Posts Tagged ‘Africa’

In this post, I continue the draft of sections of my forthcoming book, “Marxian Economics: An Introduction.” This, like the previous post, is for chapter 1, Marxian Economics Today.

A Tale of Two Capitalisms

Marxian economists recognize, just like mainstream economists, that capitalism has radically transformed the world in recent decades, continuing and in some cases accelerating long-term trends. For example, the world has seen spectacular growth in the amount and kinds of goods and services available to consumers. Everything, it seems, can be purchased either in retail shops, big-box stores, or online. And, every year, more of those goods and services are being produced and sold in markets.

That means the wealth of nations has expanded. Thus, technically, Gross Domestic Product per capita has risen since 1970 in countries as diverse as the United States (where it has more than doubled), Japan (more than tripled), China (almost ten times), and Botswana (where it has increased by a factor of more than 22).

International trade has also soared during the same period. Goods and services that are produced in once-remote corners of the world find their way to customers in other regions. Both physical commodities— such as smart phones, automobiles, and fruits and vegetables—and services—like banking, insurance, and communications—are being traded on an increasing basis between residents and non-residents of national economies. To put some numbers on it, merchandise trade grew from $318.2 billion dollars in 1970 to $19.48 trillion in 2018. And exports of services have become a larger and larger share of total exports—for the world as a whole (now 23.5 percent, up from 15 percent) and especially for certain countries (such as the United Kingdom, where services account for about 45 percent of all exports, and the Bahamas, where almost all exports are services).

The world’s cities are the hubs of all that commerce and transportation. It should come as no surprise that the urbanization of the global population has also expanded rapidly in recent decades, from about one third to now over half. In 2018, 1.7 billion people—23 per cent of the world’s population— lived in a city with at least 1 million inhabitants. And while only a small minority currently reside in cities with more than 10 million inhabitants, by 2030 a projected 752 million people will live in so-called megacities, many of them located in the Global South.

We’re all aware that, during recent decades, many new technologies have been invented—in producing goods and services as all well as in consuming them. Think of robotics, artificial intelligence, and digital media. And, with them, new industries and giant firms have emerged and taken off. Consider the so-called Big Four technology companies: Amazon, Google, Apple, and Facebook. They were only founded in the last few decades but, as they’ve continued to grow, they’ve become intertwined with the lives of millions of companies and billions of people around the world.

The owners of those tech companies are, to no one’s amazement, all billionaires. When the first Forbes World Billionaires List was published in 1987, it included only 140 billionaires. Today, they number 2825 and their combined wealth is about $9.4 trillion. That works out to be about $3,300,000,000 per billionaire. Their wealth certainly represents one of the great success stories of capitalism in recent decades.

Finally, capitalism has grown in more countries and expanded into more parts of more countries’ economies over the course of the past 40 years. Both large countries and small (from Russia, India, and China to El Salvador, Algeria, and Vietnam) are more capitalist than ever before. As we look around the world, we can see that the economies of rural areas have been increasingly transformed by and connected to capitalist ways of producing and exchanging goods and services. Global value chains have incorporated and fundamentally altered the lives of millions and millions of workers around the world. Meanwhile, areas of the economy that had been formerly outside of capitalism—for example, goods and services provided by households and government—can now be bought and sold on markets and are the source of profits for a growing number of companies.

But, unlike mainstream economists, Marxists recognize that capitalism’s extraordinary successes in recent decades have also come with tremendous economic and social costs.

All that new wealth of nations? Well, it’s been produced by workers that receive in wages and salaries only a portion of the total value they’ve created. The rest, the surplus, has gone to those at the top of the economic pyramid. So, the distribution of income has become increasingly unequal over time—both within countries and for the world economy as a whole.

According to the the latest World Inequality Report, income inequality has increased in nearly all countries, especially in the United States, China, India, and Russia. In other countries (for example, in the Middle East, sub-Saharan Africa, and Brazil), income inequality has remained relatively stable but at extremely high levels.

