various elements on the right that might have gone for a moderate option tilted far-right.”

I think the answer to this question has to engage with the class and economic issues that made the GOP the party of Goldwater rather than Nelson Rockefeller and other patricians who had much more in common with FDR than they did with today’s politicians. Essentially, the sharp turn to the right has to be explained in terms of the relationship of class forces in the USA and the failure of American capitalism to provide enough crumbs off the table to sustain the social compact that FDR created.

In 1944, Thomas Dewey lost a close election to FDR whose fourth term was cut short by his death. Dewey epitomized the liberal tendencies of the GOP. As a member of the Eastern Establishment, Dewey doubled state aid to education, increased salaries for state employees and still reduced the state’s debt by over $100 million. (From Wikipedia). Four years later, running against Truman, Dewey refused to compete with the Democrat for who could be more anti-Communist. He opposed a ban on the CP on the basis that “you can’t shoot an idea with a gun” and added later on that he was not “going around looking under beds”.

In 1954, President Eisenhower, another paragon of the Eastern Establishment who even had served as President of Columbia University at one point, made a speech that warned against any attempt to undo the gains of the New Deal:

Should any political party attempt to abolish social security, unemployment insurance and eliminate labor laws and farm programs, you would not hear of that party again in our political history. There is a tiny splinter group, of course, that believes that you can do these things. Among them are a few Texas oil millionaires, and an occasional politician or businessman from other areas. Their number is negligible and they are stupid.

Despite Richard Nixon’s well-deserved rotten reputation, he did not stray far from the Dewey/Eisenhower agenda. In 1971, he stated, “I am now a Keynesian in economics”. It was the year in which the American economy first began to show signs of anemia, a product of inflationary pressures from military spending on Vietnam and growing competition from Japan and Germany. In response to a faltering economy, Nixon carried out a program according to Keynesian principles. He proposed an expansionary budget for 1972 that would “be a budget in deficit, as will be the budget in 1971.” He also proposed an expansionary monetary policy that would be sufficient “to fuel a growing economy.”

After resigning from the presidency, he was replaced by his Vice-President Gerald Ford who Alexander Cockburn described as “our greatest President”–maybe a bit tongue in cheek but not entirely in consideration of this:

As a percentage of the federal budget, social spending crested in the Ford years. Never should it be forgotten that Jimmy Carter campaigned against Ford as the prophet of neo-liberalism, precursor of the Democratic Leadership Council, touting “zero-based budgeting”.

Nobody could possibly mistake Betty Ford with the wives of Republican presidents that followed. As Marxmailer Stewart Lawrence pointed out in a CounterPunch article, she was an outspoken defender of the Equal Rights Amendment, abortion rights, and even recreational pot-smoking. All this might have actually cost her husband his re-election and even led to the Reagan ascendancy.

However, to return to the initial point made in this article, it was not “social issues” that led to Reagan’s election but malaise over Jimmy Carter’s neoliberal economics. Promising like Trump to restore America to greatness, Reagan’s presidency was the first attempt to make the working-class pay for capitalist decline.

During the Carter years, I began to notice a move away from the New Deal consensus marked particularly by his 1979 “malaise” speech that set the tone for the Clinton and Obama administrations. To jump-start the economy, Carter pushed for deregulation of the airlines, the railroads, and trucking. Deregulation was a key part of supply-side economics, a policy that most people associate with Reagan but that was incubated in the Carter years. Lloyd Bentsen, Carter’s Secretary of the Treasury, issued a report in 1980 that “signals the start of a new era of economic thinking. The past has been dominated by economists who focused almost exclusively on the demand side of the economy … [T]he Committee recommends a comprehensive set of policies designed to enhance the productive side, the supply side of the economy.”

While Carter was pushing such neoliberal measures, Mobil Oil was running advertorials on the op-ed page of the N.Y. Times every Thursday that telegraphed the determination of big capital to organize an all-out assault on the New Deal legacy. You can read a sample of some of the 800 of these corporate messages here, including one from 1981 that proposed weakening the Clean Air Act since it impeded “the battle for industrial revitalization, economic growth, and less dependence on foreign energy”.

But the real motivation for the neoliberal turn was pressure from the completely recovered WWII economies in Europe and Japan, particularly the two axis powers that were making such headway into American markets that auto workers decided to stage rallies in which they took sledgehammers to Toyotas (racism explains why Mercedes-Benz got off the hook.) Throughout the 1980s and 90s, the rust belt became ever-widening as it turned cities like Detroit, Cleveland, Newark, Philadelphia, Youngstown, St. Louis, Buffalo, Pittsburgh and others into shells of their once-thriving, job-creating machines.

Most people on the left explain the ruthless attack on the New Deal social compact as driven by greed. To some extent, this is undeniable. People like the Koch brothers, Goldman Sachs partners, hedge fund operators, Silicon Valley magnates, energy company executives, et al, are creatures that only feel fulfilled by wealth, the more of it the better. Just 2 blocks north of my apartment, there used to be the International Center for Photography that was originally a mansion owned by Willard Straight, an investment banker who founded the New Republic in 1914 with fellow Progressive movement stalwart Walter Lippmann.

