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Art and Value
Dave Beech, Art and Value: Art’s Economic Exceptionalism in Classical, Neoclassical and Marxist Economics (Boston: Brill, 2015)
Reviewed by Nizan Shaked
Dr. Nizan Shaked is professor of contemporary art history, museum and curatorial studies, at California State University Long Beach. She is author of The Synthetic Proposition: Conceptualism and the Political Referent in Contemporary Art (Manchester University Press, 2017), and is currently working on Museums, the Public, and the Value of Art: The Political Economy of Art Collections, forthcoming with Bloomsbury Academic.
Abstract
Art and Value: Art’s Economic Exceptionalism in Classical, Neoclassical and Marxist Economics reveals the irreconcilable differences between the Marxist economic definition of the term ‘value’ and its other uses in relation to the art object. It corrects the faulty assumption that rare or historical objects bear intrinsic value, symptomatic of capitalist worldview. Beech’s analysis of art’s value-form is critical to unpacking the double ontological condition of art as both an object of collective symbolic value and a hoard of monetary value, since the two operate in mutually exclusive spheres, yet function to constitute one another. The book can help us understand the capitalist sleight of hand that allows art to flicker between two forms of being, making profit appear as value, and value appear as significance (and vice versa), the toggling between the two facilitating the transfer of commonly held symbolic value in support of the individual accumulation of wealth.
A long-awaited turn from the melancholic or moralistic tone taken in most accounts of art and the market, Art and Value by Dave Beech is a systematic examination of art’s economic status in relation to the capitalist mode of production, circulation and consumption. Mapping art’s position as exceptional to that of the standard capitalist commodity, Beech examines piece-by-piece art’s anomaly at every stage of capital’s transformation, from the labour relations of its production and entry into the circuit of merchant capital, to its behaviour as an asset in financial capital. Until recently direct economic inquiry was considered vulgar (as Beech reminds us in the seventh chapter ‘On the Absence of a Marxist Economics of Art’), and Western Marxism largely integrated Weberian Sociology to form a cultural analysis of art’s relationship to the market, developing terms such as ‘reification, culture industry, commodification, Ideological State Apparatuses, spectacle and cultural capital’ (p. 221). Determining that art has been incorporated and/or commodified, key thinkers that developed the terms above such as György Lukács, who described the effects of capitalism on the culture and psychological wellbeing of subjects; Theodor Adorno, who, together with Max Horkheimer, theorised the systematisation and rationalisation of culture as a form of mass consumption; Louis Althusser, who analysed the relation of politics and culture; Guy Debord, who developed the concept of spectacle; or Pierre Bourdieu, whose sociology of art institutions identified how cultural predispositions help sustain class stratification—all sidestepped the basic economic description of the mechanisms that organise art under capitalism, and assessed the consequences instead. These approaches have become staples for theorising art’s social roles, as artists negotiated or attempted to negate the coercive powers of capitalism. However, in the vast majority of cases, Beech shows, the application of Marxist theory to art theory and history is done by ways of homology. His work is therefore a major contribution to addressing this gap as he positions art in terms of: ‘the labour theory of value, labour power, surplus value, formal and real subsumption, self-accumulation, relative surplus value, and so on’ (pp. 226-7). Beech’s entry point into the question, and the structural set up of the book, reveal the complexity of a field that on the one hand is deeply concerned with politics as theme and context, and on the other hand is an arena where political battles play out.
Using the three volumes of Capital, the Grundrisse, and the Contribution to a Critique of Political Economy, Beech argues that art is not a typical capitalist commodity since the labour of artists has not been subject to abstraction. Artists do not sell their labour power but rather a product for which they own the means of production; they do not work for a capitalist giving the latter their surplus labour over and above the time needed for their sustainment; no capital is advanced for art’s production; the means of art-making have not been organised to maximise profit (at least not on a social scale); and the prices of art bear no relation to the cost of their production. So, we must ask, if art is exceptional to the capitalist mode of commodity production, why use these terms of analysis at all?
The answer is twofold. Firstly, since the world order is dominated by capitalism, we would be remiss to forego a close analysis of art’s movement through the system, and secondly, without a sound understanding of the economic forms of the art object our further inquiry into the political implication of its social functions would be impeded. Beech’s book is a first step in a wholly new mode of describing art and its institutions. Given the scope of the undertaking, it is understandable why Beech does not address the broader implications of art’s exceptionalism (his advocacy for the public funding of the arts ultimately argued on the basis of those historical and cultural claims that form the context of his economic analysis). It remains for others to apply his findings, and perhaps clarify and sharpen those few instances where the writing, and the materials chosen for discussion, meander and return without clear resolution. That said, the study is thorough and profound and should be applied to a series of interlocking fields that include art economics, the politics of art’s funding, institutional analysis, the study of collecting and museums, discussion of aesthetic judgment and the discipline of art history.
The first part of the book is an intellectual history of art’s anomalies, providing arguments for debating neo-classical and conservative outlooks that see art as ‘nothing but’ a regular commodity whose value can be measured by empirical tools, an activity that requires no special support or state funding. Framing his discussion in the distinction between classical, neoclassical, and Marxist economics, Beech sets the ground for dialogue with policy-makers in the field, the majority of which do not subscribe to Marxist world-views. Dedicated to a rigorous analysis based in a primary reading of Marx, the second part provides us with a toolkit of defined categories that we can now apply towards debates within the critical, professional, and academic field commonly referred to as the ‘art world,’ and which is vast if you include its markets and audiences. Whether we agree with all of Beech’s formulations or not, what is clear is that a baseline from which to work has been set.
The art world speaks predominantly in liberal terms, which in many ways is a different language, such that common words like ‘value,’ ‘abstraction,’ or ‘productive’ are employed in a disparate sense from their proper Marxist definitions. Value, price, or worth may be used in various interchangeable combinations as do money, wealth, capital, surplus, revenue, and profit. A cause for confusion in intellectual and academic circles, it is also a reflection of the continued blindness to some fundamental realities that structure our current existence. As some basic assumptions have gone unchecked, the assimilation of Leftist art history into the system can carry on without interrupting the operation of the liberal institution, where for example Marxist cultural criticism or formalist analysis are fuel for research and development. Likewise, protest actions quickly find their place under the thematic rubric of political art.
Beech’s assertion that art has no intrinsic value, anathema to the liberal mind, is one of two interconnected myths to be dispelled: that money is productive of value, and that things (land, rare objects, precious stones) have inherent value to them: ‘[i]f we know from where added value derives, then we will not be fooled into thinking, for instance, that banks, money markets and commodity markets are wealth creators’ (p. 258). Making art does not contribute surplus value to the economy either—‘artworks have no value (average labour time) since they cannot be reproduced and therefore it is impossible for surplus value to be created in their production’ (p. 263).[1]
In her review for Mute, Josefine Wikström notes that, for those versed in the historical specificity of Marx’s critique of political economy, Beech’s argument is not new, reiterating that:
Categories like ‘productive’ and ‘abstract labour’ are in Marx’s work relational, or perhaps better put, ‘social.’ Whether labour is productive or not is dependent on its relation to wage labour and the production of surplus value. This is why art production, like other marginal forms of production, only produce surplus value relatively and marginally compared with other sectors. They are, in that sense, not really subsumed.[2]
But in liberal language the terms value or production have the function of judgment. It is difficult, if not impossible, to convince the vast majority of the art world that art has no value, or that when we claim that art ‘generates the economy’ what it in effect does is distribute value produced elsewhere through extreme exploitation. This review is written in the throes of a massive cultural phenomenon, the release of yet another Star Wars film, whose creator (George Lucas) was famously made wealthy by choosing future merchandising rights over an immediate increase in fee at the dawn of his career success. For the vast majority of art world participants it will be impossible to conceptualise that the making of an endless stream of Star Wars merchandising objects, produced by scores of labourers toiling in what I can only assume are inhumane conditions, contribute to the aggregate of value while the making of art does not, or that (presumably) unskilled workers are productive of value, while artists are not. By showing that only labour that produces surplus value for the capitalist is productive, Beech’s book provides us with the vocabulary and rhetorical equations to analyse and demonstrate to a broader art audience how things work.
With formal subsumption, the first phase of capitalism, the effect of which: ‘is not profiting from the labour of others, which had always existed, but the ownership and control of production itself,’ (p. 249) the surplus for the productive capitalist is derived from the productivity of wage labour on a social scale. Then, with the next stage of real subsumption, the process of labour is systematically reorganised to ‘increase the proportion of unpaid labour and decrease the proportion of paid labour’ (p. 251). Artmaking is not waged labour and therefore cannot be subsumed under capital. Beech specifically insists that: ‘[a]s soon as we posit subsumption in general rather the subsumption of labour by capital then, it appears to me, the mechanism by which capital takes hold of society is lost’ (p. 17). In addition: ‘[s]ince capitalist production is the production of surplus value, we need to attend to labour primarily in its capacity as the source of surplus value for capital’, Beech tells us (p. 243). However, ‘[t]he formal subsumption of artistic labour – executed by assistants rather than artists – is feasible’ (p. 255). Indeed, Beech pays special attention to the question of studio assistants, one of several sets of labour relations, processes, and transformations that the art object undergoes and which he unpacks stage by stage. Do studio assistants contribute surplus labour to the artist rendering her a capitalist, or does their work contribute to revenue or profit? After close examination his answer is tentatively no, characterising artists that are owners-producers and that employ assistants using Marx’s notion of ‘transitional stage’ (p. 256). The issue here seems unresolved, as the various examples and lines of reasoning that Beech gives in different sections can contradict one another, but given the meticulous steps he takes to demonstrate his rhetorical moves, those can contribute to the debates around what constitutes productive or unproductive labour, especially when it comes to the creative trades. Nevertheless, some possible questions are left unanswered. Can modes of commodity production that are not capitalist, but reside within capitalism, produce and introduce value into the system? Should art be theoretically relegated to the realm of distribution alone? For example, what about the issue of transportation, which Marx considers to be productive labour? An artwork’s worth is significantly enhanced when it is loaned out for exhibitions, a process that entails it be moved by art handlers and transport labour. Does this movement invest it with value? Does art’s travel add to the general aggregate of value?
In their review of Beech’s book Jasper Bernes and Daniel Spaulding argue that the fact that artistic labour cannot be subsumed to capital is rooted in a historical anomaly. Admitting that historical analysis may be too much to ask of an already substantial undertaking they nevertheless ask:
All the same it would have been useful to dedicate more attention to the specific cultural, institutional, and/or technical barriers to capitalist investment in the production of fine art, and thus also to be more specific about how the fine arts differ from ‘culture industry’ sectors, such as film production, that are in fact prey to real subsumption, as well as from borderline cases such as theater or the publishing industry, in which enterprises may be organised along either capitalist or non-capitalist lines. It is tempting to say that there is something about the material qualities of artistic procedures that makes them resistant to subsumption. But if so, this begs the question of why these procedures were set apart – and thus allowed to survive – in the midst of capital’s thoroughgoing transformation of the forces and relations of production.[3]
For Beech the answer resides not on the level of art’s production, but circulation. I would also argue that it is not, as Bernes and Spaulding argue ‘the material qualities of artistic procedures that makes them resistant to subsumption’, but rather the agreement, which so many societies seem to share, to collect these objects and hold them as common patrimony, which necessitates that they continue to function as unique.[4] The other answer is that capitalism has set its eyes not on art’s production, but on its mysterious potential for extreme monetary appreciation during circulation (which also relies on sustaining the status of the object as unique), and capitalism has finally, after attempting for over one hundred years to corral this potential, figured out how to liquidate art, albeit not to the point where it is as liquid as stocks or bonds. Much work lies ahead to define the way art is similar or different from items such as assets, real estate, rare objects or materials, or various types of luxury goods, and how it relates, on the one hand to its artisanal origins, and on the other, to the practice of collecting, or to the collection as a unified category. Beech’s groundwork will facilitate such inquiries.
Because the social order has morphed to fit the forms of capitalism, even relations that are not subsumed to capital orbit in its gravitational scheme. Art, Beech argues convincingly, bypasses production capital, entering capitalism at the stage of merchant capital, but here too in an exceptional way. The gallerist is not a regular merchant capitalist, in that she does not normally extend funds in advance, he explains. Also, he continues, since art prices are not regulated by supply and demand in a conventional sense, or by a relation to their cost of production, they may seem erratic. Nevertheless, sociologies of art prices have shown that there are in fact very specific underlying dynamics regulating prices on the primary market, and it is in such cases that Beech’s theoretical clarifications should be brought to bear on the methods of study to yield analytical insight beyond robust description.[5]
Here we begin to glean the stakes of art’s exceptional condition, for as art enters the circuit of capital at the stage of merchant capital the form of its value is transformed.
This sort of metamorphosis is at the heart of the circulation process of exchange in capitalism. Money turns into capital, commodity capital turns into money capital, commodities turn into use values, labour turns into value, products are turned into raw materials, raw materials are turned into commodities, capital is realised in the consumption of use values, products are used up in the production of exchange values, and so on and so forth. Not only do products and values move around, circulate, flow and pass from hand to hand, in doing so they change from one kind of economic being to another. (p. 271.)
‘The alchemist is the gallery owner,’ Beech tells us: ‘[a]s well as converting artworks into commodities, therefore, the gallerist also converts art into capital’ (p. 272). Neither merchant capitalists nor their retail workers add value to the object, but by their activities can transform art into several forms, depending on ‘the social circulation through which it passes’ (p. 272). Beech distinguishes between the consumption of art for accumulation, further circulation, or for use. He walks us through several examples of how the art object functions differently for owners versus observers, or investments buyers versus passion collectors. This is followed later by a convincing analysis of the object itself, where he details how art is exceptional to several typologies of objects such as Veblen, public, merit, or luxury good, pending on the method by which they are defined, extending arguments that can be very useful for the defence of public funding for the arts and for maintaining the division of the public and private uses of art. Accumulatively these analyses demonstrate the various permutations of monetary and symbolic value arising from differing social configurations that serve divergent political agendas. Since art does not perish by consumption it can metamorphose between forms such as use value, or financial asset. It is the ability of the artwork to be transformed into various economic beings that arguably makes it such an attractive collectible, and such a curious object for investment. Art is never just one or the other.
Isabelle Graw (whom Beech does not cite) uses Pierre Bourdieu’s definition of ‘symbolic value’ as distinct from market value. Based on case studies and evaluation of the art media, hers is a cultural history of the contemporary art market in the context of celebrity culture. Graw argues correctly that art historians, critics, and curators (with the recent addition of lifestyle and fashion magazines), all contribute to generating art’s symbolic value. However, there is a fundamental difference, Graw claims (but does not scientifically prove), between art and other objects: ‘[a]dmittedly, other commodities, especially branded goods, are increasingly defined by symbolic value. But a designer item like a pair of Dior sunglasses would not be expected to produce “truth” or “epistemological insight” as does a work of art’.[6] The commonly held belief that objects carry meaning or knowledge has two major sets of histories: that of art and artists and that of collecting and collections. They overlap but are not the same. Contemporary art relies on their convergence for its symbolic status, as well as on its ability to circulate in the market.
Herein lies a foundational and especially significant juncture, and which is also unique to our historical moment. The convergence of an unprecedented surge in the magnitude of the art market (an all-time record of €51 billion in 2014, 7 per cent more than in 2013, according to the TEFAF Art Market Report, compiled by Dr. Clare McAndrew), the fact that contemporary art is now the major category for the market (Sotheby’s since 2007 and Christie’s since 2012), the museum boom (more museums have opened world-wide in the first fifteen years of the twenty-first century than the entire nineteenth and twentieth centuries combined), and the financialisation of the art object (one can now borrow sums as low as $250,000 against art assessed at double that sum), pose acute ethical problems for museums and non-profit institutions. The ways in which the monetary worth of art has been corralled and leveraged since the 1970s, and most specifically the development of art-credit systems in the 1980s, exploit art’s exceptional status. What matters here is the manipulation of art’s public form for private gain, greatly exacerbated by the conditions stated above, through the increasing reliance of public institutions on private and corporate donations of money and artwork.
In her article Fetishism and the Public/Private Divide Ann E. Davis shows how the apparent division of society into state and market facilitates the illusion that money and commodities have intrinsic value, legitimising private claim to surplus value. The state issues currency against debt, supporting private growth through public taxation: “‘national wealth’ serves to provide liquidity for private financial markets and to underwrite private credit to firms for the purposes of private profit. This is a form of exploitation of the public for private gain, on a systemic level, by means of the financial system’.[7] Art institution structure is derived from a similar logic. The metamorphosing double helix of the art object’s value can traverse freely through the threshold of publically supported museums and private wealth. I am referring here as ‘public’ also to those private museums that benefit from massive tax reductions and other subsidies, and of course to the various private-public partnership configurations that form the legalfiduciary structure of most American museums, increasingly spreading in the U.K., Europe, and internationally. There is much work to be done on these issues that reside between disciplines and methods, but without a thorough theory of art’s value , our options so far been have been limited.
The analysis of art’s value transmutations can help us prove at what points art should be considered for its symbolic qualities versus it’s monetary measures, distinguishing when decisions on behalf of the public should be made by mutual systems (expert opinion, peer review, or a combination thereof—another area ripe for debate, the principle being that democratic processes be upheld), and how to locate and prevent the intervention of private interest in the public domain. There are long-term implications for our ability to understand art’s value, when we will have the opportunity to imagine a way that institutions can truly be common. Until then, under a liberal world-order, these understandings should clarify some of the immediate shortcomings of the current state of public institutions, and the ways in which their crude definitions of value’s appearance serve to mask the motion between symbolic and monetary, thus affording the continual flow of wealth towards the money-power constituency.
Asking how art stores wealth, Beech shows that it can resemble Marx’s notion of the hoard, which is ‘potential money capital’.[8] But this Beech claims is not capital, as it lacks liquidity. Although Beech later analyses art and finance capital, like many other writers he underestimates the potential liquidity of art when he argues that: ‘[w]orks in a given collection can be valued as an asset even when the owner has no intension of selling, and such works are, potentially, commodity capital, but capital permanently withdrawn from circulation, is not capital except in name’ (p. 273). Two major case studies stand in mind in this respect.
The potential for the monetisation of publically held collections has already been activated in 1990. As Rosalind Krauss warns:
In August 1990, the Guggenheim Museum, through the agency of The Trust for Cultural Resources of The City of New York … issued $55 million of tax-exempt bonds to J. P. Morgan Securities (who will presumably remarket them to the public). This money is to be used for the museum’s physical expansion in New York City.[9]
‘The collateral for these bonds is curious’, Krauss notes, as presumably none of the foundation’s assets, the museum’s endowment, or the private assets of the trustees could have functioned as guarantee.[10] Beyond projecting the museum’s ability to pay, a further probe leads Krauss to deduce that, since ‘certain works’ from the foundation’s holdings have sale prohibitions or restrictions, the rest of the museum’s “assets” in effect functioned as collateral. Placed in scare-quotes for a good reason, “assets” referred to the collection, which, held in the public trust should never have played part in such a high-risk venture.[11] Dropping this bomb in a footnote, Krauss is one of the first art historians to show how the aesthetic claims artists make for their work relate, not only to the ideological infrastructure of the institution, but to the future forms of capital. She demonstrates that when Minimalist artists substituted the disembodied opticality of abstract painting with a phenomenological encounter with the work in space, they contradicted their own intended critique: ‘immediacy was always potentially undermined—infected, we could say—with its opposite’.[12] Sounding Fredric Jameson, she highlights how, Minimalist artists, in their attempt to negate the ethos of previous art movements, eventually rendered the imaginary structures of the next stage of capitalism. Minimalist artists cast the subject of industrial capitalism as the subject of mass culture. Krauss admitted that her connections were tentative, yet twenty-five years after the fact we should now continue in two interconnected modes, along the lines of art history and museum studies.
Following Krauss’ linking of aesthetics to institutional politics, I will cursorily tie Beech’s analysis of the social relation of art’s making (such as the question of studio assistants) with current strategies of serial artistic production. There exists today a body of market artists that in sophisticated, yet cynical, ways have collapsed two distinct logics of artmaking that ran through the twentieth century and that formed the backbone of the avant-garde: the conceptually-based strand that spawned serial work, and the expressive mode reliant on the unique gesture of the artist’s hand. The distinction is significant, as artworks correspond with divergent historical paradigms and as such with their contemporaneous philosophical implications. Hybridising paradigm empties the artistic gesture of its significance. We now see studio practices where unique works are being serially produced in cottage industry capacity, artisanal in character but claiming, and being allowed to sustain, the status of unique works of art, and as such fetch extremely high prices on the primary market. Here, I am not referring to serial mechanical production (photography and other print works, casting, etc.), but to the serial production of hand-made works, where one can see systematic production of, for example, unique paintings. As the contemporary art market favours signature works, some of these practices see colossal success. Part of a well-oiled machine of art’s education, the aesthetic claims made by such artists, or the critics and historians hired to make claims on their behalf, are always well grounded in academic and critical terms, and even if those are nothing but intellectual gymnastics, it may be impossible to distinguish the latter from any ‘true’ analysis. If left to the judgment of the market, this conflation of paradigms poses no problem for us, let herd mentality fill collections with meaningless art. However, as museums have dramatically turned to acquisitioning works by very young living artists, we need to urgently pose to our public institutions questions of criteria and judgment. It is alarming to observe artworks produced in this mode are accessioned into museum collections, while verified artists (artists who have made significant contributions to the field, for whom exhibition records, independent bibliographies, or evidence of influence on other artists exist) are sitting on studios-full of historical work. The question of art’s value can now aid us in challenging this phenomenon, if we base our retort, on the one hand, on the fact that the economic infrastructure of art has changed in the 1980s (and as such, for example, relying for pedigree on neo-avant-gardist artistic discourse is moot), and on the other, in answering the question of how serial production and its labour relations are being employed. This will take us one step beyond the liberal claim, which in fact should hold but is also eroding, that the market should be barred from directly influencing public museums and vice versa. Here we can tentatively pose the argument that museums should not purchase the work of young artists but rather pay wages for display, after all, it mostly takes great many years to be able to properly assess the contribution of an artist to the field, and hence what humanity should collectively guard for posterity. In any case it is clear that we should work to actively limit the influence of the market on our common collections, and several pragmatic solutions can be posed on this account.
Marxist economics have a direct relationship to aesthetics, extending the best argument for the defence of judgment outside of the market. We are not naïve to assert that autonomous judgment is possible, but the point is to regulate separation. There are plenty of areas where the so-called freedom of the market or populism are methods of choice, so let us preserve the option for one mode of cultural engagement that at the very least aims to be outside of the consumer-sovereignty ratings machine. The problem with collecting contemporary art for the public in the bubble market is that art has exchange value before it has symbolic value, and that exchange value determines symbolic value, while historically it was the other way around. If the market is allowed to determine what is deemed important and therefore valuable, we have a judgment system that compromises the future promise of our common collections, as it is based on a conflict of interest that should be posing a legal problem even for the liberal system.
The fetishistic conflation of state (public) and market (private), as Davis describes, is historically specific to the structure of the nation-state. In his excellent account of the British Art Council and its Keynesian origins Beech traces the development of the notion of artistic independence, the art market, and the bourgeois institution, concluding that: ‘[t]he art market is a prerequisite for its apparent opposite, the public funding of art’ (p.139). The rise of the modern museum is part and parcel of this process, and Beech is correct to assume that: ‘a public collection … is not permitted to sell of its stock of artwork’ (p. 274). Nevertheless, we see, with our second case, the creative ways in which ostensibly out of reach commons have been manipulated to cover for the depleted public sector.
In 2013 when the city of Detroit, once the industrial heart of the US, filed for bankruptcy, a heated debate erupted around the fate of the outstanding art collection it had amassed during its golden years. Assessed in the billions, the Detroit Institute of Arts (DIA) boasts major historical works by Tintoretto, Breugel the Elder, and van Gogh, to name a few. The irony of what came to be called “The Grand Bargain,” is that the city monetised its art collection, and in some ways sold it to itself:
In the end, the grand bargain called for preserving the collection in Detroit by transferring ownership of it to the nonprofit already running the museum for the equivalent of $816 million. […] The deal provided cash to help win support of major creditors and spin off the museum to a nonprofit outside the reach of the city and its creditors.[13]
Although the state-appointed emergency manager and his advisors demanded that DIA sell some of its artworks to pay the city’s debt, in effect, as institution officials argued, the collection was not an asset but a cultural treasure held in the public trust.[14] Run since 1998 by the foundation to which it was transferred, the collection should have never been available for sale. Yet, since eventually the case was not tested in court, no precedent was set. The precarious status of such commons now looms large as the potential to exploit art’s exceptional status to cover up for crumbling economic infrastructure extends far beyond the debt of one city.
