PANDEMONIUM REVOLUTIONARY
REVIEW
No. 1042
N
FULL SPECTRUM EMANCIPATION IN
VENEZUELA
Published: Thursday, September 16, 2004
Bylined to: Franz J. T. Lee
Franz J. T. Lee -- Venezuela: What is the trouble with Capitalism?
University
of Los Andes (ULA) professor Franz J. T. Lee writes:
After the glorious victory of the Battle of Santa Ines, with
anti-imperialist efforts, now Venezuela is depening the revolution.
Profound theory and praxis concern radical measures, doing things that
we have never done before, thinking about social processes that never
have dawned on our intellectual horizon.
Profound changes, deep processes concern the New, the Original, the Authentic. What follows intends to germinate revolutionary food for thought, for emancipatory action.
What is the trouble with capitalism, with capital, money, profits and power?
Of course, across the ages hundreds of thousands of authors seriously have tried to explain this planetary blessing or scourge. Even the Christian Holy Bible points out that "Money is the root of all Evil." Also many erudite scholars have warned that currently capitalism is developing from "bad to worse."
Some directly blame Bush, others prefer to attack the "Fourth Empire." Marxists explain the economic exploitative essence of higher forms of capitalism, "neocolonialism," "neo-capitalism," "neo-liberalism," "late capitalism" and "corporate capitalism."
But, on this planet, what is really going on?
Of course, a single individual, a brilliant scholar alone could never fathom the manifold totality of this intricate, complex, intra-galactic process. However, like Hegel did it once, the ever-flowing phenomenology of the historic essence of planetary existence we surely can approximate. Hence, in honor of the Bolivarian Revolution, here is our scientific and philosophic trialogical approximation.
(Also, see: HARRY SHUTT,The Trouble with Capitalism: An Enquiry into the Causes of Global Economic Failure. London, New York: Zed Books/St. Martin's Press, 1998. 230 pp.)
To try to resolve the social problems of Ancient Greece, where the primitive accumulation of capital was launched, in Miletus, the birthplace of philosophy and capitalism, already Thales was searching for a singular exchange value, that expresses the arche or hyle of everything, that, into what you could transform everything, and that, which produces everything. Obviously, the center of commerce, the Mediterranean sea, presented the philosophic aristocratic solution: ariston men hydor -- the best is water.
This dramatic discovery, forming the social superstructure of Europe for millennia to come, was expressed philosophically by the geocentric apeiron, air, logos, nous, fire, deus, etc. Parmenides of Elea expressed this Ptolemaic world outlook most efficiently, which governed Europe till the 16th century, when bourgeois, capitalist Science launched the heliocentric cosmovision. This departure from a single postulate, that reflects a closed system, a single world order, he called the hen kai pan, the unomnia, the "One and All." Heracleitus of Ephesus explained the internal motion, movement, the evolution of this One, as panta rhei, as "everything flows."
Formal Logics assured that the unomnia never changed, that it was in repose, and Dialectics guaranteed its auto-dynamism, its internal changes and development. Everything else, any other postulate, was blocked with the Third Law of Formal Logics, with "Nothing," and with the Christian and Philosophic God, intellectus or ratio.
Bourgeois dialectics, a result of the heliocentric world outlook, refined by Kant and Hegel, launched the social dynamics of the Superstructure, of Society, of the World Spirit, of the World Order, of Reason, of Capital.
Eventually, generated by the "Industrial Revolution", production, technology, overseas markets, the unequal exchange on the world market, produced the corresponding economic, exploitative global imperialist basis. This accelerated the bourgeois, democratic, capitalist Revolution, setting loose all the "evil" forces of the underworld, that nobody and nothing can control anymore today.
No exodus, no transvolution, no emancipation, no other independent postulates, no other worlds, no other orders or spheres, were permitted. The whole human species was reduced to only "human beings," ignoring their existence, their transcendence, their own "Holy Trinity." Ab ovo, some were honorable citizens of the polis, others were third-grade "speaking tools," some were masters, others slaves, some civilized, others savages, some Christians, others pagans.
There is nothing normative or apocalyptic about this state of affairs, this planetary reality is simply the logical result of a unilateral, perverse non-relation between Nature and Society -- euphemistically called "History" -- of the process of production, of Labor, of evolutionary, intra-systemic Revolution, of its current degree of industrial and technological development, that is, of Capital, of Capitalism, the internal negation of which is "Non-A," Socialism.
The global, trans-historic contradiction, the world order, "Capitalism-Socialism" is the Revolution, is the Globalization of the French, bourgeois, democratic revolution. It follows that the real logical question is: What is the Trouble with Capitalism and Socialism?
Studying very carefully the occult and visible realities of the current world system, transcending the barriers of equal, unequal and combined, intra-systemic developments, also surpassing our own different levels, degrees and mensions of self-consciousmess, of social consciousness, of class consciousness, of historic consciousness, we will notice that radical, fundamental transformations are taking place.
The "truths" of the geocentric and heliocentric world outlooks, including their practices and theories, are vanishing into galactic oblivion. Something new, really "trifferent" appears in the Milky Way, neither capitalism nor socialism, neither heaven nor hell -- this is, what dawns on the human horizon. Production is in death throes, Labor is in labor pain, Capitalism is in agony.
To verify all these, just read between the lines of our daily news, just take note of the "Life Sciences", of genetic engineering, of nanotechnology, of the genoma, of "space exploration", of Pentagon "Aliens", of the American "Flying Saucers", soaring over The Andes, over Iran, of ELF-waves, of scalar waves, of HAARP, of high-tech military operations, like blowing up "Twin Towers", of Tesla "free energy", of Reich's "Orgon," etc., etc.
Thus, Venezuela and Latin America, in the beginning was Production, now Creation dawns.
All these have to be considered in our daily Praxis and Theory, in our revolutionary projects, in our emancipatory endeavors. With obsolete Science and Philosophy we cannot grasp these trans-revolutionary global events.
Authentic Marxism explains much of current realities, but, like in any other Science and Philosophy, it has to renew, to renovate, its fundamental postulate, its concepts, its laws, its method, its logic, its perspectives, to be the vanguard of world emancipation.
Franz J. T. Lee
franzjutta@cantv.net
Franz
John Tennyson Lee, Ph. D (University of Frankfurt), Author, Professor
Titular & Chairholder of Philosophy and Political Science,
University of The Andes, Merida (Venezuela) -- http://www.franzjutta.com ; http://www.franz-lee.org ; http://www.geocities.com/juttafranz/publications00001.html
***********************************************************************
The Trouble With Capitalism in One Country Theories
Capitalist Origins: A Comment
A discussion on the problem of "Eurocentrism" in theorization of capitalism and anticapitalist struggle was initiated with Ellen Meiksins Wood's esay on "Eurocentric Anti-Eurocentrism" (ATC 92, May-June 2001). We present here a response by Christopher McAuley, author of The Mind of Oliver C. Cox, to be published by University of Notre Dame Press in 2001. Other contributions will appear in forthcoming issues. —The Editors.
ANYONE FAMILIAR WITH the many theories of the origins of capitalism is probably cognizant of the fact that, like all theories irrespective of the field, they are/were conceived in opposition to one or more competing theories. On this matter, the theoretical divides have typically run along these lines: the genesis of specialized commercial capital vs. that of industrial capital; the economic development of Protestant Europe (namely, post-Reformation England and the Netherlands) vs. Catholic Europe (primarily the Italian city-states of the late-medieval era and the Spanish and Portuguese Empires of the early-modern era); European vs. extra-European loci and foci; Marxist vs. non-Marxist definitions and characteristics of capitalism; and internal (based on class/property relations) vs. external (trade relations based) catalysts of socioeconomic transformation.
Of course, none of the theories of the origins of capitalism named in the above dyads excludes elements found in the other theories; it is simply that one argument ranks above the others. Thus, it is common to see particular combinations of the above arguments in one theory. For example, theorists of the origins of capitalism who consider the Industrial Revolution its hallmark or culmination tend to focus on socioeconomic and sociopolitical developments in Protestant England between the sixteenth and nineteenth centuries.
Conversely, those theorists who look to specialized commercial exchanges as the early manifestations of an eventual full-fledged capitalism (of which industrial capital is but one branch), tend to place central importance on Catholic Europe, the impact of trade on national development (or underdevelopment), and when not bound by Eurocentric thinking, even to entertain extra-European origins, inputs, and/or contributions.
Frequently, however, even when theorists of the origins of capitalism identify themselves, by name, as members of the same school of thought, the differences between the positions of individual theorists is so great that it is no longer useful to put them in the same group. Such is the case within the Marxist school of the origins of capitalism. One school (and the student of intellectual currents would probably name more than two of them) largely adheres to the first model we described earlier—in internally generated transformation of class/property relations in pre-industrial England.
