A Marxist take on “the great stagnation”

From Will Davies:

Wandering around Stratford Westfield the other day, I had a similar but more pessimistic thought: maybe capitalism is gradually morphing into the ‘actually existing’ state socialism of the old Eastern Bloc. (For international readers, Stratford Westfield is a vast shopping centre that was strategically located between the 2012 Olympic Park and the nearest train station, in the hope of rinsing unfortunate athletics fans for some cashen route to the games.) British capitalism already has many of the hallmarks of Brezhnev-era socialist decline: macroeconomic stagnation, a population as much too bored as scared to protest about very much, a state that performs tongue-in-cheek legitimacy, politicians playing with statistics to try and delay the moment of economic reckoning.

…My feeling is (and I discuss this in a book I’m just finishing) that neoliberalism has entered a post-critical, repetitive phase, in which certain things have to be spoken – delivery, efficiency, security, competitiveness – but in order to hold the edifice together, rather than to reveal anything as objectively ‘delivered’, ‘efficient’, ‘secure’ or ‘competitive. Political systems which do not create space for critique encounter this need for mandatory repetition immediately, as occurred to state socialism.

Eastern bloc socialism had to keep going through the 1970s and 80s, in spite of lagging growth and failed ideological hegemony, because nobody knew what else to do. This is the stage neoliberal policy-making has now reached. The difference is that there is still one area of our economy that is still moving and changing, namely the money economy, with corporate profits high and financial innovation ongoing. What seems to have changed, post-2008, is that the price paid for this monetary dynamism is that the rest of us all have to stand completely still. In order that ‘they’ in the banks can cling on to their modernity of liquidity and ultra-fast turnover, ‘we’ outside have to relinquish our modernity, of a future that is any different from the present. Finance is to our stagnant societies what the space race and the Cold War were to the Eastern Bloc countries of the 1970s and 80s – a huge cost that the state imposes on its public, with the result that cities and economies start to become tedious processions of the same.

The link is here (good photos), and the underlying Potlatch blog is here.  The blog has plenty of interest, and this is an amusing post about advertising.

Comments

After 100 million dead, maybe we could like, never listen to these people? Ever?

Can we do that? We don't listen to a Nazi take on anything, right?

"British capitalism already has many of the hallmarks of Brezhnev-era socialist decline: macroeconomic stagnation, a population as much too bored as scared to protest about very much, a state that performs tongue-in-cheek legitimacy, politicians playing with statistics to try and delay the moment of economic reckoning."

Replace "British capitalism" with "welfare state" and he'd be right on everything.

No True Capitalism.

Mike H. is right, and Will Davies is evading the point only by making completely unnatural thought contortions -- although those contortions are typical of Marxists.

Will Davies himself says about the project in Stratford Westfield:

"Only a very carefully planned alliance of state and corporate actors could have made this happen, with the principle goals being 'security' and 'delivery'. "

The Marxist theory of capitalism assumes that the state will be captured and used by capitalists in order to secure its interest.

This does not make the Marxist theory of capitalism a theory of communism; it just suggests that theories of capitalism which imply that the state will remain benign so long as one believes in the non aggression principle vigorously enough, or writes down the right magic words on a piece of paper (typically called a "constitution"), are probably a little silly.

"The Marxist theory of capitalism assumes that the state will be captured and used by capitalists in order to secure its interest."

No it doesn't. It only assumes competition, ie, that competition leads inevitably to monopolization, at which point "exploitation" and volitility increase without bound and you get a proletarian revolution. There's absolutely no requirement that government be involved in process in any way.

"through the emancipation of private property from the community, the State has become a separate entity, beside and outside civil society; but it is nothing more than the form of organisation which the bourgeois necessarily adopt both for internal and external purposes, for the mutual guarantee of their property and interests. The independence of the State is only found nowadays in those countries where the estates have not yet completely developed into classes, where the estates, done away with in more advanced countries, still have a part to play, and where there exists a mixture"

". It is therefore obvious that as soon as the bourgeoisie has accumulated money, the state has to beg from the bourgeoisie and in the end it is actually bought up by the latter. This takes place in a period in which the bourgeoisie is still confronted by another class, and consequently the state can retain some appearance of independence in relation to both of them. Even after the state has been bought up, it still needs money and, therefore, continues to be dependent on the bourgeoisie; nevertheless, when the interests of the bourgeoisie demand it, the state can have at its disposal more funds than states which are less developed and, therefore, less burdened with debts. However, even the least developed states of Europe, those of the Holy Alliance, are inexorably approaching this fate, for they will be bought up by the bourgeoisie;"

For more than my offhand remarks, see this post on the similarities between Public Choice and Marxist-Leninist state theory:

http://crookedtimber.org/2013/01/11/buchanan-and-market-marxist-leninism-re-re-post/

GiT

Ahem ... No true Marxism.