The monetisation of art exploits art’s double ontology for its symbolic and monetary value. Beech takes us in the right direction, pointing out that the use value of art can be independent from its consumption as exchange value. Following Beech we can say that in the case of Detroit the collection is being consumed twice. If we are to ask why not, Beech’s formulation can show us that if it is, since these transactions do not produce value but rather syphon it from the exploitation of abstract labour, they should be prohibited, not just ethically, but by law, as they double dip into art’s monetary potential while the latter is sequestered, in the public trust, to be consumed for its symbolic value. In her account Krauss noted some specific conflicts of interest and listed some of the private firms that stood to gain enormously from the Guggenheim’s transactions. This was also true in the case of Detroit’s bankruptcy. Beech’s study helps us make the case that not only should the division between the private and the public uses of art be regulated as a matter of course, but also demonstrates the machinations and implications of value’s transformation in relation to art.
The problem is that this type of Marxist thinking is at odds with the immediate goals of arts administrators, who work in defence of public institutions where the only means of survival within the system of capitalism is to argue for more government funding on the basis that art adds to the economy, or, barring other options, rely on the philanthropy of the wealthy, which are increasingly allowed by cash-strapped institutions to promote their own cultural agenda. Introducing into the discourse a surgical Marxist definition of value in precise terms should rearrange the game board. As Beech proves that art does not inject value into the economy and that art is part of the secondary system that distributes value produced elsewhere, he offers a wholly different vocabulary from that which is employed in numerous studies by governmental and non-governmental advocacy groups that follow standard liberal logic and tend to find that arts generate and catalyse the economy, without distinguishing between production of value and its distribution. So far the major argument for the advocacy for arts education and funding has relied on a very generalised concept of value, as did the entire discourse.
Art has always had the potential to realise as exchange value, and this potential had philosophical, ideological, and therefore political implications. The force Beech designates as ‘money power’ (p. 279), a nexus of influence and coercion yielded through the consumer power of collectors, is a dynamic that predates capitalism and functions independent of it. Activated through political means, Beech argues that it cannot be resisted by criticising the market and instead claims that: ‘[i]n art, at the moment, this is left to individual artists (supported or hampered by their dealers), to either fend off money power or succumb to it’ (p. 279).
My disagreement with Beech here is profound. Firstly, this is precisely the point to be taken up collectively, and not by individual artists. The notion that individual artists can resist the Tsunami-sized force of money-power, drove conceptual and institution-critique practices, but also marked the pathos of their failure, as Charles Harrison wrote: ‘[i]t was quixotic though to hope, as many did, that perturbations in the economic base would be achieved by superstructural artistic tinkering. That ideas can move mountains has been a recurrent fantasy in twentieth-century art’.[15] Secondly, since ‘money power’ forces exude major influence on public institutions, the battleground is not the individual artwork, but the commons. In this respect art too is exceptional. Music, theater, literature, film, fashion, and most other cultural production, get collected and displayed only incidentally—art does not. What makes art different from other forms of creative work or enterprise is the fact that there is a whole system of museum and exhibition institutions that function to collect, display, and preserve it for posterity. Art’s special status is dependent upon these institutions whose very existence is dependent upon rarity and uniqueness. That art retains its status in a ‘transitional stage’ is a condition sustained by these institutions. At the present moment the museum is a part of the system where metamorphoses occur between symbolic and monetary value. The public consumes art through this apparatus. It is remarkable that an institution dedicated to the collective display of knowledge and meaning, in effect functions to conceal social realities.
The task remains to explain in simple and convincing terms to a liberal audience how it is that art not only does not generate surplus value, but rather that in circulation its monetary appreciation syphons from the system as a whole. This idea, central to the Marxian conception of value, requires the understanding of a total system in operation, in which circulation does not add to the general aggregate of value. The biggest contribution of Art and Value is that it breaks apart every step and turn of art’s transformation, from its making to its movement through private and public circuits, giving us an atomic formulation by asking what types of social relations have been set up in terms of the capitalist mode of production.
In his recent article ‘The Coming Exception: Art and the Crisis of Value’, Sven Lütticken names his retort of Art and Value: ‘The trouble with classicists’, referencing Beech’s direct reliance on Marx for his theoretical analysis/ Presumably Lütticken is also playing on a title of a song about Andy Warhol, the artist who named his studio ‘the factory’ and coyly employed reproducible art techniques to make singular objects.[16] Citing the recent proliferation of writing on the matter of art and value, and providing some concise summaries of critical perspectives on Marxist critiques of value and various artistic practices that take on this question, Lütticken speculates about art’s exceptional status with the hypothesis that: ‘debates occur at a moment when the “culturalization” of the economy and the economization of culture suggest that this exceptionality may be becoming a thing of the past’.[17] He faults Beech for failing to: ‘acknowledge that capitalism itself appears increasingly “exceptional” to the labour theory of value’.[18] In contrast, I would argue that adhering to Marx is precisely the strength of Beech’s analysis, because it is not the law of value that has been altered by globalisation, financialisation, or a shift to service-based industries, but its effects and their magnitude. The design and marketing operations on the North/West end that makes an object like the iPhone sell for an exorbitant price is not because of an addition of value, but a swelling of a stage in the value chain that necessitates super-exploitation of labour on the South/East side of the globe.[19] The task now is to identify where and how the constellations of social relations function, and accurately describe their place within a total system. The difference between Beech’s formulation and the other theories of value summarised by Lütticken (with a focus on autonomists the Krisis group: the former believing that labour itself has been transformed, and the latter that value has become an automated subject) is in the ways in which they conceive of and describe capitalist totality, and how they distinguish between productive and unproductive labour.
The trouble with the term ‘classicist’ is that it implies something of the past, ignoring the fact that some foundational Marxist definitions are still in operation. Value is not added by the ‘creative’ industries be them advertisement, marketing, social media participation, etc.—the point is that no matter how large the consequent markup, the sectors that encourage consumption only participate in the distribution of value. A marginal cost at that time, Marx would have classified advertising as faux-frais, yet, this does not mean that the principle of incidentals has changed, just the quantities and extent. That advertising is a multi-billion dollar business does not move the production of value from labour to circulation, it just means that this creative industry participates in the amplification of price markup, exacerbating the reliance of capitalist societies on superexploitation.
It does not follow that workers in cultural industries are not exploited, it just means that extracting surplus from production has to be intensified, for capitalism to survive.[20] It also does not mean that the armies of women working in unwaged reproductive and care capacities are not exploited, it just means that they do not add value into the total system in the process, even if they are essential to keeping it intact. The problem with the term ‘value’, is that it is often perceived in its qualitative referencing capacity: as if ‘adding value’ is a positive event. Instrumentalising and subsuming multiple societal structures, capitalism is exploitative on several levels, but it is not the case that exploitation and the addition of value are the same, as Haug clarifies:
In explicating the differentiation between productive and unproductive labour adopted by Smith, Marx separates the concept of the productive from its relation to the ‘external thing [Ding]’ and connects it to the social relation in which a labour is performed. The concept thereby reveals its relativity or its particularity [Standpunktbezogenheit]. That which, from the standpoint of capital, is productive because it forms surplus-value is not necessarily so from the standpoint of the preservation of life, and vice-versa. In capitalism, therefore, he states emphatically, it is not good fortune, but rather, ‘a misfortune’ ‘to be a productive worker’ (Capital, 644).[21]
Beech’s analysis of art as an exception to the commodity is a description of art’s place in the value chain in relation to the commodity as the basic unit of capitalism; it doesn’t concern artists and intellectual workers as subjects of capitalism, or art as an imaginative mode of emancipation. He does not fall into the utopian trap of imagining that intellectual work can add value to an object (or that intellectual work can somehow be equated with labour), that artists can undermine the divisions of labour, that the distinction between labour and leisure have collapsed, or that art can be valorised.
Ideas such as the collapse of the distinction between labour and leisure conflate the term ‘work’ and ‘labour’, just as thinking that art can be valorised conflate value with price. Value is never fully autonomous. Even if there is a great gap between profits and wages value will not be autonomous, in the capitalist system the former will always bear a link to labour. Profit is ultimately always dependent on the extraction of surplus value from abstracted labour, even if this extraction is hidden from our purview. By rendering art’s place in the system Beech gives us a blueprint with which to describe, not art’s (modernist autonomy), but its (very contemporary) symbolic and monetary dependency on a constellation of social relations.
Bibliography
Bernes, Jasper and Daniel Spaulding, ‘Truly extraordinary’, Radical Philosophy, 195
Davis, Ann E. 2012, ‘The New “Voodoo Economics”: Fetishism and the Public/Private Divide’, Review of Radical Political Economics, 45(1) 42–58.
Dolan, Matthew 2014, ‘In Detroit Bankruptcy, Art Was Key to the Deal’, The Wall Street Journal.
Graw, Isabelle 2010, High Price: Art Between the Market and Celebrity Culture, New York: Sternberg Press.
Harrison, Charles 1984, ‘The Late Sixties in London and Elsewhere’, in 1965-1972, When Attitudes Became Form, Cambridge and Edinburgh: Kettle’s Yard and the Fruitmarket, 9-16.
Haug, Wolfgang Fritz 2009, ‘Immaterial Labour’, Historical Materialism 17 177–185.
Krauss, Rosalind 1990, ‘The Cultural Logic of the Late Capitalist Museum’, October, 54 Autumn: 3-17.
Lütticken, Sven 2016, ‘The coming exception: Art and the Crisis of Value’, New Left Review, 99 May-June, 111-136.
O’Donnell, Nicholas 2014, ‘A Trust For The Benefit of the Public is Not “the Public Trust”—The Deaccessioning Debate and the Detroit Institute of Arts’, The Art Law Report, June 4th.
Smith, John 2016, Imperialism in the Twenty-First Century, New York: Monthly Review Press.
Velthuis, Olav 2013, Talking Prices: Symbolic Meanings of Prices on the Market for Contemporary Art, Princeton, New Jersey: Princeton University Press.
Wikström, Josefine 2015, ‘Art’s Economic Exceptionalism’, Mute, 12 November.
[1] To clarify: with marginal exceptions, all artists that work in reproducible modes sell their work in limited editions such that in effect they function as unique objects.
[2] Wikström 2015.
[3] Bernes and Spaulding 2016, p. 54.
[4] Art produced in limited editions functions as unique on the level of circulation, since, as it exchanges hands, each item in a series will be assessed at a different price depending on it’s place in the sequence, previous ownership, exhibition or sales record, and so on.
[5] Velthuis 2013.
[6] Graw 2010, p. 29.
[7] Davis 2012, p. 48.
[8] As quoted by Beech: Marx 1959, p. 210.
[9] Krauss 1990, pp. 16-17, n.19.
[10] Ibid.
[11] Ibid.
[12] Krauss 1990, p.10.
[13] Dolan 2014. Money was pooled from the state, the institution’s donors and trustees, as well as a string of regional foundations
[14] O’Donnell 2014.
[15] Harrison p. 15.
[16] Lou Reed and John Cale, “Trouble with Classicists,” in Songs for Drella (1990), satirises typologies of art personae and their concomitant artistic styles. Drella, a compound of Dracula and Cinderella, was Warhol’s nickname.
[17] Lütticken p. 111.
[18] Lütticken p. 113.
[19] With detailed empirical analysis and precise theoretical terms John smith explains the machinations of the value chains, commencing with analysis of three archetypical objects: the T-shirt, the coffee cup, and the iPhone, mapping, stage by stage, how labour (abstracted under imperialist super exploitation) is the source value, and not those activities that function to distribute it and mark it up. Smith 2016.
[20] Here, again, John Smith’s study is grounded and convincing.
[21] Haug 2009, p. 179.
Why was There No Capitalism in Early Modern China?
In this paper, we ask the following question: why couldn’t Early Modern China make the leap to capitalism, as we have come to know it in the West? We suggest that, even if China compared well with the West in key economic features – commercialization and commodification of goods, land, labor – up to the 18th century, it did not traverse the path to Capitalism because of the “fact of empire”. Lacking the scale of fiscal difficulties encountered in Early Modern Europe, Late Imperial China did not have to heavily tax merchants and notables; therefore, it did not have to negotiate rights and duties with the mercantile class. More innovatively, we also propose that the relative lack of fiscal difficulties meant that China failed to develop a “virtuous symbiosis” between taxing, monetization of the economy and public debt. This is because, essentially, it was the mobilization of society’s resources – primarily by way of public debt or taxes – towards the support of a military force that created the first real opportunities for merchants and bankers to amass immense and unprecedented wealth.
INTRODUCTION
“In the West, capitalism triggered revolutions in science, technology and economic growth with the industrial revolution. From there, it became the dominant mode of production in Europe and in most of the rest of the world. Capitalism enabled favored classes and countries to amass capital, power and knowledge at an unprecedented rate. In China, something rather different occurred” (Gates, 1996, p. 40).
However we may define capitalism – whether we understand it as a “free private enterprise exchange economy” or we grasp it as a mode of production based on exploitative property relations and the accumulation of capital through the extraction of surplus value from wage-earning workers – there is but little disagreement about the fact that Europe embarked, beginning in the late 1700s with England, on a road of sustained per-capita income growth that quickly made it look very different from the rest of the world, still mired in what Kenneth (Pomeranzs 2000, p. 207) dubbed as a “proto-industrial cul-de-sac”. But what really makes the European breakthrough – “the capital-intensive, energy-intensive, land-gobbling European Miracle”1 – unique is the fact that, as recent research has thoroughly demonstrated2, far from being unique, in the late 1700s “the most developed parts of western Europe seem to have shared crucial economic features – commercialization, commodification of goods, land, and labor, market-driven growth… – with other densely populated core areas in Eurasia” (Pomeranz, 2000, p. 107). The author is thus arguing that there is no reason to think that this pattern of market-development would necessarily have led to any kind of industrial breakthrough.
There has been extensive research on what prevented China from breaking through to an industrial revolution3. If one equates capitalism with the “perfect functioning of markets”, one is boggled by the fact that it has not been convincingly proven that Early Modern Europe was closer to Smithian ideas of freedom and efficiency than China. In the seminal book “The Pattern of the Chinese Past”, (Elvin 1973) puts forth the thesis that in the 18th century China had reached a “high-level equilibrium path”: in Gunder Frank’s interpretation of this thesis (1998, p. 301-2), China had gone about “as far as you can go with the agricultural, transport and manufacturing techniques developed in the preceding centuries on the basis of abundant human labor combined with scarce land and other resources”. Elvin and others thus challenge cultural and institutions-based theories that purport to find Europe’s advantage against China in some kind of European civilizational traits that can be traced back centuries before the industrial revolution4. Andre Gunder Frank is particularly critical of what he dubs the “Eurocentric Vision, received from Weber, Marx and their disciples, that the Asiatic Mode of Production was stagnant and literarily useless, while European institutions were progressive” (1998, p. 205). Actually, he thinks the whole “Asiatic Mode of Production” construct is laden with unproductive prejudices, and thus needs to be discarded in favor of more unbiased analyses of Asia’s pre-industrial economy, what he convincingly did in his ReOrient.
In this article, we offer a political economic contribution to an explanation of why China was not the birth place of capitalism, understood as a system of endless growth of the capital stock (commodities, machines, money) and unfettered search for profit. As Wallerstein puts it (1999, p. 27), this definition has the double advantage of being consonant with most or all explanations of the processes of the “capitalist/modern world” and of being a good fit with historical reality. Our argument will bear on the line of scholarly work first advanced by Braudel, who argued for a distinction between capitalism and the market economy, thus suggesting that the political economy of Early Modern Europe may have mattered more than social class relations in explaining the “Rise of Europe”. Especially, we will advance the arguments of José Luis Fiori, a Brazilian scholar who – to our mind – develops and improves upon the Braudelian tradition.
Like Frank, Elvin and Pomeranz, we deem the birth of capitalism to have been something accidental, not the result of dialectical contradictions inherent in the feudal mode of production. While these authors focus on environmental and resource availability factors – silver and other resources extracted from the Americas allowed Europe to buy its way into Asian markets and then dominate world markets (Frank); China’s unfavorable man-to-land ratio thwarted innovation in labor-saving technologies, in comparison to Europe (Elvin); South-American and Caribbean colonies and Europe’s (chiefly British) coal reserves were indispensable for providing the necessary resources for capital and energy-intensive growth (Pomeranz)5 – we focus on the effects of state-making and war-making on “state rulers to economic elites (chiefly merchants)” relationships. Particularly, we stress Fiori’s powerful argument that capitalism was a sub-product of the power struggle within the Early Modern European Interstate system.
This paper is organized as follows. In the first section we present our main theoretical underpinnings, respectively, (i) the Arrighian/Braudelian rejection to liberal theories of the transition to capitalism and (ii) Fiori’s Global Power theory, which actually downplays the very role of economics in explaining the transition. In the second section (before the conclusion), we outline why state-elite relations in Imperial China did not lead to capitalism, whereas the alliance between cash-hungry European rulers and merchants facilitated the leap to a new mode of production.
THE DISTINCTION BETWEEN THE MARKET ECONOMY AND CAPITALISM AND FIORI’S GLOBAL POWER THEORY
A series of scholars have tackled the problem of why China did not embark on a capital-intensive accumulation process – despite having reasonably well functioning markets, secure property rights to land, generalized wage-labor6 (etc.) – by escaping the conundrum one comes across when linking capitalism directly to the development of markets. These scholars argue that, while capitalism is obviously compatible and to a large extent dependent on the wide-spread development of property rights and competitive markets, the ideal conditions for continuous capital accumulation – and not only for its origin, for its debut – include (or perhaps demand) arrangements that make it possible for some people to circumvent competitive markets, to profit from securing monopoly rights and other state-sponsored privileges that make profit rates soar to the point where investment in capital goods becomes attractive. Were it not for these perpetually-reproduced arrangements, they say, the drive for capital accumulation would soon wither away as competition would plummet profit rates back to the levels of “traditional-market” societies. Hence the famous distinction that Fernand (Braudel 1977, p. 62) makes between the market economy and capitalism: “there are two types of exchange, one is down-to-earth, it is based on competition, and is almost transparent; the other, a higher form, is sophisticated and domineering. Neither the same mechanisms or agents govern these two types of activities, and the capitalist sphere is located in the higher form”. Whether state-sponsored or not, Braudel considers long-distance trade and financial intermediation examples of the second type. For him, it was the sheer amount of capital involved in these enterprises that, in turn, “enabled capitalists to preserve their privileged position and to reserve to themselves the big international transactions of the day” (1977, p. 58). But we should remember that, for Braudel, “capitalism (ultimately) only triumphs when it is the state”7, that is, when rich merchants enjoy from the state both the security and favour necessary for “capitalist dynasties” to build their fortunes over generations.
Following Braudel, (Arrighi 1994, p. 10 ss.) also believes that the transition marking the rise of capitalism in Europe above the existing market structures little had to do with the proliferation of commercial activities (these have purportedly always existed), but with the fusion of capital with government, the mix that propelled European States towards the territorial conquest of the world (p. 11). In other words, it was the military and colonial endeavors of warring European states that created the economic loci that allowed capital to be accumulated – via public debt, tax-farming, trade monopolies, etc. – at unprecedented rates. More specifically, if it weren’t for the European inter-state competition for capital, blocks of governmental and business organizations would not have been formed. And for Arrighi, were it not for this fusion, the vast “elements of capitalism” – located everywhere in the world for the past few millennia – could never have amassed such power as to revolutionize the material world. So, for the Italian scholar what needs to be explained is not the domestic aspects of capital accumulation per se but how exactly the geopolitical competition between European States impelled them to furnish an ever-increasing concentration of capitalist power in the European (then World) system at large, a concentration that directly served the interests of sequential leading capitalist powers.
Now it is time we presented an innovative line of research not well known in the English-speaking world because most of it has yet to be published in English8. Like Braudel, for José Luis Fiori the specifically European collusion of profit and power is central to explaining the rise of capitalism. However, Fiori thinks that Braudel’s Wheels of Commerce (1982) focus excessively on the development of individual trade and markets and conveys the idea of a gradual transition – within the “games of exchange” – to the “high gear” world of capital and capitalism (Fiori, 2010, p. 126). To put it differently, there seems to be a missing link between Braudel’s “games of exchange” and his theory of capitalist “large profits” and “large predators”.
Fiori’s main argument in his Preface to Global Power (2010) is that there is no intrinsic factor related to exchanges and markets that explain the decision to accumulate and the universalization of market themselves, and thus, that the leap from market to capitalism must be mediated by the worlds of power and war. Put differently, the expansive force that accelerated that growth of markets came not from the “games of exchange” nor from capital-labour relations (class struggle), but from the “games of conquest”.
Somewhat counter intuitively, Fiori goes on to say that taxes were the first price of labor: only after its imposition was the population forced to produce a surplus. “The value of taxes became the elementary unit of value of the first pricing system within the payments community, unified by the sovereign’s taxes and currency” (2010: 130). And as the payments of taxes in cash fostered the exchange of surpluses in markets where “taxpayers” could accumulate the necessary credit (money) required for the payments of their debts in sovereign currency9, “a virtuous circle of sovereign power accumulation and increased surplus, trade and markets” (p. 130) ensued.
For reasons not entirely known, it was only in late medieval Europe that a sufficient number of competing sovereigns monetized their tributes so as to turn Europe in what Maurício (Metri 2007) – another scholar from the Federal University of Rio that participates in the “Global Power” research group – calls a “monetary mosaic”. In other words, for historical reasons there emerged in Europe endless currencies, each valid within their “taxation area”. But by “monetary mosaic” Metri means that the originality of Europe lay in the fact that those tributary territories were not isolated and in conjunction formed an “international community of payments” in which operations for the cancellation of sovereigns’ debts and credits and arbitrage in foreign exchange became the first real opportunities for money to beget more money. In Fiori’s words: “the first European banks were born out of these transactions and began to internationalize their operations and multiply their financial wealth in the shadow of Power” (2010:131).
The interlocking between power and wealth first appeared decisively in the Northern Italian maritime republics, where rulers and merchants often found themselves being the same person, but the Italian Republics of the late middle ages were too small in scope to constitute what Fiori calls, in The Global Power Formation (2004, p. 14), “revolutionary forces of accumulation of power and wealth, with global expansion strategies”: the national economies, born half state, half empire.
War could not have played more important a role in the shaping of these nascent National Economies. In the north of Europe, the Hundred Years War (1337-1453) was decisive in shaping the national identities of France and England, and responsible for providing a “power concentration impetus” that outlasted the war and led to the relatively “centralized” governments of Louis XI and Henry VII. In the Iberian Peninsula, the centralizing impulse that resulted in the union of the crowns of Castile and Aragon led to the completion of the Reconquista (1492) and ultimately to the Great Navigations and the exploration of the American colonies. And it was the Spanish Habsburg Empire and its long wars against France in Italy (1494-1559), England (1588) and the United Provinces (1560-1648), that borne out their correspondingly National States. Lastly, the Thirty Years War (1618-1648) in Germany, the first “European International War”, was the war that finally integrated and established the frontiers (in 1648) of these incipient National States. The Great Northern War (1700-21) brought Russia into the system and by the second decade of the 18th century one could already speak of a European International System (soon to become a world system by action of the expansionist rationale of the European Nations-cum-Empires), integrated by virtue of war, the fundamental engine of this system10.
Of course, war, currency and trade have always existed. What was original in Europe, as of the Late Middle Ages, was the way the “need for conquering” induced, and was later associated to, the “need for profit”. This is why the historical origin of European capital and the capitalist system “derives from the conquering and accumulation of power and the authoritarian encouragement to the growth of surpluses, exchanges, and large financial gains11 built in the shadow of winning powers” (Fiori, 2010: 132).
Therefore, the success of England in becoming the first mature capitalist country cannot be understood without bearing in mind that England was, undoubtedly, the most successful mercantilist country. Mercantilism, defined as a set of policies designed to increase the state’s power and wealth in a non-friendly environment, was necessary to create the locus in which capital could be accumulated: in Fiori’s words (2004, p. 32), “mercantilism was the knife territorial states wielded to carve “national markets” out of the vast and disorganized “European World Economy” of the 16th century” (and later, it was the weapon states employed to protect their new creature – the national markets – from foreign competition). To use another Braudelian metaphor, mercantilism – and all the national policies so related – was necessary to carve extraordinary profit opportunities out of the “ordinary and ever existing market economy”. Why mercantilism, financial revolutions12, and capitalists having political clout did not take place in China is what we turn now to answer.