The second school locates capitalism's origins in commercial growth in the late medieval and early-modern eras in which colonialism and neo-colonialism figure quite largely. In other words, theorists of this branch of the Marxist school of capitalism's origins share the belief with some non-Marxist theorists that regional, if not global, trade relations played a greater role in the development of capitalism than did the trajectory of a single nation's class relations.
It should also be mentioned as more than an aside that the overwhelming majority of those Marxist theorists in the first camp are of European descent, while a substantial number of those in the second are of African descent. I would include scholars like Maurice Dobb and Robert Brenner in the first group and Samir Amin, Oliver Cox, C.L.R. James, Eric Williams, and Walter Rodney in the second.
It should also be noted about the scholars of European descent in the second Marxist grouping that most of them have been students of "Third World" political economy and have incorporated those lessons and experiences into their theories of the origins and reproduction of global capitalism. Here, I am referring to Immanuel Wallerstein and his initial work on Africa; Andre Gunder Frank and his early work on Latin America and now on Asia; and James Blaut (to whose ideas the second part of this essay is devoted) and his work on the Caribbean and continental Latin America.
I have opened this essay with these remarks not to provide a synopsis of the most recent trends in the theoretical explanations of the origins of capitalism, but rather to situate myself in one of the above groups—among the Marxists of African descent—so as to foreground my reading of Ellen Meiksins Wood's May/June 2001 article in Against the Current, "Eurocentric Anti- Eurocentrism," and of her more general work on the subject, The Origin of Capitalism (Monthly Review Press, 1999. An expanded version is forthcoming from Verso.—ed.)
From my perspective, Wood's explanation of the origins of capitalism is representative of the first Marxist school that I described above. I will refer to that theory as the Brenner-Wood thesis since she admittedly draws on Robert Brenner's findings and conclusions. With that said, let me now turn our attention to their theory of the development of capitalism.
As theories of capitalism go, the Brenner-Wood thesis is ostensibly sound. At its most basic level it posits this: It was only when property rights became formally established such that property owners could dispose of their land as they saw fit that we can locate and date the origin of capitalism. In their view, this transformation began to take place in southeastern England as early as the fifteenth century when landlords inadvertently converted landholding into landowning in order to reverse the trend of declining incomes. As Wood describes the process, "by claiming exclusive private ownership," landholders-cum-landowners, "challeng[ed] the customary tenures that gave many smallholders right of possession without unambiguous title." (The Origin of Capitalism, 82. All quotes from Wood refer to this title except where noted.)
One immediate result of this transformation was that "tenure increasingly took the form of economic leases, with rents not fixed by custom but responsive to market conditions," as current and prospective tenants now had to compete with each other to secure leases. (46) With "profits" now serving as the base of rent payments, both tenants and landlords, the Brenner-Wood thesis maintains, "had an interest in agricultural "improvement,' the enhancement of productivity by innovative land use and techniques, which often implied, among other things, enclosure [viz., landholding expansion]—not to mention increasing exploitation of wage labor." (47)
Of course, the pressure to "produce cost-effectively" weighed most heavily on tenants since failure to do so bore the threat or "penalty of dispossession." (76) Still, agricultural improvements (increase in farm size, draining of marshlands, introduction of crop rotation, etc.) were instrumental in the creation of the first national market, since greater agricultural production meant cheaper food and cheaper food meant that all but the poorest Briton had more money to spend on consumer goods.
Finally, in addition to laying the foundations for competitive leases, land sales, the creation of a wage-earning class, and an agricultural revolution, Wood maintains that the English property revolution also paved the way for the industrial revolution:
Although this is not the place to explore in detail the connections between agrarian capitalism and England's development into the first "industrialized' economy, some points are self-evident. Without a productive agricultural sector which could sustain a large non-agricultural work force, the world's first industrial capitalism would have been unlikely to emerge. Without England's agrarian capitalism, there would have been no dispossessed mass obliged to sell its labor power for a wage. Without that dispossessed non-agrarian work force, there would have been no mass consumer market for the cheap everyday goods—such as food and textiles—that drove the process of industrialization in England. It is worth emphasizing that this large market derived its special character not only from its unusual size but also from its limitations, the relative poverty of consumers demanding cheap goods for everyday use. It had more in common with later mass consumer markets than with the luxury trade of "classical' commerce. (102)
Before assessing this admittedly pared-down presentation of the Brenner-Wood thesis on its empirical and theoretical grounds, I think it important to mention what its proponents believe make this theory of the origins of capitalism superior to others. Wood names at least four reasons.
First, the Brenner-Wood thesis does not fall into the trap of "reading capitalist principles back into pre-capitalist societies," as do other theories of the origin of capitalism. (43) In order to avoid this pitfall, the Brenner-Wood thesis assumes that, unlike capitalist societies in which change and innovation is the order of the day, non-capitalist societies are socially conservative, thus their members pursue courses of action to maintain or to reproduce the standard of living to which they are accustomed.
In light then of this conservative bias on the part of non-capitalist actors, the transition to capitalism had to be, according to the Brenner-Wood thesis, the unintended consequence(s) of actions meant to preserve rather than to change the structure of non-capitalist society.
Second, in establishing the precise historical origin(s) of capitalism, the Brenner-Wood thesis draws a clear space/time line between non-capitalist society and capitalist society. In other words, the Brenner-Wood thesis supplies capitalism with both a date and place of birth. Again, not only does this determination demonstrate that capitalist society is not the natural or inevitable culmination of all pre-existing systems of production and exchange since time immemorial, but that it is a "qualitative break," a decisive departure from all societies that preceded and surrounded it.
Third, the Brenner-Wood thesis demonstrates that the market in capitalist society is the bestower neither of opportunities or of freedom as is popularly believed and as the "commercialization model" of the origins of capitalism implies.
Rather, the market in capitalist society is highly coercive: Most members of capitalist society must sell not only their labor power to their employers but also purchase or rent their means of reproduction or subsistence. Unlike non-capitalist societies in which the market is governed by other social considerations (the will of God or of the gods, the ancestors, the Court, of custom, etc.), in capitalist society the market or, in more general terms, the economy shapes all other social forces in its image.
Finally, the Brenner-Wood thesis has an explicit political purpose which Wood describes most eloquently:
The purpose of this exercise is both scholarly and political. The naturalization of capitalism, which denies its specificity and the long and painful historical processes that brought it into being, limits our understanding of the past. At the same time, it restricts our hopes and expectations for the future, for if capitalism is the natural culmination of history, then surmounting it is unimaginable. The question of the origin of capitalism may seem arcane, but it goes to the heart of the assumptions deeply rooted in our culture, widespread and dangerous illusions about the so-called free market and its benefit to humanity. Thinking about future alternatives to capitalism requires us to explore alternative conceptions of its past. (7-8)
Measured by these criteria, Wood maintains that James Blaut's attempts, most notably in The Colonizer's Model of the World and in Eight Eurocentric Historians, to de-eurocentrize the origins of capitalism falls short of the author's goal. As she sees it, Blaut's claim that "protocapitalism" existed in a number of societies before the Western European "take-off" in the fifteenth and sixteenth centuries, is merely an appropriation of an "old Eurocentric principle:"In the old accounts, Europe surpassed all other civilizations by removing obstacles to the natural development of "commercial society;' in the anti-Eurocentric version, the failure of non-Europeans to complete the process of development, despite the fact that they had already come so far, was caused by obstacles created by Western imperialism. (Wood, "Eurocentric Anti-Eurocentrism," 31)
Moreover, in failing to provide a precise definition of capitalism, Wood contends that Blaut "can have no clear conception of non- or precapitalist modes of production with different operating principles, and no conception of a transition of one to the other. Commercial practices shade into "protocapitalism,' which grows into "modern' capitalism." (Ibid.)Despite the undeniable relevance of Wood's remarks about Blaut's position, they do not address what I believe to be his more serious charges against her version of the origins of capitalism. Of these there are at least three, one at each of the following levels: the empirical, the conceptual, and the ideological. Each warrants a brief discussion.
At the empirical level, Blaut contests the Brenner-Wood thesis on what it claims about England's agricultural revolution as well as how it describes the volume of medieval trade. As for the first point, Blaut maintains that contrary to its adherents' instruction not to read later events into earlier periods, the Brenner-Wood thesis does just that by inserting eighteenth-century agricultural advances in British agriculture into preceding centuries, as many as three centuries in some instances.