Well, when the state controls 40-60% of productive outcome, I'd say it's safe to call it something other than capitalism. Much unlike 90s era communists claiming the Soviet Union wasn't communism because of a few peripheral objections they dreamed up only after the fall.

Hong Kong is probably as good as it gets, at least until the Independent Republic of Greater Texas secedes around mid-century :)

ding ding ding.

first two paragraphs are good.

How did you calculate that number, I am curious?

Actually 100 million is a very conservative estimation of what communism did. See Rudolf Rummel's own estimation: http://www.hawaii.edu/powerkills/20TH.HTM

I used to blog with Rudy, great fellow and a tremendous resource on democide. His book is well worth reading.

If we persecuted Communists as much as we persecute racists, we'd be in a vastly different (and better) world.

Didn't you try that in the 50s with less than spectacular results ?

Japan, South Korea, Taiwan, Hong Kong, Singapore, Malaysia, Chile. I'd say the purging of communists in those countries worked rather quite well.

And we don't need to say *purging*. Of the list, only Japan has been democratic since WWII, and it has allowed the communists their share in the democratic process.

Oh Japanese were purged, that is why the only ones left have basically been a stalking horse for the LDP since at least the mid 1950s.

You can't get more ineffective than a Japanese, non terrorist division, communist.

You might want to check recent news related to Guatemala. It would suggest that we were quite willing to go further in persecuting communists than racists. I don't recall any McCarthyite hunts for Klan members, or Reagan sponsoring genocide against, I don't know, racist Boers or something.

Will this 'stop listening to Marxists' thing start before or after the 'stop inviting people like Eliot Abrams to CPAC' thing?

I'm not sure my analysis is Marxist, is it? I make the argument that, done correctly, neoliberalism would defend the rights of small businesses, trading in a marketplace, rather than the same, tired undynamic monopolists. I also make the observation that state socialism had to enter a 'repetitive' phase of propping itself up almost immediately, because it was unable to win real public legitimacy.

Social democratic governments figured out in the 70's and 80's that government ownership of the means of production and confiscatory taxation didn't work. To maintain the welfare state required a vigorous economy, vigorous growth. The realities of the Laffer curve forced a change in strategy. So you get a variety of measures where instead of taxation and spending for some service or other, employers, developers, pretty well anyone who is conducting some economic activity is required to provide some kind of social programs. Again not directly, many times in concert with a government program. For example in Canada both father and mother have maternity leave or whatever it is called, a certain period of time where their job is held for them. They also get UI benefits or something similar. And when they are done they come back to their job. Provisions for substance abuse up to the employer mandates on health insurance coverage.

So the socialists got what they wanted, a very deep and very expensive social welfare system that grows every year. The financial transformation of the economy since the 80's allowed growth that for the most part covered the cost. That cycle has run it's course, now the financial industry demands government support instead of the other way around. Costs have caught up with the ability of the economy to grow, hence the stagnation.

The movement of production out of expensive jurisdictions to elsewhere has been pushed by the increase in costs and the pull of access to investment capital.

So we have a dead end. If you get rid of the financial system burdens, let it rationalize by essentially letting it shrink to what makes sense, governments will have trouble borrowing and there will be shrinkage of the economy due to the necessity of everything having to actually pay it's way. To shrink the social welfare state is almost impossible and only done when there is no other way, mostly by some sleight of hand shuffling of responsibilities or what we see in socialized medical system, long waiting lists. (How do long waiting lists save money? Spontaneous remission?). Or simply large numbers of the population falling off the official open economy and benefit system and making do with their own arrangements.

What Canada has done, to much gnashing of teeth, is depended on the growth of the energy export sector. That has allowed governments to borrow on the world market for deficit spending, as well as a core of vigorous economic activity that supports government spending. This cycle too is maturing.

Also, ask any Marxist to explain what happened to Baltic states, Poland, Czech Republic, Slovakia, Mongolia - i.e. post-cold war countries that took "neoliberalism" well-beyond what the "capitalist roaders" in the West recommended them to. According to Marxist theory these countries would have long been obliterated in the 2007-2008 cycle for their over-reliance on foreign capitals and unchecked capitalism.

If you start late, you've got to play catch-up and make up for the lost years. Besides, the grass is always greener on the other side.