BY WAY OF COMPARISON: CHINA VERSUS EUROPE
Scholars have argued that, in pre-modern times, a virtuous symbiosis between the Chinese government and mercantile/financial activities was non-existent; that the Chinese government was hostile to “higher forms of exchange”13; that the Chinese highly developed and precociously meritocratic civil service drew the elite’s attention away from commercial activities and into building specific human capital to pass civil service examinations, whose basic readings were the Confucian classics, that supposedly taught “rational adjustment to the world”, not mastery over it14; that the late Imperial China – framed broadly as the Song through Qing dynasties, ca. 960-1911 CE – official discourse lauded farming and weaving activities as the material foundation upon which a proper social order should be built, a social order that “rested on wholly non-capitalist understandings of materialism, efficiency and instrumentality”15; that the self-engrossment of the Celestial Empire, particularly after its withdrawal from the avenues of long-distance trade and conflict, in the 15th century, deprived China of the inventiveness and flexibility that warring European states were forced to develop if they wished to remain sovereign16; that the impact of the Chinese empire upon the economy was negative, in the sense that the “empire supported a traditional status system which was a surer access to money than was commerce”17.
All of the arguments above stress that the fact of empire, present in Ming (1368-1644) and Manchu (1644-1912) China (and much before), militated against the full impact of capitalism. The authors underline that, whenever “buds of capitalism” sprang, they were sooner or later nipped by political institutions that (1) either diverted potential merchants/industrialists away from pursuing a “capitalist career”, or (2) made sure they would not receive the necessary support from the state – according to the Braudelian/Arrighian tradition, vital for the development of capitalist dynasties – because the geopolitical situation of non-competition (of empire) dispensed with the politically risky prospect of supporting merchant/financial capital. None of the authors quoted above would deny that China’s pre-modern achievements in science and technology were remarkable18, that China had probably the most advanced economy in the medieval world19, that market exchanges did increasingly characterize Chinese imperial society until its demise, etc. Nonetheless, they all believe that the fact of empire – 1371 to 1911 represented the longest period of (practically) uninterrupted imperial rule in history – removed alternative bases of power, that is, removed internal and external threats to the almighty Chinese bureaucracy, which consistently stifled the development of capitalism.
Notwithstanding our endorsement of the view that the “fact of empire” precluded capitalism, we need to assess some of the arguments outlined above. First of all, it is not clear why – in the social structure given by the fact of empire – Chinese merchants and entrepreneurs would be more inclined to invest their accumulated wealth in land and offices than their European counterparts. The Marxist scholars (Brenner 1976, 1977) and (Teschke 2003) argue that, in pre-capitalist Europe, where agrarian relations were essentially feudal (even during most of the Early Modern period, in continental Europe) – most of the surplus that the ruling elites extracted from the peasantry was invested either in land or in the purchase of offices. Calling Absolutist France a tax/office state, the authors claim that a good deal of the surplus in the French economy was channeled into the state by way of the selling of future revenue streams (tax-farming) or through public debt per se. The French State resorted to these expedients because, like any other Pre-Modern state, it did not possess big enough a bureaucracy to directly administer taxation, and thus was forced to do so via local notables. For all the talk of the power of the Chinese empire, its government was even more ill-equipped: in the early sixteenth century there were probably not many more than 20,000 Mandarins (civil servants) for a population of probably no less than 150,000,00020, whereas in early seventeenth-century France the Crown could count on almost 40,000 royal servants, or one for every 400 inhabitants21. This means we should not think that the Chinese bureaucracy had strong blocking powers over the development of trade. For example, despite a series of edicts (between 1371 and 1567) that officially banned foreign trade, private “pirate” trade continued to exist22. In the rest of this paper we will outline how it was precisely the fact that Chinese capitalists were seldom the instrument used by Ming or Qing authorities to draw revenue from, build Merchant Empires23 or help wage wars – and not the purported blocking powers of the bureaucracy – that stifled their development.
Scholars often view Ming-Qing economic history in the light of the Song Era (960-1279). The Song – and to a lesser degree, its predecessor, the Tang (618-907) – period brings the formation of institutions and structures that evolved in the foundations of what we think of Traditional/Imperial China: a land-based tax system; the regularization of a merit-based civil service; and the use of written examinations, rooted in Confucian ideology, to select candidates. The political changes were accompanied by long-lasting transformations in the economy: a shift from large landholdings to an agriculture regime based on small-holder ownership and the growing importance of markets for goods and factors of production along with the extensive development of private mercantile activity (Brandt et. al., 2013: 6). In other words, building on the considerable expansion of markets and commerce under the Song – some of which declined during the short Mongol (Yuan) interregnum (1279-1368) – the Ming-Qing era witnessed renewed expansion of commerce and growing commercialization of agriculture. (Wong 1999: 215-217) goes on to assert that between 1500 and 1800 some of the same kinds of commercial expansion that took place in Europe also happened in China. Commercialization penetrated to the village level and engaged peasants in cash cropping activities. Long-distance domestic trade was rampant, grain being the most important commodity traded (40% of the total in the eighteenth century). Even international trade was also significant – most was intra-Asian, with China shipping manufactures and tea in exchange mainly for timber, spices, bullion and horses -, though for obvious reasons the bulk of demand and sales was domestic and trade could never make up much more than 1% of pre-modern China’s GDP24.
However, despite sharing structural economic similarities, circa 1500 there came a large set of changes in the scales and dynamics of European maritime commerce that did not take place in Chinese long-distance trade. In the late 15th century onwards different European governments started to directly support merchants and adventurers:
“The Spanish extracted New World silver, while the Portuguese and then the Dutch sought to control the lucrative trade in spices. The Dutch formed the Dutch East India Company to organize their maritime aspirations; the English did likewise creating the English East India Company. Between 1500 and 1800, Europeans in Asia and the New World shifted from spices to drugs and stimulants – coffee, tea, and sugar. For sugar Europeans went beyond merely organizing lucrative trading arrangements, creating what Sidney Mintz has called “agro-industrial enterprises’’ in the Caribbean and Brazil” (Wong, 1999, p. 216).
The Chinese imperial government did not offer as much support to merchants because, in Wong’s words (1999, p. 221), it “did not depend either economically or politically on the support of many rich merchants for its fiscal security or its political power and legitimacy”. Hence, Chinese officials would not risk making concessions to the nascent capitalist-class, concessions that granted European economic elites an unprecedented voice in government.
This is not to say that commercial capitalism did not exist in Traditional China. For example, two major merchant groups came to occupy dominant positions across the empire (Wong, 1999, p. 217). In the north the Shanxi merchants, who expanded their wealth in the fifteenth century by supplying government troops in the northwest in return for monopoly rights in salt distribution to the interior25. In central and southern China the Huizhou26 merchants established themselves in many marketing centers. The economic undertakings of these merchants were broadly similar to those practiced by, say, merchants of northern Italy or of the Low Countries. Each competed with others for profits to be made through long-distance trade. In particular, when the above mentioned grain-salt exchange system broke up in the end of the fifteenth-century, merchants from the region of Shanxi and merchants from Huizhou of southern Anhui met in the newly-formed Liang-huai salt-administration area. With the salt-trade thrown open, new opportunities were afforded to these two groups of merchants who, “because of the niggardliness of their native soils, had long been trading throughout the empire and gained notoriety for their hard-working and frugal habits” (Ho, 1954: 143). For centuries, they reaped great profit from the salt trade. The Liang-huai salt merchants even contributed financially to the Qianlong Emperor’s (1735-1796) campaigns to suppress the Jinchuan rebels in the western province of Sichuan. But, yet, no “European-like virtuous synergy” between the need for profit and the need for conquering ensued. It is, then, in the general exam of Imperial China’s fiscal system and needs that we might find the answer to why this was so.
Peer (Vries’s 2012) thorough survey of the Chinese system of public finance in the period stretching from the consolidation of Qing rule in 1683 to the outbreak of the First Opium War (1839) reveals, pace Pomeranzs and the revisionists, a state that was in almost all relevant financial aspects completely different from Early Modern European states. In China we see no upward trend in the collection of taxes, no development of constitutional constraints on the executive, no consolidation of public debt, no discernible system wherein revenue was traded off for property (and monopoly) rights; no consolidation of state-sponsored charted companies, etc. Indeed, notwithstanding the long tradition of describing China in terms of “oriental despotism” and of claiming that there taxes were oppressively high27, official tax income for Chinese Central government was very low during the Qing. According to (Vries 2012, p. 18 ss.), these are the estimates of the average annual official central income for the government: 35 million taels during the reign of the Kangxi emperor (1662-1722); 40 million in the reign of the Yongzheng emperor (1722-1735); and some 43 to 48 million during the reign of Qianlong (1735-1796) (and it continued to be at that level for the next half century). Of course, these figures refer only to the official taxes on land, salt and customs28. Adding all types of surcharges, the Imperial Household income – that although not government income per se, was often used to pay for public expenses – and sources like the sale of offices, land, titles and tax-farming, Vries’s very high guess – according to him, higher than any guess ever found in the literature – is that total income for the Qing government may have amounted, before the Opium war, to a maximum of 300 million taels, in peak years. What is surprising about this figure, says (Vries 2012, p. 20), is that it is extremely low (per-capita wise) compared to the central government income for Europe’s most successful fiscal-military state, Britain (even without taking into account that only a minor part of these 300 million taels ever reached Beijing). Three-hundred million taels were roughly equivalent to 11 billion grams of silver (using the official conversion rate of 37 grams a tael). In England, taxes were clearly on the increase during the so-called Second Hundred Years War (1688-1815) against France. The average annual taxes jumped from 3.6 million pounds during the Nine Years War (1688-1697) to 6.4 million, during the War for the Spanish Succession (1701-1714). They would double again to 12 million in the American War of Independence (1775-83)29and reach a whopping 28 million pounds30, at the end of the Napoleonic Wars (1815), what amounted to around 18% of National GDP31! 28 million pounds are worth slightly more than 3 billion grams of silver, using Vries’s exchange rate of 110 grams a pound sterling. In other words, in the beginning of the 19th century the British state drew almost a third as much tax revenue as the Chinese state from a population 20 to 25 times smaller32!
Of course, 1815 was a peak year and the purchasing power of silver was 2 to 3 times higher in China than in Britain. In any case, the comparison between tax revenues leaves out Britain’s most lethal weapon: the public debt. Tax receipts scarcely funded a third of the immediate costs of military mobilization of most 18th century wars33. The Revolutionary Wars of 1793-97 cost the British crown 100 million pounds, 90 million of which came from loans. The percentage of immediate military costs covered by loans came down to 50%, during the Napoleonic Wars (1798-1815), if only because of Pitt’s new income tax. But one must not forget that this last war cost the British state an astronomically high figure of 772 million pounds (MacDonald, 2003: 339). By 1815, public debt reached 830 million pounds, or more than 250% of GDP (O’Brien, 2006).
(Vries 2012, p. 15 ss.) contends that the British public debt at the end of the Napoleonic Wars, being the equivalent of 88 billion grams of silver, was equal to more than half of the Chinese GDP (following the 1833 estimate of 4 billion taels, or 150 billion grams of silver). To put it differently, this estimate of the Chinese GDP in 1833 boils down to about 10 taels or 370 grams of silver per person. And, thence, the British national debt of about 6300 grams of silver per capita would mean that the British State commanded a per capita sum 17 times bigger than the average annual earnings of a Chinese. Even taking into account different silver purchasing powers, “per capita in real terms, Britain’s government always spent far more than its Chinese counterpart – in my estimates at least, excluding Ireland, seven times as much at the height of the Napoleonic Wars -, accumulated an enormous debt, and got away with it” (Vries, 2012, p. 16). While other European states did not appropriate- in the long 18th century – as big a share of the national product in the form of taxes and debt, they still were in many regards closer to Britain than to China. The Dutch State appropriated roughly the same per-capita taxes as Britain in the second half of the 18th century (around 160 grams); France came a not too close second with 70 grams; Spain came with 50 and most other European states hovered around 30-40 grams of silver of average annual per-capita taxes in the second half of the 18th century34. China found itself, then, at the lower end of the scale35. The biggest difference, though, would accrue from public debt, which China did not manifest whatsoever. For lack of space, we should only refer to the fact that it was partly a financial crisis that triggered the French Revolution: public debt stood at 60% of French GDP in the 1780s (Bonney, 2004: 195).
This is not to mean that China did not wage wars. Not very unlike Europe, some 50 to 70 percent of the official budget of the central government went to the army. Compared to Europe, less was relatively spent in years of war and more in years of peace, in the form of regular military expenditure on the frontiers. Peter Perdue estimates that the major Qing campaigns between 1747 and 1805 cost an average of 5 million taels per year. The seven-year campaign of the Yongzheng emperor (1723-1735) against the Zunghars had cost even more, close to 18 million taels per year36. Of course, those were emergency expenditures that have to be added to the annual regular military expenditures – during roughly the period from 1740s to the turn of the 19th century – of 32 million taels. To conclude our numerical comparisons, following (Vries 2012) the 37 (32 regular plus 5 extraordinary) million taels per year in military expenditures during the Qianlong reign would amount to double the expenditures on the British military in the same period37. Per-capita wise, then, Britain spent 10 times as much on its army and navy as China.
This overall comparison between the Chinese and British fiscal systems shows us that the average Chinese subject had a much smaller stake in the government. Parallely, the Chinese state did not penetrate as much into society. In his brilliant analysis of taxation during the Ming (1368-1644) – we should stress that the Qing retained most of the Ming tax rates – (Huang 1974) describes how there was widespread evasion by influential landowners38 and how, therefore, the Ming could not increase tax rates without disproportionally hurting the poor; how government finance under the Ming represented an attempt to impose an extremely ambitious centralized system on an enormous empire without the necessary technology or administrative capacity (and without the necessary numbers of officials); how public finance was always in disorder not because of excessive absolute expenditure, but because the system had very limited flexibility and handling capacity; how, ultimately, the low official tax burden – owing to the Empire fiscal system’s “ideological preconceptions, rigid sense of responsibility, compartment spheres of action, unrealistically low salaries, insufficient office personnel, lack of information, deficiency in logistical capacity at the intermediate level, and reluctance to invest (all connected in one way or another with initial under-taxation)” (Huang, 1974: 315-316) – led to rampant corruption at the local level (as the officials complemented their income with illegal extortions) and to under mobilization of the empire’s financial resources.
In the end, the financial establishment of the Chinese Empire was passive – as a rule expenditures were normally simply adapted to income and in case of problems one resorted to ad-hoc solutions – and the low-level of taxation only made possible because of the Ming and Qing dynasties’ “policy” of peace abroad and austerity at home. Clearly, this was only natural as long as the system could depend on “continuing cultural and political dominance over a large and self-sufficient economy which was able to disregard commercial pressures and competition from above” (Huang, 1974, p. 323). In other words, China did not consider itself surrounded by enemies or competitors, especially after the defeat of the Zunghars in the 1760s. As a matter of fact, the celebrated “Ten Great Campaigns” fought during the reign of the Qianlong Emperor (they took place in various moments between 1755 and 1792) helped enlarge the area of Qing control in Central Asia, but most of these campaigns were not exactly “wars” – definitely not European-like wars between powerful states -, but actually policy-like actions on frontiers. The fiscal stress seems to have been even lower in previous Qing governments, as the Kangxi and Yongzheng emperors had the habit of providing loans to merchants.
It seems no coincidence, then, that the more peaceful rule of the Ming and Qing, as compared to the previous dynasties of Yuan and Song, was accompanied by decreased per-capita taxation and financial sophistication (Guanglin Liu, 2005). Even though the Northern Song supposedly rule all of China from 960 to 1127, the constant threat posed by the militant nomadic Jurchen – who actually conquered the capital – encouraged the Chinese to step up military expenditures. This period also coincided with the great socioeconomic reforms led by Chinese economist and chancellor Wang Anshi (1021-1086). Anshi thought the State should take the management of commerce, agriculture and industry into its own hands. He also successfully advised the government to convert the obligations of the populace into monetary obligations and to step up the production of copper coins, so as to foster trade. The fact of disunity was even clearer during the Southern Song (1127-1279), after the Jurchen Dynasty conquest of Kaifeng, in 1127. It encouraged the Song to “build a navy in order to man all waterways that stood between them and their northern competitors” (Hall, 1985, p. 46).
Yet once China was reunited under the native Ming dynasty, it proved possible again to downplay military innovations and the use of gunpowder. Financial techniques widely employed under the Song and Yuan – land taxes assessed in copper coins produced en masse by the state, wide use of paper currency39, integration of fiscal accounts, professionalism in fiscal administration – seem to have been lost under the Ming (Huang, 1974, p. 316) and not particularly recuperated under the Qing. The absence of inter-state competition forced onto China a tendency to a condition of stagnation, or even historical reversion (Fiori, 2004). Its absence meant that the great concern of the Ming and Qing emperors would be to sustain a centralized fiscal authority with extensive, rather than European-like intensive coverage.
This non-intensive tapping of subject’s wealth and skills towards the goals of the state translated, in the geopolitical area, into the so-called tribute system, “an institutional arrangement through which the moral authority of the Chinese empire could be translated into normative pacification in Chinese International relations” (Zhang, 2001, p. 47). Thence, In the Sino-centric world, China was by definition the world, its empire was by definition universal. Of course, China’s hegemony was never as fully political as it was cultural40. But precisely because it was more cultural, and as long as the non-Chinese ruling elites accepted the “assumptions underlining the prevailing belief in the moral purpose of the state” (Zhang, 2001: 58), i.e., as long as they accepted the Confucian conception of the world as civilizational, in the sense that the “organizing principle of sovereignty is concentrically hierarchical, with China sitting at the core” (p. 56-57) and others participating in this order and assigned a place according to how “civilized” they were, no alternative institutional/geopolitical design seemed to be able to challenge the Pax Sinica41. And, more importantly, under the Pax Sinica, Imperial China’s military prowess did not matter that much precisely because it was not a necessary condition for the maintenance of this world-order.
The European “world-order” could not be more different. Though the Latin Christian Church could have been seen as an Empire, as “an heir to Rome” – not of course, in the military sense, but in the spiritual, ideological, cultural and legal arena – the very role the papacy played in making a secular empire impossible42 – in the West, the “church evolved its own system of authority as well as its own imperial claims and sought to deny divine legitimacy to all other rulers” (Brady, 1991, p. 127) – transformed the Church into another of the various political and legal entities fighting for power and recognition in Europe. It was this power struggle that would create fiscal-military states and capitalism as the dominant mode of production that would later conquer the world.
Under the Pax Sinica, on the other hand, cheap government made sense. It entailed a kind of “agrarian paternalism”43 where agriculture was seen as the main pillar of society and where rulers interpreted the “state’s mandate as one of managing and stabilizing wealth rather than controlling and extracting it” (Vries, 2012: 33). Likewise, the concept of concentrically hierarchical sovereignty translated into “control from afar” and lean government44. Policy-wise then, the agendas of Ming and Qing rulers resembled much more laissez-faire than mercantilist doctrines. That’s why, even though rich Chinese merchants sometimes contributed to their emperors’ campaigns and tours45 – and vice-versa, as tax remissions were common among Chinese emperors -, they had no support from their rulers in the form of public investment in merchant infrastructure46; they were never encouraged to go abroad or form chartered companies (no Merchant Empire was built); they were (almost) never given monopoly rights; i.e., taxes were not channeled from the general populace towards “bourgeois” needs: no bourgeois revolution ensued. Ultimately, no leap from the market economy to capitalism took place because no significant group of capitalists were taken into the state’s bosom and shielded from competition in world-wide markets.
Competition, after all, is the mother of capitalism. But it should be more than clear by now that we do not endorse the well-known argument that geopolitical competition within Europe made for an overall freer economic environment where, following institutional economics, progressive adoption and enforcement of rent-seeking thwarting institutions diminished transaction costs and paved way for the coming and utter generalization of free profit maximizing enterprises. From the beginning we have – specially following (Braudel 1982) and (Fiori 2004, 2010) – assumed that the life-force of the capitalist are uncompetitive rents, that in both the history of capital accumulation and the history of interstate power struggle, the winners have been historically those who featured greater capacity or proclivity to break the rules and circumvent the institutions that have been created either to protect market competition or state sovereignty. In trying to circumvent these institutions, Early Modern European states were, in fact, heeding their “imperial calling” (Fiori, 2004). In this sense, all states are imperial – as Tilly puts it: “at the very moment empires were falling apart in Europe, the main European states were building empires outside Europe…” (1996: 244) – and the very difference between the Chinese Imperial Order and Europe’s is that China actually managed to secure a cultural and political monopoly. Had that happened in Europe, military and economic power would also have ceased to matter as much because the very competition that fuels them would have ended.
Lastly, we should note that, in pursuing their imperial strategies abroad and at home – the very creation of national states in Europe meant the subjugation of less powerful local powers – European states happened to favor a particular form of property (merchant property) and created fiscal-military apparatuses with intensive, not extensive, coverage. European fiscal states – mostly through representative institutions that were predominantly of aristocratic origins, where nonetheless these aristocrats became increasingly aligned with moneyed interests and where taxation was becoming increasingly more regressive47 – transferred large amounts of wealth from the populace to military entrepreneurs, merchant/pirate adventurers and capitalist land-owners: capitalism was born a rent-seeking society.
CONCLUDING REMARKS
In this paper we eschewed the notion that capitalism – as an unfettered search for growth of the capital stock – can be directly derived from the development of markets. We argued that such capitalist rationally has to be explained – not assumed -, because it is not consistent with society’s (in principle) much more rational praise for social stability. We pointed out how both Late Imperial China and Early Modern Europe were highly commercialized societies, but only the latter made the leap to capitalism. We then sought answers to this theoretical problem (of the transition) in what we called the “Braudelian/Arrighian school of Political Economy,” which draws a distinction between capitalism and the market economy, capitalism being the anti-market, where the possessor of money meets the possessor of political power and where large profits are reaped. Bearing on this literature, we concluded that the reason why Imperial China did not embark on a capitalist accumulation trajectory, whereas Early Modern Europe did, must have had something to do with different “state rulers to economic elites” relationships.
Following the clue laid out by José Luis Fiori – a Brazilian scholar who developed a theory of the origins of the capitalist interstate system as deriving from the way the “need for conquering” induced, and was later associated to, the “need for profit” – we proceeded to demonstrate how the Pax Sinica entailed relatively low military spending on the part of Chinese rulers and low taxes on the populace. We also stressed how the relatively peaceful Chinese world-order translated into a kind of agrarian paternalism with extensive coverage and lean government. This meant that Chinese officials did not have to heavily tax merchants and notables. Therefore, they did not have to negotiate rights and duties with the mercantile class, i.e., concessions that granted European economic elites an unprecedented voice in government, with which they enacted reforms that all societies had previously thought unnatural.
But more importantly, we concluded that Europe made the leap to capitalism only because it created (exclusive) fiscal-military states that imposed themselves in Europe and abroad and routinely used military power to wage trade wars and stifle competition. To those European rulers and capitalists, power and plenty were inseparably connected. We thus hope that this paper will instigate fellow scholars to do further research on how power and plenty are still inextricably connected in Modern Capitalism, on how Braudel’s contre-marchés are still the lair of the big shots who thrive above the economics textbooks’ markets based on so-called representative agents.
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48Jel Classification: N; H2; F5.
1Ibid. p. 207.
2See, for example, Gunder (Frank 1998), (Bray 1999), (Wong 1999), (Wong and Rosenthal 2011), (Pomeranz 2000) and (Goldstone 2008).
3See last footnote, but also (Elvin 1973) and Yifu (Lin 1995).
4See, for example, (Macfarlane 1978), (North and Thomas 1973), (Mokyr 1990) and (Bryant 2006).
5We could also add (Wong and Rosenthal’s 2011) argument, who say that Europeans were developing and deploying machine more intensely than the Chinese at least since 1600 because of Europe’s higher urbanization rate: geopolitical factors (war) had propelled European proto-industry to shelter itself from the common ravaging of the countryside by looking for protection inside the cities, while in China proto-industry had always been much more of a rural development. And because capital relative to labor has always tended to be cheaper in cities than in rural settlements, investing in labor-saving machines was from earlier times more economically optimal in Europe than in China.
6We should note by now that in this paper we do not intend to revise all the extensive empirical research (some of it already referred to in the introduction) that aims to disprove the traditional theses that Early Modern Europe displayed unique institutions (protection of property rights, financial intermediation, entrepreneurship, rational spirit, etc.) that launched it on an economic road unavailable to other, more backward societies. While there are several articles that aim to disproof the revisionists’ thesis that China was on par with Europe – see, for example, (Brenner and Isett 2002), (Broadberry e Gupta 2006), (Huang 2002) and Robert (Allen 2009) –, they are still somewhat inconclusive and even if the revisionists have made empirical errors in overestimating China’s past economic prowess, they opened up way for new paradigm challenging theories.
7(continue quote) “In its first great phase, that of the Italian city-states of Venice, Genoa, and Florence, power lay in the hands of the moneyed elite. In seventeenth century Holland the aristocracy of the Regents governed for the benefit and even according to the directives of the businessmen, merchants, and moneylenders. Likewise, in England the Glorious Revolution of 1688 marked the accession of business similar to that in Holland” (1977, p. 54).