It is particularly in the case of the widespread adoption of crop rotation in place of the three-field system (thereby virtually doing away with the need for fallow) that Blaut believes that the Brenner-Wood thesis has manipulated time. With regard to the second point—the Brenner-Wood thesis' estimation of the volume of medieval trade—Blaut contends that the former minimizes the latter (particularly the scale of late-medieval Mediterranean trade) in order to exaggerate the significance of English agrarian capitalism. (Blaut, Eight Eurocentric Historians, The Guilford Press, 2000, 53. All quotes from Blaut refer to this work.)
On the conceptual front, Blaut charges the Brenner-Wood thesis with mysticizing the power of capitalism's "first" appearance. "When it arrives," Blaut remarks, "it does so complete and entire, as though it were a god descending from Olympus to govern human affairs." (60)
Blaut adds that this mystical conception of capitalism leads its proponents to do great injustice to the historical record, particularly in the years between capitalism's first manifestations and the point at which payment in wages became the general form of labor remuneration not only in England and in its own empire, but in the world. Here is how Blaut phrased just this point:
This mystical notion of capitalism substitutes for an empirical theory about the transition: the merely empirical facts may suggest a long, slow transition, with many complex and contradictory happenings, including some regressions toward classic feudalism—no matter. At one mystical historical moment (or year, or handful of decades) capitalism appears and transforms rural England. (60)
And it appears that only that "moment" matters to the Brenner-Wood thesis.Of course, one of the "complex and contradictory happenings" to which Blaut makes reference in the above passage is imperialism and its role in the development of capitalism.
By and large, the Brenner-Wood thesis has no reason to entertain this question. For in locating the roots of capitalism before (rather than during) the era of English overseas expansion, the Brenner-Wood thesis posits, as Blaut puts it, that colonialism "was not significant for capitalism, was rather a marginal process, a temporary aberration or diversion or sideshow, not a vital need of the system as a whole, which evolves in response to internal laws of motion." (45) It is this aspect of the Brenner-Wood thesis that strikes Blaut and others as intellectually racist.
Wood's response to charges like Blaut's is to raise Spain's failure to capitalize on an empire far larger than England's between the sixteenth and eighteenth centuries. She regards this failure as proof that "much, if not everything, depended on the social property relations at home in the imperial power," and consequently that colonialism cannot be considered the parent of capitalism but rather capitalism's offspring. ("Eurocentric Anti-Eurocentrism," 35)
While it is impossible to deny that England benefitted from its then modest empire in greater measure than Spain did from its vast one, comparing the outcomes of the two imperial ventures may raise more questions than it answers. I refer primarily to the question of why English capitalists chose to colonize overseas (like Spanish non-capitalists) so soon after having happened upon the "self-sustaining process of economic development" as Wood describes capitalism ("Eurocentric Anti-Eurocentrism," 33), and thus before they had brought the entire domestic economy under its rule.
To this question we must also add the one that inquires why English capitalists chose to use unfree labor in many of their colonial possessions well after they had presumably already come to the realization that there were greater economic gains to be made in paying workers wages both at the production and consumption ends.
As I understand the implications of these questions, they should call into question both the contention that the origins of capitalism antedate the era of England's overseas expansion and that the use of unfree labor does not rank in the repertoire of capitalist labor forms. And I believe that it is for reasons such as these that Blaut and others find themselves forced to reject both the definition and periodization of capitalism that theories like that of Brenner-Wood offer.
Bearing in mind these considerations, it is possible to conceive of an alternative interpretation of both the Spanish and English imperial examples. From this perspective, Spain's inability to capitalize on its empire may have been due less to the self-imposed limitations of its domestic class structure and more to the acquisition of colonial possessions (both American and European) the scale of which exceeded the capacity of that country's military, managerial and mercantile personnel. This overambition was no doubt fed by what seemed to many Spaniards in the sixteenth century the endless supply of Amerindian bullion.
Given their own imperial ambitions, it is doubtful that English "capitalists" would have acted differently from Spanish adventurers had they been the first to lay claim to Amerindian mines. It is likely that they too would have waged even more wars of territorial expansion in the Americas as well as in Europe; would have used their riches to purchase luxury and even food imports to the detriment of domestic production; would have been forced to tolerate the illegal provisioning of their colonies and the plunder of their ships by European rivals; and they too would have relinquished to the Crown yet more political-economic power.
To restate this hypothetical imagining, put in an international imperial context, England's relatively late start in American expansion worked to that country's advantage because it enabled its elites to learn from Spanish mistakes and conversely from Dutch successes. This was, in practical terms, the basis of mercantilist doctrine whose tenets English capitalists followed to great effect.
With these remarks about imperial Spain and England, it is not my intention to deny the empirical support of the Brenner-Wood thesis but rather to suggest that it tells only part of capitalism's story, its perspective from England, but one with which I am not convinced that even a sixteenth- or seventeenth-century participant would have agreed.
Again, for those of us who believe that the extra-European world made significant contributions (in the way of labor, resources, and the forward linkages derived from that labor and those resources) to the development of capitalism, what Wood sees as the "historical specificity" of her thesis, we see as a selective narrative that excludes extra-European inputs.
Consequently, in my reading of Blaut's project, his goal was not to claim the "prize" of capitalism's first site for the Afro-Asian worlds, but to underscore that the rise of capitalism in Western Europe was inextricably related to the decline of protocapitalism elsewhere.
Like Wood, Blaut also sought to get capitalism's story "right"
not only for the purpose of demonstrating that it is not the "natural"
culmination of history and therefore unnatural to desire its
supersession, but also to show that non-European people have been and
will continue to be instrumental in capitalism's demise just as they
were integral to its genesis and reproduction. In my opinion, the
Brenner-Wood thesis does not lend itself to such an inclusive vision of
the future.
http://solidarity.igc.org/atc/94McAuley.html
Samir Amin’s “World Poverty, Pauperization, and Capital Accumulation,” the Review of the Month in this issue of MR, addresses the growing phenomena of landlessness and pauperization among rural populations in the periphery. He reminds us that half of the people in the world are peasants, a group largely unseen by liberals and radicals. The dispossession of the peasantry throughout the third world represents one of the central problems of our time—for reasons of straightforward humanity. Amin points out that the worsening position of the peasantry, their forced migration to cities, and the growth of hunger among the poor cannot be adequately dealt with by treating these problems as mere aberrations of the system. Mounting occasional “anti-poverty” programs or “humanitarian” assistance or even projects to enhance farm productivity offer no real long-term solutions. In fact, the inherent contradictions in the third world are such that even increases in the productivity of peasants so that more food is producedin the absence of employment opportunities for rural labor that is no longer needed in agriculture—can seriously worsen the problem of displacement and hunger! The enormous humanitarian problem that Amin describes is rather a result of the way capitalism works on a world scale. The clear lesson to be drawn from his article is that the anti-globalization struggle needs to be aimed at the real problem—the capitalist system.
In August the 2003 Career of Distinguished Scholarship Award of the American Sociological Association, the sociology professions highest scholarly honor in the United States, was given to our friend and MR author Immanuel Wallerstein. Wallerstein is most famous for his pioneering work in world-system analysis that began with volume 1 of The Modern World-System, published in 1974. In a review in the December 1975 issue of MR, Samir Amin (himself one of the earliest and foremost contributors to the analysis of “accumulation on a world scale”) wrote: “Immanuel Wallerstein’s new book, The Modern World System, is not simply an addition to this long list of volumes [on the transition from feudalism to capitalism]: it transcends them because of the authors ability to integrate all aspects of reality in a powerful, synthesized, overall vision which has none of the defects of a unilateral thesis. We therefore consider that this is an outstanding contribution to historical materialism.” The same could be said of the whole body of work that Wallerstein has produced in the almost thirty years since the publication of that book. In honoring him, the sociology profession has perhaps for the first time acknowledged the reality of modern imperialism: its roots in capitalism as far back as the fifteenth and sixteenth centuries and its overriding presence today. Congratulations Manny!
In the same award ceremony the American Sociological Association presented its 2003 Public Understanding of Sociology Award, given annually to a person who has made exemplary contributions in advancing the understanding of sociology and sociological research among the general public, to our friend and MR author Frances Fox Piven. Author of many pathbreaking books, including (with Richard Cloward) Regulating the Poor (1971), Poor Peoples Movements (1979), The New Class War (1982) and Why Americans Don’t Vote (1989), Frances Fox Piven is the very model of a public intellectual. Our congratulations Frances!
