Was Marx Right?

In the NYT:

For Karl Marx’s birthday last year, his hometown of Trier, Germany, displayed 500 figures by Ottmar Hoerl. Thomas Wieck/Agence France-Presse-Getty Images

In the golden, post-war years of Western economic growth, the comfortable living standard of the working class and the economy’s overall stability made the best case for the value of capitalism and the fraudulence of Marx’s critical view of it. But in more recent years many of the forces that Marx said would lead to capitalism’s demise – the concentration and globalization of wealth, the permanence of unemployment, the lowering of wages – have become real, and troubling, once again.

The fall of communism discredited Marx’s political vision. But, as observers have wondered before, is his view of our economic future being validated?

Here’s the voice of reason in the debate:

• 
  

  A Return to a World Marx Would Have Known

  DOUG HENWOOD, LEFT BUSINESS OBSERVER

  For years, excessive consumer borrowing muted the effects of stagnant wages. But low demand is stifling the economy, with no end in sight.

Does money buy you more power in China or in America?

For anyone that thinks the “People’s [sic] Republic of China” is socialist, check this out from The Economist:

Many Americans grumble about the wealth of their politicians, but they are paupers compared with their Chinese counterparts. The 50 richest members of America’s Congress are worth $1.6 billion in all. In China, the wealthiest 50 delegates to the National People’s Congress, the rubber-stamp parliament, control $94.7 billion. Darrell Issa, a Republican from California, is the richest man in Congress, with $355m. China’s richest delegate is Zong Qinghou, boss of Hangzhou Wahaha Group, a drinks-maker, whose wealth is almost $19 billion (including assets distributed to family). Last year Mr Zong was China’s richest man, but was overtaken by Wang Jianlin, who is not a member of the NPC. Wealth can bring problems wherever you are. On September 20th, a man, angry at being refused a job, attacked Mr Zong with a knife near his home in Hangzhou. Mr Zong survived, with nasty cuts to his hand.

[READ THE REST]

Related articles

Porn queen’s money quote

Jenna Jameson at the Adult Entertainment Expo 2007, with short blonde hair (Photo credit: Wikipedia)

From Jeff Weintraub:

Jenna Jameson cuts to the heart of the matter

Quote of the Day

“When you’re rich, you want a Republican in office.”

— Porn star Jenna Jameson, quoted by CBS News, endorsing Mitt Romney for president at a San Francisco strip club.

Actually, the rich, unlike many other people, have mostly been doing fine during the Obama administration (not least because Obama and the Democrats saved the economy from going over the edge into a full-scale depression). They also did fine, incidenatlly, during the Clinton administration. And even if they wind up paying slightly higher taxes, at Clinton-era rates, they’ll still be doing fine. But that doesn’t prevent them fromwhining that they are being mistreated, and that any failure to accord them total deference (“class warfare”)  is somehow bad, not just for them, but for the public interest. Jenna Jameson, at least, seems to have been straightforward about her reasons for supporting Romney … now that she’s gotten rich herself.

(See the follow-up at The Borowitz Report.)

Jeff Weintraub also passes on some useful links on which economists are worth listening to. The first is from Jonathan Portes. Here’s his money quote:

My shortlist (apologies in advance to those I’ve omitted) of economists commenting on macroeconomic policy who I think qualify is something like the following:

• Krugman, DeLong, and Wren-Lewis on fiscal policy when interest rates are at the zero lower bound;

• Adam Posen on monetary policy when interest rates are at the zero lower bound;

• Paul de Grauwe on sovereign and eurozone debt;

• Martin Wolf on private sector savings and public sector deficits (the financial balance approach);

• Richard Koo on the implications of a “balance sheet recession”

Jeff W follows up here, with Brad DeLong and Mark Thoma. Finally, here is Bruce Bartlett on where the US Federal deficit came from.

Related articles

The Failure of Capitalist Production

This is the opening of an interview with Andrew Kliman, about his new book, The Failure of Capitalist Production. Read the whole thing here.

Duvinrouge: Can you tell me what the key message of your new book, The Failure of Capitalist Production, is?

Andrew Kliman: The Great Recession was waiting to happen. There were unresolved problems in the system of capitalist production that had been building up over a third of a century. The rate of profit fell and never recovered in a sustained manner, which resulted in persistently sluggish investment and economic growth, which in turn resulted in rising debt burdens. And these problems induced governments to solve them or paper them over with policies that made the debt build-up even bigger.

DVR: Your book is full of statistics and as we know interpretations of statistics can be very different. It would appear that your choice of historical cost as opposed to current cost is crucial. Please can you explain the difference?

Accountants can value assets at their current cost or at their original cost when they were acquired. The latter is usually called their “historical cost.” Both methods have their place. But one thing you can’t do is compute the rate of profit, i.e., the rate of return on investment, by dividing profit by the current cost of the capital assets. It’s not wrong to do this; it’s impossible. What you wind up with just isn’t a rate of return on investment. What the assets are currently worth is simply not the same thing as the amount of money that has actually been invested in them. To measure the latter, you have to take their historical cost and subtract depreciation.

DVR: You only look at US data, does this mean you can’t be sure that profit rates have fallen worldwide?