8The research group called “Poder Global e a Geopolítica do Capitalismo” (Global Power and the geopolitics of capitalism) – http://www.poderglobal.net – is based at the Federal University of Rio de Janeiro. Its main proponent is José Luis Fiori, and in the following paragraphs we will bear directly on two of his book chapters. One of them has been published in English (Fiori, 2010) and the other has been translated (but not published) and can be found under the heading “Global Power Formation” (2004), in the following link: http://www.poderglobal.net/category/2_capitulos-de-livros/.
9The reader might note the use of the Knappian concept of “State Money” and the similarity with Modern Monetary Theory’s treatment of money.
10This brief historical account was taken from (Fiori 2004, p. 16-17).
11Public debt – often along with tax-farming – enriched the bankers of Sienna when they financed Edward II’s conquest of Wales; the Medici and the Strozzi when they administered the Vatican’s debts; or several dynasties of Genoese and German bankers (namely, the Fuggers of Augsburg) when they financed the creation of the First (Spanish) World Empire.
12According to (Fiori 2004, p. 28), in the 17th and 18th centuries in England alone took place the financial revolution that allowed the English State to transform its political space into an “economic, coherent and unified space”, the first capitalist national economy.
13(Braudel 1977, p. 68) believes that the China of the Mings (1368-1644) and of the Manchus (1644-1912) displayed a political hierarchy that crushed all other kinds of hierarchies. In other words, the all-powerful bureaucracy would not let merchant/financial capitalists develop, for fear they might challenge bureaucratic power and society’s status quo.
14Justin Yifu (Lin 1995) is especially interested in understanding why an Industrial Revolution did not ensue in China. He thinks that the incentive structure created by the specific form of civil service examinations and officialdom diverted the intelligentsia away from scientific endeavors. See also Pint-ti Ho’s classic “Salt Merchants of Yang-chou” (now Romanized as Yangzhou), who claims that as soon as salt merchant families became well-to-do, “its youthful members were encouraged to embark upon an scholarly, and ultimately an official, career, with the result that the merchant element in the family became less and less predominant” (1954, p. 165).
15See Francesca (Bray 1999, p. 168).
16(Jones 1987, p. 203) particularly stresses the “sudden” withdrawal from long-distance voyages (like those of the famous admiral Cheng Ho, who sailed as far as Kamchatka and Zanzibar between 1405 and 1430) in the mid-15th century. As reasons for the “inexplicable withdrawal” Jones suggests the impact of financial and military difficulties in the North of China, which drew its attention away from distant voyaging, which had anyway always been for China a rather unprofitable activity (these maritime enterprises were more of a symbolic than commercial nature, with the aim of bringing distant lands under China’s cultural sway).
17See (Hall 1985, p. 48). To strengthen his argument, Hall (, p. 48) Shiba (, 1970, p. 2): “Many merchants and industrialists also sought to buy official status, and it was inevitable that, as the conflict between growing urban economic power and intensifying official control become more pronounced, the upper classes in the cities would attempt to safeguard their wealth by assuming a politically parasitical character”.
18“Needham was able to demonstrate that China had preceded Europe in a number of important discoveries and inventions, including documenting three Chinese inventions that Francis Bacon associated with the birth of the modern world: printing, the magnetic compass, and gunpowder” (in Bray, 1999, p. 162).
19Specially during Song times (960-1279). However, it is important to remember, as stressed by (Hall 1985, p. 46), that the great commercial expansion under the Song took place during a period of actual political disunity: between 1127-1279 the Song lost control of Northern China to the Jin Dynasty, and it is known that the Southern Song considerably bolstered its naval strength to defend its waters and land borders and to conduct maritime missions aboard.
20See (Huang 1981, chapter 2, Hall, 1985, p. 41).
21See (Brewer 1989, p. 12). Of course, not all of those 40,000 were directly paid by the crown (like modern public servants would be), but the sheer difference between each country’s civil servants to population ratio shows how the Chinese empire penetrated society less starkly than the common sense image of “great empires” would suggest.
22See (Hall 1985, p. 49-50) and Wang’s article in (1990), who writes of the Hokkien Merchant Pirates from South Fujian, the most successful overseas traders between the thirteenth and eighteenth centuries.
23For a comprehensive account of how European States nurtured merchant capital development, see the (1990) and (1991), both edited by James D. Tracy.
24This is a backward projection based on statistics from the 19th century. See Ta-chung Liu and Kung-chia Yeh, 1965 (Brand et. al., 2013, p. 12).
25These merchants were also engaged in many businesses including the provision of commercial credit.
26The Hui Merchants began to thrive during the Southern Song period (1127-1279), but rose to commercial prominence from the middle of the Ming. “Although the bulk of the trading activities of the Hui merchants were along the Yangzi River, especially the Lower Yangzi region, their reach extended nationwide and even overseas to Japan” (see Gupta and Ma, 2010).
27Too see why this position is not tenable anymore, see (Blue 1999) and (Vries 2013, p. 58-61).
28Analyzing official documents of central tax incomes, (Lai 2012, p. 6) finds that in 1753 land taxes brought in 29,611,201taels, salt 5,560,540 taels, and customs 4,324,005 taels. In 1812, land taxes brought in 29,324,005 taels, salt taxes 5,797,645, and customs 4,810,349 taels.
29These figures are from Brewer, 1989, p. 74.
30In (O’Brien 1988, p. 3).
31Yeh-chien (Wang 1973, pp. 80, 128, 133) (Brand et. al. 2013, p. 37) finds that in China total government revenue from all sources amounted to roughly 2.4 percent of net national product in 1908, suggesting that tax revenues remained well below five percent of total output throughout the Qing period.
32In 1800, for example, there were 10 million people in the UK and at least 260 million in China.
33They funded only 26% of the expenditures on the War of Spanish Succession and only 19% of the American War expenses, for example (O’Brien, 1988, p. 4).
34These figures are from Karaman e Pamuk, 2011, p. 6.
35Using the very generous estimate of a maximum of 300 million taels for government income (roughly the same number as the Chinese population in the beginning of the 19th century), we would boil down to one tael of taxes per person, or roughly 37 grams of silver.
36See Beatrice Bartlett’s Monarchs and Minister, 1991: 121-22, (Vries 2012: 27).
37In terms of domestic purchasing power, 37 million taels are about the same as 37 million pounds sterling. British military expenditure averaged slightly less than 20 million in the mentioned period.
38In 1632, tax arrears of 50 per cent or more were reported in 340 counties, that is, more than a quarter of the fiscal districts of the entire empire (Huang, 1974, p. 308).
39It is said that the great Mongol Kublai Khan, who ruled China in the 13th century, confiscated all gold and silver, issued a lot of paper currency and established its credibility by decreeing that his paper money must be accepted by traders on pain of death. The efficiency of the system is said to have impressed Marco Polo in his visit to China (see Yang, 1953).
40It is interesting that, “when the Mongols and Manchus conquered China, they had already to a considerable extent adopted the culture of the Chinese. They dominated the Chinese politically, but the Chinese dominated them culturally. They therefore did not create a marked break or change in the continuity and unity of Chinese culture and civilization” (Fung Yu-Lan, A short history of Chinese philosophy, 1953, apud Zhang, 2001, p.55-56).
41The term normally applies to a long period of peace in East Asia, under Chinese Hegemony, and stretches from the beginning of the Ming to the 19th century. Here, we use it metaphorically to mean the Chinese world-order and the Chinese Empire tribute system.
42Because “the church refused to serve as a second fiddle in an empire equivalent to those of China and Byzantium, and thus did not create a Caesaropapist doctrine in which a single emperor was elevated to semi-divine status” (Hall, 1985. p. 134-135).
43Not being forced by revenue shortages to bestow “capitalists” with a louder voice in government, Chinese officials stressed the need for balance between farming, commerce and crafts (see Wong, 1999, and Fray, 1999).
44“The Kangxi emperor, to just give an example, is supposed to have remitted 100 million during the first forty-nine years of his reign and decreed an empire-wide amnesty that excused each province in turn from remitting its annual land tax once in a three-year cycle. Famous and very consequential is his promise in 1713 that the head and poll taxes would be permanently based on the quotas of 1712.” (Vries, 2012: 31)
45In the Qianlong period, salt merchants’ contribution to military supplies, water control projects, and the emperor’s southern tours amounted to 30 million taels (Lai, 2012, p.7). Sometimes the contributions would lead to capital shortages, which would then lead to salt merchants needing to borrow from the state, what was not entirely uncommon as well.
46Late imperial government did intervene in the economy, but it surely did not follow a capitalist rationality: “All through the two millennia of the empire the state would undertake to open up new lands for cultivation; to loan tools, seed, and animals to settlers on the lands; to develop irrigation projects; and to disseminate improved methods or equipment and encourage the cultivation of new crops” (Fray, 1999, p. 173).
47Notwithstanding the impression created – by academics of institutional persuasion like (North and Weingast 1989), (Stasavage 2003) and (Hoffman and Norberg 1994) – that the trading off of revenue for political rights was a process wherein those who paid the bulk of taxes and those who were represented were identical.
Received: September 22, 2015; Accepted: December 23, 2015
Akibat Perubahan Iklim Di Sumatera: Cherry Kopi Yang Tak Berisi
Dampak pemanasan iklim akhirnya menyentuh dataran Sumatera dan memberikan dampak cukup signifikan terhadap pohon kopi di sana.
BEBERAPA tahun lalu, Brazil beserta sebagian negara di Amerika Latin dan Afrika yang merupakan daerah-daerah penting penanaman kopi sempat mengalami kerugian cukup besar mulai dari proses tanam hingga pemanenannya. Di beberapa laporan, Brazil dan Ethiopia bahkan termasuk yang paling parah dari semuanya karena kerugian mereka nyaris mendekati 80% dari total penghasilan tahunan umumnya.
Pemanasan global dan perubahan iklim yang semakin menjadi-jadi membuat pohon kopi yang mereka tanam menjadi lebih rentan terhadap hama, proses pematangan buah, atau cherry kopi juga menjadi tidak maksimal sehingga berpengaruh pula terhadap hasil panen.
Dan kasus yang mirip terjadi pula kepada para petani kopi yang berada di dataran tinggi Gayo, Sumatera. Pada November lalu, beberapa anggota dari Coop Coffees mengadakan perjalanan ke berbagai perkebunan kopi di wilayah Gayo, Aceh. Perjalanan mereka memberikan hasil bahwa kopi-kopi Gayo yang dipanen di sekitar wilayah itu ternyata mengalami kerusakan cukup serius akibat kurangnya curah hujan selama kurun Januari sampai September 2016, tahun ini.
Curah hujan yang sedikit, kekeringan yang berkepanjangan, ditambah suhu udara yang meningkat sedikit lebih tinggi membuat cherry kopi menjadi sangat lambat matangnya. Hasilnya, terdapat cukup banyak cherry yang kosong pada pohon-pohon kopi.
Sementara ketika ketika musim hujan akhirnya tiba pada akhir September lalu, hal ini justru bertepatan dengan fase dimana kopi-kopi sedang dalam proses penjemuran dan pengeringan. Di tahap ini, para petani justru sedang membutuhkan sinar matahari selama berhari-hari untuk menjamin kualitas kopi mereka tetap stabil.
Namun, ketidakstabilan iklim ini pada akhirnya membuat keberlangsungan hidup para petani kopi di Sumatera menjadi tidak bisa diprediksi dari sebelumnya.
Para petani kopi yang tergabung dalam Komunitas Tanjung Sari yang berada di bawah naungan Koperasi Permata Gayo (rata-rata perkebunan mereka berada di ketinggian sekitar 1,100 meter di atas permukaan laut) menemukan bahwa 45% cherry kopi yang mereka panen tahun ini tidak mengandung biji kopi. Cherry kopi yang “kosong” itu tentu saja membuat harga jualnya menjadi menurun drastis dan tidak sebanding dengan biaya yang harus dikeluarkan pada saat pemanenan, termasuk untuk proses pengolahannya. Karenanya Koperasi Permata Gayo memutuskan agar mereka—para petani—tidak menjual cherry kopi yang mereka panen.
Situasi ini hampir sama terjadi di seluruh perkebunan kopi yang ketinggiannya di bawah 1,200 meter di atas permukaan laut, antara lain di daerah Aceh Tengah dan Bener Meriah.
Sementara itu, pedesaan Ujung Gele yang berada sekitar 10 km dari wilayah sebelumnya sedikit lebih beruntung. Kebanyakan perkebunan yang ada di daerah ini berada di ketinggian sekitar 1,300 meter di atas permukaan laut, letaknya juga lebih dekat dengan gunung berapi Gereudong. Kondisi ini membuat suhu udara di sekitarnya masih tetap lebih dingin, tanah vulkanis juga membuatnya masih lebih subur untuk pertumbuhan pohon kopi. Tapi tetap saja, daerah ini tidak lepas dari masalah perubahan iklim.
Kondisi cuaca yang tidak menentu belakangan ini membuat proses panen di daerah ini menjadi terlambat satu bulan, dimulai dari akhir Oktober. Para petani di daerah ini juga menjadi tidak yakin kalau mereka akan mencapai puncak panen di bulan Desember seperti yang seharusnya. Alasannya karena tanaman kopi di daerah ini menjadi berkembang lebih lama, dengan perkiraan kualitas yang menurun mulai dari sekarang sampai Januari tahun depan.
Kondisi pulau Sumatera yang dekat dengan garis Khatulistiwa, ditambah musim hujan yang umumnya terjadi mulai dari akhir September membuat Dataran Tinggi Gayo juga mengalami masa panen dua kali setahun. Panen kedua ini biasanya terjadi selama bulan Maret sampai bulan Juni.
Untuk itu para petani di wilayah Gayo sangat berharap jika pada panen kedua nanti mereka bisa mendapatkan hasil (cherry kopi) yang lebih besar dibandingkan sebelumnya untuk menutupi kerugian ‘panen pertama’ yang mereka dapat tahun ini. Semoga saja.
Disadur dari dailycoffeenews(dot)com. Foto diambil dari coffeebeansdelivered(dot)com(dot)au dan situs pencari.
PERKEMBANGAN & TANTANGAN PRODUK KOPI OLAHAN INDONESIA – ppt download
Gambaran Umum Perkopian Indonesia
Penghasil devisa terbesar ketiga Subsektor Perkebunan setelah Kelapa Sawit dan Karet Komoditi kopi sumber utama pendapatan petani didominasi oleh perkebunan rakyat (96%), penciptaan lapangan kerja yang melibatkan petani secara langsung sebanyak 2,33 juta KK, terbentuknya pusat–pusat pertumbuhan, mendorong agribisnis dan agroindustri kopi.
Indonesia merupakan negara kepulauan dengan keunikan daerah masing2 yang telah menghasilkan karakteristik kopi spesialti yang tidak dihasilkan oleh negara lain.
Namun tingkat produktivitasnya masih rendah sekitar 700 Kg/ha. Jika produktivitas bisa ditingkatkan menjadi 1 – 1,6 ton/ha, maka produksi kopi nasional bisa mencapai lebih dari 1,5 juta ton/tahun atau mencapai sekitar 25 juta bag. Konsumsi domestik masih rendah sekitar 0,9 Kg/Kapita
Source: PERKEMBANGAN & TANTANGAN PRODUK KOPI OLAHAN INDONESIA – ppt download
Apostles of Growth
Capitalism’s newest critics offer a groundbreaking account of slavery, but does their economic history add up?
By Timothy Shenk
November 5, 2014
When Dr. William Levingston came to town, he arrived wearing a silk hat and peddling a cure for one of his age’s most terrifying ailments: uncontrollable growth. At $25, the cost was steep for the farmers and tradesmen of the rural countryside where Levingston did most of his huckstering. But for those in need, he made a promise that was irresistible. As one of his advertisements declared: “Celebrated Cancer Specialist. Here for One Day Only. All cases of cancer cured unless too far gone and then can be greatly benefited.”
Levingston was a confidence man of the sort that mid-nineteenth-century America bred in abundance. A self-styled “botanic physician,” he practiced without a license or any formal medical training, and by concealing his true name. William—or “Big Bill,” as he was known when he wasn’t trying to dupe gullible strangers—had nicked “Levingston” from his father’s hometown, where he grew up with the much more familiar surname of Rockefeller.
William Rockefeller’s antebellum capers gained national attention decades later, thanks to the fame of his eldest son. John D. Rockefeller’s entrepreneurial zeal resembled his father’s, but he owed his fortune to more banal talents. Like his fellow future magnate Andrew Carnegie, Rockefeller started his business career not as a tycoon in embryo, but as an accounting clerk. A mastery of finance’s intricacies was an invaluable asset for both men while they headed enterprises that yoked the pursuit of profit to the historically unprecedented productivity increases that made industrializing America into the planet’s largest economy.
Rockefeller’s success was undeniable: by the 1880s, his company, Standard Oil, had become a global behemoth, and he was well on his way to becoming the richest person in the world. Yet Rockefeller did not portray himself as an icon of cutthroat capitalism, or as the agent of Adam Smith’s invisible hand. For Rockefeller, competition was an obstacle to be overcome, a temporary phase of wasteful turmoil that industries cycled through on their way to a more rational order guided by a handful of monopolies. “Individualism has gone, never to return,” he maintained. “The day of combination is here to stay.”
The Supreme Court undermined Rockefeller’s confident prediction with a 1911 decision that broke apart Standard Oil, fracturing the corporation into more than thirty discrete firms. But Standard Oil, like its founder, cast a long shadow. Eight decades after the Court’s ruling, the company that had begun life as Standard Oil of New Jersey was known as Exxon. In 1994, still reeling from the Exxon-Valdez disaster, the firm requested a $5 billion credit line from J.P. Morgan, then a few years away from a merger with Chase Manhattan. The latter bank had once been led by David Rockefeller, a former student of Friedrich Hayek and the grandchild whom Rockefeller senior thought shared the most in common with himself. Scrambling to meet their client’s demand, Wall Street’s brightest invented a new way to minimize the loan’s cost. They would sell to a third party the risk that Exxon might default, creating a kind of insurance for the transaction. Thus was born a financial instrument that would transform banking yet remain obscure for more than a decade, until the worst economic crisis since the Great Depression made it into a household word: the credit-default swap. Dr. Levingston would have approved.
* * *
Economic crises concentrate the mind wonderfully. Although the 2008 crash and its aftermath have yet to spark an intellectual reformation among economists, it is not for lack of hand-wringing. As the Great Recession unfolded, soul-searching among economists over their discipline’s failures dominated magazine covers (Paul Krugman in The New York Times Magazine asked “How Did Economists Get It So Wrong?”); a litany of conferences (then–Federal Reserve chair Ben Bernanke used one to ruminate on the “Implications of the Financial Crisis for Economics”); and countless blog posts (not worth citing). Less noticed, however, was a parallel reckoning taking place in another branch of the academy.
Historians, as a rule, love to complain about economists. There are exceptions, but in a field where self-described economic historians make up less than 3 percent of the total population, they are a decided minority. Yet in 2008, most historians were just as baffled by the financial crisis as economists. In the rush to find the prehistory of a bewildering present, stories of the Rockefellers and their ilk were retold as parables of capitalism overflowing with lessons for the current day: the importance of elites, especially elites with access to massive amounts of capital; the indispensability of finance to more dramatic revolutions in production; the resilience of an economic order that appeared messier than economists allowed, but proved harder to resist than earlier historians had admitted. In a time of recession, nothing stood out more than the stubborn persistence of economic growth—the force that had transformed the son of a small-time charlatan into the commander of powers beyond the imagination of kings a century before. Growth was occasionally checked, but it always revived, and it remade the world along the way.
With memories of the crisis still fresh, a group of academics calling themselves historians of capitalism started to attract increasing attention. Capitalism might seem like a strange topic to require discovery, yet until recently, scholars concerned with the subject tended to style themselves practitioners of economic history, or social history, or labor history, or business history, not the history of capitalism as such. But that is the genius of the label: it names a topic, not a methodology, opening the field to anyone who believes capitalism worth studying.
Mostly young, and mostly specializing in the history of the United States, historians of capitalism are one part of a broader revival in political economy. Yet the success enjoyed by this segment of a larger groundswell remains noteworthy—and surprising. Despite the seeming predictability of the subject’s popularity at a time when economic issues have moved to the forefront of public debate, turning capitalism into the central category of historical analysis requires intellectual sacrifices, pushing some topics into the spotlight and relegating others to the shadows. This has not escaped the capitalism cohort’s peers, many of whom fear that the trend would undo advances made by a generation of cultural historians, while leading to even more scholarship of and by white men. Historians of capitalism vigorously protest those charges, but murmurs of discontent have already begun, and they will grow louder if the field continues to thrive.
Although major intellectual contributions and timely subject matter have boosted capitalism’s newest historians in their ascent, those qualities alone cannot account for their success. They have supplied, as their colleagues in business school would say, a case study in how to shift an intellectual debate. Unlike most case studies, however, tracing the origins of the turn toward capitalism brings into relief a history with profound implications for how we understand the past and the present—and how we envision the future.
* * *
Historians of capitalism hail from departments across the country, but the field’s most prominent enthusiast occupies an ideal perch for academic proselytizing. In 1996, a young German-born historian of the United States named Sven Beckert was hired by Harvard University’s history department. The title of Beckert’s dissertation alone was significant: called “The Making of New York City’s Bourgeoisie, 1850–1886,” it nodded to the Marxist historian E.P. Thompson’s classic text The Making of the English Working Class (1963), and it highlighted a concept—“bourgeoisie”—shunned by scholars wary of associating themselves with a Marxist vocabulary. Beckert’s methodology was more indebted to the great figures of modern sociology than to Capital, but at the time Marxism of any kind was unfashionable among historians. It remained so five years later when the book quarried from Beckert’s dissertation was published as The Monied Metropolis.
Though the book garnered little attention outside the ranks of specialists upon its release, it has since become a touchstone for historians of capitalism. A study of nineteenth-century America’s version of the 1 percent appeared prophetic in the wake of Occupy Wall Street, but equally important has been Beckert’s own trajectory following his arrival at Harvard. He has proved himself a vigorous academic entrepreneur with a gift for institution-building, not unlike the subjects of his research. In 2005, the now-tenured Beckert launched a graduate seminar with Christine Desan, a colleague from Harvard Law School, on “The Political Economy of Modern Capitalism.” Consisting at first of just a handful of graduate students, the seminar has since expanded considerably, becoming an incubator for a rising cohort of historians and a frequent destination for scholars outside Harvard looking to test-drive new research. Thanks to Beckert, Harvard also became the home of conferences that helped build an intellectual community devoted to the study of capitalism.
That community, which includes a substantial number of Beckert’s former students, is now flourishing. Courses on the history of capitalism have become common, and so are job searches in the field. The latest issue of The Journal of American History devoted more than thirty pages to a symposium on the topic. A canon of scholarship, much of it based on the first books of their respective authors, has begun to form. To hasten that process, three of the field’s brightest stars—Bethany Moreton of the University of Georgia, Julia Ott of the New School, and Louis Hyman of Cornell University’s School of Labor Relations, all of whom earned their doctorates in the last decade—have inaugurated a series for Columbia University Press called “Studies in the History of U.S. Capitalism.” It being 2014, historians of capitalism also have a monthly podcast (five episodes in, as of this writing) and an online course co-taught by Hyman, who has also organized a history-of-capitalism boot camp for graduate students and faculty. The movement received high-profile validation in 2013, when The New York Times made it the subject of a trend piece, an honor more often reserved for appraisals of millennial dating habits and other attempts to provoke Twitter.
The number of major figures involved is still small, but those who established themselves early are reaping the rewards of their prescience, and a parade of new books in the field has rolled off the presses this year. Unlike the first wave of publications, many come not from junior faculty but from established scholars. That includes Making Money: Coin, Currency, and the Coming of Capitalism, an exploration of England’s monetary system in the medieval and early modern periods, from Christine Desan, co-convener of Harvard’s capitalism workshop. Another much-discussed entry comes from Edward Baptist, co-instructor with Hyman of the capitalism MOOC, and also of Cornell University. Baptist’s The Half Has Never Been Told is a bold attempt to put slavery at the center of nineteenth-century capitalism that has landed on bestseller lists, thanks in part to an unintended publicity boost from The Economist, where a review—soon withdrawn—treated the book as an opportunity to defend the South’s slave owners.
