The author of The Enigma of Capital spoke to Hector Agredano about the economic crisis and the response from the Left.
IN THE Enigma of Capital you attack mainstream economists for failing to anticipate the crisis. Can you talk about why bourgeois economists missed the coming crisis, which many Marxists predicted? How is Marxism superior to bourgeois economics in this respect?
I THINK the central idea in Marxism is of course one of contradiction, that the capitalist system is seen in its very foundation as containing a series of contradictions that clash with each other and therefore produce a society always founded on tensions of various sorts. For example, the tension between capital and labor is the obvious one that every Marxist would pay attention to—the nature of the class struggle. But there are other tensions too between production and consumption, between use value and exchange value. All of these tensions are there.
What is a house for? Is it a use value where people can live their lives or is it an exchange value? What we saw for example in the recent crisis is the way in which that tension between use value and exchange value of a house erupts into a macro crisis. So from a Marxist perspective there are always tensions. The only interesting question therefore from a Marxist perspective is when those tensions erupt into a major crisis of instability and therefore have to get resolved by the emergence of a different configuration of capitalist forces if the crisis is going to be resolved internal to capitalism.
Now, there is a joke about Marxists, that they have predicted correctly the last twelve of the last three crises. So you always have to be careful about saying that a contradiction is going to erupt in a crisis or that there’s going to be a final crisis. But what Marxian theory tells us is that there is no such thing as a stable capitalist system. So for instance, when economists from Ben Bernanke to Paul Krugman start talking about the 1990s as the period of “great moderation,” or when they start to say that crisis tendencies have been resolved, from a Marxist perspective you know that is never going to be the case.
As recently as 2004-2005, even before he became chairman of the United States Federal Reserve, Bernanke was talking about the tendencies toward instability as muted and as nothing to worry about. Conventional economists have an understanding of society that is about what they would regard as a tendency toward equilibrium, that when the market is operating properly within the right institutional framework—which includes some degree of regulation of contracts and private property rights—it should produce a condition of equilibrium. So conventional economics is always talking about the tendency toward convergence, toward equilibrium, and that equilibrium is possible provided the right mix of policies and as long as there isn’t anything external that disrupts the whole system. External problems would be so-called natural disasters, wars, geopolitical conflicts, and protectionism. Crisis would then arise because of these external interventions, which take us away from the path to equilibrium, which is always possible.
From a Marxist perspective, equilibrium is an unusual condition. There are always forces taking us away that are internal to the dynamics of the system. So the Marxian framework would look at it in a very different way. But, again, I go back to this—you always have to be careful from a Marxist perspective not to say, “Here is the next crisis and it’s the final crisis.” What I try to do for instance in The Enigma of Capital, is to talk very specifically about what the nature of the internal contradictions of capitalism are and why the resolution of the crisis of the 1970s created a configuration that was likely to produce the sort of crisis we’ve finally seen erupting around us over the last two or three years. That then leads to the big question: What kind of adjustments are likely to occur within the capitalist dynamic to create the foundations for a new crisis further down the way?
DO YOU think that this economic crisis also represents a crisis in bourgeois neoliberal ideology?
I THINK there’s no doubt that the legitimacy of neoliberal theory has been called into question. Many people who were once firm believers in the efficient market hypothesis now recognize that they were wrong. There is the emergence of a consensus among many economists that stronger forms of intervention in the economy are really required in order to get out of this crisis and in order to stabilize the system. The typical neoliberal arguments that were used back in the 1970s to 1980s as a way to get us out of the crisis can’t be used anymore—including, of course, the argument that the crisis is due to greedy trade unions, greedy labor, and that labor is too well remunerated. You can’t make that argument in these times. In fact if any argument can be made at all, is that labor is too weak in the present circumstances. Of course ideologically it is very difficult to get the Republican Party or the right wing of the Democratic Party to say that the answer is to re-empower labor in the current circumstances.
