Posts Tagged ‘capitalism’


We already knew that Millenials are “generation screwed.” Now we know, thanks to the latest Harvard Public Opinion Project survey, that the majority (51 percent) does not support capitalism—and even fewer (just 19 percent) identify as capitalists.*

It also seems the members of Generation Y don’t see socialism as the preferred alternative (only 33 percent support it)—but at least those who have participated in Democratic primaries have been voting overwhelmingly for the democratic socialist candidate.


*A subsequent survey that included people of all ages found that somewhat older Americans also are skeptical of capitalism. Only among respondents at least 50 years old was the majority in support of capitalism.


Mark Tansey, Recourse (2011)

One of the great advantages of economics graduate programs outside the mainstream (like the University of Massachusetts Amherst, where I did my Ph.D.) is we were encouraged to read, listen to, and explore ideas outside the mainstream—especially the liberal mainstream.

The liberal mainstream at the time, not unlike today, consisted of neoclassical microeconomics (with market imperfections) and a version of Keynesian macroeconomics (which was, in the usual IS-LM models, best characterized as hydraulic or bastard Keynesianism). Essentially, what liberal economists offered was a theory of a “mixed economy” that could be made to work—both premised on and promising “just deserts” and stable growth—with an appropriate mix of private property, markets, and government intervention.

For many of us, liberal mainstream economics was a dead end—uninspired and uninspiring both theoretically and politically. Theoretically, it marginalized history (both economic history and the history of economic thought) and ignored the exciting methodological debates taking place in other disciplines (from discussions of paradigms and scientific revolutions through criticisms of essentialism and determinism to fallibilist mathematics and posthumanism). And politically, it ignored many of the features of real capitalism (such as poverty, inequality, and class exploitation) and rejected any and all alternatives to capitalism (in a liberal version of Margaret Thatcher’s “there is no alternative”).

Then as now, what liberal economists offer was, as Gerald Friedman has recently pointed out, a “political economy of despair.”

The reaction to my paper — the casual and precipitous conclusion that it must be wrong because it projects a sharply higher rate of GDP growth — comes from the assumption that the economy is already at full employment and capacity output. It is assumed that were output significantly below full employment, then prices would fall to equilibrate the two. This is the political counsel of despair. It is based on classical economic theory and the underlying acceptance of Say’s Law of Markets (named for the great Classical economist Jean-Baptiste Say), which says that total supply of goods and services and the total demand for goods and services will always be equal. The shoe market creates the right amount of demand for shoes — it works out so neatly that the true measure of the supply of shoes, of potential output, can be taken by measuring actual output. This concept is used as a justification for laissez-faire economics, and the view that the market mechanism finds a harmonious equilibrium. . .

There is, of course, a politics as well as a psychology to this economic theory. If nothing much can be done, if things are as good as they can be, it is irresponsible even to suggest to the general public that we try to do something about our economic ills. The role of economists and other policy elites (Paul Krugman is fond of the term “wonks”) is to explain to the general public why they should be reconciled with stagnant incomes, and to rebuke those, like myself, who say otherwise before we raise false hopes that can only be disappointed.

Fortunately, back in graduate school and continuing after we received our degrees, we were encouraged to look beyond liberal economics—both outside the discipline of economics (in philosophy, history, anthropology, and so on) and within the discipline (to strains or traditions of thought that developed criticisms of and alternatives to liberal mainstream economics).

Marx was, of course, central to our theoretical explorations. But so were other thinkers, such as Axel Leijonhufvud (whose work I’ve discussed before). He—along with others, such as Robert Clower and Hyman Minsky—challenged the orthodox interpretation of Keynes, especially the commitment to equilibrium. Leijonhufvud was particularly interested in what happens within a commodity-producing economy when exchanges take place outside of equilibrium.