Given the concern with changing conditions in rural society in much of this issue (as represented by the work of Amin and William Hinton) we thought that readers would be interested in the origin of a misunderstanding that surrounds Marx’s thoughts on rural life. One often hears the criticism that Marxism was from the beginning an extreme modernizing philosophy that looked with complete disdain on rural existence. Did not Marx himself in The Communist Manifesto, it is frequently asked, refer to “the idiocy of rural life”? Here a misconception has arisen through the mistranslation of a single word in the authorized English translation of the Manifesto. This issue is addressed in Hal Draper’s definitive, though little known work, The Adventures of the Communist Manifesto (Berkeley: Center for Socialist History, 1998)an expanded version of his earlier work, The Annotated Communist Manifesto. Draper’s Adventures includes a new English translation of the Manifesto, together with paragraph-by-paragraph annotations, and the most detailed history currently available of the various editions of the Manifesto in major European languages.
In Draper’s translation the phrase “the idiocy of rural life” in paragraph 28 of the Manifesto is replaced with “the isolation of rural life.” His explanation for this correction is worth quoting at length:
IDIOCY OF RURAL LIFE. This oft-quoted A.ET. [authorized English translation] expression is a mistranslation. The German word Idiotismus did not, and does not, mean “idiocy” (Idiotie); it usually means idiom, like its French cognate idiotisme. But here [in paragraph 28 of The Communist Manifesto] it means neither. In the nineteenth century, German still retained the original Greek meaning of forms based on the word idiotes: a private person, withdrawn from public (communal) concerns, apolitical in the original sense of isolation from the larger community. In the Manifesto, it was being used by a scholar who had recently written his doctoral dissertation on Greek philosophy and liked to read Aeschylus in the original. (For a more detailed account of the philological background and evidence, see [Hal Draper], KMTR [Karl Marxs Theory of Revolution, New York, Monthly Review Press, 1978] 2:344f.) What the rural population had to be saved from, then, was the privatized apartness of a life-style isolated from the larger society: the classic stasis of peasant life. To inject the English idiocy into this thought is to muddle everything. The original Greek meaning (which in the 19th century was still alive in German alongside the idiom meaning) had been lost in English centuries ago. Moore [the translator of the authorized English translation] was probably not aware of this problem; Engels had probably known it forty years before. He was certainly familiar with the thought behind it: in his Condition of the Working Class in England (1845), he had written about the rural weavers as a class “which had remained sunk in apathetic indifference to the universal interests of mankind.” (MECW [Marx and Engels, Collected Works] 4:309.) In 1873 he made exactly the Manifesto’s point without using the word “idiocy”: the abolition of the town-country antithesis “will be able to deliver the rural population from the isolation and stupor in which it has vegetated almost unchanged for thousands of years” (Housing Question, Pt. III, Chapter 3).
Marx’s criticism of the isolation of rural life then had to do
with the
antithesis of town and country under capitalism as expressed throughout
his
work. See also John Bellamy Foster, Marx’s
Ecology (New York: Monthly Review Press), pp. 137-38.
http://www.monthlyreview.org/nfte1003.htm
A thought for the day:
"The trouble with socialism," a European observer once remarked, "is
socialism. The trouble with capitalism is capitalists."
William F. Buckley, Jr. Quotations from Chairman Bill: The Best of
Wm. F. Buckley, Jr.
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The Trouble with Capitalism: An Enquiry into the Causes of Global
Economic Failure - Review
By HARRY SHUTT. London, New York: Zed Books/St. Martin's Press, 1998. 230 pp. $65.00, cloth; $25.00, paper.
Despite its mood of Luddite pessimism, this in-your-face critique of the status quo makes for diverting reading. It's fun to accompany Shutt on his journey recapitulating the origins of capitalism through the Industrial Revolution, the span from the 1920s' boom and 1930s' Depression, World War II, the postwar years, and the Soviet collapse to the present. The bulk of the book thus becomes an analysis of how lousy things have become - thanks to such demons or human goofs as capitalist profit maximizing, globalization, privatization, deregulation, leveraged buyouts, hostile takeover mergers, monetarism, creative accounting, redundant excess capital, the short-termism of profit-maximizing greedheads, the crisis of illegitimacy (fraud, corruption, organized crime), and the basic pathology, inert economic growth.
Oddly enough, after a generally sober if critical take on the world, Shutt ends his tract with a scary "Boo!" He dismisses as hopeless and impossible the current effort of "the apostles of laissez-faire" to revert to old-fashioned "self-reliance" and thereby undo the social gains made in the West this past century. Any such reactionary course, he writes, "would fail to resolve the deepening economic crisis whose only possible denouement, without some radical alteration of course, will be a financial holocaust on such a scale as to bring comprehensive ruin even to the most convinced supporters of the status quo." Take that!
As I say, Shutt's appraisal of modern economic history is sober and his criticisms detailed and mostly convincing. Yet a reader had best be on guard. Like all of us, he is fallible. One reads how utopian were economic growth and stability in the postwar 1950s into the 1960s, but without a single mention that this bonanza was due, of course, to the world's hustling to make up for the dearth of construction of all kinds - durables, buildings, roads, the works. An odd omission indeed. And Shutt decries at length and with feeling the curse of budget deficits. Clearly he completed his book just before the United States, even at many city, county, and state levels, moved into budget surplus. And many if not most of the nations of the world have seen their deficits somewhat eased of late. Changing times.
The chief bogeyman Shutt fears is global economic instability. One infers that it can result in wars, crime, countries' collapse. Even as I write, Russia has gone into a general default and, with Japan's passivity, may bring on a worldwide panic. Shutt's book, in a word, falls into a growing genre of recent books of economic alarm, the varied books of the "declinists" and "catastrophists," from, say, Jeremy Rifkin's The End of Work and Edward N. Luttwak's The Endangered American Dream to William Greider's One World: Ready or Not, a round dozen or more, each different, all spooky.(1) At least one cliche they all demolish is the canard "A rising tide lifts all boats." Inequality, it may be said, is the fundamental plight that engenders instability.
To rectify the problem of low economic growth, Shutt pronounces that neither Keynesian deficit financing nor reversion to fiscal laissez-faire orthodoxy has the capability. Indeed, he is clever in the detailed accounting he gives of the failures of each camp. One of his more original (eccentric?) examples of policy decisions is when he addresses the problem of market saturation by the 1970s, resulting in static demand for goods and services. He avers that in the United States, the government remedy was to relax restraints on new goods and services, specifically, to my surprise, "the abolition of legal restrictions on pornography in 1973." The consequence has been "explicit depictions of violence in television and motion pictures," as well as in Britain, he claims. To what extent this has fostered economic growth is not made clear. By the way, his citation of 1973 is interesting: What a pivotal year! Every book agrees on 1973 as the turning point downward. Kicked off by the Organization of Petroleum Exporting Countries' quadruple oil price hike (though only Jeffrey Madrick's book End of Affluence spells this out convincingly), 1973 deserves a book of its own.
Shutt is ambivalent about the state's intervention into national economic affairs. On the one hand, he seems to decry excessive state involvement, describing how intrusive it always is, even in the allegedly laissez-faire Reagan and Thatcher era. On the other, while therefore ridiculing the ideology of free market deifiers as bogus, he accepts the reality that the private sector is inescapably dependent on state support to maintain the social welfare budget, as unemployment and social deprivation rise. Thus he posits a genuine dilemma: damned if you rely on the state, damned if you don't.
The best that Shutt can do, it appears, is to caution us about all the stratagems that fail to stimulate economic growth - privatization of state-owned companies to help absorb the excess surplus of capital (capital glut and shrinking investment outlets are a Shutt nightmare); lower corporate taxation; highly leveraged takeovers; state bailouts of failed financial institutions (the incredibly costly cure for the S&L crisis in the United States); "creative accounting," such as share buy-backs to manipulate companies' own share prices; state subsidization of increased investment in securities. And, alas, the new technology, computers et al., despite all the razzle-dazzle, has not yet kicked in to enhance economic growth. Though not quite a Luddite, Shutt is ever leery. Note that the epigraph on page 1 of his book is a quotation from H.G. Wells: "So the inevitable end of a search for profit in production was a steady reduction of costs through increased efficiency - that is to say, a steady decrease of the ratio of employment to output."
The era of profit-maximizing capitalism must give way, but to just what is unclear. One hint appears in Shutt's closing section, "A New Globalism." After scolding the United States for insisting, as the world's only remaining superpower, on acting as the world's ultimate arbiter, he writes, "Amid this general dispiriting scene the most hopeful prospect is arguably provided by the European Union . . . [which] has the potential to evolve into a new global economic model," countering the excesses of nationalism that have bedeviled Europe in the twentieth century. And "Once it is accepted that in a low growth global economy maximization of profit can no longer be the main basis for allocating resources and other criteria must be established," it follows that the inequality gap must be reduced. "Some limitation of the disparities and reward between the highest and lowest paid" is essential. As a specific example, no longer can we tolerate highly leveraged takeover transactions wherein the huge fees to the buyout company and its financial intermediaries and the rewards to management necessitate big layoffs, reduced employee health coverage, even the raiding of employee pension plans. (One estimate is that, from 1985 to 1990 in the United States, more than half a million people lost their jobs thanks to high-leverage takeovers.)
