by Michael Roberts
Capitalism’s crisis deepens by Richard D Wolff, Haymarket Books $18.95
The New York Times magazine has described Richard Wolff as “probably America’s most prominent Marxist economist”.
And that is probably not an exaggeration in the description of this
emeritus Professor of Economics at the University of Massachusetts,
Amherst and visiting professor at the New School University in New York.
Richard Wolff has been one of a handful of Marxist economists with full tenure at an American university. And he has worked tirelessly to bring home to students and all who would listen in the US the
Marxist alternative explanation of the nature of US capitalism and its
current crisis. Wolff has written several important economics books,
sometimes with his close collaborator, Stephen A. Resnick. In
particular, their recent book, Contending Economic Theories, neoclassical, Keynesian and Marxian is a very useful and clear explanation of the main strands of economics for those who don’t know.
His new book, however,
is a compilation of his short articles and essays that he has written
since the end of the Great Recession in 2010. In many ways, it mirrors
the approach that I adopted in my book, The Great Recession (Lulu 2009),
which also was a series of essays and articles in chronological order
covering the lead-up to the Great Recession and its immediate aftermath.
Wolff’s book is not chronological as such, as he breaks down his
essays into themes about the current crisis: the first section looks the
depth of the crisis and the responses of economists and politicians;
the second part considers the specific issues of austerity, bank failure
and debt; the third looks at the failure of government monetary and
fiscal policy; and the final part looks at the socialist alternatives.
In the first section, Wolff outlines how mainstream economics has
been dominated by and divided between neoclassical and Keynesian
theories, while Marxist economic theory has been excluded and ignored.
And yet it is Marxian economics that best explains “capitalism’s repeated crises over the last century”
(p7). However, it is here that Wolff’s own view of the Marxist
explanation of recurrent crises under capitalism appears – and it is
very much the old ‘underconsumptionist’ thesis with extras added on
about excessive household debt that many (indeed most) left Keynesians
and Marxists have adopted as the explanation of the Great Recession.
According to Wolff, it was the end of rising wages in the neo-liberal
period from the early 1980s and rising household debt to compensate for
that which eventually led to the great slump as “mass worker exhaustion, stress and debt drove the system to collapse” (p14). Indeed, Wolff sums up five main reasons for the “persistence of the crisis”
(what I call the Long Depression after the end of the Great Recession) –
p31-34. They are: the exhausted purchasing power of the working class;
overcapacity and too much cash “without profitably productive outlets”; renewed speculation and debt; unending corruption; and no firm political and economic alternatives.
Now readers of my blog and my papers know that I do not agree that
the Great Recession, and for that matter, previous capitalist slumps,
were due to the lack of workers purchasing power or even just an
excessive credit/debt bubble that burst. For one of the earliest and
best denials that underconsumption is Marxian economic theory, see this
article by John Weeks back in 1982 (http://marx2mao.com/PDFs/JW82.pdf).
For Wolff, the “classic contradiction” of capitalism is that capitalists “paid insufficient wages to enable workers to purchase growing capitalist output”
(p166). But the main contradiction, in my view, lies not in
‘insufficient wages’ but in Marx’s law of the tendency of the rate of
profit to fall. This tendency can for periods (sometimes long) be
counteracted by more exploitation and new technology, but it eventually
operates to drive down profitability and total profits, leading to a
collapse in investment and then incomes and employment.
This explanation is entirely missing in Wolff’s book. Wolff’s five reasons for the Long Depression are true only because they describe the nature of the current low-growth world, but the explanation lies
with continued low profitability (near post-war lows), a failure to
reduce debt levels and the failure of business investment to recover as a
result. It’s not too much cash and capacity but too little profit.
Wolff does take up the “truth about profits” p81, but only to tell us that “profits have risen dramatically over the last 30 years”. This is true if measured against GDP, as many do. But
this really only measures profit margins (profits per unit of output)
not profitability in the Marxist sense, as profits over the stock of
capital and labour employed.
On that measure, profitability has
risen somewhat since the 1980s, only to start to decline again from the
end of 1990s and is now below levels achieved 20 years ago in most major
capitalist economies. And now even profit margins are falling. By the
way, Wolff’s book concentrates almost totally on the US capitalist
In later sections, Wolff clearly exposes the failure of mainstream
economic policies designed to restore the fortunes of US capitalism:
whether it is ‘austerity’ policies; bailing out the banks; easy money
etc. So what is the alternative? Wolff dismisses the prescriptions of
the Keynesians like Paul Krugman or Robert Reich, pointing out correctly
that the New Deal and deficit spending never “overcame the 1930s depression (World War 2 did)” p167.
A key problem with Wolff’s underconsumption theory is that it implies
that if wages are made ‘sufficient’, then purchasing power returns and
capitalist companies can sell and all is well. This is the economic and
political implication of the underconsumption theory: that capitalism
can deliver as long as the distribution of profits and wages is pitched
right as presumably it was in the Golden Age of the 1960s.
Wolff rightly does not draw that conclusion that flows from his
analysis. Instead, for him, the solution to recurrent crises and rising
inequality lies in “changing the class structure of capitalist enterprises” and replacing them with “workers-directed enterprises.”
Wolff is concerned , rightly, to correct the view that the socialist
alternative to capitalism is simply the public ownership of the major
corporations and a national plan (p312-3). Without democracy and
workers control at company level there can be no real socialist
development. Otherwise state officials merely replace a capitalist
board of directors. This is “insufficient conceptually and strategically” (p316).
Wolff wants to include and emphasise the role of what he calls
Workers Self-Directed Enterprises (WSDEs). I think that Wolff still
sees the necessity of a national plan based on collective ownership of
the major sectors of the economy, finance, industry and key services, to
be combined with WSDEs. I hope so because the socialist alternative
cannot just be the latter any more than it can be just the former.
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