Posts Tagged ‘Marx’

www.usnews

And the Republican Congress. . .

The premise and promise of the House and Senate versions of the Tax Cuts and Jobs Act are that lower corporate taxes will lead to increased investment and thus more jobs and higher wages for American workers.

Marx, it seems, would have endorsed the idea:

Accumulate, accumulate! That is Moses and the prophets! “Industry furnishes the material which saving accumulates.” Therefore, save, save, i.e., reconvert the greatest possible portion of surplus-value, or surplus-product into capital! Accumulation for accumulation’s sake, production for production’s sake: by this formula classical economy expressed the historical mission of the bourgeoisie, and did not for a single instant deceive itself over the birth-throes of wealth. But what avails lamentation in the face of historical necessity? If to classical economy, the proletarian is but a machine for the production of surplus-value; on the other hand, the capitalist is in its eyes only a machine for the conversion of this surplus-value into additional capital. Political Economy takes the historical function of the capitalist in bitter earnest.

Except for one thing (as Bruce Norton has explained): Marx never presumed capitalists would follow any kind of fixed rule, including using their surplus-value to accumulate capital. That’s only what the mainstream economists of his day—classical political economists like Adam Smith and David Ricardo—attributed to, or at least hoped from, capitalists. They’re the ones who thought capitalists had a “historical mission” of accumulating capital.

As I explained to students in class yesterday, you only get the accumulation of more capital out of corporate tax cuts if you assume everything else constant.

Consider, for example, the general law of capitalist accumulation:

K* = r – λ

where K* is the rate of capital accumulation (∆K/K), r is the rate of profit (surplus-value divided by the sum of constant and variable capital, s/[c+v]), and λ is the rate of all other distributions of surplus-value (including taxes to the state, CEO salaries, stock buybacks, dividends to stockholders, payments to money-lenders, and so on).

So, yes, if you hold everything else constant, corporate tax cuts, and thus a lower λ, will lead to a higher K*.

But that only works if everything else is held constant. If capitalists choose to use the tax cuts to increase CEO salaries, stock buybacks, and/or dividends to stockholders, then all bets are off. The Tax Cuts part of the act will not lead to the Jobs part of the act.

And even if capitalists do use some portion of the tax cuts to accumulate capital, that will only result in new jobs if technology is held constant. However, if they use it to invest in newer constant capital (e.g., automation and other labor-displacing technologies), then again we’ll see few if any new jobs.

And even if and when new jobs are created, the effect on workers’ wages will depend on the Reserve Army of Unemployed, Underemployed, and Low-Wage workers.

Clearly, there are lots of hidden steps and assumptions between slashing corporate taxes and more jobs.

That’s why Donald Trump and House and Senate Republicans have decided not to even attempt to justify the tax cuts but only to ram it through Congress in the shortest possible time.

They pretend they’re taking “the historical function of the capitalist in bitter earnest” but, in the end, they’re just attempting to line their benefactors’ pockets.

handbook

I just received my copy of the Routledge Handbook of Marxian Economics, edited by David M. Brennan, David Kristjanson-Gural, Catherine P. Mulder, and Erik K. Olsen.

The handbook contains thirty-seven original essays, including two—“Epistemology” and “Postmodernism”—cowritten with my good friend and frequent collaborator Jack Amariglio.

The handbook is too expensive for most people to buy. But professors and students can ask their college or university to purchase a copy for the library.

Sometimes we just have to sit back and laugh. Or, we would, if the consequences were not so serious.

I’ve been reading and watching the presentations (and ensuing discussions) at the Rethinking Macroeconomic Policy conference recently organized by the Peterson Institute for International Economics.

Quite a spectacle it appears to have been, with an opening paper by famous mainstream macroeconomists Olivier Blanchard and Larry Summers and a closing session—a “fireside chat” without the fire—with the very same doyens of the field.