Is Shutt's subtitle, "An Enquiry into the Causes of Global Economic Failure," justified? Yes, in the sense that he shows a world replete with economic inequalities and fearsome mass deprivations so overwhelming in the southern tiers. But hold on: When wasn't it unfair, inequitable? "Failure" is a relative term here. Shutt does present a plausible case for the causes of global economic failure. Has it already overtaken us? Not quite. There is still an extraordinary dynamism in global economics that should spare us from Shutt's fatalism.
Note
1. See also Stanley Aronowitz and William DiFazio, The Jobless Future: SciTech and the Dogma of Work (Minneapolis: University of Minnesota Press, 1994); Paul Omerod, The Death of Economics (New York: St. Martin's Press, 1995); Wallace C. Petersen, Silent Depression: The Fate of the American Dream (New York: Norton, 1994); Sheldon Danziger and Peter Gottschalk, America Unequal (New York: Russell Sage Foundation, 1995); Todd Gitlin, The Twilight of Common Dreams: Why America Is Wracked by Culture Wars (New York: Metropolitan Books, 1995); Kirkpatrick Sale, Rebels Against the Future: The Luddites and Their War on the Industrial Revolution (Reading, MA: Addison-Wesley, 1995).
EDWARD CHASE is a former editor in chief of New York Times Books and of the New American Library and a frequent contributor to a variety of magazines and journals.
COPYRIGHT 1999 M.E. Sharpe, Inc.
COPYRIGHT 2000 Gale Group
http://www.findarticles.com/p/articles/mi_m1093/is_1_42/ai_
53697788/print
************************************************************************************
Why is Shared Capitalism
Needed?
The trouble with capitalism," author and attorney Jeff Gates told 300 participants at the 1999 Ohio Employee Ownership Conference, "is that it doesn’t create enough capitalists."
The gap between the haves and the have-nots is widening, resulting in what Gates calls a "disconnected capitalism" that has already created a virtual two-tier society. In his address to the Conference, Gates used statistics and political cartoons to bolster his contention that "current trends in economic inequality, both domestically and abroad, pose dangers to human dignity, democracy, political stability, fiscal sustainability, social justice, freedom, civil society, physical/mental health and environmental sustainability."
Although space prohibits the recitation of all the statistics Gates presented, the following will give the reader a pretty good flavor for the points he was making:
Despite the boom of the 1990s, inequality in the United States has continued to grow
86 percent of the stock market gains went to the top 10 percent of households of which 42 percent of that went to the most well-to-do one percent.
Globally the situation , of course, is even worse
The statistics presented by Gates were enlightening while at the same time startling and rather depressing. It is quite clear that there are a great many serious problems that need to be dealt with in something other than the conventional way they have been approached up to this point.
It behooves the policymakers of the world to seriously consider Gates’ message to more fully embrace the concept and practice of widespread employee ownership. In Gates’ view, that is the only way to restore the middle class and eliminate the massive inequities in the distribution of wealth that exist in today’s society.
<>Jeff Gates has been deeply involved in what he terms "ownership engineering" since 1973 and is the author of the critically acclaimed book, The Ownership Solution: Toward a Shared Capitalism for the 21st Century<> (Addison-Wesley, 1998).
The Ownership Solution goes beyond an analysis of why broadening ownership is necessary to accomplish this end. It’s available from your local bookstore for $27.50 hard back and $16.00 in paperback.
Gates is
President of the Shared
Capitalism Institute.
According to its website, (www.sharedcapitalism.org), the Institute’s
mission is "to explore and explain the impact of ownership patterns and
to press for changes that will result in a more inclusive and
sustainable free enterprise system both in the United States and
abroad."
http://www.google.co.ve/search?q=cache:mqQvHXiLtlgJ:dept.kent.edu/oeoc/publicatio
nsresearch/Sum1999/CapitalistsSum1999.html+%E2%80%9CThe+Trouble+with+
Capitalism%E2%80%9D+&hl=es
*************************************************************************
Review of Harry
Shutt's The trouble with capitalism: an
inquiry into the causes of global economic failure, Zed Books
1998.
-- G. Chris Rodrigo
The historical backdrop
Harry Shutt's objective in this book is to expose the grim
realities of the
evolution of the global capitalist system over the last half century
and
thereby dispel 'the illusions which lie behind the neo-laissez-faire
prospectus,' as stated in the introduction. The
objective of this book review is to ascertain whether his analysis
captures
essential aspects of the economic reality and the extent to which it
does that.
Given the rather large scope of the subject, it is unreasonable to
expect a
full, comprehensive coverage of this complex subject in a volume of 238
pages.
The task undertaken here is to identify the strengths of his analysis,
flag
arguments not well grounded in contemporary economic research and also
indicate
important issues ignored or mis-diagnosed. The reviewer subscribes
to
Shutt's broad claim that the reality of globalization falls far short
of the
rose-tinted rhetoric of the apostles of globalism.
The book starts with a brief review of the emergence of the
modern
capitalist order in Western Europe, the USA and Japan in the late 19th
and early 20th century period. This is followed by an
account of the
worldwide depression of the 1930, the events leading up to the second
world war
and the post-1945 world order under US hegemony. He briefly traces the
political and economic institutions set up, nationally and globally, to
rebuild
a and stabilize the international capitalist system in the wake of the
cataclysmic events of the preceding years. Shutt describes and explains
the
reasons for the particular institutions and policies adopted and how
they laid
the foundations for the long post-war boom. Key features of the new
order were
the international financial system based on the dollar-gold exchange
standard,
a commitment to trade liberalization in the long run and political
stability
for the capitalist nations underwritten by American hegemony.
Shutt shows how post-depression and post-war reforms led to a strong,
proactive
role for the state as ultimate guarantor of economic stability and
social
security. Crises, instabilities, such as those that beset advanced
countries in
the previous period, would henceforth be managed by the new Keynesian
stabilization policies. The new technologies launched from 1900-45 were
linked
to rapidly growing mass markets after 1945, which generated a near two
decade
upswing in productivity which supported rapidly rising incomes that
served to
further stabilize the new high-productivity, high-consumption economy.
Many
then believed that the capitalist system had permanently stabilized
itself
through new, superior institutional and technological innovations and
the use
of Keynesian demand management policies to prevent or curb slumps.
However, in the 1970s, instabilities re-emerged and growth slowed down
throughout the world capitalist system. Keynesian policies also ceased
to work
as demand stimulation merely led to high inflation appearing alongside
sluggish
economic growth, the phenomenon of 'stagflation.' Other symptoms
of the
breakdown of post-war stability were the collapse of the Bretton Woods
fixed
exchange rate system and the oil-price hikes. Apart from the first two
chapters, Shutt's book is primarily an analysis of the unravelling of
this
post-war system of regulated capitalism. In particular, he examines the
theoretical and political responses to these events and how these have
forged the
neo-liberal consensus that has dominated establishment thinking from
1979/80.
The neo-liberal reaction (from 1979/80)
Keynesian policies gave way to monetarism, market liberalization
and the
privatization of public enterprises in the UK and US. However, monetary
targeting was quickly abandoned and inflation brought under control
only by
raising interest rates and precipitating the deep 1980-2 recession
which did
considerable damage to the real economy. Shutt's argument is
corroborated by
the famous economist Paul Krugman (1994; ch. 1), but Shutt brings out
the
inconsistencies in the neo-liberal ideology more clearly.
Unfortunately, Shutt
persists in using the term 'neoclassical' when he likely means
'neo-liberal,'
making a distinction between 'neoclassical' and 'Keynesian.' In the US,
the
term 'neoclassical' is commonly applied to mainstream economic thinking
which
includes the Keynesian-neoclassical synthesis and even more recent
schools of
macroeconomics (see Weintraub at
http://www.econlib.org/library/Enc/NeoclassicalEconomics.html#further).
The 1980-82 recession and the elevated interest rates also gave rise to
a chain
of debt defaults in Latin America, starting with the Mexican debt
crisis of
1982, which ushered in the famous 'lost decade' of the 1980s for many
developing countries, a point taken up later in the book.
Shutt goes on to describe how other aspects of the neo-liberal agenda
were
pushed through by the Thatcher and Reagan administrations. These were
then
taken up widely abroad starting with the nominally socialist
governments of
Australia and New Zealand. Again he points out the practical and
conceptual
inconsistencies in the policies followed and the great difficulties
encountered
in scaling back the role of the state. The Thatcher government was able
to
reduce fiscal deficits on account of North Sea oil. Not having a
similar
windfall, the Reagan administration presided over massive increases in
budget
deficits as its supply-side tax reduction policies failed to stimulate
growth
sufficient to offset the tax reductions and increases in defence
spending.
