I
left several books in the mountain house last week about the global crisis which
I need to retrieve and get into eg
·
Austerity
– the history of an idea by Mark Blyth - a Brit who is now a Prof In "Political Economy" (no less) at an American University and who actually writes clearly and powerfully! See this lecture of his.
·
Utopia or Bust - a guide
to the present crisis - a small book by American writer Ben Kunkel who has reviewed in excellent prose for the London Review of Books and who, like James Meek, looks at economic issues from a non-specialist point of view
Much
as I appreciated the freshness and elegance of the discourse – and the references
to Tonnies, Robert Owen, Saul Alinsky et al - I could have done with some
recognition in the book of the role of cooperatives.
Where, amongst the hundreds of books produced in the last few years about the global crisis, is the annotated bibliography to help us sift and classify them?
Mirowski’s
book has a 41 page list of books and posed these questions –
· What were the key causes of the crisis?
· Have economists of any stripe managed to produce a coherent
and plausible narrative of the crisis, at least so far? And what role have
heterodox economists played in the dispute?
· What are the major political weaknesses of the contemporary
neoliberal movement?
· What lessons should the left learn from the neoliberals, and
which should they abjure?
· What would a counter-narrative to that of the neoliberals look
like?
But
the book only really touches (and briefly) on the second of these questions –
the others he suggests “demand lavishly
documented advocacy and lengthy disputations” and maybe an alternative left
project. His book, he concludes with surprising modesty for such a pyrotechnic
writer, simply “dispels some commonplace
notions that have gotten in the way of such a project”. Neoliberals have
triumphed in the global economic crisis, he suggests, because -
·
Contrary
evidence didn’t dent their world view
·
They
“redoubled their efforts to influence and capture the economics profession”
This
conclusion, frankly, left me feeling a bit let down - after I had devoted a
couple of days to wading through his verbiage……surely a guy with his experience
and reading can do better??? What we need are comparisons and classifications
of this reading…..
The
titles of the books on my little list are significant – and three of them seem
to promise a bit more –Wolfgang Streeck of Koln; David Harvey of New York; and
Andrew Gamble of Sheffield – so let me just share some of the reviews before I
actually get into them
Previous crisis resolution
instruments are not available anymore. The traditional toolbox containing
inflation, increasing sovereign debt levels or making cheap credit available to
private households and corporates has exhausted itself. At different junctures
of post-World War II development these policy instruments served as short-term
fixes – or capital injections – to support redistributional objectives. The
original twist in Streeck’s line of argument is that such objectives and the
means to achieve them chiefly served to benefit those market actors who needed
them the least.
When focusing on Greece
Streeck’s ire is not only reserved to the troika’s activities and
misjudgements. He has a keen eye for the domestic origins of the fiscal crisis
in Athens. Streeck emphasises that this crisis is primarily the result of a
state that is forced to turn to sovereign indebtedness as a mechanism to
replace taxes, which the authorities fail to collect from its better off
citizens. Streeck highlights the extensive capital flight beginning in 2009 and
the privileged tax status that shipowners, farmers, various liberal professions
and the Orthodox Church continue to enjoy in Greece.
But the flight crew sitting
in the ECB tower in Frankfurt fundamentally lacks the key ingredient of democratic
legitimacy for their costly and risk-prone interventions. While these
operations allows decision makers to again buy some time, Streeck does not
consider this arrangement to be more than a short-term form of financial
doping. And the cost for the ECB’s reputation is considerable as evidenced by
various resignations of German members from its governing council during the
past three years and the challenges it faces from the Federal Constitutional
Court in Germany.
Therefore, it does not come
as a surprise that Streeck’s book has unleashed a fierce debate, predominantly
so far in Germany. His domestic critics, including the philosopher Jürgen
Habermas, the former SPD Chancellor Helmut Schmidt and Joschka Fischer from the
Greens, have either accused him of nostalgia for national currencies, being
naïve about the merits of currency devaluations or lacking a workable
alternative scenario outside the cornerstones of EU integration and euro area
membership.
The polemical reactions of
many of his critics only serve to confirm that Streeck appears to have hit a
raw nerve among many in Germany. He emphatically rejects the national consensus
demanded by the political and economic establishment in Germany and its
prominent academics, who equate Europe with the EU and consider the single
currency as a fait accompli of TINA politics, i.e. ‘There Is No
Alternative’.
Indeed, the policy
alternatives that Streeck offers are controversial. That is their purpose and
they merit a thoughtful debate. He wants the euro to become an anchor currency
parallel to the reintroduction of national denominations. Streeck is in favour
of giving back to national governments the option to devalue their currency and
thus creating leverage for discretionary policy intervention. A return to an
orderly and flexible currency exchange system is equally part of his
recommendations as are capital controls to stem recurring capital flight and
tax dodging in the euro area.