The basic question of the conference was: does contemporary macroeconomics, in the wake of the Second Great Depression, require a few reforms or does it need a wholesale revolution? Blanchard lined up in the reform camp, with Summers calling for a revolution—with the added spice of Adam Posen referring to himself as Trotsky to Summers’s Lenin.

Most people would think it’s about time. They know that mainstream macroeconomics failed spectacularly in recent years: It wasn’t able to predict the onset of the crash of 2007-08. It didn’t even include the possibility of such a crash occurring. And it certainly hasn’t been a reliable guide to getting out of the crisis, the worst since the Great Depression of the 1930s.

So what are the problems according to Blanchard and Summers? In their view, “the events of the last ten years have put into question the presumption that economies are self stabilizing, have raised again the issue of whether temporary shocks can have permanent effects, and have shown the importance of non linearities.”

Only mainstream macroeconomists could possibly have thought that capitalism is self stabilizing. The rest of us—who have read Marx and Keynes as well as the work of Robert Clower, Hyman Minsky, and Axel Leijonhufvud—actually knew something about the roots of capitalist instability: the various ways a monetary commodity-producing economy might (but not necessarily) generate imbalances and instabilities based on the normal workings of the system.

Yes, of course, temporary shocks can have permanent effects. How could they not, when tens of millions of people are thrown out of work and, especially in the wake of the most recent crash, inequality has soared to new heights?

And then there are those “non linearities,” the idea that financial crises are characterized by feedback effects such that shocks, even small ones, “are strongly amplified rather than damped as they propagate.” Bank runs are the quintessential example—whether customers demanding their deposits in the first Great Depression or the run on financial institutions (including insurance companies that issued credit default swaps) that occurred in the midst of the second Great Depression. But that’s not all: when corporations, facing a declining profit rate, choose to sell but not purchase, they make individually rational decisions that can have large-scale social ramifications—for workers, indebted households, and other corporations (on both Main Street and Wall Street).

So mainstream macroeconomists appear to be waking up from their slumber and seeing capitalism as it is—and as it has functioned for 150 years or so.

You’d think, then, with all the rhetoric of reform and revolution, they’d be in favor of questioning the entire edifice of their theories and models. What we get instead is a bit of tinkering, along the lines of the following: (a) monetary policy is limited because of low interest-rates (although it’s still expected to provide generous liquidity in the even of another shock); (b) more active financial regulation, which still may not be able to keep up with the quickly changing and complex structure of the financial sector and actually prevent financial risks; thus (c) fiscal policy should once again be important, both because of the limits on monetary policy and financial regulation and because, with low interest-rates, government debt is less significant.

No, you’re not mistaken, it sounds a lot like a mainstream version of Keynesian macroeconomic policy, which is consistent with the subtitle of the Blanchard and Summers paper: “Back to the Future.”

That’s it? That’s all we’ve learned in the last ten years? Not a word in their paper about the international dimensions of macroeconomics—nothing about international contagion (e.g., the fact that the crisis started in the United States and then engulfed the rest of the world) or cross-border capital flows. And, perhaps even more important, there’s no discussion of inequality and the role it played both in creating the conditions for the crisis or the way it has characterized the nature of the recovery.*

There’s no reform being proposed here, let alone a revolution. It’s just business as usual, which is exactly the way the recovery itself has been treated.

In the end, Blanchard, Summers, and the other participants in the conference are the macroeconomists who developed the current models and policies. Thus, for all they might venture some mild criticisms of the pre-crisis orthodoxy and call for some new ideas, they are so invested in the status quo, no one should expect a truly radical rethinking from them.

To expect otherwise is just laughable.

 

*Yes, there was one paper in the conference on inequality, by Jason Furman, but it was about growth, not macroeconomic policy. The theme of inequality was not taken up in the rest of the conference—and it was even ridiculed (e.g., in terms of the research currently being conducted in the IMF) by Summers in the final session.

 

political-22

To judge by Christopher Snyder’s attempt to defend contemporary economists, the answer is clear: nothing!

