By Michael Roberts
I attended the 10th annual Historical Materialism London
conference at the weekend. This gathering of Marxist and radical
academics generates hundreds of papers on a range of subjects to do with
economics, philosophy, social trends, theoretical and otherwise. I
presented a joint paper written with Guglielmo Carchedi – but more of
that later. This year’s conference had as its theme, The Making of the
World Working Class, and certainly the emphasis of many papers was on
the global aspects of capitalism.
Every year, there is a Deutscher Prize lecture by the author of the
previous year’s winner of the best radical or Marxist book of the year.
Last year, this was won by David McNally for his book Monsters of the Market (see my post, http://thenextrecession.wordpress.com/2012/11/12/monsters-delusions-of-debt-and-the-crisis/). David McNally called his lecture “The
Blood of the Commonwealth: War, the State and the Making of World
Money”, and by many accounts, it was a tour de force, filling in gaps in
the Marxist theoretical and historical account of the interrelationship between state and capital in a global system.
So it was no surprise that this year’s winner of the best book was The making of global capitalism: the political economy of the American Empire by Leo Panitch and Sam Gindin (http://www.versobooks.com/books/1527-the-making-of-global-capitalism).
Gindin is the former Research Director of the Canadian Autoworkers
Union and Packer Visiting Chair in Social Justice at York University
and Panitch is Canada Research Chair in Comparative Political Economy
and Distinguished Research Professor of Political Science at York
University. The two have worked together on many books and publications.
Panitch and Gindin argue that market economies have never existed
independent of nation states. The state was necessary for the genesis of
capitalism and the state was, and still is, necessary for its
historical development and continuous reproduction. The book’s primary
aim is to challenge the widespread notion that globalisation has led to
the retreat of the state. As Marx wrote, capitalism has the capacity to
“nestle everywhere and settle everywhere”. But there is nothing
inevitable in the development and expansion of the system. Through the
New Deal and the Bretton Woods framework, the American model was applied
to the remaking of capitalist states after the Second World War, with
the US dollar becoming the central currency for reconstruction. It was
in that period that the American state took responsibility for creating
the political and juridical conditions for the general extension and
reproduction of capitalism internationally. But they reckon that America
did not dictate or impose its will on other states; rather “it has set the parameters within which the others determined their course of action”.
The argument that states still have a role in directing global
capitalism is obviously right. America is still the leading imperialist
power and leads the other imperialist powers in an ‘informal empire’.
But in addition, Panitch and Gindin maintain that workers are generally
weaker now and the American state and global “informal American empire,”
has greatly strengthened since the post-1973-83 crisis. But I am not
sure that American imperialism is actually stronger now than 50 years
ago. Also, the idea that the neoliberal period was also a Golden Age
like the post-war period is wrong, if we mean by that fast growth in
GDP, high profitability and productive investment. Sure, growth in the
1980s and 1990s was faster than in the crisis period of the late 1960s
and 1970s, but it was still slower than in the first Golden Age and
investment was way less productive (the evidence for this can be found
in my book, The Great Recession). Just because in the
neoliberal period the finance sector had a bonanza and thus so did
American imperialism does not mean it was a golden age, I think.
Another area where I have a strong disagreement is with Panitch and
Gindin’s theory of capitalist crisis as expounded in the book. It is
crucial to their thesis that each crisis is unique depending upon the
particular relationships and alliances forged between workers, business,
finance, and the state. There have been four major historical global
crises, the Long Depression in the 1870s onwards, the Great Depression
of the 1930s, the Great Recession of 1970s, and what they call the Great
Financial Crisis of 2007-09. For them, each has a different cause.
This is an argument that was echoed by many at this year’s conference
(more on that later). As Panitch and Gindin put it in the book: “Going
back to the theories of imperialism a century earlier, that
overaccumulation is the source of all capitalist crises, the crisis that
erupted in 2007 was not caused by a profit squeeze or collapse in
investment due to overaccumulation. In the US in particular, profits
and investment has recovered since the early 1980s… Indeed investment
was growing significantly in the two years before the onset of the
crisis, profits were at a peak and capacity utilisation in industry had
just moved above the historic average… it was only after the financial
meltdown in 2007-8 that profits and investment declined.” Instead,
the authors prefer to explain the Great Recession as a result of
stagnating wages, rising mortgage debt and then collapsing housing
prices, causing “a dramatic fall in consumer spending”.
But this account of the years before the credit crunch of 2007 and
the Great Recession of 2008-9 just does not correspond with the facts.
As G Carchedi and I show in the paper we presented to the conference (The long roots of the present crisis),
US corporate profits were falling some two years before the recession
began and investment dropped as a result before GDP contracted. And in
the recovery, again it was profits that led investment and GDP up.
Indeed, consumption as a share of GDP had never been higher in 2007.
And the subsequent fall in consumption was much milder and later than
the huge collapse in investment – so a lack of consumption could hardly
be the major cause of the crisis.