The one place where you are beginning to see signs of that happening is of course China. The Chinese central government has for the first time allowed a major strike to unfold that was not organized by the communist-led trade union but was a spontaneous strike. We’ve seen the Honda strike, which has led to the 30-40 percent increase in wages at Honda. There’s the Foxconn conflict, which is going to double wages there. The Chinese government seems to be empowering labor right now in ways that we don’t see happening throughout the rest of the advanced capitalist world like Europe and the United States.
BASED ON what is being done by governments and mainstream economists at the moment, what is replacing neoliberal ideology?
THERE’S A theory of neoliberalism that actually never worked. Margaret Thatcher tried it and failed in three to four years. Then there’s the pragmatic form of neoliberalism, which is constantly advocating for free markets and the withdrawal of state intervention. But in practice this was always about supporting financial institutions. In the Mexican debt crisis for example, the Treasury and a revived International Monetary Fund bailed out Mexico in order to save the New York bankers. What happened there was the introduction of moral hazard into the system. So this last system was based on always deciding to bail out the financial institutions at all costs.
This is not consistent with neoliberal ideology at all. Neoliberal ideology, pure ideology, would say, “You make your bed, you lie on it. If you make a bad investment and you go bankrupt, too bad.” Right now what we see is a problem with the formal ideology that wants to keep the state out of everything but an embrace by political power, overtly, of the requirement that they bail out financial institutions at the expense of the population. There is a bit of a struggle emerging over that because both on the right and the left of the political spectrum there are people who don’t agree with that.
As I see it right now, there is no inclination whatsoever to change that thesis, that that is what you have to do. But then the problem arises that you shift the crisis. Again, one of the theses very important to me in The Enigma of Capital is that capital doesn’t solve its crisis tendencies but moves them around. So we’ve sort of solved the banking crisis, but now we’ve got a sovereign debt crisis of the finances of states. You see this of course in southern Europe, Greece, Spain, and Portugal. But internally in the Untied States we also have a fiscal crisis emerging with California for example, being one of the largest public budgets in the world, which is in serious difficulty. So we’ve shifted the locus of the crisis from the financial institutions to state finance.
Then there is a big question of how that is going to be addressed and that is the big question that is on the agenda right now. Whereas this time last year it was how to stabilize the banks, it’s now how to stabilize state finances and this is a question that is not going away easily; it’s one we’re going to have to be concerned with over the next ten or fifteen years. Alongside of that, as they attempt to stabilize state finances through austerity they’re going to stabilize high unemployment. That is the question emerging now, they shifted it from the financial institutions, then to state finances, and then to the people in terms of austerity and unemployment. The big question then is how are the people going to respond?
We see this in some degree with the strikes in Greece and Spain and some of the agitation that’s been going on in the University of California system where we actually see popular resistance beginning to build against the way in which state finances are being stabilized at the expense of the people. The state finances of course, got into a mess because they stabilized the financial institutions as a sort of chain effect. So how it’s going to turn out is going to depend very much, it seems to me, on the way in which the class struggle evolves. But this is going to be a class struggle vis-à-vis the state apparatus and state power trying to say, “You are the people that are going have to bear the costs of this crisis,” and many people saying, “No, we should not bear the cost of it. The people who bear the cost of it should be the bankers, the financiers, and the upper classes,” who by and large—some of them have taken a hit—but most are coming out of it OK at this point. So we see this dynamic of class struggle unfolding.
AS YOU have mentioned, here in the United States and in Europe austerity measures are being introduced. Do you think that the austerity measures are going to resolve the crisis?
THE AUSTERITY measures could help resolve the fiscal crisis of the state, but in the same way that that crisis arose out of resolving the [crisis of the] banks. So the big question is what kind of crisis will that promote? And of course this creates a crisis of unemployment. If states start introducing austerity—like Cameron in Britain is talking about major cuts and that’s going to cause major unemployment. Here in New York State there’s talk of massive budget cuts and massive unemployment in the public sector. So what that launches then is a huge struggle between the state and the public sector unions in particular. So we are likely to see, as we have seen in Greece and Spain, is a widespread struggle because the crisis is being displaced and this again comes back to my thesis that crises don’t get resolved, they simply get displaced from one sphere to another.