At a global level, inequality has also worsened. Thus, for example, the top 1 percent richest individuals in the world captured more than twice as much of the growth in income as the bottom 50 percent since 1980. Basically, the share of income going to the bottom half has mostly stagnated (at around 9 percent), while the share captured by the top 1 percent has risen dramatically (from around 16 percent to more than 20 percent).

And it’s no accident. Inequality has increased because the surplus labor performed by workers, in both rich and poor countries, has not been kept by them but has gone to a small group at the top of the national and world economies.

So, we really are talking about a tale of two capitalisms: one that is celebrated by mainstream economists (but only benefits those in the top 1 percent) and another that is recognized by Marxian economists (who emphasize the idea that the growing wealth of nations and increasing inequality are characteristics of the same economic system).

But that’s not the end of the story. All that capitalist growth has been anything but steady. The two most severe economic downturns since the Great Depression of the 1930s have happened in the new millennium: the Second Great Depression (after the crash of 2007-08) and the Pandemic Depression (with the outbreak and spread of the novel coronavirus). In both cases, hundreds of millions of workers around the world were laid off or had their pay cut. Many of them were already struggling to get by, with stagnant wages and precarious jobs, even before economic conditions took a turn for the worse.

And then those same workers had to look up and see one part of the economy recovering—for example, the profits of their employers and shares in the stock market that fueled the wealth of the billionaires—while the one in which they earned their livelihoods barely budged.

Meanwhile, those stunning global cities and urban centers, the likes of which the world has never seen, also include vast slums and informal settlements—parking lots for the working poor. According to the United Nations, over 1 billion people now live in dense neighborhoods with unreliable and often shared access to basic services like water, sanitation and electricity. Many don’t have bank accounts, basic employment contracts, or insurance. Their incomes and workplaces are not on any government agency’s radar.

They’re not so much left behind but, just like their counterparts in the poor neighborhoods of rich countries, incorporated into capitalism on a profoundly unequal basis. They’re forced to compete with one another for substandard housing and low-paying jobs while suffering from much higher rates of crime and environmental pollution than those who live in the wealthy urban neighborhoods. In countries like the United States and the United Kingdom, a disproportionate number are ethnic and racial minorities and recent immigrants.

The working poor in both urban and rural areas are also the ones most affected by the climate crisis. A product of capitalism’s growth, not only in recent decades, but since its inception, global warming has created a world that is crossing temperature barriers which, within a decade, threaten ecosystem collapse, ocean acidification, mass desertification, and coastal areas being flooded into inhabitability.

Meanwhile, the democratic principles and institutions that people have often relied on to make their voices heard are being challenged by political elites and movements that are fueled by and taking advantage of the resentments created by decades of capitalist growth. The irony, of course, is many of these political parties were elected through democratic means and call for more, not less, unbridled capitalism as the way forward.

Clearly, the other side of the coin of capitalism’s tremendous successes have been spectacular failures.

So, it should come as no surprise that there’s more interest these days in both criticisms of and alternatives to capitalism. And Marxian economics is one of the key sources for both: for ways of analyzing capitalism that point to these and other failures not as accidents, but as intrinsic to the way capitalism operates as a system; and for ideas about how to imagine and create other institutions, fundamentally different ways of organizing economic and social life.

Young people, especially, have become interested in the tradition of Marxian economics. They’re trying to pay for their schooling, find decent jobs, and start rewarding careers but they’re increasingly dissatisfied with the effects of the economic system they’re inheriting. Mainstream economics seems to offer less and less to them, especially since it has mostly celebrated and offered policies to strengthen that same economic system. Or, within more liberal parts of mainstream economics, offer only minor changes to keep the system going.

Marxian economics offers a real alternative—in terms of criticizing capitalism and the possibility of creating an economic system that actually delivers longstanding promises of fairness and justice.

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I know all about how corrupt a city can by. I live in Chicago, the “Capital of Corruption.”

And I hear all the time about all those other corrupt cities, most of them located in countries in Latin America, Africa, and Asia, which often fall low in the corruption perceptions indices like the one produced by Transparency International.