The museum was founded in the mansion in 1974 and operated there until 1999 when it was sold to Bruce Kovner, a hedge fund billionaire who despite refusing to back Trump in 2016 because of his boorishness remains one of the major funders of the policies he is carrying out. Kovner is one of the main funders of the American Enterprise Institute, whose journal publishes articles like The Upside of Income Inequality and Why Do We Underpay Our Best CEOs?.

So, what accounts for Willard Straight’s Progressivism and the new owner of his mansion defending values that are his polar opposite?

Back in 1998, I read a book by a British economist named Harry Shutt titled “The Trouble with Capitalism” who to this day remains my favorite thinker when it comes to understanding the retreat from FDR type liberalism in the USA and the erosion of social democratic norms in Europe. In straightforward prose, he describes it in terms that are reminiscent of the period that led up to WWI and WWII as capitalist competition for markets and resources led to a disastrous war. The difference today is that such wars would mean the end of the capitalist system itself since it would quickly involve nuclear weapons.

So to prop up the system, you have various mechanisms but none accomplishes what previous wars accomplished, mainly the liquidation of fixed assets through bombs and rockets and the possibility for a new round of capital accumulation.

In an interview with Red Pepper, Shutt dismisses greed as an explanation for a process that began more than 40 years ago. He says, “People are hitting on greed but greed is not a cause of things, greed is a symptom. Greed has been with us since the Garden of Eden.”

Instead, it is the stagnation of the capitalist system that has inhibited the bourgeoisie from redistributing a share of profits to the working class as was the case in the post-WWII period through tax collections that would be unheard of today. Under Eisenhower, the top marginal tax rate was 91 percent. In 2016, it was 39.6 percent. This is what allowed the massive expansion of state universities under Eisenhower’s Republican administration and LBJ’s Great Society that was funded by a tax system with a marginal tax rate of 70 percent.

When economic growth was skyrocketing after WWII, the bourgeoisie accepted such a tax “burden” but when it began to slow down in the 1970s, it was much more resistant. The corporate tax rate had to be cut in order for capital to expand but the contradictions of the capitalist system were making profitable investment more and more unrealizable. There was a declining rate of profit that was ultimately tied to the replacement of living labor by machinery as well as increased competition between various national capitalisms. Steel, auto, petrochemicals—and other mainstays of the industrial system from the 1930s to the 1970s—were no longer rewarding investors. So, they looked elsewhere especially in East Asia, where labor was cheap. When workers in the USA could no longer rely on jobs in an auto plant, they were forced to work for Walmart. All this meant lower pay and lower tax revenues.

With a decline in manufacturing, investors flocked not only to overseas opportunities but to financial speculation such as the collateralized mortgage securities that brought the system to the brink of oblivion only a decade ago. Despite the roaring stock market, this is an unstable system that could founder on the rocks very easily.

Shutt’s prescriptions for overcoming these contradictions stop short of overthrowing the capitalist system but his outlook for the future does not appear very rosy for the Bruce Kovners of the world, as the Red Pepper article indicates:

Remove debt-fuelled consumption and property speculation from the equation, and you are left with anaemic subsititues such as the internet, the service sector and green technology. The arguments of centre-left Keynesian commentators that the answer lies in re-regulating the financial sector and encouraging consumer spending, ignore the fact, says Shutt, that the demand for capital – the availability of new profitable productive activities to invest in – is in long-term decline, and consumer spending power has been exhausted.

“It is easy to say that we’ll emerge from the slump eventually, but to quote Keynes, ‘in the long run we are all dead’,” he says. “In other words there has to be a huge contraction in the meantime and the impact on livelihoods and lives is likely to be intolerable. The fundamental misconception of mainstream commentators is that people can and should be induced to consume more when they’re already ‘maxed out’ on credit. In practice it is right and necessary that they should now be forced to rebuild their personal balance sheets, which means saving rather than spending. Only once they’ve done this, probably after several years will they be able to start spending again. This pinpoints a fundamental weakness of capitalism. In order to function it requires the perpetuation of unsustainable levels of consumption in order to absorb the endlessly expanding stock of capital.”

The ultraright economic policies of the Republican Party are based on a big lie. They claim that squeezing the working class is in its best interest since it is only by putting more money in the hands of their exploiters can good jobs be created. Since a stagnant economy is not likely to be revived by their policies or even by a new round of Keynesian spending, the possibilities for liberal Republicanism are excluded at the outset just as they would be for a Bernie Sanders presidency.

The inescapable prognosis is one of declining standards of living and increasing state repression to keep the masses in line. There will also be more and more scapegoating of immigrants and other vulnerable sections of the population in order to mollify the white working class that is becoming as susceptible to con jobs as the non-unionized workforce in the South. Before long, the USA in its entirety will look like Mississippi unless the left can get its act together and challenge these bastards in the street where real politics always takes place.


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