The orthodox Keynesianism of the time did have a theoretical explanation for recessions and depressions. Proponents saw the economy as a self-regulating machine in which individual decisions typically lead to a situation of full employment and healthy growth. The primary reason for periods of recession and depression was because wages did not fall quickly enough. If wages could fall rapidly and extensively enough, then the economy would absorb the unemployed. Orthodox Keynesians also took Keynes’ approach to monetary economics to be similar to the classical economists.

Leijonhufvud got something entirely different from reading the General Theory. The more he looked at his footnotes, originally written in puzzlement at the disparity between what he took to be the Keynesian message and the orthodox Keynesianism of his time, the confident he felt. The implications were amazing. Had the whole discipline catastrophically misunderstood Keynes’ deeply revolutionary ideas? Was the dominant economics paradigm deeply flawed and a fatally wrong turn in macroeconomic thinking? And if this was the case, what was Keynes actually proposing?

Leijonhufvud’s “Keynesian Economics and the Economics of Keynes” exploded onto the academic stage the following year; no mean feat for an economics book that did not contain a single equation. The book took no prisoners and aimed squarely at the prevailing metaphor about the self-regulating economy and the economics of the orthodoxy. He forcefully argued that the free movement of wages and prices can sometimes be destabilizing and could move the economy away from full employment.

That helped understand the Great Depression. At that period, wages [were] highly flexible and all that seemed to occur as they fell was further devastating unemployment. Being true to Keynes’ own insights, he argued, would require an overhaul of macroeconomic theory to place the problems of coordination and information front and center. Rather than simply assuming that price and wage adjustments would cause the economy to restore an appropriate level of output and employment, he suggested a careful analysis of the actual adjustment process in different economies and how the economy might evolve given these processes. As such, he was proposing a biological or cybernetic approach to economics that saw the economy more as an organism groping forward through time, without a clear destination, rather than a machine that only occasionally needed greasing.

That “path not taken” might also have helped us understand the Second Great Depression and the uneven—and spectacularly unequalizing—recovery that liberal mainstream economists have supervised and celebrated in recent years.

Meanwhile, the rest of us continue to look elsewhere, beyond the liberal political economy of despair, for economic and political ideas that create the possibility of a better future.



The headlines this morning are all reporting the same thing: suicides in the United States are climbing dramatically. The suicide rate rose 24 percent between 1999 and 2014 after a decade and a half of declines. Moreover, the increase accelerated to an average of 2 percent a year after 2006 from about 1 percent a year from 1999 through 2006. And, finally, the suicide rate also continued to climb in the first half of the 2015.

What the hell is going on?

According to Alex Crosby, chief of the surveillance branch of the CDC’s Division of Violence Prevention,

Suicide rates have risen historically during difficult economic times, when job prospects diminish. The CDC tied increases in suicides to foreclosures on homes and evictions several years ago, he said.


In fact, according to a 2011 study in which Crosby participated,

the overall suicide rate generally increased in recessions, especially in severe recessions that lasted longer than 1 year. The largest increase in the overall suicide rate occurred during the Great Depression (1929–1933), when it surged from 18.0 in 1928 to 22.1 (the all-time high) in 1932, the last full year of the Great Depression. This increase of 22.8% was the highest recorded for any 4-year interval during the study period. The overall suicide rate also rose during 3 other severe recessions: the end of the New Deal (1937–1938), the oil crisis (1973–1975), and the double-dip recession (1980–1982). Not only did the overall suicide rate generally rise during recessions; it also mostly fell during expansions. For example, the overall suicide rate posted the sharpest decrease during World War II (1939–1945) and the longest decrease during the longest expansion period (1991–2001); during both of these periods, the economy experienced fast growth and low unemployment.

There’s a clear correlation between capitalist downturns and U.S. suicide rates—both historically and in recent years.

Sure, people kill themselves with guns—and with drug overdoses and alcohol poisoning and by suffocating themselves. But we’re forced to have the freedom to kill ourselves by the suicidal instability of the way our economic and social life is currently organized.



