Panitch and Harvey Provide Essential Primers on the Financial Crisis

In and Out of Crisis: The Global Financial Meltdown and Left Alternatives

By Ed Walsh
Irish Socialist Network
October 20th, 2010

I’ve always found the economic side of Marxism to be a bit of a chore, really. Whether it’s the great bearded one himself or such notable followers as Rosa Luxemburg and Ernest Mandel, I’ve tended to skip the weighty volumes they delivered with Capital or Capitalism in the title and go for the sparkling political essays that don’t mention the organic composition of this or the falling rate of that. Every now and then I’d dig out one of the books recommended as an accessible primer on Marxist economics, struggle my way through it and forget much of what I’d read within a few weeks.

Eventually I decided it was time to get my head around this stuff properly and clear up my ignorance of what’s been happening to global capitalism over the last few decades. Handily, I had started to get my teeth into it just when the great financial crash began. If anyone tries telling you that nobody predicted what was going to happen, don’t listen: the Marxist economic analysts whose work was derided or simply ignored by the wise men of the mainstream had their eye firmly on the ball. Here’s one random example from an essay published in 1999 by the Spanish economists Jesús Albarracín and Pedro Montes:

“The magnitude of the financial problem surpasses that of any preceding historical period, including the years preceding the crash of 1929. Considering present conditions – capital’s internationalism, decomposition of the international monetary system, deregulation of markets – the house of cards erected through financial and credit expansion is highly unstable and runs a risk of collapse which is not easy to dismiss. Before the initiation of another expansive cycle similar to that of the 1980s and above all before the initiation of a lasting phase of recovery, a cleansing of the system which destroys part of this financial capital seems necessary. No firm recovery can take place with the burden of the current financial hypertrophy and degeneration.”

Not bad for “dinosaurs”, eh?

Now that the crisis has actually hit us, it might be a good idea to check out this deeply unfashionable school of economic thought, among whose English-speaking vanguard the authors of In and Out of Crisis and The Enigma of Capital rank very highly.

In their short, accessible primer, Leo Panitch and Sam Gindin set out to dispel some naïve and woolly thinking about the crisis on the Left. They challenge the common view of neo-liberalism as an ideology pure and simple, describing it instead as a class project which aimed to reinforce the social power of capitalist elites in the global North. This brings into question the idea that 2008’s meltdown – and the massive state intervention which followed – marked the demise of neo-liberalism. The ideology has certainly been rendered laughable, but then, it was never meant to be carried out in practice. Reagan, Thatcher et al never had a problem with state intervention as such. In fact their project required it, on a vast scale. It’s not a question of whether or not states should intervene in the economy, but how and on behalf of which social interests.

Panitch and Gindin also question the widely-urged remedy to the financial joy-riding which has marked recent economic history: more and better regulation. Such calls overlook the class nature of the state in a capitalist society, which renders it unsuitable for the task of bringing finance capital to heel:

“The fundamental relationship between capitalist states and financial markets cannot be understood in terms of how much or little regulation the former puts upon the latter. Neo-liberalism brought a change in the mode of regulation, but there wasn’t less regulation. Moreover, freer markets often require more rules, if nothing else to protect the property owners who are in the market, to lay the rules under which they can sue each other and go to court when they are not able to make their obligations. It is certainly possible to say that the regulatory agencies should have developed forms of controlling some of the rampant speculative and fraudulent activities. But regulatory agencies weren’t interested in that. Their role was developing the kinds of regulations that would promote financial innovation. And the resultant financial speculation has been central to the kind of dynamic globalisation that capitalism produced to the cost of a great many people around the world.”

There will have to be a major renewal of working-class political organisation if this comfortable relationship between capitalist states and capitalist markets is to be challenged; Panitch and Gindin have some useful reflections on the impasse of North American trade unionism which can easily be linked with experience on this side of the Atlantic, and conclude with “strategic considerations” for the Left and ten theses on the crisis that deserve careful study.

Like Eric Hobsbawm and Frederic Jameson, David Harvey has managed the impressive feat of establishing himself as the pre-eminent scholar in his field despite remaining loyal to Marx throughout a resolutely anti-Marxist age. Harvey’s reputation is founded on an awe-inspiring grasp of factual material and social theory, in tandem with a lyrical prose style that recalls the best of Marx himself. Try this for a taster:

“If we could somehow map the movement of capital occurring in different places across the globe, then the picture would look something like the satellite images taken from outer space of the weather systems swirling across the oceans, mountains and plains of planet earth. We would see an upswelling of activity here, becalmed zones there, anticyclonic swirls in another place and cyclonic depressions of various depths and sizes elsewhere. Here and there tornadoes would be ripping up the land and at certain times typhoons and hurricanes would be coursing across the oceans posing imminent dangers for those in their paths. Refreshing rains would turn pastures green while droughts elsewhere leave a scorched earth brown.”

The Enigma of Capital is a remarkably clear and readable analysis of the factors that cause capital to break its cycle, generating the crises that have wreaked havoc across the globe since the birth of industrial capitalism. There’s no point trying to sum up Harvey’s argument in a few sentences: I’ll just concentrate here on one of his points about the origin of economic crises. Marxist economic theory has often been divided into camps grouped around three “crisis theories”: “The profit squeeze (profits fall because real wages rise), the falling rate of profit (labour-saving technological changes backfire and ‘ruinous’ competition pulls prices down), the underconsumptionist traditions (lack of effective demand and the tendency towards stagnation associated with excessive monopolisation).” Harvey believes that we need a more pluralist approach to crisis theory that combines the insights of different schools:

“The analysis of capital circulation pin-points several potential limits and barriers. Money capital scarcities, labour problems, disproportionalities between sectors, natural limits, unbalanced technological and organisational changes (including competition versus monopoly), indiscipline in the labour process and lack of effective demand head up the list. Any one of these circumstances can slow down or disrupt the continuity of capital flow and so produce a crisis that results in the devaluation or loss of capital. When one limit is overcome accumulation often hits up against another somewhere else. For instance, moves made to alleviate a crisis of labour supply and to curb the political power of organised labour in the 1970s diminished the effective demand for product, which created difficulties for realisation of the surplus in the market during the 1990s. Moves to alleviate this last problem by extensions of the credit system among the working classes ultimately led to working-class over-indebtedness relative to income that in turn led to a crisis of confidence in the quality of debt instruments (as began to happen in 2006). The crisis tendencies are not resolved but merely moved around … it is also vital to remember that crises assume a key role in the historical geography of capitalism as the ‘irrational rationalisers’ of an inherently contradictory system. Crises are, in short, as necessary to the evolution of capitalism as money, labour power and capital itself.”

John Waters of the Irish Times recently launched a particular ignorant and senseless (even by his standards) attack on “gobshite-Marxism”. While we have to admire his pioneering use of the word “gobshite” as an adjective, it’s hard to avoid the conclusion that Waters just didn’t have a clue what he was talking about. There’s been plenty of gobshite-neo-liberalism in the Irish media since the crisis began, however. It would be nice to imagine one of the pundits who froth at the mouth when talking about public-sector workers delegated the task of rebutting Harvey’s argument, on pain of losing their access to the opinion pages and having to go around in public with a trade union pin on their jacket if they can’t get to grips with it. We’ll be waiting a long while for that to happen, of course. But in the meantime, do yourself a favour and check out both of these books: even though they barely mention Ireland, you’ll learn more about where we might be headed than a year’s subscription to the Irish Times or the Irish Independent would divulge.

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