Yes, Snyder is right, economists have expanded their domain, to analyze such issues as art auctions and corruption. But then he goes off the rails.

That’s because the only kind of economics Snyder appears to know about and give credence to is mainstream economics—in terms of what he argues are the “core concepts” that underlie what he presumes to be all economists’ thinking.

What are those core concepts, around which all of us supposedly organize our theories and models?

For starters, Snyder thinks the most important one is “scarcity”:

Devoting resources to one project—say, preventing diabetes—means some other worthy project—curing cancer—goes unserved. So, in determining whether a choice should be undertaken, one of the functions of economics is to argue that its benefits should not be considered in isolation but weighed against its costs. Costs put a dollar value on what has to be given up when one choice is made over another.

But he never even considers the possibility that scarcity is institutionally created, not a given. And different economies are characterized by different kinds of scarcities, which are endogenously produced and reproduced. Thus, capitalism both creates and is characterized different scarcities from other economic systems, such as slavery and feudalism. Where is that in Snyder’s definition of what economists do and the core concepts they supposedly hold.

And then there’s “value,” which for Snyder “is the result of the interaction of several impersonal market forces,” illustrated in the usual fashion:

Figure-2-Snyder-768x671

But there’s no mention of long-run “natural” prices (of the sort classical economists such as David Ricardo or, more recently, Piero Sraffa focused on) or a class theory of value (emphasizing surplus labor, which Karl Marx developed in his critique of political economy)—or any one of a large number of other ways value can be, has been, and is being analyzed within economics.

Finally, Snyder, discusses “modern empirical research” and the attempt to uncover “true causal relationships rather than overinterpreting apparent correlations as causation.”

Uncovering causal relationships is difficult in economics. Opportunities to run experiments are limited by the expense and ethics involved in controlled interventions in markets (although these opportunities are growing, owing to an explosion of interest in laboratory and field experiments).

Once again, Snyder overlooks the many alternative approaches—concerning both “facts” and “causation”—within economics.

Sure, mainstream economists might claim they’ve finally solved the problem of “causal identification” (as they’ve claimed so many other times in the past). But they still fail to acknowledge the possibility that different economic theories produce different sets of facts. Nor do they consider the idea that economists actually use different notions of causation: some limit themselves to essentialist, one-way causation (from given causes to effects), while others, criticize essentialism and look at mutual effectivity (in which everything is seen to be both cause and effect).

The existence of different notions of scarcity, value, and causation within economics doesn’t prove that mainstream economists are wrong. It merely shows that reducing economics to a set of core concepts that pertain only to what mainstream economists do is wrong.

The problem, of course, is that’s the only set of concepts to which generations of students, who have been taught by mainstream economists, have been exposed. And Snyder just continues that tradition.

In the end, mainstream economists are good for nothing precisely because they exclude all other ways of thinking about and doing economics.

71V2NiQ6A9L

Yesterday, in a comment on my “Culture Beyond Capitalism,” which was reposted on the Real-World Economics Review blog, “Econoclast” requested I post the entry on “Capitalism” I wrote for Keywords for American Cultural Studies.

Here, then, is the text of the pre-publication version of that entry.

Capitalism

David F. Ruccio

While the capitalist system is generally celebrated by mainstream economists, American cultural studies scholars will search in vain through their writings for actual discussions of the term “capitalism.” Instead, neoclassical and Keynesian economists refer to the “market economy” (in which individuals and private firms make decisions in decentralized markets) or just “the economy” (defined by scarce means and unlimited desires, the correct balancing of which is said to characterize all societies) (Stiglitz and Walsh 2002; Bhagwati 2003; Krugman and Wells 2004; Samuelson and Nordhaus 2004).