That may be true of Mongolia etc., but the rest of the countries didn't "start late". On the other hand, the communist regimes built a huge infrastructure there, unfortunately mostly in preparation for the Next Great War. As a result, the transforming economies were seriously burdened by enormous rust belts and decaying useless structures.

Some of the Central European industrial regions, which formerly served as giant armories for the USSR behemoth, have never really recovered from the sudden collision with market reality, the abandoned factories slowly being overgrown by weeds and the former workers on dole for the rest of their lives.

that advertising post is insane.

When I was younger, the level of abstraction in Marxist analysis dazzled me. Now it just seems self-indulgent and pompous.

Actually, as Bohm-Bawerk and other Austrians have demonstrated very early, the whole corpus of Marxist economies would be quite easy to understand and makes complete sense until you start looking at the labor theory of value.

"When I was younger, the level of abstraction in Marxist analysis dazzled me. Now it just seems self-indulgent and pompous."

Three massive volumes just to say "Rich people suck!"

The difference is that there is still one area of our economy that is still moving and changing, namely the money economy, with corporate profits high and financial innovation ongoing

Davies' description might be true of British capitalism, but the technical economy, especially in computers and things that are being turned into computers with other features (such as cars) is still moving and changing very fast. One can argue that a relatively small share of the population is engaged in this work, but it's impossible to argue that it's not happening. Indeed it's hard to hang out in or read about Silicon Valley / SF / Seattle and not notice this.

I recommend Davies apply to Y Combinator and/or try to tag along with an accepted startup and write about what he sees there.

Still, I am thinking about Joel Mokyr's The Enlightened Economy as I read this, and specifically:

"Culture may have affected technological progress in other ways. I have suggested two examples of such attitudes that have little to do with religion and that may help explain the economic successes of the Western world" (389)

In addition, Mokyr argues that even if only a minority of people are actually reading about improved efficiency and techniques, efficiency as a whole may move forward through the spread of information from books to interpersonal contacts. He uses the example of farming when he says

"In the long run, it may not have mattered all that much that only a small minority of farmers took the trouble to read these books. Knowledge spread and filtered down through networks of personal contacts and other barely visible channels. The result was that the dire predictions of the political economists influenced by Malthus were not realized and that the explosion of knowledge in the later nineteenth century eventually led to the reverse problem for Western agricultural in a later time, namely overproduction" (187).

It may not matter much now that only a relatively small percentage of the population is participating in building digital hardware/software systems: the changes will affect all of us just as farming changes affected everyone then.

I wonder if there are fewer people participating in this economy in Britain and, if so, why.

Other then finding new ways for morons to say dumb stuff to other morons faster (facebook, twitter, etc) I'm not sure what breakthroughs Silicon Valley has produced.

You're obviously undercounting the amount and breadth of pornography one is able to consume for no cost.

There's been plenty of computing improvements that bring us things like predictive analytics, which any big corporation uses today for efficiency gains. WalMart wouldn't be what it is if they didn't have logistics built on top of Silicon Valley algorithms.

Or look at the Dell/Apple supply lines: A computer is built in China, customized to your specs, and then shipped to you directly from there, at your door in under 48 hours. We just couldn't do that 50 years ago.

"It may not matter much now that only a relatively small percentage of the population is participating in building digital hardware/software systems: the changes will affect all of us just as farming changes affected everyone then. "

Yes, but the difference was that then, this small percentage of the population had more children that survived to adulthood, and the rest had fewer. This time around, it is the reverse.

“Eastern bloc socialism had to keep going through the 1970s and 80s, in spite of lagging growth and failed ideological hegemony, because nobody knew what else to do.” What a silly statement: *everybody* knew what else to do—[genuine] capitalism! The people in power just didn’t want to allow it to be done.

The Eastern bloc had the West to imiate. Unfortunately, the West now has no West to imitate.

I was thinking the same thing, but then I thought about it further and decided that the analogy holds after all. That's because we the West *do* have another model to imitate: It's been called "Capitalism with Asian values", which just means a technocratic dictatorship that leaves room for conditional participation in global and local markets. The reason why it's unthinkable that we can transition to command capitalism is a matter of values - the same reason why the East Bloc was so repulsed by the thought of transitioning to a Western capitalism.

Why would we transition to a worse model? The only thing east-asia has to recommend itself is catch-up growth. If per capita income exceeds western european states, then we can start talking about it.

Well, per capita income in the hub cities of East Asia is very high, and the cities themselves are remarkably rich both on surface and in details.

As far as the European Union goes, I am quite afraid that in 30 years, it will be one huge open-air museum, where rich Asians will arrive to watch the indigenous populations performing the traditional dances and trading wood-carved souvenirs for hard currency. The southern wing is very decidedly on path to this, with mobs of unemployable graduates holding degrees in various bull---t, cool-sounding majors.