While fiscal orthodoxy and monetary restraint figured strongly in the
neo-liberal rhetoric, Shutt shows that it was more about institutional
reform,
trade and financial liberalization, privatization and deregulation.
While these
policies failed to roll back the state, the broader market-promoting
reform
agenda gathered momentum and has now spread widely across the world as
official
policy if not actual practice. Shutt, however, fails to identify
adequately the
cogency and coherence of the political-intellectual current that
supplied the
underlying rationale for this fundamentalist, neo-Austrian alternative
to
Keynes, developed by Friedrich von Hayek. While the Thatcher and Reagan
administrations had already been won over to the neo-Austrian agenda by
1980,
China's increasing turn to markets and the collapse of 'Socialism' in
the
Soviet Union and East Europe by 1990 strengthened and widened its
appeal. By
century's end, a sea-change in economic policy has been carried through
by
pressures exerted over various channels. The story of that revolution
in
ideology is related with some neo-Austrian bias by Yergin and Stanislaw
(1998).
What Shutt does well is to highlight the practical and theoretical
contradictions
arising out of the above policies, problems blithely ignored in
neo-Austrian
market triumphalism. He shows that despite rhetoric about shrinking the
state,
corporations and conservative governments turn to the state to resolve
these
contradictions. A prominent example is the Savings and Loan crisis in
the USA
which has its roots in earlier financial liberalization; the bankrupt
financial
institutions were bailed out by the Federal government. In fact
the role
of government in the economy has grown steadily from the 1930s to the
present
directly in response to various market failures which have been
identified and
addressed by governmental action and new regulatory institutions.
Financial liberalization and rising
instability
An important outcome of the Reagan-Thatcher reforms well described
in the
book is deregulation of financial markets and its consequences. With
safety
constraints removed, such as separation between commercial and
investment
banking, banks have undertaken much riskier behavior in the drive for
higher
profits, including highly speculative investments in property
development. The
Savings and Loan debacle in the USA, described above, is one example.
Another
was the activities of corporate raiders. Many companies have also been
induced
to take on excessive debt which undermines financial stability.
Overall, Shutt
points out that a new speculative climate has been created in which the
viability of major companies and the livelihood of millions of workers
have
been mortgaged to give free rein to speculative orgies bordering on
financial
piracy. Though not so apparent at the time the book was published
(1998) these
warnings have been amply borne out by recent scams at Enron and other
major
companies.
Another consequences is the enormous expansion of speculative foreign
exchange
transactions, which destabilize entire countries. A particular problem
is the
short-selling of wobbly currencies by hedge funds which try to make
very large
profits from forced devaluation of target currencies. Shutt also notes
the
proliferation of offshore financial centers which facilitate money
laundering,
organized crime and large-scale corruption. Caught up with the
imperative of
maintaining laissez faire conditions for international financial
transactions,
the G7 countries often wring their hands about these abuses but fail to
take
any concrete action.
Implications of technological change
One of the most important issues raised by Shutt is the effect of
technological change on demand for labor and capital. He observes that
from
around the early 1980s a great deal of investment in the services as
well as in
manufacturing, has been directed at cutting cost - that is raising
labor
productivity - without expanding capacity very much. As a result the
real demand
for capital and labor to support any particular expansion of output,
has fallen
from the norm for earlier periods in all industrial countries.
This has
led to 'jobless growth' and contributed to a glut of financial capital.
These
are well known consequences of the revolution in information technology
that
has been sweeping through the world.
The new technologies associated with computers, communication and the
Internet,
identified as the 'information technologies,' are radically changing
the
organization of business, the demand structure for skills, business
information
patterns and productivity in service and manufacturing operations.
Managerial
hierarchies are being flattened and personnel previously engaged in the
processing of business information are drastically cut in numbers since
now
much of this work is done by computers running resource planning
software.
While the demand for personnel skilled in computer-related operations
has
risen, the demand for run-of-the-mill managerial, clerical and even
manufacturing jobs has fallen. We see countries such as Germany and the
USA
seeking software engineers in India and Russia, while aggregate
unemployment
rises. This is because displaced workers cannot be absorbed in the new
jobs
being created since they do not have the training or even the aptitude
for it.
Shutt notes accurately that retraining schemes have generally failed to
have
any significant impact in bridging this skills gap.
The long-term changes described by Shutt are characteristic of
transitions in
the techno-economic paradigm (see Perez 2002) when the core
technologies
underlying the economic system undergo a fundamental change, such as
from the
age of steam and coal to the internal combustion engine and electricity
and now
to the information age. The old sets of skills are devalued and new
skills are
required. But since the re-investment in new 'human capital' takes much
longer,
an increase in structural unemployment results. Shutt does not identify
this
phenomenon in these terms. But he correctly identifies a new feature,
i.e.
reduced demand for investment in physical capital with reduced
incremental
capital/output ratios. The other feature is that computers and new
software
systems are significantly raising productivity in service operations
and even
managerial activity which reduces employment and flattens managerial
hierarchies.
These trends are seen not just in Europe, Japan and the United States,
but all
over the world. This is one reason why globalization with its
intensified drive
for higher productivity in all production and service operations that
are
internationally competitive, is so unpopular: unemployment rises along
with
productivity. Even in fast growing China where East Asian-style
productivity
growth is transforming millions of rural folk into industrial workers
on a
scale not seen before in history, there is rising frustration directed
against
the Party leadership. In the drive for productivity the social support
system
of the 'iron rice bowl' has been removed; the least skilled and least
capable
workers are thrown on the scrap heap to roam around its big cities,
vainly
looking for work.
The glut of financial capital
A central problem is that capitalism does not smoothly move from
the
initial phase of a transition in the techno-economic paradigm (a
concept that
is not clearly identified by Shutt) to a later and more mature phase in
which
rapid economic growth and increasing education and training lead to
rising
employment and even an excess demand for immigration. In the previous
transition, the new technologies that were introduced in the early 20th
century coalesced into a mature phase of high demand for labor only
after 1945.
This was preceded by social chaos, systemic breakdown in the worldwide
depression of the 1930 and the second world war, which eventually
cleared the
economic and social ground for the new techno-economic paradigm to
establish
foundations that were resilient.
Of course, conditions were vastly different at that time: capitalism
had been
in political crisis from the First World War itself and the Russian
Revolution;
liberation struggles had broken out in most of the colonial world and
the
legitimacy of capitalism was threatened by the worldwide rise of
interest in
socialism. It is well understood today that capitalism survived the
social-political crisis mainly because working people in Europe, North
America
and even in the colonies, saw the need to join with the ruling classes
in the
struggle against fascism and also because the barbaric nature of
Stalinism
effectively killed any interest in moving towards similar political
experiments. Stalinism remained attractive only in emerging Third World
revolutions where a new class of Jacobinist radical intellectuals
seized state
power and created authoritarian political systems which paid lip
service to
socialism but recreated medieval-style autocracies.
All that is past now, as global capitalism enters the present crisis.
But new
contradictions have arisen and Shutt traces some of these competently.
A
central theme in his book is the oversupply of financial capital which
from the
mid-to-late 1970s has been finding inadequate opportunities for
profitable
investment in the heartlands of industrial capitalism. What this means
is that
the supply of new technological innovations within the prevailing
techno-economic paradigm is not adequate to absorb the mass of finance
seeking
investment opportunities. Additionally there is the problem of
maintaining
adequate returns on existing investments; these returns tend to be
driven down
over time by rising competition from new domestic investments and
international
sources as trade gets liberalized. Shutt's analysis is particularly
useful here
because the systemic problems relating to global finance are rarely
raised in mainstream
analyses and even when they are, the true nature of the problems are
shrouded
in arcane terminology. Another irritant here is Shutt's failure to
distinguish
carefully between financial capital and physical capital.
Shutt also describes other ways in which surplus funds have been used.
From the
late seventies there had been a flow of funds to many 'emerging
markets'
particularly in Latin America. After the Mexican default of 1982 there
was an
abrupt drop in capital flows to Latin America which led to the 'lost
(development) decade' of the 1980s. Capital flows revived again
in the
early 1990s until the 1994-5 crisis is Mexico and elsewhere. These
flows of
short-term capital were then directed to East Asia where their abrupt
withdrawal in 1997 again led to the Asian crises of 1997-8, just as in
Latin
America. These triggered the currency crises in Russia (1998) and
Brazil
(1999). The Brazilian crisis contributed to economic collapse in
Argentina in
December 2001. Shutt identifies the problems posed by this excess of
footloose
funds sloshing around the world economy, but does not adequately
analyze the
destabilizing effect of short-term capital flows on vulnerable
'emerging
economies' possibly because at the time this book was being written,
the
problem was not well recognized. Today, however, the destabilizing
effects of
short-term capital flows are being hotly debated in many international
fora
(for details see Economist, 2003).