But the most intellectually ambitious effort is from Beckert, whose first book since The Monied Metropolis is coming out this December. Titled Empire of Cotton, it is a masterpiece of the historian’s craft: combining a global scope with concern for the nuances of individual experience, Beckert tracks the fortunes of a single commodity, cotton, across six continents and thousands of years. That sweeping project is driven by the attempt to unravel the causes and consequences of one overarching puzzle: “why, after many millennia of slow economic growth, a few strands of humanity in the late eighteenth century suddenly got much richer.” On the way to his answer, Beckert uncovers a history he claims “provides the key to understanding the modern world.” That thesis, inevitably, goes unproven, as does the contention that modernity could ever possess a single “key.” But the belief that discovering the origins of economic growth might unlock modernity’s secrets raises questions that are even more tantalizing.
* * *
One “would need to be a god to write a truly adequate history of capitalism,” according to a recent reflection on the subject. But that hasn’t stopped the earthly from trying. Though owing their popularity to the 2008 crash, the newest interpretations of capitalism’s past bear the stamp of the era that preceded Lehman’s bankruptcy, the end-of-history moment that began with the tumbling of the Berlin Wall, when capitalism’s triumphant forward march seemed assured. Perhaps unavoidably, Marxism’s intellectual legacy hangs over these histories—offering a model that some contend deserves resurrection, albeit in modified form, and that others dismiss as a failed enterprise, which must be cast aside to allow for fresh inquiry.
That fraught dynamic has intersected with a generational transition in the academy, as the baby boomers retire and their successors carve out a distinctive identity. Desan pinpoints the divide in her new book: for scholars today, she writes, “there is no romantic baseline to the coming of capitalism,” no rosy alternative crying out for recovery by later historians. (Cough—looks at senior colleagues with all those anecdotes about 1968—cough.) The recriminating impulse here is reminiscent of the last decade’s profusion of scholarship on American conservatism, both of them motivated by the concern that while academics busied themselves with inscrutable cultural theory and celebrations of the marginalized, the truly powerful went about crafting a world more to their liking.
Historians of the right corrected for the supposed naïveté of their forerunners by discarding assumptions about the nation’s irresistible march toward modernity—defined as secular, tolerant and liberal—while stressing the enduring significance of those previously dismissed as reactionary aberrations. That project was necessary, but historians of capitalism are pursuing even bigger game. Studies of conservatism were responding in large measure to the triumphalism of Bush-era neoconservatism, and they generally limited their scope to the twentieth-century United States. The revised history of capitalism, as Empire of Cotton makes clear, promises a global history spanning centuries, as seen from a present shaped by neoliberalism.
If the Detroit assembly line once seemed capitalism’s quintessential expression, Wall Street today appears a more logical one. But historians of capitalism emphasize, in one of their most significant contributions, that Wall Street’s contemporary importance should not come as a surprise. Finance, they argue, has long been the lifeblood of capitalism. That was the case during the age of mercantile capitalism that preceded the Industrial Revolution; it remained true during industry’s heyday; and it continues to be so in our financialized era.
While elites have received more attention in this scholarship, the history of the 99 percent—what prior generations would have more readily called labor or social history—has receded in prominence. More striking, though, is a redefinition of labor itself. Instead of focusing on the experiences of wage workers, scholars now dwell on the variety of ways in which labor of all sorts can be commodified and exploited. Plantation slaves and factory workers become different points on a common spectrum, rather than fundamental opposites. Commodified persons and the deft financiers capable of exploiting their commodification provide these narratives with their central figures—new embodiments for the old categories of labor and capital.
In this rendering, capitalism is less a specific entity whose precise contours can be outlined than an infinitely resilient blob capable of absorbing every blow dealt against it and emerging stronger. It is a view that imposes stark limitations on the realm of the politically possible. Hyman is explicit on this point, arguing that “American capitalism is America, and we can choose together to submit to it, or rise to its challenges, making what we will of its possibilities.” Reform might be achievable, but the only revolution on offer is what Beckert, with a sly wink to Leon Trotsky, calls the “permanent revolution” of capitalism itself.
* * *
Here lies one of the most notable gambits of capitalism studies. Where earlier scholars were eager to define capitalism—often, as in the case of Marxists, so they could identify its vulnerabilities and point toward a socialist future—today’s historians combine aggressive insistence on their subject’s centrality with a deep reluctance to provide it with any but the most minimal definition. In Hyman’s words, “The essential problem is not to primly define capitalism like a schoolmarm, but to think about why capitalism, which appears to be so simple, evades easy definitions.”
Instead of identifying a timeless essence of capitalism, many of these historians opt for something more potent: a story, and specifically a story about growth. With a handful of possible exceptions, sustained economic growth had not been a part of human history before the eighteenth century. Temporary spurts quickly expired, with flush times driving population upward, putting too much demand on the food supply and leading to mass starvation. Capitalism upended that status quo, replacing cycles of prosperity and famine with the exponential increase of per capita output. Though bound up with trends that stretched back centuries, the onset of modern economic growth marked a radical departure from previous history. Like a perpetual-motion machine, economic growth appeared to drive its own expansion. Periodic downturns and busts occasionally stopped the machine’s gears from turning, but those momentary interruptions soon gave way to the system’s irresistible advance. Viewed from this perspective, capitalism is defined not so much by its institutions as by its results—not by what it is, but by what it does. The variety of ways in which labor can be commodified, the diverse forms that capital can assume, the different institutions that structure relations of production and exchange—all of these are just means subordinated to the larger end of economic growth. A weak definition of capitalism that might seem banal when reduced to its simplest terms—“capitalism’s only constant is change”—supports a historical narrative of remarkable scope.
That narrative, historians of capitalism insist, can both explain the past and perform a valuable service in the present. “Perhaps the best thing about teaching the history of American capitalism,” Beckert has contended, is the opportunity it offers to “go beyond the stale stupidities that characterize so much of the public discussions in the media on capitalism.” Frustrated with the antiseptic depictions of markets populated by rational actors that many economists favor, historians of capitalism dwell on the multiplicity of exceptions to the market’s supposed rules. This approach comes attached to a political agenda. As Beckert puts it, historians of capitalism should draw upon their expertise and seek to “take up some of the intellectual space that economists occupy” in the wider world. “It would,” he adds, “make for better politics.”
Yet the new historians of capitalism have a much more complicated relationship with economists than these easy dismissals suggest. This is nowhere more evident than in the routine conflation of economic growth with capitalism. Though far from the only subject addressed by these historians, economic growth serves a crucial purpose in their accounts, in which capitalism’s ability to satisfy the yearning for more becomes its trump card. An incentive that has stymied would-be revolutionaries for centuries, economic growth unites communities around the pursuit of mutual enrichment, promises social mobility and political stability, and excuses every sacrifice made in its name. Despite its contemporary ubiquity, however, the idea that economic growth is a necessary feature of collective life has a brief history—much briefer than the history of economic growth itself. Not until the middle of the twentieth century was economic growth accepted as a natural and obviously attractive feature of a modern economy, and even then its reign soon came under assault.
Today, confronting the twin pressures of mounting income inequality and escalating concerns about climate change, partisans of economic growth face stronger opposition than at any time in decades. Even if continued growth were desirable, an increasing number of economists are convinced that a decrease from the last century’s norm will be unavoidable in the century ahead. It is a strange tableau: while economists speculate on growth’s decline, a swath of the historical profession, eager to challenge the tyranny of economists, has attempted to make modernity into the story of economic growth—a story that the economists of a prior generation did more than any other group to canonize. Understanding how we arrived at this intellectual crossroads requires a history of its own.
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Though hostile today, economists and historians are more like feuding siblings than rival species. The two fields grew up alongside each other at the end of the nineteenth century, when the modern research university began to emerge. Partisans for each discipline claimed that the divide between them could never be crossed, but that was just one position among many. In Germany, home to more economists than anywhere else in Europe, members of the “historical school” maintained that economics and history were inseparable. Alfred Marshall, the premier British economist of his age, led the charge to establish a specialized economics curriculum at Cambridge, but his understanding of economics was shaped by an early encounter with Hegelian philosophy, and he passed on a concern for historical analysis to his students.
In the United States, already noteworthy for the size of its university system and the speed with which it was developing, the economist E.R.A. Seligman doubled as a significant philosopher of history. Seligman was no radical, but he advocated an “economic interpretation of history” that had strong affinities with Marxism. Thanks to its adoption by Charles Beard, the most influential American historical thinker of his generation, Seligman’s program found a receptive audience among a rising group of so-called Progressive historians. The nation’s first cohort of professional historians, the Progressives aimed to make a science attentive to the needs of reform out of a discipline that had prized narrative and mirrored the prejudices of the country’s elite. Professorial equivalents of the era’s muckraking journalists, Progressive historians cast themselves as clear-eyed speakers of unpleasant truths, combining hopes for political progress with scientific aspirations.
Economists and historians could share a common language in part because many believed they had a duty to respond to problems that could only be overcome if they, along with allies in the other social sciences, forged a cohesive science of society. It was a time of industrialization, urbanization and immigration, all on an unprecedented scale. These changes coincided with, and helped foster, labor disputes of an intensity and magnitude never before witnessed. This was especially true in the United States, which, despite repeated assertions to the contrary, has a long and bloody history of class conflict.
Economists were just as preoccupied with these conflicts as historians. As with history, economics counted a fair number of reactionaries in its ranks, but they were far from dominant. Even those who leaned right could describe themselves, in the words of Yale’s Irving Fisher, as “thoroughly in sympathy with the aims of Socialism.” The field supplied Progressive politicians with some of their most effective shock troops, shaping policy on issues ranging from corporate regulation to unemployment insurance. Economists continued to play that role in Franklin Roosevelt’s New Deal, when figures like Rexford Tugwell and Adolph Berle formed part of FDR’s “Brain Trust.”
Connections between economists and historians were never tighter than at the start of Roosevelt’s presidency, but they had already frayed considerably by his administration’s close. Although a liberal consensus linked much of the academic elite and would continue to do so for decades, economists had begun to recast their profession as the hardest of the social sciences, replacing textual arguments with hyper-sophisticated mathematical models incomprehensible to all but the elect. Both economists and historians served in large numbers during World War II, but when peace arrived the historians returned to the classroom, while economists were invited to take their place as counselors to the powerful, including the president of the United States, thanks to the establishment of the Council of Economic Advisers. That newfound prominence was owed, above all, to the discipline’s authority over a subject that was becoming a global fixation: economic growth.
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Growth’s apotheosis would have many consequences, and one of the least noticed was its deepening of the rift between historians and economists. Economic history had begun to establish itself as a distinct field in the 1920s. As historian William Sewell has observed, in those early days scholarship concentrated on what would now be called microeconomic questions, like the behavior of a single firm or the influence of a specific policy on an industry. No special training as an economist was necessary to produce this work, only the typical historian’s willingness to dig around in archives and come up with a description of what happened in a particular place at a particular time.
All that changed radically in the aftermath of World War II, when investigations of the economy as a whole became the norm. And no issue connected to the economy attracted more commentary than growth. Before 1940, no economics dissertation in the United States included the phrase “economic growth” in its title; a decade later, it was everywhere. But growth could not be studied with the same tools that economic historians had relied upon previously. People accumulate papers, and so do companies—papers that historians can later use to piece together narratives. The economy is an altogether more abstract entity, an object built out of aggregates like productivity and unemployment that can never be seen, even when their consequences are felt. Reconstructing the economy’s history required tables, graphs, models, estimates of national income and output—an entire instrumentarium that historians had little familiarity with, partly because economists had just recently conjured it into existence.
Economic history was transformed into the history of economic growth—the search for examples that preceded its breakthrough in the eighteenth century, along with explanations for why it had taken so long for growth to become routine. In the process, the field became less important to both economists and historians. Historians viewed it as the province of economists, while economists treated it as a testing ground for prefabricated models, implicitly (and sometimes explicitly) dismissing it as a refuge for number-crunchers incapable of producing the mathematically avant-garde theoretical work prized by the discipline.
While the methodological divide widened, a political gap had also begun to open up. As academically inclined baby boomers started their march from the streets into the faculty lounge, they took fields across the humanities and the social sciences with them. History was no exception, as was evident at the 1969 meeting of the American Historical Association, when a group of radical historians staged what one of their irate opponents described as “an attempted revolution.”
Two years before historians grappled with that rebellion, economists had dealt with their own insurgency. But these dissidents had different objectives, and they were much better positioned to succeed, thanks in part to their leader, Milton Friedman, who took direct aim at his discipline’s status quo in his 1967 presidential address to the American Economic Association. Retrospectively judged a pivotal moment in the breakdown of postwar Keynesianism, Friedman’s speech denied that policy-makers could reduce unemployment in the long run by accepting greater inflation, undercutting one of the most persuasive rationales for an activist fiscal policy. This technical justification for a constricted state was just one piece of Friedman’s larger project, but it would seem prescient a few years later, when “stagflation” entered the national vocabulary and the failure of Keynesians to secure prosperity became a staple of conservative rhetoric.
Historians and economists might have finagled their methodological differences if mutual political sympathies had fostered sufficient good will. But when combined with trying to bridge the chasm separating radical historians and Friedmanites, the obstacles proved insurmountable, especially after the Vietnam War shattered what remained of an elite liberal consensus. While economists became even more preoccupied with dazzling mathematics, historians took a cultural turn that led them further away from their erstwhile allies. Both sides discarded the grand aspirations for a unified social science that had animated their forebears—a gloomy end for a campaign that once inspired such utopian hopes. By this point, however, few bothered to mourn.
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Throughout all this, economic growth remained a vital concern, both among economists and in the wider world. It has also continued to frame research in economic history. “Modern economic growth” are the first words of the first volume in the just-released Cambridge History of Capitalism, and chapter after chapter brings news of the same discovery, always depicted as a startling challenge to received wisdom. Babylonia, ancient Greece, medieval Europe and the Middle East at the turn of the first millennium are among the sites reported to have possessed more vibrant economies than previous scholarship recognized. Some even managed to escape, temporarily, from the dangers of overpopulation and famine. Those lucky few recorded impressive growth rates for their time—though, inevitably, they fell short of the heights achieved with capitalism’s arrival.
The search for growth’s prehistory has turned up a surprising ancestor: slavery, long regarded as an obstacle to commercial progress, now cast as a potent engine of development. An emphasis on slavery’s productivity has become accepted among scholars of the distant past, and still more so among students of comparatively recent history. Accenting the significance of slavery is not by itself novel. In the nineteenth century, Marx was only one of many who required no persuasion on this point. According to his succinct formulation, “Without slavery you have no cotton; without cotton you have no modern industry.” Yet even those convinced of slavery’s indispensable role in capitalism’s ascent could consider the system a relic of a bygone era that was fated to die out with time.
No group has done more to undermine that reassuring belief than historians of capitalism. Though built on scholarship reaching back decades, a once controversial thesis has become conventional wisdom with remarkable speed. In the last year alone, three of the most impressive works of American history in many years have bolstered this interpretation: Baptist’s The Half Has Never Been Told; Beckert’s Empire of Cotton; and from Beckert’s Harvard colleague Walter Johnson, River of Dark Dreams. Divergent in crucial respects, these books all depict slavery in the antebellum South as dynamic, thriving and thoroughly capitalist.
This shift has taken place not because historians unearthed a previously hidden industrial economy, but because the criteria used to define capitalism have changed. Foregrounding abstract categories like economic growth and productivity brings otherwise conflicting social orders into a common analytic frame, minimizing the differences that earlier scholars considered immense. When historians turn to particulars, they are far more likely than in the past to highlight the figures whose livelihoods depended on yoking together Northerners and Southerners, like the merchants who, in Beckert’s words, “made capitalism whole.” While the South lacked the hallmarks of industrialization, more capital was concentrated in its slave population—that is, in its ownership of people—than in all of the nation’s industrial investments combined, including banks, factories and railroads. Slaves commanded high prices because they supplied the labor necessary for the production of cotton, arguably the central commodity of the Industrial Revolution. It was little wonder that the South, bound to international networks of trade and holding gargantuan amounts of capital, went on to develop a financial system of extraordinary sophistication. Taken together, these features make the South an exemplary model of capitalism—different from what was developing in the North, to be sure, but a variation on a common theme.
But recent histories of slavery aim to do more than prove that the institution was growing; they want to show that it was indispensable to the emergence of modern economic growth itself. Baptist provides the crispest exposition of this argument: “the move from arithmetical to geometric economic growth,” he contends, “would have been short-circuited if embryo industries had run out of cotton fiber,” which could have occurred if not for an astonishing rise in productivity among the slaves who labored in the cotton fields of the South. Historians already know that productivity climbed during these years, but Baptist offers a novel explanation for this upswing: torture of the enslaved, a process refined over the decades by planters (or, as Baptist refers to them, “entrepreneurs”) desperate to satisfy the demands of cotton markets and keep ahead of their otherwise crippling levels of debt. This is the ultimate payoff of interweaving slavery and capitalism: a history that puts slavery not just at the center of our understanding of the South, or of the United States, but of global capitalism.
That shared project, however, can accommodate a variety of contradictory impulses. The sharpest example of this divergence comes in the work of two authors whose paychecks issue from the same university. Although both Johnson and Beckert share Marxist sympathies, that is where their intellectual similarities end. For Johnson, the essence of what he labels “slave racial capitalism” appears when typologies are put aside and a particular market is investigated “concretely and specifically.” In part for this reason, Johnson has distanced himself from what he refers to as “the end-of-historiography enthusiasm for the ‘new’ history of capitalism.” According to Johnson, tracing the path of a single bale of cotton reveals more about the antebellum economy’s workings than any number of theories targeting “the grand abstraction” of capitalism.
Where Johnson revels in particularity, Beckert describes himself as “centrally concerned with the unity of the diverse.” Though he has an eye for the telling detail, his passion lies with what his mentor, the sociologist Charles Tilly, called “big structures, large processes, huge comparisons.” In Beckert’s telling, the United States in the nineteenth century provided the site for an epic clash between a “war capitalism” whose “beating heart” was slavery and a more familiar industrial capitalism. Nurtured in its infancy by war capitalism, industrial capitalism was fated to grow beyond the constraints of its parent and partner, even if it took a civil war to effect that separation. While Johnson sets out to demolish the categories that have undergirded histories of slavery and capitalism, Beckert tries to establish the dialectic that will finally get the division right. The difference between these two interpretations is profound, yet not profound enough to prevent both from agreeing that, whatever the descriptors—“slave racial” or “war”—the system was ultimately capitalist.
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The significance of this revised history of slavery to our understanding of the past is obvious, and the scholarship it rests upon extraordinary; but its relevance to the present is murkier, as is its threat to the influence of economists over the public debate so lamented by historians. Baptist, for example, depicts his emphasis on the role of torture in the increase of slavery’s productivity as a rebuke to economists who assume the market’s verdict always yields a just outcome. As he puts it, in one of many swipes at the dismal science, “we don’t usually see torture as a factor of production. Economics teachers don’t put it on the chalkboard as a variable in a graph.” Those polemical jabs, however, don’t preclude him from scattering favorable references to economists—including John Maynard Keynes, Joseph Schumpeter, John Kenneth Galbraith, and recent research in behavioral economics—throughout the book. Despite the fire of Baptist’s rhetoric, his criticism is restrained: a salvo targeted not at economics as a whole, but at one (albeit vocal) section of the field.
Beckert and Johnson both provide pieces of a more comprehensive critique, but they refrain from outlining grand theories of capitalism as such, and with good reason. If Johnson is right to prize specificity, he undercuts the rationale for extracting lessons about capitalism today from the experience of the Mississippi Valley more than a century and a half ago. Though Johnson balances this particularism with a more conventionally Marxist insistence on capital’s tendency to rush into particular industries and stimulate crises of overproduction, the tension between this generalizing theory and his focus elsewhere on careful descriptions of capitalism’s precise forms goes unexplored. Beckert comes closer to proposing a unified theory, suggesting the enduring importance of certain crucial elements in economic life—including violence, coercion and the state—that cruder apologists for capitalism overlook. But Beckert’s emphasis on capitalism’s adaptability weakens his case. If the system is as relentlessly changeable as he maintains, then its defenders can shrug off past crimes as tragic but irrelevant to contemporary practice. What corporate titan doesn’t think that he—or, more rarely, she—would have provided safe passage to fugitives on the Underground Railroad?
To a traditional Marxist, these difficulties would seem a predictable consequence of using slavery’s history to understand capitalism. In Capital, Marx wanted to prove not just that capitalist practices were uglier than the soothing fables its theorists spun (though he made that point too), but that capital’s internal logic drove the system toward collapse. He intended to beat those he dismissed as “bourgeois economists” at their own game, and he could only do that if he had an alternative theory of his own. Dwelling on slavery, or the myriad other sins of actually existing capitalism, made critique too easy. Though Capital drew upon historical examples, history itself was useful only to the extent that it grounded theories that revealed capitalism’s fundamental dynamics.
For much of the twentieth century, even Marxist historians skeptical about that part of Marx’s intellectual project were reluctant to fixate on capitalism. Confident that capitalism was but a passing phase in a larger history, they were more likely to describe their object of inquiry as society—something that predated capitalism and, they believed, would endure after its demise. That revolutionary faith animated, among others, Eugene Genovese, one of slavery’s greatest historians and for most of his life a dedicated Marxist. Genovese devoted his career to arguing that slavery had provided the foundation for a Southern way of life that was, according to a formulation he developed with his wife, the historian Elizabeth Fox-Genovese, “in but not of the capitalist world.”
This commitment was present from the opening pages of Genovese’s first book, The Political Economy of Slavery (1965), where he also described himself as “concerned less with economics or even economic history as generally understood than with the economic aspect of a society in crisis.” The ease with which Genovese took up society as his largest category of analysis was characteristic of his time, and it was echoed later in the 1960s during a blossoming of social history. That so many inheritors of Marxism’s totalizing ambitions find capitalism a suitable label for the totality they’re pursuing reveals much more about our moment than it does about the past.
The analytic costs of this perspective come across most clearly in a geographical slippage common to much recent scholarship. Though Beckert and Baptist make frequent references to the South, they typically mean the cotton-producing states of the Deep South. Johnson skirts this pitfall, but only because he makes explicit his choice to focus on the Mississippi Valley. Concentrating on the Deep South, however, excludes much of the Confederacy, including Virginia, which in 1860 counted more slaves in its population than any other state in the nation. While cotton powered an expanding slave economy in the Mississippi Valley, slave owners a little farther to the north grappled with a system that bore a much closer resemblance to the decaying order depicted by prior historians.
The lumping together of a complex region under the sign of cotton is especially striking, given Virginia’s prominence in many of the first histories to foreground slavery’s importance in American development. For earlier historians, the tangled relationship of slavery and freedom in the home state of half the country’s first ten presidents—including George Washington, Thomas Jefferson and James Madison—supplied a potent symbol for a national problem. That the cotton South has replaced Jefferson’s Virginia as the iconic representative of the nation’s commitment to slavery reflects a present when American democracy—easily dismissed as global capitalism’s bumbling sidekick—no longer seems like a scalp worth taking.
Beckert’s global scope and reach into the twentieth century make the consequences of this marginalization of politics even more vivid. By 1980, the world’s two largest producers of cotton were China and the Soviet Union, yet Beckert devotes only a handful of paragraphs to the history of socialism in these countries. In that brief discussion, the policies of socialist governments appear not as alternatives to capital’s rule but as “a sharpening of the tools and an enhancing of the methods of industrial capitalism.”
That socialist parenthesis is forgotten by Empire of Cotton’s close, where Beckert returns to the subject that dominated its opening pages: growth. Noting estimates that cotton production will quadruple by 2050, he pays tribute to capitalism for having “enabled a growth in the churning out of goods that has never been matched by any other system of production.” His hope for a better future comes not from the belief that capitalism will be transcended, but from the chance that its perpetual flux might, somehow, bring forth a world “that is not only productive, but also just.” If so, that would mark a radical break from Beckert’s history of a system driven by the shifting but remorseless logic of capital, with no agent of transformation in sight. This optimistic conclusion aside, the rest of the book imparts a much grimmer lesson: growth arrived centuries ago dressed as a liberator; today, it is our master.
* * *
But what if growth stalls? That question has increasingly occupied economists, many of whom are convinced that we have reached a new stage in growth’s history. Those parts of the world with the longest experiences of growth—Europe and the United States—face the prospect of a sustained decline in the metric that has come to define prosperity, and the planet as a whole confronts the even more daunting challenge of mitigating the environmental damage that has accompanied economic growth since the Industrial Revolution. The irony is conspicuous. Historians have begun in large numbers to rewrite modernity as the history of growth at precisely the moment when moderns might have to learn to do without their accustomed rates of economic expansion—one last swoop for the Owl of Minerva before climate change ravages its natural habitat.