But his underlying argument
about policy alternatives is that contemporary capitalist societies in Europe
urgently need an infusion of democratic oxygen, citizens’ involvement and a
public willing to articulate different options. How this can be voiced is
anybody’s guess, not least Streeck’s. Given that numerous democratic institutions
have been reduced to mere bystanders in the course of the past crisis
management years, Streeck formulates a rather pessimistic, but entirely
reasonable alternative.
He pointedly asks why
should only markets be allowed to panic and follow herd instincts? What happens
when civil society threatens to do the same? Streeck argues that democratic
mobilization and civic engagement should be the orders of the day. The protests
may be desperate, loud, display a makeshift air and be highly disorganized but
they are absolutely necessary. The ‘’αγανακτισμένοι’’ in Greece or the
“indignados” in Spain are examples of a growing constituency across Europe who
feel they are being treated with contempt and that their dignity has been hurt.
David
Harvey, although a geographer, is the world’s best- known exponent of Marx. His
Origins of Neo-Liberalism can be read online. His latest book is a small one
which tries to compress his extensive work into 17
Contradictions and the end of capitalism
Drawing on his previous
commentaries on Karl Marx’s Capital, David Harvey’s latest book is a brave
attempt to translate that monumental work into the simplified language of the
21st century. It is beautifully written, persuasively argued and – in these
dismal times – refreshingly optimistic about the socialist future awaiting us
all.
The author begins by
drawing “a clear distinction between capitalism and capital”. “This
book”, Harvey explains, “focuses on capital and not on capitalism.” More
accurately, the topic is the hidden engine that drives capitalism, not the
rickety vehicle as it trundles along bumpy roads. Harvey is not only interested
in finding out how the engine works and why it sometimes fails. “I also want to
show”, he adds, “why this economic engine should be replaced and with what”. No
shortage of ambition, then.
Although it might seem
force, I can see why this distinction is necessary. To write a short book – or
indeed to do any kind of science – you have to simplify, abstracting away from
reality in all its complexity. “How does the engine work” is, I suppose, a
different question from “Where are we going?” or “Will we ever arrive?”
Focusing simply on the
engine, Harvey’s 17 contradictions are exclusively internal ones –
tensions intrinsic to the hidden mechanisms driving the circulation and
accumulation of capital. It’s a convenient strategy that allows him to set
aside such “external” factors as, say, changing gender relations, epidemics or
warfare. But I couldn’t quite understand the basis on which some topics were
excluded and others discussed at length.
Harvey’s 16th contradiction
– entitled “Capital’s Relation to Nature” – includes the looming prospect of
catastrophic climate change. It’s an excellent, scientifically well-informed
chapter and one of the highlights of the book. Harvey claims it as an
“internal” contradiction on the basis that capital is a working and evolving
ecological system embracing both nature and capital. I agree with that. But in
accepting that point, aren’t we including the bumpy road as part of the engine?
If climate change counts as “internal”, what justification is there for
excluding race and gender? Harvey explains: “I exclude them because although they
are omnipresent within capitalism they are not specific to…capitalism”. Well,
no, but then neither is environmental degradation. The consequences might be
more terrifying today, but humans have been triggering extinctions since the
beginning of farming and probably before. Mammoths once roamed across Europe…
My other criticism is that
while Marx wrote quite a lot about revolution, Harvey goes strangely silent on
the topic. As a result, the book’s final pages remind me of going to the
wishing well and asking for 17 nice things that ought to happen – solidarity
everywhere, no alienating work, everyone creative and fulfilled. It’s an
inspiring list. But it does little to help us think about how to get there or
if it would really work. Marxists need to do more if we are to sound
convincing.
This is not a book on the
financial crisis per se, but one that uses the crisis as a point of departure
to consider how our world has been ordered over the past century, along the way
displaying in-depth understanding of the events leading up to the crash and the
actions taken to respond to it.
Before analysing the
consequences of the crisis for neoliberalism, Gamble lays out his notion of a
neoliberal economic order and details how the current international economic
system was set in place after the Second World War. This section is extremely
valuable, as most scholars connected to post-structuralist or post-Marxist
schools of thought are content to use neoliberalism as a kind of
bogeyman-placeholder for all that is wrong with the predominant political and
economic system in the West without ever defining the notion.
