Why so dismal?

Economics has been rightly called ‘the dismal science.’ If you read this depressing article in the recent Monthly Review magazine (I have the print edition), you will understand why.

The authors, Fred Magdoff and John Bellamy Foster, remind their readers that capital accumulation and “secular stagnation” are hardly new, even though some of today’s more prominent economists (e.g., Larry Summers) would have us believe that the twin syndromes have just been discovered. It is the nature of the capitalist system, the authors aver, for capital to grow as labor diminishes.

We may be familiar by now with the broad contours of Thomas Piketty’s book Capital in the 21st Century. He, too, speaks of capital accumulation, though he stops short of concluding that its path to infinity is inevitable. Piketty argues for a global tax on capital, a measure he quickly judges difficult in today’s political climate, one dominated by—you guessed it—the capitalists. He distances himself from more radical measures.

Not so the authors of the Monthly Review article. They write:

However, the relations of power today—with the state more than ever the state of the capitalist class—guarantee that no top-down initiative to promote such objectives will occur. Radical change in this direction will come primarily from the bottom and will require a struggle that must today be revolutionary in spirit.

Indeed, viewed from a wider historical standpoint than that offered by the capitalist economy itself—one in which global humanity reemerges as a world-historical force—it is possible to envision revolutionary social transformations arising from mass action driven by the force of a common necessity. Such radical revolts against the system are likely to emanate initially from the global South (Toynbee’s “external proletariat”). But popular upsurges in the center (the “internal proletariat”) are also essential. If by means of such struggles the rules of the game were to be changed—or the game itself were to be altered—a whole new world of previously unimagined social possibilities would arise.

I hate to break it to the authors, but such “radical revolts” are even less likely to occur than Piketty’s proffered partial solution. More probable is a perpetuation of the status quo, however dysfunctional and inimical to the needs and interests of the Rest of Us.

The American political economy reached a tipping point in the late 70s, as Berkeley’s Emmanuel Saez and Robert Reich have remarked. Wealth concentration began to skyrocket, aided and abetted by Congress. The share of the economy’s output flowing to the top one percent is now at an all-time high. Meanwhile, incomes of the bottom 90 percent have either stagnated or shrunk in real terms. Yet, there are no signs of revolt.

Perhaps the people have simply been co-opted. Certainly they’re distracted. Many appear to be in survival mode, anxious about the present, uncertain about their futures. They do indeed struggle, but not in the manner preferred by Magdoff and Foster.


I must add this quote from the linked article:

The dominant perspective on the financial problem in the advanced capitalist states is that a period of “austerity” is needed whereby cash flows in the “real economy” are systematically redirected to the financial sector, increasing the liquidity of the latter, while simultaneously a period of slow deleveraging within finance occurs, further increasing the ratio of assets to liabilities. A major part of this overall strategy involves reducing government debt, so as to strengthen the capacity of the state to fulfill what in the eyes of the financial elites is now its primary role: as lender of last resort for firms deemed “too big to fail.” [my emphasis]

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