In contrast, discussions of the term capitalism have long occupied a central position in the vocabulary of Marxian economic theory. References to capitalism in American studies and cultural studies draw, implicitly or explicitly, on the Marxian critique of political economy: a critique of capitalism as an economic and social system, and a critique of mainstream economic theory. Karl Marx and latter-day Marxists criticize capitalism because it is based on exploitation, in the sense that capitalists appropriate and decide how to distribute the surplus labor performed by the direct producers, and because it periodically enters into crisis, imposing tremendous costs on the majority of people. They also criticize the work of mainstream economists for celebrating the existence of capitalism and for treating capitalist institutions and behaviors as corresponding to human nature (Mandel 1976; Resnick and Wolff 1987; Harvey 1989).

Much of this scholarship draws on Marx and Frederick Engels’s critique of political economy in the Manifesto of the Communist Party (1848) and the three volumes of Capital (1867, 1884, 1894). In the Manifesto, Marx and Engels compare capitalism to other forms of economic and social organization such as feudalism and slavery. What they have in common is that all are based on class exploitation, defined as one group (feudal lords, slaveowners, and capitalists) appropriating the surplus labor of another (serfs, slaves, and wage-laborers). At the same time, capitalism exhibits a distinct dynamic. For the first time in history, it “established the world market,” making it possible for the capitalist class to “nestle everywhere, settle everywhere, establish connexions everywhere” and giving “a cosmopolitan character to production and consumption in every country” (1848, 486, 487). It leads to radical and continuous changes throughout the economy and society, since, as Marx famously put it, “all that is solid melts into air” (487).

If the goal of the Manifesto was to challenge the prevailing belief that capitalism had eliminated classes and class struggles, the point of Capital was to analyze the specific conditions and consequences of the class dimensions of a society in which the capitalist mode of production prevails. Capitalism presumes that the products of labor have become commodities, in the sense that the goods and services human beings produce have both a use-value (they satisfy some social need) and an exchange-value (they can be exchanged for other commodities or money). The existence of commodity exchange, in turn, presupposes a culture congruent with the “fetishism of commodities”: a culture whereby individuals come to believe and act such that they have the freedom to buy and sell commodities; that the commodities they exchange are equal in value and that the commodity owners meet one another as equals in the marketplace; that individuals have well-defined property rights in the commodities they sell and purchase; and that they are able to calculate the ability of external objects to satisfy their needs and desires. The existence of commodity exchange is not based on the essential and universal human rationality assumed within mainstream economics from Adam Smith to the present. Nor can the cultures and identities of commodity-exchanging individuals be derived solely from economic activities and institutions. Rather, commodity exchange both presumes and constitutes particular subjectivities – forms of rationality and calculation – on the part of economic agents (Amariglio and Callari 1993).

In both the Manifesto and Capital, capitalism refers to a system in which capitalists are able to produce commodities that will, at least in principle, yield them a profit. The source of the profit is the value created by the laborers who have been forced (historically, through a process Marx referred to as “primitive accumulation,” and, socially, through capitalist institutions and cultures [1867, 871–940]) to exercise the specifically capitalist “freedom” to sell their ability to labor as a commodity. Under the assumption that all commodities (including labor power) are exchanged at their values, a surplus-value arises based on the ability of capitalists to appropriate the surplus labor performed by the wage-laborers and to realize that extra labor by selling the commodities that are produced. Struggles consequently arise over the “rate of exploitation” (the ratio of surplus-value to the value of labor power labor) and over the subsequent distributions of surplus-value (to managers, state officials, and other capitalists, who receive portions of the surplus). The keyword “capitalism” thus designates not just an economic structure, but also the conflicts, contradictions, and subjectivities inherent in that structure. Both the initial emergence and the subsequent reproduction of capitalism, if and when they occur, often lead to social dislocations and acute crises; they are also conditioned by the most varied cultures and social identities.