While one does not have to
agree with the anti-neoliberalism rhetoric, Gamble’s introduction ably sets the
pace for what follows by showing that while the crisis wounded the neoliberal
order, five years on it seems remarkably unscathed. He then embarks on
answering his main question: Why has the neoliberal order proved so resilient,
and can it renew itself in the face of the challenges to its effectiveness,
sustainability and legitimacy that the crisis revealed?
Gamble lays out three
hypotheses – thesis, antithesis and synthesis – about why we haven’t seen much
change in the aftermath of the recent global financial crisis.
1) The crisis was just a
blip. Although it seemed serious, it has no long-term significance for the
functioning of the present economic system because it is not structural.
2) The 2008 crash revealed
not just a serious malfunctioning of the financial system but deeper underlying
problems that need fixing before recovery is possible.
3) And most plausibly, in
Gamble’s view: the crisis has revealed an impasse. The fundamentals governing
the international economic order have changed, but since the immediate crisis
was contained, incumbent policymakers could stave off radical change. However,
the neoliberal order has become highly unstable and postponing change will lead
to further breakdown or deadlock. Hence the “crisis without end”.
A compelling line of
argument appears in Gamble’s second step, where he discusses the three
fundamental conflicts underlying the functioning of the neoliberal economic
order that the crisis has not only revealed but intensified. He compares the
current crisis’ characteristics to those of the two major crises in the 20th
century in light of the dilemmas that he sees as inherent in the international
neoliberal order: governance, growth and fiscal trade-offs.
- The
governance dilemma lies in the tension between a unified international market
order and a fragmented state system, between international connectedness and
national sovereignty, in which the emergence of new powers poses severe
challenges to the existing order.
- The
growth trade-off manifests itself in the tension between the incentives needed
for maximising private gains and the social conditions necessary to facilitate
private accumulation. The question of how sustainable growth can be achieved in
the face of prolonged stagflation and environmental risks is at the heart of
this dilemma.
- Finally,
the fiscal dilemma concerns the legitimacy of markets, as uncontrolled
competition undermines social cohesion and solidarity, especially with
increasing debt and falling living standards.
Gamble paints his picture
in broad strokes, and in arguably overly gloomy shades. The welfare state may
be more resilient than he might admit, especially its continental and Scandinavian
versions, because different primary mechanisms of redistribution were
originally put into place. While the Anglo-Saxon variety relies mainly on
redistribution through taxation, the continental version is contribution-based.
Since the fiscal dilemma implies difficulties of raising revenues from taxes,
inequality is more of a problem in the tax-based redistributive systems
prevalent in liberal market economies.
The fundamental dilemmas
underlying neoliberalism raise the question of what has to change before a new
era of prosperity in the West can be established, and Gamble considers four
scenarios.
The first is the default,
where nothing much changes and rising internationalisation leads to further
shocks and a perpetual crisis.
The other three scenarios
move away from a unipolar economic order; in scenario 2, to a bipolar situation
in which US-Chinese competition over resources and markets spurs protectionism
and a decline in trade with renewed fiscal and monetary problems.
Scenarios 3 and 4 involve
multipolar situations, with either multilateral cooperation including emerging
powers leading to a more diversified new market order (scenario 3), or with
conflictive and bloc-building tendencies bringing more fragmentation and
decline in international flows (scenario 4).
Evidently, scenario 3 is
most likely to restore confidence and build conditions for sustainable growth.
Alas, Gamble leaves the
question of how to achieve scenario 3 unanswered, and concludes that the future
is likely to include aspects of all four. Like me, the reader may be left
wishing he had taken a few more risks in identifying conditions that make
different outcomes more likely.
This is clearly not a book
that crunches numbers and draws conclusions based on well-identified empirical
evidence, but Gamble gives his own account of the general feeling that there is
something wrong and lethargic about the way the West is dealing with the
aftermath of the financial crash, and that only more radical change can lead us
back to sustainable growth and prosperity.
Like Thomas Piketty
in Capital
in the Twenty-First Century, Gamble shows that the global financial crash
and its effects are not just manifestations of the normal capitalist cycle, but
extraordinary, and will affect the world and the international economy for
decades to come. Although he analyses the crisis through the lens of a critique
of neoliberalism, this does not distract from his insights into the challenges
for economic and political systems at both transnational and domestic levels.
Where Piketty’s book
convinces with myriad historical data and empirically derived evidence,
Gamble’s gripping narrative persuades via insight and anecdotal evidence.
My personal quibble with
Gamble’s approach is that we must have faith in his analytical brilliance and
persuasive argumentation, because none of us knows the counterfactual – what
type of social and/or economic system would generate better societal outcomes,
and better from what perspective? Arguably, more rigorous empirical
identification and quantitative evidence would have helped the momentum and
credibility of some of his arguments.