The argument that the cause of the global financial collapse of
2007-8 and the Great Recession of 2008-9 was really just a financial
collapse and nothing to do with profitability of capital is also a
conclusion of another new book, Profiting without producing; how finance exploits us all,
by Costas Lapavitsas. Lapavitsas presented his book at an HM session
just before Carchedi’s and mine. The book’s key point is that
capitalism has been transformed in the neo-liberal period with the
emergence of a financial sector that bears no relation to what Marx
experienced in the 19th century. It now gets profit not from interest
on lending to corporations but through the exploitation of workers
through mortgages and this a huge innovation. Mortgage debt can be
flipped on and capital gains can be made again and again. So the
financial sector can make huge profits without any connection with the
So “Anglo-Saxon Marxists” who are obsessed with the rate of profit
and production crises are missing the trick. The Great Recession was
not preceded by a fall in the rate of profit, but by a financial crisis
in mortgages and securitised debt. And Lapavitsas is ambiguous about
whether this profit comes from a deduction from wages or reduced
variable capital (although what is new about that – are not taxes a
deduction from wages or surplus value?) or from surplus value (i.e. the
profits of other capitalists) or is in some way additional
to surplus value created in the productive sectors (in which case, in
Marxist theory, is it not just fictitious?). But wherever it comes
from, it is a new form of profit and so it makes its own crises,
according to Lapavitsas.
In this sense, I think Lapavitsas takes the same position as those
bourgeois theorists who see the Great Recession as a result of a banking
crisis or panic induced by excessive credit, financial speculation and a
lack of regulation (see my previous post, http://thenextrecession.wordpress.com/2013/11/11/why-the-crisis-and-will-there-be-another-imf-speaks).
The policy conclusion could also be similar to the bourgeois, namely
that more regulation or the end of speculative banking might solve these
crises. Indeed, the subtitle of the book suggests this when it says
that finance ‘exploits us all’ (the productive capitalists
too?). Lapavitsas, being a good socialist, no doubt would deny this and
say his conception has revolutionary implications and anyway he is not
denying the contradictions in the production sectors either. But his
theory of ‘financialisation’ does seem to suggest that the crisis is all
the fault of greedy bankers directly exploiting the workers rather than
due to the contradictions within the whole capitalist mode of
Indeed, all these theories that there has been a structural change in
the nature of modern capitalism through ‘financialisation’ seem to lead
towards a view that the cause of crises is centred in finance and not
in capitalism at large – this is something that a paper by Juan Pablo
Mateo Tome has shown (Financialization_theory_of_crisis_JPMT_PERI). And it is the point made by Maria Ivanova in a recent paper (she also presented at this year’s HM conference, CONF_2011_Maria_Ivanova MARX and MINSKY).
It seems to me that this new form of financial profit that Lapavitsas
analyses is not new at all. Either it is a deduction from the surplus
value created by the productive sector of capital (interest-bearing
debt) or from workers wages (mortgage debt interest), or it is
fictitious profit from an extension of credit (selling on
mortgage-backed securities), which eventually must be brought into line
with real values through crisis. In that sense, it does not change the
nature of capitalist accumulation or exploitation (see Ben Fine’s clear
paper on this issue, Ben Fine, Locating financialisation, HM 18 2010-1).
It would be more fruitful to try and measure just how much of the
rise in profits in the neo-liberal period was actually fictitious and
driven by an expansion of financial instruments, thus hiding the reality
of falling profitability in the productive sector. This is what Tony
Norfield (who also presented at the HM conference) does in his excellent
paper Tony Norfield on derivatives and the crisis.
Also, in a recent paper to the Australian Society of Heterodox
Economists last month, Peter Jones has has tried to identify just how
much profit generated by the financial sector since the mid-1980s is
fictitious. His measures show that when this fictitious profit is
stripped out, the overall profitability in the US has been falling,
especially from about the late 1990s. This would support a ‘monocausal ‘
explanation of the Great Recession of 2008.
Nevertheless, the idea that each major capitalist crisis has had a
different cause and there is no ‘monocausal’ theory of crisis remains
dominant. Riccardo Bellofiore’s contribution on the two Marxist Pauls,
Sweezy and Mattick (senior), was very entertaining as he went into lots
of anecdotal and personal accounts of his readings of and meetings with
Sweezy, Sraffa and others. But his main point was to argue that he had
read the letters exchanged between Sweezy and Mattick and concluded in
his readings of all their stuff that Sweezy was not really an eclectic
multi-causal stagnationist and Mattick was not really a crude
‘monocausal’ breakdown theorist. According to Bellofiore, Mattick was
right about Keynesian policies not really working in the 1970s when the
crisis was one of a ‘profit squeeze’. But, you see, each major crisis
has had a different cause ‘within the Marxist paradigm’: in the 1890s
it was a ‘classic’ crisis of profitability under industrial capitalism;
the Great Depression of the 1930s was a crisis of ‘realisation’; the
crisis of the 1970s was one of profit squeeze and the current one is a
post-Fordist financial credit one. So Mattick was right in the 1970s
and presumably Sweezy is sort of right now.
Instead, we ‘Anglo-Saxon’ Marxist economists remain ‘obsessed’ with
finding the ultimate cause of crises in the production sector and in
trying to find a ‘mono cause’ for the regular re-occurrence of crises.
And that is what we try to do in the paper that Carchedi and I presented
to the HM Conference. Our paper was originally published in the World
Review of Political Economy, Spring 2013 (The Long Roots of the Present Crisis: Keynesians, Austerians and Marx’s Law).
At the conference, I outlined how we reckoned that the US data show a
close connection between the movement in the rate of profit and Marx’s
law of profitability, including its countervailing factors; and also
that the movement in the mass of profits is the driver behind boom and
slump (as Peter Jones also shows).
As a result, what is wrong with Keynesian and Austerian explanations
of crises and their ‘solutions’ is a denial of any role for profit in
what is after all a profit economy where businesses are money-making
machines – and where meeting some people’s needs for goods and services
is merely a necessary, but not sufficient, side-effect. Nowhere does
profit appear in the Keynesian multiplier, which has only investment and
consumption as its drivers. But unless profitability recovers, no
amount of Keynesian fiscal spending or monetary injections will revive
the global economy.
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