In the case of the United States, the last two centuries have witnessed the widening and deepening of capitalism, both domestically and internationally. Initially a market for foreign (especially British) capitalist commodities, the original thirteen colonies oversaw the establishment and growth of domestic capitalist enterprises, which sought both raw materials and markets for final goods within expanding geographical boundaries and across a heterogeneous class landscape. One result was that noncapitalist – communal, independent, slave, and feudal — producers were eventually undermined or displaced, thereby causing waves of rural peoples – men, women, and children of diverse racial and ethnic origins – to migrate to existing and newly established cities and to sell their labor power to industrial capitalists. The opening up of new domestic markets (through the determined efforts of retail merchants, advertisers, and banks), capitalist competition (which drove down the unit costs of production), and government programs (to establish a national currency and regulate trusts and working conditions) spurred further capitalist growth. The continued development of capitalist manufacturing provoked vast international migrations of laborers: initially, from Africa and Western Europe; later, and continuing to this day, from Latin America, Asia, Eastern Europe, and Africa (Dowd 1977; Duboff 1989; Amott and Matthaei 1996).

The movement of capital that accompanied the expansion of markets and the search for cheaper raw materials transformed regions outside the industrialized Northeast, including the relocation of textile mills to the South, the creation of foundries and automobile factories in the Midwest, the development of the oil industry in the Southwest, and the flourishing of capitalist agriculture and the movie industry on the West Coast. Capital was also exported to other countries to take advantage of lower wage levels and other cost advantages, thereby introducing economic and social dislocations similar to those that had occurred inside the United States. In both cases, governments, business groups, and social movements (such as trade unions, civil rights organizations, and political parties) struggled over the economic and social conditions and consequences of the new industrial capitalist investments – the boom and bust cycles of domestic economic growth; large-scale movements of populations; the formation of new social identities; and imperial interventions. The uneven development of capitalism at home and abroad has left its mark on the culture of the United States (Kaplan and Pease 1993; Jacobson 2000).

Recently, as during the Great Depression of the 1930s and many other times throughout its history, U.S. capitalism recently entered into an economic and cultural crisis. The conditions leading up to the current crisis have put new issues on the agenda of American and cultural studies – the exponential growth of inequality (Collins et al. 2008), the role of economists in creating the crisis (Grossberg 2010), the increasing importance of the financial sector (Martin 2010), the continued racialization of the housing market through subprime lending practices (Lipsitz 2011), and the heightened role of communication technologies and culture in processes of capital accumulation (Fuchs et al. 2010). The severity of the crisis has cast doubt on the legitimacy of neoliberalism and of capitalism itself (Clarke 2010).

In the analysis of this nexus of capitalism and U.S. culture, we face three major challenges that in turn open up new paths of investigation for American and cultural studies. The first concerns globalization. It is often assumed that the internationalization of the U.S. economy and society is a radically new phenomenon, something that burst on the scene in the 1980s. However, when measured in terms of movements of people (migration), goods and services (imports and exports), and money (capital inflows and outflows), the globalization of capitalism achieved, beginning in the 1980s, levels that are quite similar to those experienced almost a century earlier (Ruccio 2003). Because of these similarities and others (particularly the rise in the rate of exploitation and, with it, the increasingly unequal distribution of income and wealth), it is a mistake to describe contemporary developments as unprecedented (Phillips 2002). This is not to say that the forms of capitalist development during the two periods are the same. One of the challenges for students of American culture is to register these differences—such as the outsourcing of jobs, the growth of Wal-Mart, the spread of financial markets, the conduct of wars to protect petroleum supplies, the emergence of new media and communication technologies—without losing sight of the past.

The second challenge is to avoid treating capitalism as a purely economic system, separate from culture. The influence of capitalism on the culture industry— including the rise of a capitalist film industry and the export of U.S. culture (Miller et al. 2001; Wayne 2003)—has been widely studied and debated. What is less clear is that the capitalist economy is “saturated” by cultural meanings and identities. From this perspective, each moment of capitalism, from the existence of commodity exchange to the export of capital, is simultaneously economic and cultural. The point is not to substitute cultural studies for political economy, but to recognize—and analyze, concretely and historically—the cultural conditions of capitalism. Money, commodities, labor power, surplus-value, profits: all of these economic forms require the performance of specific, historically and socially constructed, meanings and identities. It is also important to understand the role of economic thought in influencing the development of U.S. capitalism and U.S. culture generally. These topics remain open, though a fruitful place to begin is by understanding the role that “languages of class” play in creating new class identities (Gibson-Graham et al. 2001), the complex interplay of capitalist and noncapitalist economic imaginaries (Watkins 1998), and the need to rethink the economy and economic knowledge (Grossberg 2010a).