An important distinguishing feature of Shutt's analysis is the linking
of the
wave of privatization to the need to find adequate investment
opportunities for
excess financial capital. There are other reasons as well, such as the
need to
plug gaps in public finance. He shows that privatization has been sold
to the
public as necessary to raise productivity in the privatized sectors,
but
questions this justification. He notes that rising public sector debt
deriving
from declining tax revenues and rising fiscal deficits brought about by
neo-liberal policies, have also served as another investment
opportunity for
footloose finance seeking adequate returns. Other investment
opportunities have
been created by allowing private investment to fund public
infrastructure and
move into services such as postal, prison and garbage collection
services,
hitherto confined to the public sector. In the US, companies can now
buy back
stock, thereby raising the stock price to the advantage of top
executives who
are compensated partly with stock options.
There are some problems with this utilitarian justification of the
neo-liberal
programme started by the Thatcher and Reagan administrations. It is
commonly
known today is that this missionary free-market zeal was inspired by
neo-Austrian thinking transmitted to Thatcher via Keith Joseph. Shutt's
story needs
to be supplemented by the saga of ideological evolution told by Yergin
and
Stanislaw (1998) which has been briefly stated above. This reviewer
believes
that history is made as much by ideological waves as much as by
perceived
material interest. Otherwise it is hard to explain the
short-sightedness of
capitalist ideologues and Stalinists, whose gross misperceptions
eventually
undermine their own long-term interests. Ideas are certainly influenced
by the
concrete material conditions in which they arise, but they cannot be
explained
comprehensively by these conditions in a deterministic way. Thus
ideological
currents owe as much to the peculiar ideas of their founders as much as
the
material challenges they confronted. Shutt unfortunately largely
ignores the
ideological dimension as noted earlier; thus his explanations remain
incomplete.
Transitional economies and the Third
World
Shutt also analyses the recent evolution of the former planned
economies
into more 'emerging markets' and the 'emerging' or more often
'submerging'
markets of the Third World. He does identify many weaknesses of the
Soviet
System and other planned economies. These include use of
administratively
determined priorities and quantitative targets rather than signals
emanating
from the market, poor cost accounting and control, unwieldy
organizational
hierarchies and distortion of information flows, corruption,
suppression of
criticism and other bureaucratic ills. He also points to crumbling
public
infrastructure, capital stock that has not been renewed for decades,
increasing
fiscal anarchy in public enterprises and the rise of organized crime,
as major
causes - and symptoms - of social breakdown. Rising defence expenditure
was the
crucial burden that broke the camels back and this derived largely from
competition with the US in global power politics. Yet for this reviewer
at
least, he misses the most crucial issue leading to Soviet decline, the
inability of that society to generate endogenous technological
innovation
unlike the more successful capitalist societies. This major lacuna in
Shutt's
conception of economics is discussed elsewhere in this review.
Shutt discusses the different modes of transition to market economies
exhibited
by Russia, China and Eastern Europe. He shows how 'shock therapy'
liberalization in Russia, inspired by illusions about market forces
being able
to instantly spring into action and operate as in mature capitalist
nations,
led to a disastrous collapse of production from which the country is
still
recovering. In the meantime, mismanaged privatization has led to
oligarchic
control over industrial companies and set back the process of
democratization.
The lesson is that market forces operate best within a strong
institutional
structure which takes decades to build up, a point that appears to have
been
unknown to the various Western gurus that guided shock therapy
strategies.
Additionally, Russia has generated an extraordinary amount of
lawlessness,
including organized crime, which will be very hard to shake off now on
account
of the political and economic power amassed. He also shows that the
transition
worked better in Poland and the Czech Republic because policies there
were
quite different. He points out that China, the best performer of all,
has
totally ignored shock therapy ideas and gradually liberalized markets,
concentrating on promoting FDI and exports without dismantling the
administrative structures of the bureaucratic state. China was of
course helped
a great deal by the proximate East Asian examples from the early 1980
and by
the readiness of the Chinese Diaspora to bring productive investment to
its
coastal regions.
In a separate chapter, Shutt covers the evolution of Third World
economies over
the last 50 years or so. Except for East Asia, the general picture is
one of
catastrophic decline, particularly after the debt crises of the 1980s.
He shows
that the public sector in many countries has failed to meet up to the
challenges
of development, the growth of population, environmental decay and the
rise of
lawlessness and separatism. Many of the reforms foisted on developing
countries
by the World Bank and the IMF have not succeeded in generating economic
dynamism in the private sector in most countries. The flow of finance
to
developing nations and the instabilities generated by hasty
liberalization of
financial institutions, leading to a series of financial crises in
Latin
America and Asia, have been described earlier. Shutt sees the 'Third
World
catastrophe' as the broader playing out of the contradictions that
beset the
capitalist system worldwide.
While it is hard to quarrel with the broad thrust of his analysis of
the Third
World, he is probably somewhat over-pessimistic. Latin American nations
have
indeed made some progress in cutting down deficits and getting better
control
over macroeconomic management. Though enormous problems remain in
Brazil,
Argentina and Mexico, they have learnt some lessons from mistakes of
the past.
If one is to judge by recent postings on their web-sites, so also have
the IMF
and the World Bank, at long last. They are now less likely to impose
disastrous
policies on client states. Furthermore these countries are now much
stronger
exporters, so much so that Brazil faces many trade disputes with the
USA,
Canada and Europe. Nevertheless, Shutt is right to point to serious
weaknesses
in these countries, growing inequality and lawlessness. The recent
privatization wave in most countries, has also generated a great deal
of
corruption.
Many Asian countries have made much more progress than Latin America,
particularly the first tier East Asian tigers. This is another blind
spot with
Shutt. He argues that South Korea, Taiwan, Hong Kong and Singapore have
grown
on the basis of imported capital and technology and by exploiting
cheap
domestic labor. Here he completely misses the scope and scale of the
East Asian
achievement. Since 1960, labor productivity and wage rates have grown
steadily
and very rapidly on the basis of the fastest building up of
technological
capability seen in recent times. Hong Kong and Singapore now boast
standards of
living higher than Spain, Portugal or Greece and Taiwan and South Korea
are
close behind. These four countries are developed countries by any
measure and
labor is highly skilled there and no longer so cheap.
Obviously any developing country must grow initially on the basis of
adapted
technology, but today, except for Hong Kong, they are fully integrated
with the
networks of technology development of the advanced industrial
world (see
Rodrigo, 2001 for details). One has only to see the products exported
by South
Korea and Taiwan to see the extent of their technological mastery.
Finally
these nations have exhibited the highest savings rates in history and
are a
large source of capital and FDI for the rest of the world. They also
have the
largest foreign currency reserves in the world, next to Japan and
China. It is
hard to understand how someone as critically observant as Shutt could
be so
profoundly wrong about East Asia. In his eagerness to develop the case
for
general capitalist collapse, he dismisses East Asia without any serious
assessment of their achievements.
Technology as a public good: a lacuna in
Shutt's conception
Another major issue on which Shutt is out of touch with
contemporary
research on the advance of technology is in his conception of state
support for
technology advancement. He see this as another case of private
companies
relying on the state to bail them out. That is profoundly false. The
advance of
technology is a very complex kind of human activity. At the surface
level we
see companies developing commercially exploitable technologies to
produce goods
and services for profit. They are after all motivated by profit, not by
philanthropic considerations. Commercially exploitable technologies,
however,
arise out of an underlying stratum of generic technologies, also called
general
purpose technologies. This stratum in turn develops out of more
fundamental
advances in knowledge carried out in universities and research
institutions.
Therefore knowledge advance in science and technology takes place at
roughly
three distinct but interconnected levels.
The bedrock stratum of knowledge advancement is clearly a public good
or even
more a global public good. The development of scientific
knowledge is
clearly the responsibility of public, not-for-profit institutions like
the
universities and government research labs and programmes. Even if
carried out by
private firms, they need to be funded by public investment, since firms
cannot
turn these into profit-making activities. The intermediate layer of
generic
technologies also has many features of public goods. Even if developed
by
individual firms, they generate technological spillovers to other firms
within
the nation and also to firms outside. In short the development of
generic
technologies is rife with what economists call 'positive externalities'
in
which the social returns are much greater than the private returns that
can be
secured by the firm initiating the innovation. In the case of a
'negative
externality' such as industrial pollution, the social costs are higher
than the
costs borne by the polluting firm; hence society must exact clean-up
costs from
the firm. The crucial outcome of this conception is that private firms
will
invest insufficient effort in developing generic technologies since
they cannot
capture most of the returns.