Special mention



George Monbiot makes a compelling case that the Left still needs to come up with a viable alternative to contemporary economic and social common sense.

Monbiot summarizes that common sense as neoliberalism.

Neoliberalism: do you know what it is?

Its anonymity is both a symptom and cause of its power. It has played a major role in a remarkable variety of crises: the financial meltdown of 2007‑8, the offshoring of wealth and power, of which the Panama Papers offer us merely a glimpse, the slow collapse of public health and education, resurgent child poverty, the epidemic of loneliness, the collapse of ecosystems, the rise of Donald Trump. But we respond to these crises as if they emerge in isolation, apparently unaware that they have all been either catalysed or exacerbated by the same coherent philosophy; a philosophy that has – or had – a name. What greater power can there be than to operate namelessly?

So pervasive has neoliberalism become that we seldom even recognise it as an ideology. We appear to accept the proposition that this utopian, millenarian faith describes a neutral force; a kind of biological law, like Darwin’s theory of evolution. But the philosophy arose as a conscious attempt to reshape human life and shift the locus of power.

And, Monbiot is right: to propose Keynesian solutions to the crises of the 21st century is “an admission of failure.”

The problem, of course, is that focusing on the evils of neoliberalism—hyper-individualism, privatization, market freedom, blaming the victim, and so on—does lead to more government programs, state regulation, and, in general, Keynesian solutions.

The problem, as Chris Dillow explains, is that “neoliberalism is NOT free market ideology.”

Instead, it’s that all these policies enrich the already rich. Attacks on unions raise profit margins and bosses’ pay. Privatization expands the number of activities in which profits can be made; managerialism and academization enrich spivs and gobshites; and benefitsanctions help ensure that bosses get a steady supply of cheap labour if only by creating a culture of fear. Ben [Southwood]’s claim that neoliberalism is happy with a big state fits this pattern; big government spending helps to mitigatecyclical risk.

All this makes me suspect that those leftists who try to intellectualize neoliberalism and who talk of a “neoliberal project” are giving it too much credit – sometimes verging dangerously towards conspiracy theories.  Maybe there’s less here than meets the eye. Perhaps neoliberalism is simply what we get when the boss class exercises power over the state.

The real issue, in other words, is capitalism. It’s what happens when the “boss class” runs the enterprises and gets the state to create the conditions so that the bosses continue to profit from running the enterprises. That was already the case before the rise of neoliberalism, when the common sense was more Keynesian, and it has continued under neoliberalism, after the pendulum swung in a more anti-Keynesian direction.

Moving the pendulum back toward more Keynesian solutions can’t solve the problem of the bosses, the state, and profit. A project of imagining and enacting alternatives to capitalism can.

market concentration

Mainstream economists (such as Larry Summers and Paul Krugman) are clutching at straws to try to explain capitalism’s poor performance, especially the specter of low investment and slow growth—otherwise known as “secular stagnation.” The latest straw is monopoly power.

Even the Council of Economic Advisers (pdf) is focusing attention on the monopoly straw—although, like others within mainstream economics, they’re not at all clear why it’s happening.

there is evidence of 1) increasing concentration across a number of industries, 2) increasing rents, in the form of higher returns on invested capital, across a number of firms, and 3) decreasing business and labor dynamism. However, the links among these factors are not clear. On the one hand, it could be that a decrease in firm entry is leading to higher levels of concentration, which leads to higher rents. On the other hand, it could be that higher levels of concentration are providing advantages to incumbents which are then used to raise entry barriers, leading to lower entry. Or it might be that some other factor is driving these trends. For example, innovation by a handful of firms in winner-take-all markets could give them a dominant market position in a very profitable market that could be difficult to challenge, discouraging entry. Even though it is not clear whether or how these three factors are linked, these trends are nevertheless troubling because they suggest that competition may be decreasing and could require attention by policymakers and regulators.