Predicting an end to growth has become something of a cottage industry among economists. Tyler Cowen of George Mason University advanced the case in 2011 with his book The Great Stagnation, and his prognostication won further support from his colleague Robert Gordon’s work heralding, in the title of one recent paper, “The Demise of U.S. Economic Growth.” Lawrence Summers, former head of President Obama’s National Economic Council, has brought these concerns into the mainstream of liberal debate with repeated warnings of “secular stagnation.” Robert Solow—winner of a Nobel Prize for his research in, appropriately enough, growth economics—has added his voice to the chorus. So has Thomas Piketty, whose forecast of capital’s twenty-first-century prospects includes the assumption that countries at the frontier of technological development cannot long sustain per capita growth rates above about 1 percent. That is still exponential growth, but it is a sharp drop-off from expectations set during the last century.
Yet even if high growth rates could be sustained, the conviction is spreading that declining economic growth might be beneficial, even necessary. Though a departure from the recent past, skepticism of growth is also a return to a historical norm. Political leaders have long sought to ensure the well-being of their subjects, but the conflation of prosperity with a steadily rising national income has a much shorter history. National-income accounts were unavailable for most of the world until the middle of the twentieth century. And once they appeared, their relevance for the general population turned on two factors: the dependence of recently expanded welfare states on revenues linked to national economic performance; and the assumption that economic growth benefited rich and poor—or at least the middle class—alike. The first proposition remains true; the second has collapsed.
This is clearest in the United States, where the thread holding together economic growth and median income has been unraveling for decades. Economists have many explanations for this trend, but the phenomenon itself is undeniable. From the aftermath of World War II through the 1970s, most of the total earnings from economic expansion flowed to the bottom 90 percent of Americans. That came to an abrupt end in the 1980s. Although the Clinton years posted marginally better tallies on this front than the Reagan era, the record since 2001 has been abysmal, and the worst has come under Obama. From 2009 to 2012, the last year with reliable data, incomes for the lower 90 percent have declined, while those for the top 10 percent have increased at a healthy clip, with the greatest gains accruing to the 1 percent and above. The tide still rises, but it only lifts yachts.
While the benefits of economic growth for the average American have become increasingly fuzzy, the costs have snapped into focus. Before the Industrial Revolution, economic growth was held in check by the pace at which animals could labor, crops mature and soil recover from depletion (or unexploited territories be acquired). Shifting to fossil fuels—first coal, then oil—upended that system. Energy previously supplied by immense tracts of land worked over decades now came from lumps of coal formed over millions of years. Thus commenced a revolution of economic time and space, with exponentially rising energy consumption propelling economic growth, a flight from the countryside to towns and cities, and a population explosion. Though restricted in the nineteenth century for the most part to Europe and the United States, that revolution has since spread across the planet. Between 1950 and 2000, the world’s population more than doubled, petroleum consumption more than tripled, and the global economy expanded sevenfold. Meanwhile, the amount of carbon dioxide in the atmosphere rose by almost a fifth. That has prepared the way for an as yet undetermined statistic: how far and how fast the earth’s temperature will climb.
A future in which the small amount of economic growth that is eked out accumulates in the bank accounts of the rich and boils the planet bears little resemblance to the bright forecasts of perpetual prosperity conjured by optimists in the mid-twentieth century. This bleak vista has convinced some that capitalism has entered its final days: absent the possibility of unlimited growth, the system will stumble forward until it collapses under the weight of its internal contradictions. Others maintain that the same combination of entrepreneurial vigor and technological resourcefulness that has averted catastrophe in the past, and frustrated the many earlier prophets of capitalism’s downfall, will come to the rescue soon, perhaps via apps. Those of a reformist bent see these challenges as the foundation upon which a new generation of activists can build a politics that does more than mouth slogans borrowed from the past. They have reason to hope, as two of the most vibrant movements on the left are the campaigns against economic inequality and climate change, one symbolized by Occupy Wall Street, the other by the People’s Climate March. Yet both the skeptics and enthusiasts of capitalism’s twenty-first-century career tend to ignore one remarkable fact: before the twentieth century, the prospect of continued economic growth struck most people as an impossibility. And those most likely to declare the concept absurd were economists.
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Dreams of endless plenty have a long history. Over the course of the seventeenth century, the notion that commerce might convert the pursuit of individual gain into advances for the common good gained plausibility among European writers on political economy. Belief in a coming world of abundance also had more exotic sources: alchemy figured prominently in these discussions, as did theology. They laced together in arguments contending that humanity would soon master the natural world, releasing mankind from burdens imposed after its expulsion from Eden.
The Wealth of Nations restricted its attention to more pedestrian matters, but Adam Smith inherited a good deal from his seventeenth-century predecessors—above all, faith that commerce might strengthen the general welfare. Smith, however, balanced equanimity about trade’s benefits with anxiety for the future. Though nations benefited from periods of high profits and rising population—key measures of prosperity in this age before national-income accounting—booms were by their nature fleeting: a “progressive state” led to a “stationary state” and, eventually, a “declining state.” Nations could postpone economic decay through geographic expansion: vampirelike, they would preserve their youth by feeding on fresh territory. Absent these colonial adventures, stagnation was assured. Individuals eager to turn a profit would still find opportunities in the marketplace, but societies as a whole faced a grimmer horizon.
Seventy years later, that framework still endured, though it would be put to very different uses than Smith imagined. With The Communist Manifesto, Marx and Engels gave a revolutionary spin to the stationary state. In their telling, a bourgeoisie that had sparked an explosion in productive capacity was now caught in perpetual crises of overproduction, a “sorcerer, who is no longer able to control the powers of the nether world whom he has called up by his spells.” Communism would deliver mankind from the rule of scarcity, but Marx left the details of that new world vague.
Members of the bourgeoisie seeking a tonic for their jangled nerves could find it in John Stuart Mill’s Principles of Political Economy. Released the same year as Marx and Engels’s call to the barricades, Mill’s text proposed a more tranquil resolution to the problem of the stationary state. Like his predecessors, Mill accepted the “irresistible necessity that the stream of human industry should finally spread itself out into an apparently stagnant sea.” But he welcomed stagnation. For Mill, the progressive state was analogous to adolescence, a phase passed through on the way to maturity. In the progressive state, money occupied the place in society’s consciousness that sex does in a teenager’s. Upon reaching adulthood, a broader set of concerns would emerge. In Mill’s words, “the art of getting on” would give way to “the Art of Living”—an art that included ameliorating economic inequality and reducing the hours wasted on the “drudgery and imprisonment” of modern labor.
Those indifferent to the abstractions of a stationary state had to grapple with more tangible fears: not too little prosperity but too much, and the exhaustion of the earth’s resources that followed. Perhaps, as Thomas Malthus predicted, restraint would come from limits on a food supply that could not keep pace with an increasing population. Others drew attention to the threat of peak coal, a concern that lingered throughout the nineteenth century, in no small part thanks to cautions from economists. One of those authorities, William Stanley Jevons, would later be remembered as a pioneer in the effort to create a mathematical science of economics. But he first achieved fame for an 1865 treatise warning that depletion of coal would usher in a Malthusian nightmare, with fuel replacing food as the fatal constraint on economic progress.
Optimistic and pessimistic appraisals of stagnation vied with each other well into the twentieth century, sometimes within the same person. In the early days of the Great Depression, John Maynard Keynes predicted a century of advances that would leave “the standard of life in progressive countries one hundred years hence…between four and eight times as high as it is to-day.” Like Mill before him, Keynes viewed prosperity not as an end in itself but as a means for pursuing other, higher ideals: “do not let us overestimate the importance of the economic problem,” he stressed, “or sacrifice to its supposed necessities other matters of great and more permanent significance.”
Keynes had adopted a darker perspective a decade earlier, in the book that turned him into an unlikely celebrity. Published in the immediate aftermath of World War I, The Economic Consequences of the Peace began with a portrait of the “economic Eldorado” destroyed after 1914. Keynes’s focus was less on the lost glory of the prewar period than on how unlikely it was that such a “utopia” had come into existence at all. Recalling the “deep-seated melancholy” shared by the pioneers of political economy, Keynes argued that a host of contingent factors had sustained a delicate equilibrium in Europe before the war. For a brief time, the “Devil” of resource exhaustion “was chained up and out of sight. Now, perhaps we have loosed him again.” His former teacher, Alfred Marshall, sounded a similar note shortly thereafter, when he was asked what would be the first question he would want answered, if he could transport himself a hundred years into the future. Marshall’s response condensed centuries of anxiety about looming stagnation into eight words: “how has the exhaustion of coal been met?”
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The Malthusian spirit became increasingly fashionable as the Depression ground on. Almost a decade into the downturn, Alvin Hansen, a Harvard economist and the most important American Keynesian of his age, announced the crossing of “a divide which separates the great era of growth and expansion of the nineteenth century from an era which no man, unwilling to embark on pure conjecture, can as yet characterize with clarity or precision.” That gloomy conviction persisted through World War II, when many treated a return to Depression conditions in peacetime as a near certainty. As Hansen’s student Paul Samuelson remarked in 1944 for The New Republic (beneath the title “Unemployment Ahead: The Coming Economic Crisis”), ”despite a superficial veneer of optimism, a great fear stalks the land.”
Postwar expansion soothed that fear, and led to a bumper crop of grandiloquent assertions that the free world had mastered the art—and, more important, the science—of managing the economy, which became the vessel for much older hopes that humanity might enter an age of abundance. Where Gilded Age tycoons like John D. Rockefeller had envisioned a stagnant industrial world overseen by trusts guarding against the dangers of excess competition, triumphant economists now announced that deft manipulation by government experts would allow for both economic growth and competitive markets. The stationary state, finally, could be forgotten. But scars from the Depression took many years to fade, and beneath the bombast lurked a real dread that prosperity was a collective dream from which the capitalist powers would soon awake.
Apostles of growth always faced doubters. In the United States, much of the early criticism came from conservatives, who saw economic management as tainted by its roots in the New Deal. Frustrated by John Kennedy’s repeated denunciation of the Eisenhower administration’s economic record, Richard Nixon grumbled during the 1960 presidential race that his rival was fostering an unhealthy “growthmanship.” Eight years later, it was Robert Kennedy’s turn to criticize the economists’ myopia. “Gross National Product,” he observed, “counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage.” That line was popular enough to make its way, lightly plagiarized, into the campaign of a would-be Democratic congressman in Ohio two years later. “GNP,” he said, “includes smokestacks that pollute, drugs that destroy, and ambulances which clear our highways of human wreckage.” The aspiring public servant—Jerry Springer—lost that election, but he was better suited to a career in television anyway.
When the postwar boom shuddered to a halt in the 1970s, growth’s detractors enjoyed a boost in credibility. They had an ally in the White House during the tenure of Jimmy Carter, who later called “dealing with limits” his administration’s “subliminal theme.” That could not be said of his successor. Ronald Reagan brokered a union between growth’s disciples and partisans of a resurgent right, undoing a suspicion of excessive prosperity that had earlier found a congenial home among conservatives, from Malthusian anxieties about a lascivious underclass in the nineteenth century to George H.W. Bush’s strictures on “voodoo economics.”
Reagan’s synthesis occurred just in time to frame interpretations of what his supporters would deem the Great Communicator’s signal accomplishment: the collapse of the Soviet Union, widely attributed to socialism’s failure to compete with capitalism’s unrivaled capacity for growth. Partisans of economic growth, and of the capitalist system it was now so easily identified with, could rest secure in their triumph. Despite the occasional eruption of dissent from the margins, the primacy of economic growth became a piece of common sense so widely accepted that it shaped even the views of capitalism’s critics, and its historians. The true privilege of victory is not, as is so often claimed, that winners may write their history. No, the greatest reward is being allowed to forget it.
Yet history has a way of reasserting itself. Economic growth has real benefits—right now, in Europe and the United States, especially for the rich, but also for anyone who depends on a sound basis for the welfare state. But the increase of per capita productivity and population captured by the gross domestic product is just one way of measuring prosperity, and a deceptive one at that. Though economic growth’s limitations were easier to see before its canonization in the middle of the twentieth century, they are again coming into sight.
Prophets of an end to economic growth, or of its triumphant resurrection, beg to be made into fools by an unpredictable future. Indictments of contemporary policy, however, don’t hang on forecasts of what is to come. That fact was clear to the hundreds of thousands of people who marched against climate change in September, and to anyone who felt a twinge of recognition after seeing the protesters in Zuccotti Park—or to the 58 percent of Americans who reported in a recent New York Times/CBS News poll that protecting the environment should take precedence over economic growth.
Easy to say for those enjoying a lifestyle that would ensure climatic devastation if extended to the rest of the globe. That is just one of the hurdles to crafting policies that are neither ecologically suicidal nor economically bankrupt. These obstacles are immense, and perhaps insurmountable: threats planetary in scale that must be addressed through the creaky institutions of particular nations, each balancing its own geopolitical imperatives and domestic political challenges, all while facing entrenched opposition from those reaping the benefits of the current order. Strange allies might come along—including Rockefellers, who have announced that their $860 million philanthropy portfolio will divest itself of assets in fossil-fuel companies—but this cannot be a campaign of elites, and a popular movement deserves a bolder agenda than technocratic nudging can supply.
The invention of modern economic growth—capitalism, if you like—reshaped the world. But it was part of an ensemble of larger transformations that we are still grappling to understand, and control. If it was possible, in the midst of the Great Depression, for John Maynard Keynes, an economist who hailed from Britain’s elite, to insist that his nation must not “overestimate the importance of the economic problem,” the rest of us have no excuse. The categories we use to make sense of the world—including such basic concepts as ecology, economy and society—have all changed before. The twenty-first century belongs to whoever changes them next.
Class Struggle and Class Compromise in the Era of Stagnation and Crisis
19 September 2019
For Erik Olin Wright, our greatest chance at developing non-capitalist economic institutions may be in periods of class compromise initiated from below. The question is what it would take – or even whether or not it is possible – to rebuild such conditions in the present.
In the decades following WWII, Social Democracy (broadly understood)2 built and consolidated three main achievements:
- A system of various forms of publicly supported social insurance to deal with a range of risks people experience in their lives, especially around health, employment, and income.
- A tax regime sufficient to provide funding by the state for a fairly expansive set of public goods, including basic and higher education, vocational skill formation, public transportation, cultural activities, recreational facilities, research and development, macro-economic stability, etc.
- A regulatory regime for the capitalist economy that curtailed a range of negative externalities of capitalist markets: pollution, product and workplace hazards, predatory market behavior, etc.
These achievements were, at least in part, the result of what might be termed a positive class compromise between the capitalist class and popular social forces.3 Capitalists were basically left free to allocate capital on the basis of profit-making opportunities in the market, while the state took responsibility for correcting the three principle failures of capitalist markets: individual vulnerability to risks, under-provision of public goods, and negative externalities of private profit-maximizing economic activity. While it would be an exaggeration to say that there was no contestation over these achievements – even in the most robust social democracies there was conflict over the scale and scope of each of these elements – nevertheless there was a loose consensus that these were legitimate activities of the state and that they were broadly compatible with a robust capitalist economy.
This consensus no longer exists, even the social democratic heartland of Northern Europe. Everywhere there are calls for rollbacks of the “entitlements” connected to social insurance, reductions of taxes and the associated provision of public goods, and deregulation of capitalist markets. This assault on the affirmative state has intensified in the face of the economic crisis that has gripped global capitalism in recent years. The rhythm and intensity of the crisis has varied from place to place: in the United States it was most severe in 2008-2009, while in 2012 it is most sharply present in Greece and other countries on the periphery of Europe. The details of this economic turmoil also vary considerably across capitalist countries, but there is near universal sense that economic prospects are bleak, that life under capitalism for most people has become more precarious and is likely to stay that way for some time to come, and that in the wake of this crisis the state must retreat from its earlier expansive role.
So far the political Left has not managed anywhere to mobilize a coherent positive response to the crisis. To be sure, there have been protests, sometimes massive protests, and some of these have unquestionably had an important impact on public debate; some may even have had a significant impact on elites, impeding their strategies for dealing with the crisis on their own terms. The protests have, however, mostly been defensive in nature – resisting draconian cuts to the social safety net, pensions, health, education, and other public programs – rather than mobilizations around a positive project for overcoming the crisis through a reconstruction or transformation of the economic and political conditions for social democratic ideals.
In this paper I will explore the broad contours of what such a positive project for a new progressive politics might look like. I will build the analysis around a contrast between the conditions facing progressive politics in what is sometimes called the “Golden Era” of capitalist development in most advanced capitalist countries in the decades following the Second World War during which the social democratic achievements were built and the conditions in the current era of stagnation and crisis. The central argument will be that the Left has had its greatest durable successes when it is able to forge what I will call a positive class compromise within capitalism. The question, then, is what it would take – or even whether or not it is possible – to rebuild such a class compromise in the present.
The paper is organized as follows. Section I will present the theoretical tools needed for the analysis of positive class compromise. Section II will compare the conditions for class compromise in the relatively favorable era of the third quarter of the 20th century with the much less favorable conditions at the beginning of the 21st. Section III will discuss the kinds of transformations needed to reconstruct on a new basis such favorable conditions. Section IV will conclude by examining how a positive class compromise within capitalism might also help point the way beyond capitalism.
I. Class Compromise: Theoretical tools
The idea of “class compromise” generally has a negative connotation on the Left, especially among Marxists. It suggests opportunism and collaboration rather than militancy and struggle. This objection is grounded in the view that efforts to create class compromise block more radical transformations that would ultimately move us beyond capitalism in ways that would better serve the interests of the working class and other popular social forces. This objection will be addressed in section IV below. For the moment I will simply assume that for the foreseeable future it is not possible to break with capitalism, and thus improving the conditions of life for ordinary people depends upon forging the best conditions possible within the constraints of capitalism, and this depends upon the viability of class compromise.
To understand the idea of class compromise it is useful to begin by distinguishing between what can be called “negative class compromise” and “positive class compromise.” Negative class compromise refers to a situation in which there is a kind of balance of opposing class forces each capable of inflicting considerable costs on the other, but neither capable of decisively defeating the opponent. In such a situation it may be possible for the contending forces to accept a compromise in which each makes concessions in exchange for refraining from imposing damage on the other. “Compromise” in this case means that the outcome of struggles for each party falls somewhere between complete victory and complete defeat.
Positive class compromise means something quite different. In a positive compromise, in spite of their opposing interests, the contending forces find a way to actively cooperate in ways that open up some space for non-zero-sum gains. Active forms of mutual cooperation help both workers and capitalists to better realize their interests than is possible by simply extracting concessions through confrontation.
There is very good reason to be highly skeptical of this possibility. Descriptions of capitalism as a positive-sum game are typically made by defenders of capitalism who deny the fundamental antagonism of interests between capitalists and workers and who see class struggles as irrational and counter-productive. This kind of rhetoric is found in “trickle down” economics accounts of capitalist investment and inequality: “a rising tide lifts all boats,” and this depends upon stable investments by capitalists, which depends upon profits, etc. Nevertheless, I will argue as a broad generalization that the Left has been most successful in robustly institutionalizing its gains for ordinary people when these gains have been consolidated within positive class compromises.
To understand the reasoning behind this argument, we need to examine the relationship between class interests and popular power.5 For simplicity I will focus on the interests of workers and capitalists, and ignore the complexity of various categories lumped together under the rubric “middle class” and various social categories that are marginalized from the main axis of the capitalist class structure.6 The relationship between the realization of working class interests and popular power is straightforward, as illustrated in Figure 1: as popular power increases from weak levels of power to strong levels of power, the realization of working class interests increases, at first slowly, then more rapidly. What is much less obvious is the relationship between the realization of capitalist class interests and popular power. This is illustrated in Figure 2: Initial increases in popular power interfere with the realization of capitalist interests.
Indeed, initially, increases in popular power harm capitalists much more than it helps workers, reflecting the fact that in social conflicts it is generally easier to impose harm on one’s opponents than actually deliver benefits for one’s supporters. Once popular power reaches a certain intermediary level, however, further increases of popular power are associated with increased realization of the interests of capital. This upward sloping part of the curve is the crucial region of positive class compromise.
How is it possible that increases in popular power could be beneficial for capitalists? The core idea here is that certain kinds of problems faced by capitalists and capitalism are more easily solved under conditions of relatively strong popular power than under conditions of weak and disorganized popular power. The classic example of this is the role of organized labor – one of the key bases for popular power – in helping to solve certain problems posed by Keynesian macro-economic policy. Full employment, insofar as it implies high levels of capacity-utilization and higher aggregate demand for the products of capitalist firms, potentially serves the interests of capitalists. But it also risks a profit squeeze from rapidly rising wages and spiraling levels of inflation. Keynes himself recognized this as a serious problem: “I do not doubt that a serious problem will arise as to how wages are to be restrained when we have a combination of collective bargaining and full employment.”7 The emergence and consolidation in a number of countries of strong, centralized unions capable of imposing wage restraint on both workers and employers was perhaps the most successful solution to this problem.8 In this sense, a powerful labor movement need not simply constitute the basis for a negative class compromise, extracting benefits for workers through threats to capital. If a labor movement is sufficiently disciplined, particularly when it is linked to a sympathetic state, it can positively contribute to the realization of capitalist interests by helping to solve such macroeconomic problems.
Many other concrete examples of how relatively strong popular power helps solve problems faced by capitalists. Because of pressures of profit maximization, capitalists often operate under short time horizons that are sub-optimal for their interests in the long-term. Short time horizons reduce the willingness of capitalists to support levels of taxation needed for the funding of public goods, including things that are critical for long-term productivity – education, training, infrastructure, basic research. High levels of popular power within the state can increase the production of public goods that are critical for training, innovation, and other elements of high productivity. Strong popular power can also potentially help block narrow rent-seeking behavior by capitalists in the state, reduce corruption, and in other ways improve government performance.9
I assume that the basic shape of this curve linking popular power to capitalist interests is a reverse-J rather than either a symmetrical U-curve or J-curve. If the shape was a J-curve, then capitalists would have a strong, active interest in increasing popular power to the maximum possible. Opposition to doing so would reflect false consciousness on their part. If the curve were U-shaped, then capitalists would be generally indifferent about being on the left or right hand extremes of the curve. They certainly would have no reason to strongly oppose movements to high levels of popular power once a moderate level had been reached. The fact that historically capitalists generally do resist expansions of popular power to high levels is evidence that the underlying curve has a reverse-J shape. What this means is that there are real costs imposed on capital by strong popular power – higher levels of income redistribution than capitalists would prefer, for example, or the creation of extensive public goods that may improve social wellbeing without directly benefiting capital accumulation – but that the stability of the economy and productivity-enhancing characteristics of positive class compromise make these trade-offs acceptable.
The reverse-J shape of the curve in Figure 2 assumes that popular power is not so strong as to call into question the foundations of capitalist power. If this were to occur, popular power would itself potentially become the dominant form of power. This would mean that the working class and other popular social forces would not simply be in a position to forge a positive class compromise with capital, but to subordinate capital. Such a situation would clearly threaten capitalist interests. This is illustrated in Figure 3.
In actual capitalist economies – or, at least in stable developed capitalism – the extremes of the curve are excluded by strong institutions that constrain the scope of popular power. On the one hand, the legal rules and public policies that protect private property exclude the right hand region of the curves. Given the effective enforcement of capitalist property rights by the state, popular power cannot develop to the point where it can become dominant. On the other hand, legal rules and policies around civil liberties, rights of association, labor rights and the welfare state exclude the extreme left hand region of the curve. The stable existence of these institutional conditions assures at least some capacity for popular mobilization and power. The historically accessible region of the curve, as illustrated in Figure 4, thus covers the middle regions of popular power, from moderate to strong.
II. Conditions for class compromise in the Golden Age and the early 21st century
The relationships portrayed in Figure 4 provide a way of comparing the conditions for class compromise across time and place. A number of things in this figure can vary: the shape of the curve itself can vary, with more or less favorable slopes in the positive class compromise region of the curve; the parts of the curve that are excluded by legal rules and public policy can vary, creating a more or less favorable region of the curve that is historically accessible; and the specific location of a country within that historically accessible region can vary depending on the balance of forces. It is, of course, an extremely demanding research task to give precision to any of these forms of variation. There are no easy metrics for any of the dimensions, nor any way (that I know of) really to measure variation over time in things like the shape of the curve or the zones of exclusion. The purpose of the figure, therefore, is to clarify theoretical arguments and provide a way of more systematically formulating claims about changes over time. What follows, then, is a suggestive way of framing the contrast in the central conditions for class compromise in the highly favorable situation of the Golden Age of post-WWII capitalism and the much more difficult context of the current era of crisis and stagnation.