Hence if a society wants the optimum development of technological
innovation,
the public sector needs to get involved in the development of generic
technologies. Ever since the late 19th century
governments in
Germany, Britain, France and the USA have shouldered this
responsibility to a
greater or lesser degree. Public-private cooperation in the development
of
generic technologies has been most spectacular in the USA during and
after the
second world war, under Federal, i.e. central government leadership.
Thus was
developed advances in semiconductors, computers, aerospace
technologies,
electronic communications, the Internet, biotechnology and many others.
There
is another important consequence of state involvement in technological
change.
Since the progress of technology is evolutionary, it is rife with
uncertainty, especially at the beginning of a techno-economic paradigm.
Even
firms that operate at the leading edge of technology are liable to make
disastrous mistakes as evidenced from a casual reading of business
journals.
The guiding hand of the state can greatly reduce the uncertainty
associated
with technical change.
Hence state involvement in technology development is a necessary
function under
capitalism, not just a class-conspiracy as seen by critics on the left
or an
unnecessary interference with market forces as charged by market
fundamentalists on the right. If the private sector is to be induced to
undertake risky investments in innovative generic technologies, it is
entirely
appropriate that part of the risk and investment cost be borne by the
public
sector, since society will draw much larger benefits than will accrue
to the
firm alone. It is hardly an accident that in the USA where
public-private
cooperation in the advancement of technology has been developed to a
higher
level than elsewhere, we also have the strongest advance of
technological
innovation in general. An explicit goal of the European Union project
has been
to mobilize public and private productive resources of the
aggregate of
nations to match technological innovation in the US. One example of
success is
the European aircraft producer Airbus Industrie, which has now achieved
competitive parity with the US giant Boeing, directly as a result of
organized
support from European states.
Conclusion: many strengths and some
weaknesses
Shutt concludes his book by emphasizing the crisis of political
legitimacy
for the profit system as presently constituted, on account of its
manifest
inability to address the growing contradictions of the system as a
whole. Thus
rising inequality and technology-related unemployment in advanced and
developing countries is accompanied by more frequent episodes of
systemic
macroeconomic instability. Corruption and internationally organized
crime are
definitely on the rise, with Russia and other transitional economies
contributing
a disproportionately large share. Additionally, there is increasing
international discord over trade, investment and intellectual property
rights
issues and about appropriate global collective action to safeguard the
environment and restore shrinking fish stocks caused by overfishing.
Developed
nations seem to be facing increasing difficulty in maintaining health
care
benefits, adequate education, social security for the unemployed and
the aged,
keeping crime under control and so on.
If Shutt were to be update his book today in the light of developments
over the
last 5 years or so since his book was published, he would undoubtedly
strike
a more pessimistic note. Global problems have got intensified and
a few
new ones have been added. He is likely to see the rise of militant
Islamic
fundamentalism as a failure of leaders of hegemonic nations to
address
historic injustices and resolve contemporary conflicts. Drug related
crime and
corruption have got worse as has the exploitation of Eastern European
women for
prostitution. Separatist violence has not got better and crime and
violence in
Brazil, Mexico, China and elsewhere has risen alarmingly. Following the
stock
market collapse in 2000 in the USA, recessionary conditions have
appeared
throughout North America and Europe. Japan continues in recession,
unable to
fix its major economic and institutional problems and now Germany has
slipped
into the same quagmire. Serious problems have arisen about malfeasance
by
corporate executives relating to gross manipulation of financial
statements for
their personal benefit, an issue that Shutt deals with briefly in his
book.
From the perspective of 2003, his 1998 claims seem excessively cautious.
At the very end, Shutt also discusses some of the political issues
arising out
of the major storm he sees on the horizon. He goes on to enumerate some
guidelines for a more viable, equitable world order. This is not the
place to
critically review the brief framework he has laid out in his last
chapter since
he seems to have developed this theme more fully in a later book
(Shutt,2002)
which is probably well worth reading. One crucial point is worth
highlighting:
Shutt does not appear to suggest that a more sustainable world economic
order
would do away with market forces completely. Instead, he sees market
forces and
profit incentives being redirected squarely towards serving major
social ends.
This approach can be interpreted as an attempt to redirect productive
activity
strongly towards the production of crucially important public goods,
away from
the present excessive production of private goods for private
consumption. At
least that is the interpretation that this reviewer imputes to Shutt in
accordance with his own prejudices.
To sum up, Shutt does manage to capture many of the essential features
of the
world economy in its evolution over the last half century. He does seem
to
understand economic issues much, much better than most of the critics
of
globalization. Because he understands the economic logic and political
exigencies
behind major events such as the formation of the IMF, the World Bank
and the
WTO, he rarely needs to conjure up fantastic conspiracy theories, such
as are
purveyed in some of the left literature. This book will provide
the
reader a sober and plausible account of how the post-War system evolved
and its
major problems and shortcomings. There are some serious flaws in his
analysis,
particularly his conception of technological change, which have been
identified
above. A better understanding of this issue will explain why capitalism
has so
far muddled through despite serious contradictions. It is also crucial
to
understanding why planned economies were not able to develop the
productive
forces beyond a certain level.
The major weakness is the conception of technological innovation and
the
central, symbiotic linkage between innovation and capitalist dynamism.
Though
Shutt talks about technology from time-to-time and even has a chapter
titled
'technological nemesis,' he seems to implicitly believe that innovation
is an
exogenous process, i.e. it is something that happens 'outside the
system.' This
is a weakness of mainstream economics as well; even most professional
economists have the vaguest notion of the role of technological
innovation.
Neoclassical growth theory actually models technological change as if
it were
'manna dropping from heaven,' using this exact phrase to explain why
this is
treated as an exogenous input. New growth theory, developed since 1986,
tries
to endogenize innovative activity. But it has hardly shed any new light
on this
problem, as pointed out by experts of technology such as Richard Nelson
(1997).
There is a much better understanding of technology now within a small
circle of
economists who specialize in the analysis of technology. These include
distinguished economists such as Nelson who are respected across the
profession. As a result more realistic ideas about technological
innovation are diffusing through the profession. Schumpeter is back in
fashion,
since he was the first economist to see the central role of innovation
and the
entrepreneur, in the progress of capitalism. Actually, Marx was the
first major
economist to understand the role of technological innovation in
regenerating
the dynamism of capitalist processes. Schumpeter, who was a great
admirer of
Marx, acknowledged this. But Marx did not arrive at the more
comprehensive
insights of Schumpeter, possibly because the processes of innovation
were in
their infancy up to 1870.
A major theme that runs through Shutt's analysis is the implicit
presumption
that the global capitalist system is moving inexorably towards a
catastrophic
breakdown. While this is a distinct possibility, this reviewer takes
that
position that a softer landing may also be within the realms of
possibility.
There are many complex, self-regenerating processes within capitalism.
For
example crises often lead to reforms that strengthen the system, making
it more
resilient. This is what has happened in South Korea and Taiwan after
the 1997-8
crisis. As pointed out earlier, capitalist dynamism waxes
and wanes
over long periods of time as new technological paradigms replace
existing ones.
Currently we are witnessing the spread of information technology
replacing and
transforming the older industries at the same time that industrial
capitalism
is spreading rapidly into a broader swathe of developing countries,
particularly in Asia and Latin America.
To make sense of these processes, it is necessary to suspend, or at
least
relax, some of the mental models of the past, such as the implicit
belief that
capitalism has been in 'permanent collapse' from the beginning of the
twentieth
century, which is manifestly false. The historical process is more
complex than
we can imagine and its prudent to be prepared for a range of possible
outcomes.
The transition from the present predicament of capitalism to a superior
social
order need not be contingent on a catastrophic collapse, though that
outcome
cannot be ruled out by any means. For the present this book provides a
pretty
good account of the problems that need to be fixed.
References cited in review
Economist (2003), "A cruel sea of capital, " special
supplement in May 3rd issue.
Krugman, Paul (1994) Peddling prosperity,
Norton.
Nelson, Richard R. (1997), 'How new is new growth theory?', Challenge,
40 (5): 29-58.
Perez, Carlota (2002) Technological
revolutions and financial capital, Edward Elgar.
Rodrigo, G. Chris (2001) Technology,
economic growth and crises in East Asia, Edward Elgar.
Shutt, Harry (2002) A new democracy:
alternatives to a bankrupt world order. Zed Books.
Yergin, Daniel and Joseph Stanislaw (1998) The
commanding heights, Simon and Schuster.
Professor
G. Chris Rodrigo, School of Public Policy, George
Mason University, 3401 Fairfax Drive, Arlington VA 22201, USA.