The third potential stumbling block is the treatment of capitalism as an all-encompassing, unitary system that has colonized every social arena and region of the globe. While capitalism certainly represents a powerful project for making and remaking the world, deploying the concept of capitalism as a complete mapping of the economic and social landscape has the effect of obscuring noncapitalist forms of economic organization and cultural sense-making. “Capitalocentrism” (akin to the role played by “phallocentrism” and “logocentrism” with respect to gender and language) hides from view the diverse ways in which people in the United States and elsewhere participate in individual and collective noncapitalist economies— including barter, communal production, gift-making, and solidarity—that fall outside the practices and presumed logic of capitalism (Gibson-Graham 1996; Ruccio and Gibson-Graham 2001). On this view, U.S. culture is heterogeneous and contradictory with respect to different class structures. It contains elements that foster and reproduce capitalism and, at the same time, its noncapitalist others.

References

Amariglio, J. and A. Callari. 1993. “Marxian Value Theory and the Problem of the Subject: The Role of Commodity Fetishism.” In Fetishism as Cultural Discourse, ed. E. Apter and W. Pietz, 186-216. Ithaca: Cornell University Press.

Amott, Teresa and Julie Matthaei. 1996. Race, Gender and Work: A Multi- Cultural Economic History of Women in the United States. Rev. ed. Boston: South End Press.

Bhagwati, Jagdish. 2003. Free Trade Today. Princeton, NJ: Princeton University Press.

Clarke, J. “After Neo-Liberalism.” Cultural Studies 24 (3): 375-94.

Collins, J.; M. di Leonardis; and B. Williams, eds. 2008. New Landscapes of Inequality. Santa Fe, NM: School of Advanced Research Press.

Dowd, Douglas Fitzgerald. 1977. The Twisted Dream: Capitalist Development in the United States since 1776. 2d ed. Cambridge, MA: Winthrop Publishers.

Duboff, Richard B. 1989. Accumulation and Power: An Economic History of the United States. Armonk, NY: M.E. Sharpe.

Fuchs, C.; M. Schafranek; D. Hakken; and M. Breen. 2010. Special issue on “Capitalist crisis, communication & culture.” tripleC (cognition, communication, co-operation): Open Access Journal for a Global Sustainable Information Society 8 (2): 193-309.

Gibson-Graham, J. K. 1996. The End of Capitalism (As We Knew It): A Feminist Critique of Political Economy. Cambridge, MA: Blackwell.

Gibson-Graham, J. K.; Stephen Resnick; and Richard Wolff, eds. 2000. Class and Its Others. Minneapolis: University of Minnesota Press.

Grossberg, Lawrence. 1998. “Cultural Studies vs. Political Economy: Is Anybody Else Bored with this Debate?” In Cultural Theory and Popular Culture: A Reader, ed. John Storey, 613-24. Athens: University of Georgia Press.

 Grossberg, L. 2010a. Cultural Studies in the Future Tense. Durham, NC: Duke University Press.

———. 2010b. “Standing on a Bridge: Rescuing Economies From Economists.” Journal of Communication Inquiry 34 (4): 316-36.

Harvey, David. 1989. The Condition of Postmodernity: An Enquiry into the Origins of Cultural Change. Cambridge, MA: Blackwell.

Jacobson, Matthew Frye. 2000. Barbarian Virtues: The United States Encounters Foreign Peoples at Home and Abroad, 1876-1917. New York: Hill and Wang.