 

AK: Well, research I’ve done on rates of profit of U.S. multinationals’ foreign subsidiaries, only some of which is reported in the book, has led me to conclude that the worldwide rate of profit of all corporations, not just U.S. corporations and their subsidiaries, probably trended downward between the early 1980s and the Great Recession. U.S. subsidiaries’ rates of profit fell in the great majority of the 20 countries in which at least 1% of U.S. foreign investment is located. Also, the fall was very broad-based in terms of industrial composition—it wasn’t the case that subsidiaries’ rates of profit fell because, for instance, the manufacturing sector took an especially hard hit. I also found evidence that globally-operative forces, not only country-specific ones, tended to depress the rate of profit in a large majority of cases. When you put these facts together, it’s not easy to believe that there was something unusual about U.S. subsidiaries and corporations in the U.S. that caused their rates of profit to fall while the worldwide rate of profit was rising.

DVR: Is it your argument that the growth in debt is a consequence of the falling rate of profit?

[continue…]

Related articles

Deglobalisation?

The government surplus/deficit of Portugal, Italy, Ireland, Greece, United Kingdom, Spain (PIIGGS) against the Eurozone 2000-2010. Data from Eurostat. (Photo credit: Wikipedia)

From IWCA:

The current Eurozone crisis is only the spearhead of a wider crisis of globalisation. The neo-liberal economic model which has swept the world over the past thirty years has reached, or is reaching, its limits. Senior capitalist spokespeople are talking of the possibility of ‘deglobalisation’, and the need for a ‘rebalancing’ of the global economy. We are in the early stages of a transition to a post-neo-liberal era. What that era will look like is unknown, but there is no guarantee that it will be progressive. 

Karl Marx is hot

Image by Dunechaser via Flickr

Joe Weisenthal in Business Insider:

With things going the way they are, a lot of people are talking about big history in action, whether it’s the breakup of the Eurozone, or the simultaneous market/economic/political spasm happening in the US.

Today Paul Krugman reminds us once again that this could be 1937 all over again.

Simon Johnson thinks it could be even worse: The long depression of the 1870s all over again.

Recently Nouriel Roubini got a lot of attention for saying that Marx basically got the battle between labor and capital correct, and that capitalism itself now stood on the brink of collapse.

And even on Wall Street…

UBS’ George Magnus has a big piece out on political economy favorably quoting Karl Marx[…]

Again, you know it’s a real panic when everyone’s trotting out the old guys, and even capitalists think Marx got the endgame right.

Here’s what Roubini said:

“Karl Marx said it right. At some point capitalism can self-destruct itself because you cannot keep on shifting income from labor to capital without having excess capacity and a lack of aggregate demand,” Roubini said. “That’s what’s happening. We thought the markets work. They’re not working.”

Zombie Marx

Recommended reading, following on from the above: Mike Beggs in Jacobin on “Zombie Marx”, starting with Brad DeLong’s attacks on David Harvey, but moving on to a fascinating discussion of which elements of Marx’s economic theory are relevant today, and how we should approach Marx’s work. Also read: Norman Geras on gravediggers and skeletons.

Related articles

• Marx Was Right. Capitalism May Be Destroying Itself by Nouriel Roubini… (xkorpion.wordpress.com)
• Zombie Karl Marx rises from the dead (exile.wordpress.com)
• Karl Marx had both disciples and close friends that took part in the 1848 socialist/communist revolts in Europe. Lots of them came here and sought to repeat their socialist experiment here during the War of Northern Aggression. Guess which side they ended (gunnyg.wordpress.com)
• Capitalism has hit a Crisis Point. Is it True? (wuwuming.wordpress.com)
• Watching a video: Baby Marx, On surplus value (serve4impact.com)

The Malthusians who masquerade as Marxists [Daniel Ben-Ami]

From Spiked:

Both radical and mainstream authors now frequently attack ‘neo-liberalism’ and ‘free-market fundamentalism’. But their alternative to these largely mythical creeds would be far, far worse.

One of the great puzzles of contemporary political debate is what exactly critics of Western governments mean by the term ‘neo-liberalism’. Typically, the concept is associated with the ideas propagated by a familiar cast of conservative villains, including Margaret Thatcher, Ronald Reagan and Rupert Murdoch’s Fox News. Behind the scenes, pulling the strings, are said to be the financial powers of Wall Street and the City of London. But this will not do as a definition. It is rarely made clear whether the ultimate object of their attack is a theory, a set of policies, a phase of capitalism, or something else.

The mystery deepens when it comes to David Harvey, one of the most sophisticated exponents of the concept of neo-liberalism. In the current intellectual climate, it would probably come as a surprise to many to learn that the work of a 75-year-old professor of anthropology and self-proclaimed Marxist is so popular. Yet his 2010 YouTube lecture on the crises of capitalism has received over one million hits. Other critics of neo-liberalism also widely cite Harvey’s many books as authorities on the subject.