WHAT DO you think about the response of the left to the budget cuts and what do you think would be the way forward for the left?
WELL, IT depends who you call the left. There are many groupings on the left that are discontent with the situation, but I don’t see a unified analysis of what the nature of the problem is on the left. To many degrees I see many kinds of solutions and different configurations of organization. So I think the left has not been together in terms of its response. I think right now, to the degree that the nature of the crisis is shifting toward public sector unions, we are likely to see a more classic class struggle response to the situation than occurred when the crisis was located in the banking system. What that will lead to is a convergence of many forces on the left around the idea that we have to protect the population in general against these austerity measures that are coming from the state. I think the objective circumstances under which the crisis is unfolding are likely to lead to a more unified politics on the left, but there are many different factions on the left.
Sometimes I get in trouble for saying this, but for example, the anarchist autonomist line does not want to take state power and does not believe in taking state power, although there are some shifts now among some of the major theorists in that area. I thought it interesting that in the last book by Hardt and Negri, they did not oppose taking state power, which is very unusual from that sphere, so maybe that idea will shift. I think that the classic left-wing configurations, and I am not talking about the social democratic, I’m talking more about the Marxist and communist configurations, I think they have a problem, and I’m making a caricature here. Their notion of the factory worker as the vanguard proletarian figure that is going to make the revolution, I don’t think that works; I don’t think it ever really worked very well. You have to have a broader notion of an alliance of forces in which the conventional proletariat is an important element, but not necessarily an element that has a leadership role.
A leadership configuration has to evolve around all those people who are involved. For example, one of my areas of interest would be those who are involved in the production of urbanization, the people who produce cities and the people producing city life. Right now, to the degree that the struggle is likely to be between public sector workers and the state apparatus, this is a very specific form of struggle, which is not based in the factories. It’s going to be the teachers unions and these [types of] groups that are likely to be pushed into a more vanguard role. So I think the left groups need to sit back and ask themselves who is likely to play a vanguard role in the current situation and what should the politics be in relationship to state governments and to corporate forms as well.
MARXISM HAS always been about both explaining and changing society. What role do you think Marxism should play in building a new resistance with a goal of transforming society?
I THINK it plays a key role. From my perspective, the failure of other forms of understanding of political economy is now so obvious and the possibility now exists to push really hard for a clearer Marxian understanding of how political economy works so I think at that level of critique Marxism has a very important role to play. But I think also that the history of Marxism and its constructive side is a collective memory that can be drawn upon politically, and I think the argument has to be made very directly that the degree of standards of living we did achieve by the 1970s had everything to do with the dynamics of class struggle as it occurred after 1917, and as it occurred even in this country during the 1930s.
There is a kind of story line that says that Marxism failed—well, it didn’t. Actually it had a very constructive role to play. Now at the same time, within Marxism we also have to look back and be very critical of what I see as some very conservative, rather dogmatic understandings of the world. For example, we can’t simply go back and cite Lenin as if somehow this is the solution. What a good Marxist does is to look at the conventional situation and do an analysis all over again given Marx’s method to try and understand the dynamics of the situation and therefore try to intervene in a way which is going to push society toward more democratic and more egalitarian solutions, and ultimately to solutions that are entirely non-capitalistic. I think that Marxism as a revolutionary theory and as a revolutionary practice has much to teach. There is a tremendous historical record, but we have to approach that historical record with some critical perspectives on what we did wrong as well as what we did right, and I think that is why right now this is a tremendous moment to re-present if you like, what the Marxian argument is about, and I think that a lot more people are willing to listen.
There is this wonderful poll that came out from the Pew Research Center that said only 43 percent of the people in this country actually think capitalism is good, and I think particularly among a younger group from [ages] eighteen to thirty, 43 percent thought socialism was better. So even in this country with the likes of Glenn Beck, I think they are getting so upset precisely because there is a quiet revolution going on in terms of attitudes, and we can support that by producing arguments. My own contribution was to write The Enigma of Capital, which is accessible to people, so they could get a good sense of what the Marxian argument is without being too dogmatic or arrogant about it. So I think that should be where we position ourselves right now.