But for all the talk about transparency and the need to tackle corruption at the 2016 Anti-Corruption Summit in London, the host country itself may be the most corrupt in the world.

As Joel Benjamin [ht: ja] explains, the indices produced and disseminated by groups like Transparency International “only measure perceived corruption based upon the abuse of public office for private gain, i.e. the payment of bribes.” What they don’t account for is the fact that “While nepotism and subservience to finance capital is rife in Britain and its overseas dependencies, it is not illegal.”

At least Chicago’s corruption is transparent. Donate to the mayor’s campaign chest and you get a city contract or assistance with a development project. In the city of London (and other such financial centers in Britain, the United States, and Western Europe), corruption is based on money laundering and financial secrecy.


And if we measure those forms of corruption, then (as with the Financial Secrecy Index developed by the Tax Justice Network) the tables (so to speak) are turned: Switzerland ends up at the top, the United States rises to number 3, and the United Kingdom rounds out the top 15.

If anything, the bribing of public officials in Chicago, Lagos, Bogotá, and Bangalore is quite transparent—and often involves the siphoning-off of some of the surplus from the initial appropriators to their friends in high places in order to keep doing business. The corruption in Geneva, London, and New York is something quite different and even more pernicious: it involves the laundering of the surplus captured from the entire world so that the economic and political elites who capture it get to keep it and accumulate even more wealth, for themselves and their friends in high places.

All of it legal—and fundamentally corrupt.

Consider the irony: Bernie Sanders was seated alongside Bolivian President Evo Morales as he participated in a conference on social, economic, and environmental issues hosted by the Pontifical Academy of Social Sciences. Meanwhile, in news reports concerning Sanders’s visit to the Vatican, I learned that Jeffrey Sachs is one of the democratic socialists’s foreign policy advisers.

Why the irony? Because Sachs, aka Dr. Shock, was responsible not only for the economic and social disasters his version of shock therapy created in Poland and Russia, but also—at least indirectly—for the rise to prominence and ultimately the election of Morales.

As Benjamin Kohl and Linda Farthing explain, in challenging Sachs’s 2012 campaign for World Bank president,

What Sachs fails to mention, however, is the clear link between the SAP [structural adjustment program] in Bolivia and the 1980s coca and cocaine boom. Thousands of miners, peasants, and factory workers who lost their livelihoods because of ‘stabilization’ fled to the agricultural frontier to sow coca, the one crop that had a guaranteed market. The government implicitly allowed the laundering of drug money through offering certificates of deposit in US dollars at the central bank, no questions asked. The influx of money from the drug trade, perhaps the best expression of what capitalism can do in an unregulated market, was responsible for a substantial part of the economic growth for which Sachs wishes to claim credit.

We show in Impasse in Bolivia that the neoliberal ‘stabilization’ plan that Sachs is so proud of set the stage for 15 years of slow economic growth and increasing opposition to neoliberalism. Bolivia, promoted by the World Bank and IMF as a neoliberal success story in the 1980s and 1990s, morphed into the poster child of the anti-globalization movement when the people of Cochabamba rose up in the ‘Water War’ of 2000. This set in motion a period of unrest that led to the resignation of two presidents before a leader committed to the interests of the poor majority was elected in 2005.

More recently, Sachs has been criticized for the exaggerated claims he has made concerning his use of a handful of African villages as test cases for his Millennium Villages Project.

There’s no doubt that, during the past couple of months, Sachs has been on the mark—in his defense of Sanders and his attack on the Clinton war machine.

But we shouldn’t forget Sachs’s checkered history as an imperious, globe-trotting development economist or, for that matter, his enormous ego,

which exposes almost anything he does to the suspicion that he’s in it mostly for the attention. But while his work in Russia, though it drew attention, was mostly destructive – something he still can’t admit to – his concerns today are a lot more admirable. His criticisms of American warmongering and Western indifference to the poverty of a billion or two of our fellow humans are mostly on the side of the angels. Maybe the best summing up of the latest incarnation of Jeffrey Sachs comes from David Ellerman: “I hope he gets what he wants, but that he doesn’t get any credit for it.”


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