Wednesday, September 02, 2009
The approach of governments in response to this has first been to defend the financial sector at all costs - or rather at the cost of a trillion dollars in bailouts and stimulus, and $5 trillion in quantitative easing programmes. This has been branded 'socialism', but it is a staple of neoliberal ideology that the banking system is so central to the system's ability to reproduce itself that the state must spare no means in protecting it. It is no surprise either - the financial sector has been the single biggest source of corporate profits in both the US and UK economies in recent years. In 2006, Wall Street accounted for 40% of all corporate profits in the US economy. Obama has therefore faithfully cleaved to neoliberal doctrine, not just with TARP and its sequels, but by orchestrating a system of lending to the banks that actually results in the additional expropriation of the treasury to the tune of $33bn per year. The result is a massive transfer of wealth from the majority to the major owners of shares and assets.
The left-Keynesian solution to such absurdities is to socialise that spare capacity, use deficit-financing to fund jobs, boost incomes and stimulate demand, and boost the bargaining power of labour so that consumption is supported by reasonable wages rather than debt - all of which would be a good start. However, to the extent that governments have engaged in job creation, income-boosting and stimulus, they have been timid and reverential as regards existing property arrangements. Even moderate moves to cap bonuses are being resisted by the UK government at G20, and they have sternly chastised the FSA head Adair Turner for calling the banks bloated and socially useless, and advocating a Tobin Tax. (Bear in mind that Turner is a former head of the CBI, not a radical reformer). This refusal to socialise assets and make meaningful efforts to redistribute wealth is one reason why employment continues to fall, and why demand remains weak - and this is in turn a large part of the reason for Nouriel Roubini's cheerlessness as regards the 'recovery'. The effects of the stimulus will exhaust themselves by next year at this rate, but private sector demand is unlikely to have recovered by that point.
Another reason for cheerlessness is what David Harvey has called the "capital surplus absorption problem". In the best of times, he has pointed out, the system is always going to come up against limits to its ability to find profitable investment opportunities for trillions of dollars - he pointed out that about $1.5tn of new investments need to be found every year just to maintain the average growth rate of approx. 3%. A healthy growth rate has to be maintained because otherwise capitalism isn't doing what it's supposed to do. It is an inherently expansionist system, and if it isn't expanding that means that capitalists aren't competing for market share, aren't investing, and aren't obeying the basic imperative of capital accumulation: they aren't being capitalists, in other words. Finding such investment opportunities becomes more and more of a daunting prospect, though - notwithstanding the ecological catastrophe that awaits us if we can't find a new paradigm of economic well-being, the fact is that the total sum of new investment required rises each year, and by 2029, the sum needed will be double what it is now. Capital's ability to overcome these limits depends upon usurious capital, or what would now be called finance capital. However, one result of financialisation is a long-term problem of surplus liquidity: this is when the banking system is so loaded with money that it will throw dough at any project that a capitalist can dream up. This is what is usually referred to as 'venture capitalism'. New financial devices of slicing and tranching debts and assets have to be invented. That's called innovation. New bubbles emerge, whether in the dot.conomy or in the housing market. That's called a bull market. This is usually resolved, temporarily, through a financial crash. In 2001, the system lost $7tn in stock market value. Last year, $55tn of asset values were wiped out, which is equivalent to the total GDP for the whole planet - one year's work by several billion people, completely obliterated. (You know that feeling when you build a tower out of playing cards, and just as you add the last storey the whole thing collapses? Well, this is 55 trillion times worse.) By means of such mass destruction, the system reboots itself, but the basic problem of finding profitable avenues for speculation etc. remains.
So, this is the dilemma that capital presents us with. There is spare capacity, there is abundant labour, and there is money ready to enter into circulation as capital. And there are real, pressing social needs that these resources could theoretically be put to work to meet. But there are few profitable investment opportunities in any of that. Furthermore, unless a key source of our current miserable condition is renewed and protected (the financial system) there will not even be enough profit in the system to maintain below-par growth rates. One way out of this is what Harvey has termed 'accumulation by dispossession' (see The New Imperialism, Oxford University Press, 2003, pp 152-169 for detail). This is an elaboration on Marx's account of the 'primitive accumulation of capital', which referred to a violent process of expropriation and enclosure that was necessary to establish capitalist property relations between a new capitalist owning class, and a new propertyless (largely rural) proletariat. Harvey maintains, following Luxemburg, that such a manner of accumulation continues to be central today. Capitalism must always "have something 'outside of itself'", as Harvey says (p 140), in order to stabilise itself. This exterior can take the form of the public sector, the commons, the hitherto uncommodified, wherever it exists.
The enclosure of certain public assets is obviously on the agenda, and a transfer of public wealth is already occurring de facto, as indicated above. Social Security is certainly a prized item for finance capital, and Obama might have more success in delivering that to private capital than in delivering meaningful healthcare reform. However, the real opportunities for such divestment may lie overseas. The lack of domestic investment opportunity is fuels authoritarian imperialism and is arguably what - more than anything else - drove the adventurism and extremism of the Bush era. If US capitalism cannot be successfully reproduced and expanded on the basis of current relations, then a new wave of violent expansionism - perhaps smarter under Obama, but still very brutal - is a realistic scenario.