Per capita income in Western Capitalist hub cities is really high too. A lot higher than it is in East Asian hub cities, even Tokyo and Hong Kong. And weirdly both those cities are not considered the dynamos of the region anymore.

I'd like to think you're right. China has its own problems and isn't ready to be a high-status model yet, but Singapore seems to be doing some interesting things with governance that produces superior results to the West. But my concern is that the West is still the highest-status governance model, and has plenty of hard power (exporting democracy) as well as soft power (everyone wanting to imitate what cool Western countries do). Some educated Singaporeans I've talked to wish that it would transition to an American-style democracy - not because they have particular policy preferences or understand the public choice behind such a transition, but simply because it's what the currently-cool kids are doing.

I think the best case scenario is that China rises fast enough that these Asian experiments don't have time to decay into vanilla Western liberalism. I don't think we'll get a Beijing Consensus as hegemonic as the Washington Consensus, but the mere fact of there being a great power that's *not* an interchangeable liberal democracy should open up some space for interesting experimentation in governance.

The pessimistic case is that China itself tries to imitate liberal democracy, thus preventing this ideological diversity from forming.

The even more pessimistic case is that what we currently consider "Western failure modes" are in fact human failure modes, and that once any country gets rich enough it falls into a similar pattern of dysfunction.

Singapore is a city. You can do great things at a small scale, Sweden for example. Although one could do worse, like the current Washington intent on imitating Detroit.

Derek, this is actually an argument for some de-centralization. The current states are too big for effective government.

Marian,

But how do we get to smaller states? I can't really imagine a path that doesn't involve higher than 20th century levels of carnage.

Just a bunch of words.

> What seems to have changed, post-2008, is that the price paid for this monetary dynamism is that the rest of us all have to stand completely still.

Marxists won't give up their zero sum economy theory, will they?

Yes, an ideology premised on the overcoming of scarcity through advances in technical production believes in a 'zero-sum' economy...

Maybe they're just following the data.

http://www.bls.gov/opub/mlr/2011/01/art3full.pdf

Ah, yes, the productivity gap that coincides with the rise of the financial sector, which itself coincides with triumph of global fiat currency.

"Travelling around the area, you get a very clear sense that you are no longer in an unplanned, emergent or liberal urban space."

It's weird how you can actually *feel* the difference between emergent and planned spaces. You know that feeling you get when you're getting your picture taken and you're trying to be relaxed, but you're like "Where do I put my arms? How do I normally sit?". It's a lot like that; the whole project suddenly feels self-conscious. It's as if somebody told a whole neighborhood: "Quick! Look normal!".

Try visiting Canary Wharf on a weekend; it's remarkably planned, and it's a ghost town on the weekends. The unnatural feeling is doubly reinforced by the total absence of people (the mall shops are open, lights are on...but there aren't any customers! So odd.)

Not exactly an indictment of laissez-faire now is it. But WTF does "I don't want to defend this form of testing, which is often cynical, bullying and depressingly unsympathetic to other valuation systems." mean? At any rate, I think its safe to say the world is going to hell in a hand basket and maybe the survivalists are not stupid, or maybe not. Who knows.

On the link, I agree that the Stratford development is horrible and Stalinist. But it is nothing to do with "neo-liberal" thinking. This is old fashioned state socialism, of the kind practiced in the UK since the end of the second world war. The Olympic project was developed by the Labour party, and only finished by the Conservatives, and was entirely funded by tax payers money with the exception of the helterskelter, which was a "gift" from Mittal. In fact the Olympics and Stratford development were squarely in the tradition of the 1951 Festival of Britain type of approach, which so many writers were decrying the loss of so recently during the Lady Thatcher remembrance. If there is a neo-liberal momument in the UK it is the Channel Tunnel, a useful piece of infrastructure entirely financed by the private sector and a joy to use. Yes the private investors lost their collective shirts, but allowing failure by investors is exactly what is promoted by the neo-liberals (and so opposed by corporatists).

I suspect in the authors eyes, neo-liberal and Libertarianism is conflated with corporatism. They could not be more different. Just to note for future reference; libertarianism is a broad church, but all libertarians have a strong dislike of governments being captured by corporate interests. The current financial industry, with its implicit state guarantee, is definitely not a libertarian ideal.

The corporatist/free-marketer distinction is a really important one, but in a lot of places the latter isn't a choice, and even where it is it's often ignored. Different institutions, I suppose. Sad.

It's always fun to hear from the Marxists. Thanks for sharing!

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