While some on the liberal wing of mainstream economics have recently discovered increased concentration within the U.S. economy, they fail to credit the longstanding tradition outside of mainstream economics (e.g., within the Marxian critique of political economy) of analyzing the concentration and centralization of capital and the rise of “monopoly capital.”

Liberal mainstream economists simply have no theory of the contradictory dynamics of capitalism (one that can explain, for example, its recurring boom-and-bust cycles), much less a theory of the firm (other than hanging on to the fantasy of the social benefits of competition). That’s why they don’t have a theory of the causes and consequences of the rise of monopoly capital—nor, for that matter, do they indicate any knowledge of the criticisms of and alternatives to the theory of monopoly capital.

I’m thinking in particular of the work of Bruce Norton who, in a variety of articles, has identified some of the key problems in the theory of monopoly capitalism, especially the presumption that “capitalists always strive to increase their accumulation to the maximum extent possible.”* Norton draws particular attention to the wide variety of distributions of the surplus-value corporate boards of directors appropriate from their workers—not just in the form of dividends, but also “profit taxes, salaries of corporate supervisory managers, lawyers, financial and personnel officers, etc., [which are] equally central to the basic workings of the US economy and particularly aggregate demand.”

Each supports processes shaping in particular ways the social formation, the accumulation process, and the continued appropriation of surplus value, and each is a class process, a distribution of surplus labour. We need accumulation theory which takes pains (1) to identify all these various flows of surplus in a particular social formation and (2) to theorise their variegated inter relationships with other aspects of social life (including the continued extraction of surplus value).

That’s precisely what is missing from mainstream economics, including its liberal wing: a theory of the contradictory class dynamics of capitalist firms and of capitalism as a whole.


*See, e.g., his “Epochs and Essences: A Review of Marxist Long-Wave and Stagnation Theories,” published in 1988 in the Cambridge Journal of Economics, and “The Theory of Monopoly Capitalism and Classical Economics,” published in 1995 in History of Political Economy.

Good for Manhola Dargis [ht: bn]. She certainly does a much job reviewing La Loi du Marché (bizarrely rendered into the English-language version as The Measure of a Man) than Jordan Hoffman.

I especially appreciated her conclusion:

It’s too bad that the movie’s blunt original title — “La Loi du Marché,” or “Market Law” — was traded in for something prettier and blander. “The Measure of a Man” suggests stirring possibilities (“Of all things the measure is man,” as the philosopher once put it), but it doesn’t convey the ordinary cold brutality of what it means to be defined by the unpaid and the radically underpaid hour. Mr. Brizé, who wrote the script with Olivier Gorce, doesn’t break ground here. Yet, with Mr. Lindon’s help and in several extraordinary scenes in the market’s back office — a white hell in which people are pushed to sell out one another — Mr. Brizé transforms one individual’s story into a social tragedy.

That final comment on the movie is actually a perfect characterization of capitalism: it turns individual stories (whether of an unemployed worker or capitalists who make rational decisions not to reinvest the surplus they appropriate) into social tragedies.

That unemployed worker not only loses the ability to sell their ability to labor, in order to receive a wage that allows them to purchase the commodities they need to survive; their situation also imperils their psychological and physical health as all as that of their family, not to mention the economic and social health of the community in which they live. All are placed on a shakier footing because one worker who loses their job is often accompanied by many others in a similar situation within capitalism—whether because enterprises reorganize, industries collapse, or entire economies enter into recessions and depressions.

The same is true of capitalists: they often make individually rational decisions not to invest (because, for example, future expected profits are low, since wages might be rising or other businesses are slowing down). But, when they do, the workers they let go and the contractors from whom they were making purchases now can’t make their own purchases from still others and so on, thus multiplying the effects of the original decision. That’s how individually rational decisions can become social disasters.

In both cases, under capitalism, one individual’s story is transformed into a social tragedy.