[READ THE REST]

Related articles

• The Project Is Far More Insidious Than That: (brothersjuddblog.com)

Socialism or your money back

A few items from the above-named blog:

China’s ghost cities and the biggest property bubble of all time

A couple of months ago, a lot of people were passing around the news about China’s plan to create a megacity that would be home to 42 million people, the so-called “Turn the Pearl Delta Into One” idea. The reporting was generally favorable, painting a picture of economic growth and opportunity — the narrative of a prosperous China, with a growing middle class, that has become commonplace in recent years.

Unfortunately, the view of China’s urban planning strategies from the ground is less shiny. A riveting report from Dateline, an Australian TV show, reveals a disturbing pattern of development for development’s sake — the construction of gigantic infrastructure projects with no regard for human needs. (Hat tip to WalkableDFW.)

Take the New South China Mall, in Dongguan. The Dateline crew took a tour of the place, which has been 99 percent vacant since it opened in 2005, and the result is one of the most depressing things I have ever watched. Six years after its creation, what is touted as the largest mall in the world sits almost empty. One of the very few stores that’s in business is a toy shop, where the wistful owner spends his days dusting children’s bikes that no child will ever ride. He is lucky if he makes one sale a day. [READ THE REST]

Doom and gloomier

British families are on average £910 worse off than they were two years ago. Rising food, clothing and energy prices mean the average British family will have £910 less to spend this year than they did in 2009.The squeeze – which is considered the worst in peacetime for 90 years – is set to continue with a two per cent fall in household disposable income this year. The fall in disposable income is comparable with the savage post-World War One recession which lasted between 1919 and 1921, as a result of a collapse in manufacturing and international trade.The findings also show the fall in household disposable income is sharper than in the 1930s depression.

The Centre for Economics and Business Research forecasts inflation will average 3.9pc in 2011. At the same time, salaries will rise just 1.9pc as unemployment remains high and the public sector makes cut-backs.

Employment lawyers have predicted that older workers and pregnant women will be hit by a fresh wave of job cuts. Paul Griffin, head of employment at DBS Law, said: “The growth of discrimination claims from older workers and pregnant women suggests that employers are now targeting their more expensive staff, despite them being in protected groups. Obviously mistakes are being made in companies as accounts departments win out against human resources.”

working harder for the same

Robert H. Frank, an economics professor at the Johnson Graduate School of Management at Cornell University, invented the toil index, a measure of how many hours the median American must work to pay for an average family home in a school district of average quality.

“During the immediate postwar decades the toil burden for meeting the rent of that median-price home actually declined slightly, from 42.5 hours a month in 1950 to 41.5 in 1970, according to my calculations.… By 2000, the median worker had to work 67.4 hours a month to put his or her family into the median home. “

The Libyan weapons shop-window

To take out Moammar Gadhafi’s air defenses, Western powers such as France and Italy are using the very aircraft and weapons that only months ago they were showing off to the Libyan leader. Times change, allegiances shift, but weapons companies will always find takers for their goods. The Libyan no-fly zone has become a prime showcase for potential weapons customers, underlining the power of western combat jets and smart bombs, or reminding potential buyers of the defensive systems needed to repel them.

Almost every modern conflict from the Spanish Civil War to Kosovo has served as a test of air power. But the Libyan operation coincides with a new arms race — a surge of demand in the $60 billion a year global fighter market and the arrival of a new generation of equipment in the air and at sea. For the countries and companies behind those planes and weapons, there’s no better sales tool than real combat. For air forces facing cuts, it is a strike for the value of air power itself.

Libya and the British state

Important analysis of what the Libyan intervention tells us about the British state.

The American dream

Two items:

• Business Is Booming: “This rise in profits, however, has not been accompanied by a rise in employment, wages, or national income. Official unemployment hovers just under 10 percent, and the Federal Reserve is predicting that it will stay at around 9 percent throughout 2011. Gross domestic product increased by just 2.5 percent during the third quarter of 2010. The Wall Street Journal has calculated that as a result of this combination of high profits and stalled prosperity, after-tax second-quarter profits of American companies as a percentage of national income were the third-highest of any quarter since 1947.” Funnily – perhaps not as in funny haha the author of the article points to Germany as an example of a different – yes, the Germany we used to love to laugh at when they muddled about with their outdated factories and unions and such, while we was all soaring into the post-industrial Shangri La of symbol interpretation and fast lanes and virtual this and that.
• Workers face broad assaults: “He is worried, he says, about a lot: the future of the bankrupt supermarket chain he works for, the midcareer colleagues who feel trapped and hopeless, and anyone, really, who strives for a middle-class life anymore. He’s been stocking shelves and moving groceries through the checkout line for the same Philadelphia-area chain since the Vietnam War. It’s how he put a child through college, bought a $28,000 rowhouse, and pays for the occasional movie when he and his wife go out for a treat.” You see: there was a relatively long period after WWII where the Yankee dollar was so strong and the world was so young that everything was possible: get a job, any job, move to the suburbs, two car garage, maybe a boat – life was good. Then reality came knocking… But, then again, the biggest illusion, the biggest successful sale of them all was to make all those folks genuinely believe that they were now bona fide middle class and had some interests in common with the bosses in the country club over there. Not so. But at least the streets of Madison have shown that something is stirring. Perhaps belatedly, one could fear.

Related Articles