Krugman, Paul and Robin Wells. 2004. Microeconomics. New York: Worth Publishers.

Lipsitz, G. 2011. How Racism Takes Place. Philadelphia: Temple University Press.

Mandel, Ernest. 1976. Late Capitalism. Rev. ed. New York: Schocken Books.

Martin, R. 2010. “The Good, the Bad, and the Ugly.” Cultural Studies 24 (3): 418-30.

Marx, Karl. 1867-94 (1976-81). Capital: A Critique of Political Economy. 3 vols. Trans. Ben Fowkes and David Fernbach. New York: Vintage Books.

Marx, Karl and Friedrich Engels. 1848 (1976). “Manifesto of the Communist Party.” In Collected Works, vol. 6, 477-519. New York: International Publishers.

Miller, T. et al. 2001. Global Hollywood. London: British Film Institute.

Phillips, Kevin. 2002. Wealth and Democracy: A Political History of the American Rich. New York: Broadway Books.

Resnick, S. A. and R. D. Wolff. 1987. Knowledge and Class: A Marxian Critique of Political Economy. Chicago; University of Chicago Press.

Ruccio, David F. 2003. “Globalization and Imperialism,” Rethinking Marxism 15 (January): 75-94.

Ruccio, David F. and J. K. Gibson-Graham. 2001. “‘After’ Development: Reimagining Economy and Class.” In Re/presenting Class: Essays in Postmodern Political Economy, ed. J.-K. Gibson-Graham et al., 158-81. Durham: Duke University Press.

Samuelson, Paul A. and William D. Nordhaus. 2004. Economics. 18th ed. New York: McGraw-Hill/Irwin.

Stiglitz, Joseph E. and Carl E. Walsh. 2002. Economics. 3d ed. New York: W. W. Norton & Company.

Watkins, Evan. 1998. Everyday Exchanges: Marketwork and Capitalist Common Sense. Stanford: Stanford University Press.

Wayne, Michael. 2003. “Post-Fordism, Monopoly Capitalism, and Hollywood’s Media Industrial Complex.” International Journal of Cultural Studies 6 (1): 82-103.

Wright, Handel Kashope. 2001. “Larry Grossberg on the Status Quo of Cultural Studies: An Interview.” Cultural Values 5 (April): 133-62.

 

 

global

There is perhaps no more cherished an idea within mainstream economics than that everyone benefits from free trade and, more generally, globalization. They represent the solution to the problem of scarcity for the world as a whole, much as free markets are celebrated as the best way of allocating scarce resources within nations. And any exceptions to free markets, whether national or international, need to be criticized and opposed at every turn.

That celebration of capitalist globalization, as Nikil Saval explains, has been the common sense that mainstream economists, both liberal and conservative, have adhered to and disseminated, in their research, teaching, and policy advice, for many decades.

Today, of course, that common sense has been challenged—during the Second Great Depression, in the Brexit vote, during the course of the electoral campaigns of Bernie Sanders and Donald Trump—and economic elites, establishment politicians, and mainstream economists have been quick to issue dire warnings about the perils of disrupting the forces of globalization.

I have my own criticisms of Saval’s discussion of the rise and fall of the idea of globalization, especially his complete overlooking of the long tradition of globalization critics, especially on the Left, who have emphasized the dirty, violent, unequalizing underside of colonialism, neocolonialism, and imperialism.*

However, as a survey of the role of globalization within mainstream economics, Saval’s essay is well worth a careful read.

In particular, Saval points out that, in the heyday of the globalization consensus, Dani Rodrick was one of the few mainstream economists who had the temerity to question its merits in public.

And who was one of the leading defenders of the idea that globalization had to be celebrated and it critics treated with derision? None other than Paul Krugman.

Paul Krugman, who would win the Nobel prize in 2008 for his earlier work in trade theory and economic geography, privately warned Rodrik that his work would give “ammunition to the barbarians”.