Figure 5 presents the class compromise curve in the Golden Age for the modal country in the developed capitalist world. Because of the strong institutionalization of labor rights and the stable and relatively generous welfare state promoted by various forms of social democracy, the left-region of exclusion was quite broad. So long as these rules of the game were in place, it was relatively easy for the labor movement and other popular social forces to achieve at least moderate levels of popular power. In terms of the shape of the curve, because of relatively positive conditions for capitalist growth and profitability, the upward slopping part of the curve rises to a fairly high level. From the point of view of capitalist interests, therefore, the class compromise part of the curve looks pretty attractive; it is certainly better to be somewhere on the upward sloping part of the curve than in the valley. While capitalists might still prefer to be well to the left, high on the downward sloping part of the curve, this region is – at least in short-run – inaccessible because of stable institutional rules. So, all things considered, a positive class compromise is a tolerable modus vivendi: capitalists make adequate profits; popular power exercised through the state creates public goods that strengthen capitalism and provide employment and income security; and labor movement power in the economy stabilizes employment relations and supports strong productivity growth.
While the configuration in Figure 5 may have been acceptable for capital, it wasn’t optimal, or at least over time it came to be seen as suboptimal.10 In the course of the 1960s and early 1970s a series of contradictions in the regime of accumulation began to intensify and gradually made the positive class compromise less secure, especially in the United States: the welfare state expanded to the point where it began to absorb too much of the social surplus (from the capitalist point of view); wages were sticky downward and began to create a profit squeeze; global competition intensified with the development of Japan and Europe, which undermined the specific advantages of the US and the global financial system which it anchored. Into this mix, the debacle of the Vietnam War intensified fiscal problems for the US. And, to top it off, there was the Oil price shock in 1973. Taken together these economic and political processes eroded the stability of the Golden Age equilibrium in the United States and elsewhere.
These economic developments helped create the political context for the assault on the institutional foundations of class compromise beginning in the 1980s, an assault which came to be known as neoliberalism.11 Neoliberalism, in turn, opened the door for a number of other dynamic developments which accelerated in the last decades of the 20th century. Two are particularly important in the present context: globalization and financialization.
The globalization of capitalism intensified along its many dimensions. This meant that the economic conditions in particular places and regions became less autonomously determined by what was happening in those places and more dependent upon what was happening elsewhere in the world. Of particular importance was the emergence of a global labor force that includes hundreds of millions of very low paid workers in developing countries competing within a relatively integrated global system of production in manufacturing and some kinds of services. Globalization also contributed to the dramatic increase in immigration to the developed countries and the increased ethnic heterogeneity of their popular social forces.
The dramatic financialization of capitalist economies in the rich countries meant that capital accumulation became rooted in much more volatile speculative processes and less connected to the development of the real economy than in the past.12 The globalization of financial markets further intensified the potentially destabilizing effects of the shift of capital accumulation towards the financial sector. The combination of globalization and financialization meant that from the early 1980s the interests of the wealthiest and most powerful segments of the capitalist class in many developed capitalist countries, especially perhaps in the United States, became increasingly anchored in global financial transactions and speculation and less connected to the economic conditions and rhythms of their national bases.
The result of these structural developments was a transformation of the class compromise curve and the regions of exclusion as illustrated in Figure 6. The critical developments are the following:
1) The financialization and globalization of capitalism pushed the right hand peak of the class compromise curve downward. Basically, the value for many capitalists of a positive class compromise decline as the returns on their investments become less dependent upon the social and political conditions of any given place.
2) Neoliberalism shifts the regions of exclusion at both ends of the class compromise curve. On the one hand, the aggressive affirmation and enforcement of private property rights creates impediments to the enlargement of popular power. On the other hand, the erosion of labor law in some countries (especially the United States), and the partial dismantling of the safety-net of the welfare state, reduces the region of exclusion on the downward sloping part of the curve, making more of that region strategically accessible.
3) In the context of the above developments, the level of popular power within the modal country declines as a result of a number of interacting factors: the increasing competition for jobs within the working class as unemployment increases and job security declines; the increasing heterogeneity within popular social because of immigration which erodes mass based solidarities and open a political space for right-wing populism; austerity policies which increase the vulnerability of workers and make them more risk-averse; aggressive anti-labor strategies by employers who take advantage of this vulnerability.
Taken together, these forces pushed the balance of class forces into the adverse downward sloping region of the class compromise curve.
III. Restoring Conditions for Class Compromise
I assume that an exit from capitalism is not an option in the present historical period. This is not because of any qualms about the desirability of a break with capitalism as an economic system, but because of a belief in the impossibility of any kind of viable ruptural strategy. This belief is rooted in the central dilemma of revolutionary transformation of capitalist democracies: As Przeworski argued in the 1980s, if a ruptural break with capitalism is attempted under open democratic conditions, then even under the most optimistic of scenarios, it is extremely unlikely that a ruptural socialist political project could survive multiple elections.13 Because of the disruptions between the election of political forces attempting a break with capitalism and the stabilization of a socialist economy, any plausible transition will be marked by a “transition trough” of sharply declining material conditions of life for most people and considerable uncertainty about future prospects. Under open, competitive democratic conditions, it is implausible that solidarity in the heterogeneous coalition that initially supported the rupture is likely to be sustained over the number of election cycles needed to complete a transition. A ruptural break with capitalism, therefore, can only happen under nondemocratic conditions. But if a rupture with capitalism takes place under nondemocratic conditions it is extremely unlikely that it would result in creating democratic, egalitarian socialism, as suggested by the tragic history of attempts at nondemocratic revolutionary ruptures with capitalism in the 20th century. The only plausible ruptural scenarios are thus either a nondemocratic rupture with capitalism that results in authoritarian statism rather than democratic socialism, or an attempted democratic rupture with capitalism which is reversed during the extended transition period. For the foreseeable future, therefore, even if we retain revolutionary aspirations for a world beyond capitalism we will be living in an economic system dominated by capitalism. The question is, on whose terms and in what form.
So long as the working class and other popular social forces live in a capitalist world, a positive class compromise offers the best prospects for securing the material welfare for most people. This does not mean that no gains are ever possible without a positive compromise – concessions can sometimes be won through struggles that result in negative compromises. Socialist and social democratic parties can win elections and initiate progressive reforms even in the absence of positive class compromise. But such gains are always more precarious than gains under conditions of positive class compromise, both because they encounter greater resistance, and because they are more vulnerable to counteroffensives.
I will explore two broad responses to the erosion of conditions for positive class compromise: The first examines strategies which could potentially reverse the trends in Figure 6 and reconstruct the favorable conditions in Figure 5. The second explores ways of potentially making the welfare of ordinary people living in a capitalist economy less dependent on the prospects for a positive class compromise with the capitalist class. My thoughts on these issues are very incomplete and tentative; I do not have a well worked through analysis of strategies of social transformation in the present era. I offer these ideas in the hope of contributing to the discussion of the dilemmas and possibilities we face.
1. Strategies which try to recreate conditions for positive class compromise
Figure 7 presents a rough guide to the kinds of transformations needed to restore conditions for positive class compromise. Here I want to specifically focus on the problem of the shape of the curve itself: are there plausible strategies and public policies that could affect the shape of the underlying functional relation between popular power and elite interests in ways that would help to improve the prospects for stable positive class compromise? Or is the current deterioration of the underlying macro-economic conditions for class compromise simply the inexorable result of the dynamics of capitalism operating behind the backs of actors and not amenable to strategic intervention?14 It is possible that the few decades after WWII were a happy historical anomaly in which conditions just happened to be favorable for the positive class compromise that underwrote economic security and modest prosperity for most people in developed capitalist countries. We may now be in the more normal condition of capitalism in which the best that can be hoped for are occasional periods of negative class compromise and most people adopt, as best they can, individual strategies for coping with the risks and deprivations of life in capitalism.
What I want to explore here is the less pessimistic scenario in which it is possible to forge new structural conditions for a more robust positive class compromise. I will not address the narrower political question of the prospects for actually mobilizing the political forces with progressive ideological commitments necessary for implementing the policies required to create these conditions, but rather the question whether or not there are viable policies to be implemented – what policies should be implemented if progressive political forces were in a position to do so.15 If my diagnosis in Figure 6 is correct that the right-hand peak in the class compromise curve has declined because of forces unleashed by globalization and financialization, then what is needed are strategies which encourage geographically-rooted forms of capital accumulation and which impose effective democratic constraints on financial institutions.
Geographical rootedness
In terms of the problem of geographical rootedness, one promising line of thought on these issues is Joel Rogers’ proposals for what he terms “Productive Democracy” (which he earlier referred to as “high road capitalism”).16 Rogers argues for the importance of concentrating attention on regional economies anchored in metropolitan areas, rather than on the national economy, and especially on the role of the local state in building local public goods capable of supporting high productivity economic activities. The emphasis here is in producing a high density of productivity-enhancing infrastructures which creates incentives for capitalist firms to become more embedded locally: public transportation, education, research parks, energy efficiency, and much more. Strong local public goods are potentially particularly effective for small and medium sized firms, firms which are generally less geographically mobile and whose owners are more likely to have non-economic roots in the region.
A key element of these local public goods concerns training and skill formation, one of the classic collective action problems faced by capitalist firms (because of the temptation to free ride on the on-the-job training provided by other firms). Here is where strong unions can play an especially constructive role in the design of training programs and in coordinating skill standards that are essential for the portability of skills. Regional development strategies that focus on such public goods and that involve local collective actors (especially unions) in the deliberative problem-solving connected to those public goods could generate local conditions for positive class compromise with locally-rooted capital.
Changes in technology may make the anchoring of capitalist production in locally-rooted, high productivity small and medium enterprises more feasible. One of the critical features of the era of industrial capitalism is strongly increasing returns to scale in production and distribution, since steep increasing returns to scale give large corporations a competitive advantage. The deep transformation of the technological environment of economic activity in the digital age has significantly reduced these returns to scale in many sectors. Consider publishing. While large publishers still are important, the per unit costs of publishing are much less sensitive to scale than they were even a decade ago, especially with the advent of electronic books. New technologies on the horizon for manufacture also suggest the possibility of much more linear returns to scale, which in principle could make small and medium firms much more productive and competitive. All of this may increase the prospects a productive democracy underwritten by local and regional public goods.
Public goods, of course, require taxes, and one view is that the taxation capacity of the state is seriously undermined by globalization. If taxes rise, the argument goes, capital moves. This seems even more cogent an argument for local public goods: if local taxes rise to fund local public goods, then capitalist firms will simply move out of the jurisdiction of those taxes. Such arguments assume that taxation must always, directly or indirectly, raise the costs faced by capitalist firms. This, of course, may be the case, especially when the taxation is directly levied on profits. But in principle taxation can simply be a way of dividing the consumption of wage earners between their private consumption and their collective consumption through public goods and have little effect on profits of capitalist firms. Whether workers are willing to accept high or low taxation on wage earners depends, of course, on the degree of solidarity among wage earners and their confidence that the taxes so levied will be in fact used for such public goods. The tax constraint on creating the local public goods needed for a locally-rooted productive capitalism is thus much more political and ideological than narrowly economic.
Constraining Finance
In terms of the problem of financialization, two things seem especially important to accomplish: The first is to redirect finance from a central preoccupation with speculative activity to investment in the real economy. While there is often no unambiguous line of demarcation between these two faces of the allocation of capital, one of the things that detaches the interests of investors from the conditions of life of ordinary people and thus makes positive class compromise less likely is the disengagement of investment from the real economy. In order to redirect finance towards the real economy, the state has to be able to impose real constraints on investment activity, and this requires at least partially impeding the global flow of capital. So long as capital can easily exit the jurisdiction of political authority, such regulation will always be precarious. This, then, is the second critical task: reestablishing the capacity of the state to effectively regulate finance and hold it democratically accountable. There are many proposals on the table to move in this direction: breaking up the largest financial institutions, both to undermine their power to manipulate regulatory authority and to remove their willingness to engage in excessive risk because of their “too-big-to-fail” status; explicitly recognizing the public goods aspect of finance as grounds for creating a more vibrant sector of public and cooperative financial institutions – credit unions, cooperative banks, community banks; new forms of transactions taxes, like the Tobin tax, to impede the smooth global flow of finance for speculative purposes.
Taken together, public policies which help build a locally-rooted productive democracy and which render finance more democratically constrained would potentially move the class compromise curve in figure 6 in the direction of the Golden Age curve in Figure 5. Such policies, especially the ones that impinge on the power of finance, would certainly meet strong opposition by various elites. The problem, of course, is mobilizing sufficiently strong and resilient political forces to overcome such opposition. Many of the same political economic structural developments that have generated an unfavorable class compromise curve have also contributed to undermining the power of popular democratic forces needed to push for these kinds of public policies.
2. Strategies which strengthen non-capitalist economic domains
Because of the political difficulty of instituting policies that would change the conditions for class compromise curve as illustrated in Figure 7, it is worth exploring the possibility of strategies that respond to the adverse conditions for class compromise less by directly confronting the state and instead focus on ways of building alternatives in civil society and the economy itself. At the center of my analysis in Envisioning Real Utopias of socialist alternatives is the idea that all economies are hybrids of different kinds of economic relations. In particular I argued that modern capitalist economies should be viewed as hybrids of capitalist, statist, and socialist economic structures. The synoptic description of such a hybrid economy as “capitalism” implies that the capitalist component is “dominant.” The idea of positive class compromise is focused on power relations and class interests generated by the capitalist dynamics of the system. One way of approaching the problem of restoring conditions in which at least some of the benefits of positive class compromise can be realized is to strengthen the non-capitalist aspects of the economic structural hybrid.
Here are a few examples.
Worker cooperatives
By their very nature, worker-owned cooperative firms are geographically-rooted. The owner-employees in such firms have a stake in where they live, and thus they have a deep interest in creating locally-favorable economic conditions and supporting the public goods which make this possible. Although in most existing capitalist economies, worker cooperatives tend only to occupy small niches (in the United States in 2012 there were fewer than 400 worker cooperatives), there are instances of large, successful worker-owned cooperatives, most famously the group of over 100 cooperatives known as the Mondragon Cooperative Corporation.
Of particular relevance in the present context is the fact that in the current economic crisis in Spain, Mondragon has fared much better than most of the rest Spanish economy: only one of the over 100 cooperatives in the group has had to be dissolved.) Many issues are involved in explaining the durability of the Mondragon cooperatives in the face of the crisis. Among other things, the Mondragon structure includes a system of cross-subsidization of less profitable by more profitable cooperatives, which acts as a buffer when times are difficult. The common stakes of workers in the cooperatives and the relatively low level of internal inequality mean that the levels of solidarity and commitment among workers are quite high. The idea that “we are all in this together” is a reality, and thus workers are less resistant to the shared sacrifices needed to weather a crisis. But also, there are non-member employees in the cooperatives, and lay-offs of these employees also helped.
The existence of Mondragon as a successful, productive, large scale complex of cooperatives shows that worker cooperatives need not be restricted to small, artisanal firms in marginal parts of the economy. In any case, given the decline in capital intensity in many domains of economic activity (especially because of the development of digital technologies) and the increasing possibilities of modularized forms of production, the scale constraints on worker cooperatives in many sectors are decreasing. One way of fostering a more geographically-rooted structure of capital accumulation would be to encourage the development and expansion of worker cooperatives.
Worker cooperatives are founded mainly in two different ways: either by a group of people getting together and collectively starting a firm on a cooperative basis, or by the workers of an established capitalist firm buying out the owners of the firm. The latter strategy is particularly relevant in contexts where aging owners of family firms face a “succession crisis” in which no one in the younger generation of the family wishes to take over the firm. One option in such a situation is for the workers to buy the firm. The problem, however, is that workers generally do not have sufficient savings to do so and thus, to buy the firm, they have to take on levels of debt which then impose a significant burden on the subsequent viability of the firm. This problem is intensified in the broader context of macro-level economic stagnation.
What is needed for the co-operativization of small and medium sized family firms, therefore, is some way for workers to assume ownership of the firm on a collective basis without taking on excessive debt that undermines the future viability of the firm. One possible source for such support might come from the labor movement. Traditionally unions have been relatively hostile to worker cooperatives, seeing them as rivals for the allegiance of workers. In recent years there are indications of a change in this stance. In the United States the Steelworkers Union has been in discussions with Mondragon on the possibility of some kind of collaboration in creating worker cooperatives in the steel industry. In Cleveland, the initiative to create a cluster of cooperatives facilitated by the city government and other large public institutions has also received support from local unions. In Brazil unions have been broadly supportive of cooperatives as well. Rather than being rivals, worker cooperatives may have the potential of being a complementary basis for collective organization of workers power. In places where the labor movement remains relatively strong, unions could help mobilize the capital needed for worker-buy-outs of small and medium firms.17
If the problems of credit market failures and undercapitalization of cooperatives were solved, then it is possible over time not only for the number of cooperatives to increase, but for there to develop dense networks of cooperatives, meta-cooperatives (cooperatives-of-cooperatives), and other institutional arrangements of what can be termed a “cooperative market economy.” On a regional scale this is what the Mondragon cooperative Corporation has accomplished. Within the Mondragon complex there are a range of institutional devices which increase the viability of each of the individual cooperative enterprises: specialized research and development organizations; processes for cross-subsidization of profits from higher to lower profit cooperatives; training and education institutions oriented to cooperative management and other needs of the firms in the network; and so on. A dense network of cooperatives connected to this kind of elaborated environment of specialized institutions creates cooperative market economy enclave within the broader capitalist market.
Employee-majority ESOPs
ESOPs (Employee Stock Ownership Plans) are a hybrid form combining, in varying degrees, capitalist and participatory-democratic elements. There are approximately 4,000 firms in the United States with 100% employee owned ESOPs.18 In most firms with ESOPs, especially large firms, the employees only own a minority of shares, and often those shares a concentrated in management. Most 100% ESOPs are relatively small firms. Actual democratic governance rights vary across ESOPs, although in 100% ESOPs the employees do elect the board of directors of the firm (on a one-share one-vote basis). Nevertheless, ESOPs with a high percentage of employee shareowners are more geographically rooted than conventional capitalist firms. ESOPs can also be a transitional form between a conventional capitalist firm and a fully democratic worker cooperative (although, of course, worker cooperatives also, sometimes, convert to ESOPs), but they may also be a stable hybrid form that connects to the development of a substantial cooperative market economy sector much more amenable to the rehabilitation of the democratic affirmative state.
The social economy
The social economy constitutes economic activities organized by communities and various kinds of nonprofit organizations directly for the satisfaction of needs rather than for exchange and profit. Most often social economy organizations produce services, but in some contexts goods are produced in the social economy as well. The social economy has an ambiguous status with respect to the provision of public goods and reducing vulnerability, for often the social economy mainly serves to fill gaps caused by the retreat of the welfare state. This is one of the reasons why conservatives sometimes applaud the social economy (for example, in the advocacy of “faith based initiatives” in the United States). But the social economy can also be at the center of building an alternative structure of economic relations, anchored in popular mobilization and community solidarity, especially when it receives financial support from the state. The Quebec social economy is an example of a vibrant social economy involving community-based daycare centers, elder-care services, job-training-centers, social housing, and much more. In Quebec there also exists a democratically elected council, the chantier de l’economie sociale, with representatives from all of the different sectors of the social economy, which organizes initiatives to enhance the social economy, mediates its relation to the provincial government, and extend its role in the overall regional economy. The chantier enhances democratic-egalitarian principles by fostering economic activity organized around needs and by developing new forms democratic representation and coordination for the social economy.
Solidarity finance
Another way of strengthening non-capitalist elements within a capitalist economy is by expanding the ways in which popular organizations are involved in allocating capital. Unions and other organizations in civil society often manage pension funds for their members. In effect this is collectively controlled capital that can be allocated on various principles. An interesting example is the Quebec “Solidarity Fund” developed by the labor movement initially in the 1980s. The purpose of these funds is to use investments deliberately to protect and create jobs rather than simply to maximize returns for retirement. One way the Solidarity Fund accomplishes this is by directly investing in small and medium enterprises, either through private equity investment or loans. These investments are generally directed at firms that are strongly rooted in the region and satisfy various criteria in a social audit. The Solidarity Fund is also involved in the governance of the firms in which it invests, often by having representation on the board of directors. Typically the investments are made in firms with a significant union presence, since this helps solve information problems about the economic viability of the firm and facilitates the monitoring of firm compliance with the side-conditions of the investment. Solidarity finance thus goes considerably beyond ordinary “socially screened investments” in being much more actively and directly engaged the project of allocating capital on the basis of social priorities.
Solidarity finance can be considered a partial model for enhancing the geographic rootedness of regional market economies by tying investment more closely to people who live there. For this to be done at a scale that would make a significant difference, various kinds of support by the state may be important. In the Quebec Solidarity Fund there are generous tax incentives for people who invest through the fund, but a more vigorous form of solidarity finance could involve different kinds of direct subsidies to the fund by different levels of government. Such direct subsidy can be justified on the grounds that geographical-rootedness – rather than free-floating capital mobility – is a public good because of the ways this makes the regulation of negative externalities easier and creates greater space for linking the interests of owners, workers and citizens.
Solidarity funds need not, of course, be restricted to control by labor unions. Other associations in civil society and perhaps even municipalities could also organize solidarity funds. The key idea is to develop decentralized institutional devices that direct investment funds to those economic activities that are geographically rooted and whose long-term viability depends most upon the robustness of the regional economy. Solidarity funds can therefore be seen as a complement to the regional economic development strategies organized by the state advocated by Rogers.
Conclusion
Social democracy has, traditionally, not given much weight to strengthening non-capitalist forms of economic organization. Its core ideology was to support the smooth functioning of capitalism and then use part of the surplus generated within capitalism to fund social insurance and public goods. Capitalists were left relatively free to invest as they wished on the basis of private profit-maximizing criteria. The state provided incentives of various sorts to shape investment priorities and certainly the state tried to create the public goods and regulatory environment that would be congenial to capital accumulation, but it generally did not attempt to nurture non-capitalist sectors and practices. The mainstream Left throughout the developed capitalist world broadly supported these priorities.
It is uncertain whether or not it will be possible to reconstruct a political-economic equilibrium in which positive class compromise within capitalism could once again govern the terms in which the social surplus is allocated between private returns through capitalist investment and collective returns used to promote well-being through the affirmative state. But even if it is, given the long-term uncertainties of the trajectory of structural conditions in capitalism, the Left should begin to seriously think about the desirability and possibility of expanding the space for non-capitalist alternatives within capitalist economies.
In Defense of Exploitation
July 21, 2020
I went vegan almost exactly one year ago and it was a long time coming. Moral philosophy was my first academic interest, stemming from my encounters with libertarian thought and my early questioning about religious faith. Along the way, I discovered that seeking and applying true moral knowledge is a primary pursuit of mine, and one which intensified with my entrance into veganism.
The vegan community is notorious for the militancy of a small set of its members, but I have found that a huge number of ethical vegans advocate the more general idea of “ethical consumerism” — i.e., increasing demand for ethically made or Fairtrade certified goods through one’s consumption practices and having low-carbon, low-waste, vegan lifestyles. (Some go so far to say that you “can’t identify as vegan” if you don’t support other forms of ethical consumerism.)
To the ethically driven, this kind of lifestyle sounds like a truly fulfilling one. It seemed right to me, too, to reconcile my beliefs about altruism, animal rights, human rights, and conservation with my belief in the power of supply and demand. But what was it about green living, ethical consumerism, and even veganism that aligned with my moral goals to minimize suffering and coercion? And what was the best way to go about these practices to achieve my goals?
By chance, I discovered that one of my favorite contemporary philosophers, Matt Zwolinski, had a lot to say on this topic — particularly on exploitation. Before touching on other authors and other areas of ethical consumerism, I want to summarize some of Zwolinski’s points.
On Exploitation
“Exploitation”, as we know it, is the act of someone in power taking unfair advantage of someone in a position of vulnerability. Two key examples of exploitation are sweatshops and price gouging — i.e., corporations taking advantage of people in poverty, post-disaster situations, and other dire circumstances. Needless to say, this kind of exploitation receives strong protest from the general public and legislators.
Mutually Beneficial Exploitation
Exploitation is certainly unfair. From this sense of unfairness, we seem to conclude that it must benefit one party at the other’s expense.
Yet, in reality, exploitation can be unfair and morally objectionable and still mutually beneficial. We know this because typical cases of exploitation (sweatshop labor, price gouging, sex tourism, and even some cases of child labor) are voluntary exchanges. People don’t participate in exchanges unless they expect to gain more than they lose — even when their options are severely constrained, they tend to choose their least bad option.
Obviously, this doesn’t apply to explicitly coercive cases of exploitation, such as those that involve forced labor. But, for example, there are data that detail sweatshop workers’ satisfaction with their job choice, and show that sweatshop wages are generally higher than the prevailing wage rate.
The Paradox of Exploitation
Many forms of exploitation involve mutually beneficial exchanges. Exploiters, then, are often doing something that makes vulnerable people better off, not worse off. On the other hand, most of us, the non-exploiters, do nothing to make vulnerable people better off. Yet the general sentiment is that exploiters are morally worse than the non-exploiters.