It was a tacit acknowledgment that pro-globalisation economists, journalists and politicians had come under growing pressure from a new movement on the left, who were raising concerns very similar to Rodrik’s. Over the course of the 1990s, an unwieldy international coalition had begun to contest the notion that globalisation was good. Called “anti-globalisation” by the media, and the “alter-globalisation” or “global justice” movement by its participants, it tried to draw attention to the devastating effect that free trade policies were having, especially in the developing world, where globalisation was supposed to be having its most beneficial effect. This was a time when figures such as the New York Times columnist Thomas Friedman had given the topic a glitzy prominence by documenting his time among what he gratingly called “globalutionaries”: chatting amiably with the CEO of Monsanto one day, gawking at lingerie manufacturers in Sri Lanka the next. Activists were intent on showing a much darker picture, revealing how the record of globalisation consisted mostly of farmers pushed off their land and the rampant proliferation of sweatshops. They also implicated the highest world bodies in their critique: the G7, World Bank and IMF. In 1999, the movement reached a high point when a unique coalition of trade unions and environmentalists managed to shut down the meeting of the World Trade Organization in Seattle.

In a state of panic, economists responded with a flood of columns and books that defended the necessity of a more open global market economy, in tones ranging from grandiose to sarcastic. In January 2000, Krugman used his first piece as a New York Times columnist to denounce the “trashing” of the WTO, calling it “a sad irony that the cause that has finally awakened the long-dormant American left is that of – yes! – denying opportunity to third-world workers”.

The irony is that Krugman won the Nobel Prize in Economics in recognition of his research and publications that called into question the neoclassical idea that countries engaged in and benefited from international trade based on given—exogenous—resource endowments and technologies. Instead, Krugman argued, those endowments and technologies were created historically and could be changed by government policies, including histories and policies that run counter to free trade and globalization.

Krugman was thus the one who gave theoretical “ammunition to the barbarians.” But that was the key: he considered the critics of globalization—the alter-globalization activists, heterodox economists, and many others—”barbarians.” For Krugman, they were and should remain outside the gates because, in his view, they were not trained in or respectful of the protocols of mainstream economics. The “barbarians” could not be trusted to understand or adhere to the ways mainstream economists like Krugman analyzed the exceptions to the common sense of globalization. They might get out of control and develop other arguments and economic institutions.

But then the winds began to shift.

In the wake of the financial crisis, the cracks began to show in the consensus on globalisation, to the point that, today, there may no longer be a consensus. Economists who were once ardent proponents of globalisation have become some of its most prominent critics. Erstwhile supporters now concede, at least in part, that it has produced inequality, unemployment and downward pressure on wages. Nuances and criticisms that economists only used to raise in private seminars are finally coming out in the open.

A few months before the financial crisis hit, Krugman was already confessing to a “guilty conscience”. In the 1990s, he had been very influential in arguing that global trade with poor countries had only a small effect on workers’ wages in rich countries. By 2008, he was having doubts: the data seemed to suggest that the effect was much larger than he had suspected.

And yet, as Saval points out, mainstream economists’ recognition of the unequalizing effects of capitalist globalization has come too late: “much of the damage done by globalisation—economic and political—is irreversible.”

The damage is, of course, only irreversible within the existing economic institutions. Imagining and enacting a radically different way of organizing the economy would undo that damage and benefit those who have been forced to have the freedom to submit to the forces of capitalist globalization.

But Rodrik and Krugman—and mainstream economists generally—don’t seem to be interested in participating in that project, which would give the “barbarians” a say in creating a different kind of globalization, beyond capitalism.

 

*Back in 2000—and in a series of articles, book chapters, and blog posts since then—I have attempted to rethink the relationship between capitalist globalization and imperialism. Marxist economist Prabhat Patnaik has also made the case for the continuing relevance of imperialism as an analytical construct for understanding and challenging effectively the logic and dynamics of contemporary capitalism.

Capitalism 2cx col

Special mention

download 636355006687958723-071217detroit-donald-trump-jr-defense