The reality is, those of us who do nothing in the wake of natural disasters and third-world poverty are simply neglecting the victims of those circumstances. And generally, we give neglect a pass while condemning the exploiters who take advantage of those situations to their benefit — and to the victims’ benefit. Neglect is arguably worse for victims than exploitation, and yet we not only give it a pass, but we inadvertently encourage neglect through policies designed to reduce exploitation.
Anti-gouging laws, for example, instead of resulting in an abundant supply of less-than-market-rate goods in emergency situations, will wipe the supply clean before those who are desperate enough to pay the higher prices are able to buy the goods. Or, businesses won’t even bother to enter emergency areas to sell goods, as they can sell their products at normal prices in more convenient environments.
As another example, when we protest sweatshop-made goods through boycotts and regulations, it doesn’t encourage manufacturing companies to increase wages or more fairly treat their sweatshop workers; rather, these companies will no longer find hiring workers in developing countries worth the cost, and will move their business to countries like America, where workers are already extremely well paid — leaving workers in developing countries jobless.
So why is this paradox of exploitation vs. neglect so prevalent among the first-world masses? There are many possible reasons, including the following quirks in our moral psychology:
- Self-serving bias: we like think of ourselves as good people, and so look for reasons to reject ideas incompatible with that self-image. Most of us engage in neglect on a daily basis, and most of us do not engage in exploitation.
- Projection: we associate exploitative practices like sweatshops and price gouging with images of human suffering. We very often slip into thinking that the cause of this suffering is the exploitation. This is a usually a mistake: poverty and natural disasters cause suffering — and common forms of exploitation relieve it.
- What is seen and what is not seen: it’s easy to visualize exploitation, to identify the exploiters and the exploited. Neglect, on the other hand, is invisible — it’s the absence of something. Thus, exploitation pulls our emotions in a way that neglect does not.
Where does this leave us?
How can this paradox of exploitation — the widespread fallacious belief that exploitation is a serious moral wrong and neglect isn’t—be corrected? There are a couple of possibilities:
- We could blame exploitation less: neglect is not very wrong, and exploitation is even less wrong
- We could blame neglect more: exploitation is very wrong, and neglect is even more wrong
One thing is clear: if our outrage at exploitation is driven by a concern for the wellbeing of vulnerable people, then we shouldn’t act in ways that make the vulnerable even worse off. This is precisely what we do when we encourage neglect by protesting exploitation.
Zwolinski, whose arguments in defense of exploitation I have just summarized above, is an outspoken libertarian — one that cares a lot about social justice, but still, a libertarian. Libertarians advocate broadly for minimal government regulation/intervention, a generally heterodox and controversial philosophy.
Perhaps this New York Times article is more convincing to the anti-libertarian reader: leading Keynesian economists with strong liberal backgrounds, Jeffrey Sachs and Paul Krugman, agree with Zwolinski’s ideas—and they assert them even more loudly.
“My concern is not that there are too many sweatshops but that there are too few.” — Jeffrey Sachs
“The overwhelming mainstream view among economists is that the growth of this kind of employment is tremendous good news for the world’s poor.” — Paul Krugman
William MacAskill, cofounder of the effective altruism movement, writes in his book Doing Good Better: “The reason there’s such widespread support among economists for sweatshops is that low-wage, labor-intensive manufacturing is a stepping-stone that helps an economy based around cash crops develop into an industrialized, richer society… Because sweatshops are good for poor countries, if we boycott them we make people in poor countries worse off.” He cites the Child Labor Deterrence Act of 1993 as an example of unintended consequences: “[This act] would have made it illegal for the United States to import goods from countries using child labor… out of fear that this act would pass, [Bangladeshi] factories quickly laid off fifty thousand child workers.” According to the US Department of Labor and an investigation by UNICEF, these child workers found lesser paid employment elsewhere instead of going to school. Many “had resorted to even more desperate measures to survive, including street hustling and prostitution.”
Thus, our initial defense of exploitation rings true. If we believe in doing our best to help the vulnerable, it is more effective to fight poverty and real causes of suffering than to protest exploitation. And indeed, buying sweatshop-produced goods is more beneficial for the world’s poor than buying domestically produced goods (or buying secondhand items, which yields the same effect).
On Fairtrade
I want to do better than both the neglecters and the exploiters. Is supporting “Fairtrade” a good way to do this?
Many products (e.g. chocolate and coffee grown in developing countries) proudly bear the Fairtrade certified label, which can be acquired by producers who meet certain wage and safety criteria for their workers. Fair-trade producers are licensed to a “social premium” for their products, and are typically guaranteed an above-market-rate price.
While demand for Fairtrade certified goods has increased astronomically since the label’s launch in 1988, there are a few reasons why you should think twice before buying fair-trade over “regular” coffee, tea, sugar, chocolate, and bananas:
- You’d often make a bigger difference for people in poverty when you buy non-fair-trade. Fair-trade standards are typically too high for the producers in the poorest countries, like Ethiopia, to reach. Fair-trade coffee production mostly comes from middle income countries like Mexico and Costa Rica, which are ten times richer than Ethiopia. Your dollar is worth much more to the Ethiopian farmer than to the Costa Rican farmer.
- Of the premium that fair-trade goods charge, very little of it goes to the producers. Researchers from the World Bank and several different universities found that “for one British Cafe chain, less than 1 percent of the additional price of their fair-trade coffee reached coffee exporters in poor countries”, “of fair-trade coffee sold in Finland, only 11 percent of the additional price reached the coffee-producing countries”, and in the US, only 8 percent of the additional price for fair-trade coffee reached producers. The rest go to middlemen, largely within the Fairtrade Foundation.
- Of the small amount that does reach the producers, little or none will typically turn into wages for farmers and workers — rather, the Fairtrade certified organization will absorb the higher prices. Many investigations have concluded that fair-trade workers do not receive increased wages or improved working conditions — in fact, fair-trade workers in Ethiopia and Uganda were found to have systemically worse conditions and wages than their non-fair-trade counterparts.
Even a review commissioned by the Fairtrade Foundation itself concluded that “there is limited evidence of the impact on workers of participation in Fairtrade.”— Doing Good Better
Thus, when it comes to the decision between buying a fair-trade certified consumable and buying the regular version, the latter typically does more good.
On green living and veganism
I want to talk about “green living” and veganism for good measure, but any reasoning here (about best practices,with the assumed premises that reducing harm to the environment and/or reducing animal suffering is good) is largely statistics-based. So, I’ve reproduced some of the statements and references from Doing Good Better below, and you can take them at face value or evaluate them.
Green living: common misconceptions
- Turning off or unplugging electronic devices when idle: This is a common recommendation for reducing your carbon footprint. In reality, one hot bath will add more to your footprint than leaving a phone charger plugged in for a year. Driving a car for two hours is worse than leaving the TV on for a year. Lighting only accounts for 3 percent of household energy use, so turning off lights (or even never using them) isn’t very effective.
- No plastic bags: Totally cutting out plastic bag use would only cut 0.4 percent of your carbon footprint, and this is a generous estimate. Furthermore, plastic bags account for a tiny fraction of our trash.
- Buying local: 10 percent of carbon emissions from the food industry comes from transportation, whereas 80 percent comes from production. So what matters more is what kind of food you buy — e.g., cutting out red meat and dairy once a week is more effective than eating an entirely local diet.
Some of the most effective ways to reduce your carbon footprint is to eat less meat (especially beef), reduce the amount you travel, and use less household electricity and gas. For some people, however, this may mean changes that come at a huge personal cost to them. MacAskill cites a yearly donation of $105 to Cool Earth, a rain forest protection organization, as an effective way for an American adult to offset all his carbon emissions, and an alternative to potentially drastic lifestyle changes. (The book has detailed descriptions about carbon offsetting and the research on Cool Earth which I will not go into here.)
Veganism
The environmental argument for veganism is weak if you enjoy eating animal products and would rather donate money to offset your emissions. The animal welfare argument is much stronger, and like the environmental argument, it is stronger for some animals than others:
- Broiler chickens, layer hens, and pigs are kept in the worst conditions — beef and dairy cows are kept in far better, but still bad conditions
- Taking that into account, as well as the number of animals it takes to make a meal and the lifespan of each animal, “the most effective way to cut animal suffering out of your diet is to stop eating chicken, then eggs, then pork.”
One takeaway from this is that if you’re planning on promoting veganism or vegetarianism for animal welfare reasons, encouraging people to cut out beef first may hinder your cause — many of them will just end up eating more chicken and pork.
Can you offset this suffering instead of changing your diet? Perhaps to some extent, but it seems different from carbon offsetting. While carbon offsetting is effectively removing your emission from the planet, preventing it from harming someone, “offsetting animal suffering” by donating to an animal advocacy charity to help them persuade someone else to become vegan just changes which animals are being harmed.
One thing that ethical vegans (and ethical non-vegans?) have a hard time grasping is this: the relationship between the mass manufacturing industry and third-world laborers is the antithesis to that between the factory farming industry and animals. The former involves mutually beneficial, voluntary exchanges and has shown to not only benefit the individuals involved, but also be a bridge towards industrialization for the poorest countries. In contrast, the latter involves the involuntary mass breeding, torture, and killing of living, suffering beings. There is a big difference, and it is crucial.
Conclusion
Ultimately, this post details some of what I’ve learned about being an “ethical consumer”, and is by no means a prescription for the reader. What I will continue to do is give my best effort at a cruelty-free lifestyle and support anyone who chooses to reduce by any amount the consumption of animal products in their own life (and leave those alone who choose not to). I’ll continue to use sustainable modes of transportation, and not worry as much about plastic bags. When it comes to ethically made goods, I do believe the better choice is the sweatshop-made good, or the food product without a Fairtrade label.
I don’t know if I’ll ever come close to the lofty goal of moral wholeness, but through careful reasoning about the consequences of my lifestyle and consumer choices, I’m more confident in my progress. And while there are certainly degrees of effectiveness, there is no state of achievable or provable perfection in ethical consumerism.
Metabolic Monstrosities: Vampire Capital in the Anthropocene
December 14, 2019
Paraphrasing a passage from Marx in the Grundrisse, Stavros Tombazos remarks that “every economy is in the end an economy of time” (2014, 13). This is to say that the productivity of labour, the accumulation of wealth, and the circulation of goods and resources which make up an economy in its broadest sense are all components of a particular organisation of time. Changes to this economic organisation are therefore felt not only in the transformations they effect materially, but also in the order of temporality and the rhythms of life possible under a particular economic system. This fact that the passage of time, which is so often taken for a given, is in actuality conditioned by the material and economic conditions in which we live is nowhere more apparent than in our present moment of climate change and ecological catastrophe.
Two long centuries of industrial capitalism have left us with a perception of time which is no longer adequate to the material conditions now reshaping our lives. The ecological historians Christophe Bonneuil and Jean-Baptiste Fressoz typify this old order of time by its dependence on the extraction of fossil fuels: “The continuous time of industrial capitalism,” they write, was “projected onto cultural representations of the future, conceived as a continuous progress unfurling to the rhythm of productivity gains” (2016, 203). The shock of our present moment is that this steady and linear increase in productivity, conceptualised as the natural progress toward a tomorrow greater than today, was only ever the product of a temporary influx of energy from a diminishing resource. As Rob Nixon writes, “in this interregnum between energy regimes, we are living on borrowed time—borrowed from the past and from the future,” with the continuation of the status quo only accelerating us “toward an abbreviated collective future as fossils in the making” (2011, 69).
In the twilight years of fossil capitalism we see the emergence of a new organisation of time in which the present is no longer able to fuel itself at the expense of the future, and the accumulated destruction of the past returns at a planetary level. To address this disjunction between the time of capital and the temporalities of nature upon which it feeds, I will offer an account of the metabolic rift theory of contemporary ecosocialists and attempt to expand this metabolic account into more monstrous territory by way of Marx’s own characterisation of capital’s vampiric thirst. Consequently, I wish to suggest Walter Benjamin’s approach to history, nature, and capital as a potential bridge between the metabolic account of capital’s planetary depredation and the project of ideological critique required to lift the haze of our temporal stasis and dispel the vampire’s curse for good.
I: Thirst for Accumulation
In the first volume of Capital, Marx writes that “labour is, first of all, a process between man and nature, a process by which man, through his own actions, mediates, regulates and controls the metabolism between himself and nature. […] Through this movement he acts upon external nature and changes it, and in this way he simultaneously changes his own nature” (1976, 283). Not merely an action taken upon nature, labour is the act of controlling the exchange between humanity and nature and the mutual transformation that result from that exchange. As has been remarked upon by the ecosocialists John Bellamy Foster (2000), Paul Burkett (2014), and Kohei Saito (2018), Marx’s conception of labour and the relation it establishes between humanity and nature hinges upon the concept of metabolism. Borrowed from the agronomist Justus von Liebig, Marx’s conception of metabolic exchange draws from its origins in chemistry, as “an incessant process of organic exchange of old and new compounds through combinations, assimilations, and excretions so that every organic action can continue,” and is applied “not just to organic bodies but also to various interactions in one or multiple ecosystems, even on a global scale, whether ‘industrial metabolism’ or ‘social metabolism’” (Saito 2018, 69-70).
In any material system, whether it involves bodies or machines, or if it occurs at the scale of an individual or a society, necessarily involves a metabolic exchange of chemicals and energy to keep that system in motion. Like the economy at large, metabolism is here characterised as a temporal relation, describing the rates of exchange between a given system and its natural foundations. What has emerged under capitalism, however, is a particular disjunction between natural and economic temporalities, tearing an ever widening metabolic rift between them. We now face a “contradiction of nature’s time versus capital’s”—as Paul Burkett writes:
“Capitalism’s accelerated throughput involves a conflict between the time nature requires to produce and absorb materials and energy versus the competitively enforced dynamic of maximum monetary accumulation in any given time period by all available material means” (2014, 112).
Under capitalism the metabolism between humanity and nature is pushed out of joint, not simply in a Malthusian trap of consumption outstripping production, but through the complex web of exchanges and processes by which capital trades short-term gains in profit for a long future of pernicious outcomes. McKenzie Wark remarks:
“Marx’s example of metabolic rift was the way nineteenth-century English farming extracted nutrients such as nitrates from the soil, which growing plants absorbed, which farmers harvested as crops, which workers in the cities ate to fuel their industrious labors, and who would then shit and piss the waste products out of their private metabolisms. Those waste products, including the nitrates, flow through run-off and sewers and pour out to sea. Whole industries for making artificial fertilizer would arise to address this rift—in turn causing further metabolic rifts elsewhere” (2015, xiv).
Whereas previous societies met natural limits at local levels, in the forms of soil exhaustion and resource depletion, capitalism constantly moves further and further afield to expand the scope of its markets, seize resources from abroad, and dispossess its periphery of labour and lands. Each limit which manifests on a local level is transcended and passed over to seek new sources of accumulation. Yet, as Marx makes clear, “from the fact that capital posits every such limit as a barrier and hence gets ideally beyond it, it does not by any means follow that it has really overcome it” (1973, 410).
Although able to escape or even feed upon the market fluctuations of natural crises by exploiting the elasticity of material limits, capital cannot overcome these limits entirely, and instead searches widely for means of delaying the inevitable. In Kohei Saito’s words: “Capital always tries to overcome its limitations through the development of productive forces, new technologies, and international commerce, but, precisely as a result of such continuous attempts to expand its scale, it reinforces its tendency to exploit natural forces (including human labor power) in search of cheaper raw and auxiliary materials, foods, and energies on a global scale” (2018, 96). Each temporary crisis overcome only offsets systemic collapse in the present by increasing the scope of the next crisis, so that eventually the entire earth is caught in the metabolic rift and a real global limit is reached.
II: Under the Vampire’s Spell
With “its blind and measureless drive, its insatiable appetite for surplus labour,” coupled with its relentless feeding upon both present and future life, it is no wonder that Marx gestures toward the vampire to characterise capital (1976, 375). In a now famous passage from Capital’s first volume, Marx describes capital as “dead labour which, vampire-like, lives only by sucking living labour,” and elsewhere as driven by a “vampire thirst for the living blood of labour” (1976, 342; 367). The vampire emerges here not only as a figure out of time, the dead which will not die, but as a conspicuously metabolic monster, which is driven not by malice or moral failure, but by a primal drive to sustain itself on the vital processes of the living. The vampire as metabolic monstrosity is not original to Marx, and may be found in Liebig’s own writings on agronomy, in which he remarks—on the topic of the imperial seizure of guano and other fertilisers from around the world—that “Great Britain seizes from other countries their conditions of their own fertility… Vampire-like, it clings to the throat of Europe, one could even say of the whole world, sucking its best blood” (Bonneuil & Fressoz 2016, 186-7).
Beyond its polemical flourish, the evocation of the vampire plays the fundamental role of revealing in a single image the hidden mechanisms of capital’s bloodied feast. As Foster and Burkett remark: “Marx’s use of metabolism was not ‘analogical’, but was meant to promote the basis for a materialist and dialectical understanding of the human productive relation to nature” (2016 35-6). Similarly, I wish to argue that capital is not merely like a vampire, but literally exercises a vampiric relation with the living both in its parasitic thirst for accumulation and in the psychic bondage it exercises over its victims. In addition to characterising capital as predominated by metabolic processes, the vampiric metaphor brings with it the connotations of bewitchment, invisibility, and the thraldom of the victim to the vampire. In effect, the conjunction of vampire-capital merges the logic of metabolism with the ideological apparatus that conceals it. As David McNally writes in Monsters of the Market:
“Capital’s great powers of illusion lie in the way it invisibilises its own monstrous formation. In endeavouring to pull off the magic-cap of modernity, Marx sought a confrontation with monstrosity. He set out to reveal the legions of vampires and werewolves that inhere in capital so that they might be banished” (2011, 114).
Just as the time of capitalist production instils in those caught within it the rhythms of industry and the progressive increase of productive forces, the occlusion of its metabolic imbalance exercises its own temporal logic. Capital doesn’t only drain the living of their lifeblood, but does so at times and intervals which, at least for the time being, evade direct perception. Counter to the theories of Max Weber, for whom modernity was the triumph of reason over myth, we may refer Walter Benjamin’s proposition that: “Capitalism was a natural phenomenon with which a new dream-filled sleep came over Europe, and, through it, a reactivation of mythic forces” (1999, K1a,8). The identification of capital’s metabolic relation to humanity and nature as vampiric goes some way in piercing through the new myths of capitalism’s dream-filled sleep. Firstly, it dispels the ideological haze that disguises the slow desiccation of labour and nature under capitalism as just or necessary. As McNally remarks:
“If there is a Marxist Gothic, then, it is one that insists, amongst other things, on journeying through the night spaces of the capitalist underworld, on visiting the secret dungeons that harbour labouring bodies in pain” (2011, 138).
Secondly, it reveals that the cyclical crises and disasters of capitalism are not abnormalities or irregularities in the upward arch of progress, but are rather the throes of pain of myriad metabolisms caught between the vampire’s fangs. As Benjamin writes:
“The concept of progress must be grounded in the idea of catastrophe. That things are ‘status quo” is the catastrophe. It is not an ever-present possibility but what in each case is given. […] Hell is not something that awaits us, but this life here and now” (1999, N9a,1).
III: Wake in Fright
Benjamin’s project of uncovering the dark, magical underbelly of capitalist modernity—what Margaret Cohen (1993) has called a form of “Gothic Marxism”—puts him in welcome company among the vampires and werewolves of Marx’s imaginary. But for all Benjamin’s success as a critic of culture, ideology, and history, his relevance to an ecologically-conscious Marxism is less clear. Writing in Marx’s Ecology, John Bellamy Foster sets himself apart from the Western Marxists for their failure to take the materialist account of nature seriously. “The Frankfurt School,” Foster writes, “developed an ‘ecological’ critique which was almost entirely culturalist in form, lacking any […] analysis of the real, material alienation of nature, for example, Marx’s theory of metabolic rift” (2000, 245).
By way of a conclusion, I’d like to put this claim under pressure on two fronts: Firstly, with the claim that in Benjamin—if not in other Frankfurt thinkers—we do in fact find a thoroughly materialist account of nature, which both refuses any account of history separate from its natural conditions and any theorisation of nature impervious to historical alteration. Secondly, I wish to argue that within Benjamin’s philosophy of nature we also discover hints of a metabolic relation between humanity and nature which will allow us to bridge the gap between a Gothic Marxist critique of ideology and the ecological thought necessary for a twenty-first century Marxism.
From his early works through to his last, Benjamin’s thought returned not only to the question of nature and its place within the course of history, but also the moment when the “antithesis of history and nature” is undone, and “history passes into the setting” as another component of a purely material world (2019, 81). This entry of history into nature—and nature into history—preoccupies Benjamin’s thought in his final unfinished work, The Arcades Project, in which the history of the nineteenth century is conceived in naturalistic terms as composed of fossils from a vanished age. From out of the rubble of this earlier stage of capitalism, Benjamin pieces together a genealogy of late capitalism to reveal the ideological effects that emerge when history and nature are conceptually divorced. As Susan Buck-Morss writes:
“Whenever theory posited ‘nature’ or ‘history’ as an ontological first principle, this double character of the concepts was lost, and with it the potential for critical negativity: either social conditions were affirmed as ‘natural’ without regard for their historical becoming, or the actual historical process was affirmed as essential” (1977, 54).
In Benjamin’s own terms, so long as the modern environments of “architecture, fashion,” and “even the weather” are left unconsidered as products of human intention, “they are as much natural processes as digestion, breathing, and the like. They stand in the cycle of the eternally selfsame, until the collective seizes upon them in politics and history emerges” (1999, K1,5). What we take to be merely “natural,” whether it is the drive for profit or a change in the weather, exists for us only unconsciously until we recognise the mutually constitutive relationship between these seemingly natural facts and the history which we collectively create. Without this moment of awakening to our own natural history, the course of historical events seem inevitable and beyond our grasp. “To the dreaming collective,” writes Benjamin, “the decline of an economic era seems like the end of the world itself” (1999, R2,3). In our own era of apocalyptic foreboding we are in dire need of a politics able to pierce through this myth of inevitable catastrophe to confront the ecological and economic disjunction at its heart.
Despite its seeming inevitability as a fact of nature, the “ecological rift is, at bottom, the product of a social rift: the domination of human being by human being” (Foster et al. 2010, 47). “Accordingly,” writes Kohei Saito, “Marx’s socialist project demands the rehabilitation of the humans-nature relationship through the restriction and finally the transcendence of the alien force of reification (2018, 133). Or, as Benjamin put it many years prior, the vital task of our technical knowledge “is not the mastery of nature but of the relation between nature and man” (1979, 104). Here we see clearest the metabolic potential of Benjamin’s natural philosophy: To master not nature itself but the relation between humanity and nature is to understand the metabolic exchanges which conjoin earthly processes and human affairs. But what Benjamin’s writing also makes clear is that an understanding of our metabolic relation to the earth is not sufficient in itself. To be politically effective an ecologically-conscious Marxism must be coupled with an insight into the ideological structures that obscure our metabolic relations and instil in us a faith in temporalities of infinite progress or inevitable disaster. The vampiric grip of capital, which obscures the means of its mastery even as it deploys them upon humanity and nature alike, can only be cast off by a conscious and collective mastery of our relations to nature and the initiation a new metabolism with the earth.
Bibliography
Benjamin, Walter. One Way Street and Other Writings. Translated by Edmund Jephcott and Kingsley Shorter. London: Verso, 1979.
——. The Arcades Project. Translated by Howard Eiland and Kevin McLaughlin. Cambridge: Belknap, 1999.
——. The Origin of the German Trauerspiel. Translated by Howard Eiland. Cambridge: Harvard University Press, 2019.
Bonneuil, Christophe and Jean-Baptiste Fressoz. The Shock of the Anthropocene. Translated by David Fernbach. London: Verso, 2016.
Buck-Morss, Susan. The Origins of Negative Dialectics. New York: The Free Press, 1977.
Burkett, Paul. Marx and Nature: A Red and Green Perspective. Chicago: Haymarket Books, 2014.
Cohen, Margaret. Profane Illumination: Walter Benjamin and the Paris of Surrealist Revolution. Berkeley: University of California Press, 1993.
Foster, John Bellamy. Marx’s Ecology: Materialism and Nature. New York: Monthly Review Press, 2000.
Foster, John Bellamy, and Paul Burkett. Marx and the Earth: An Anti-Critique. Chicago: Haymarket Books, 2016.
Foster, John Bellamy, Brett Clark, and Richard York. The Ecological Rift: Capitalism’s War on the Earth. New York: Monthly Review Press, 2010.
Marx, Karl. Grundrisse. Translated by Martin Nicolaus. London: Penguin Books, 1973.
——. Capital Volume I. Translated by Ben Fowkes. London: Penguin Books, 1976.
McNally, David. Monsters of the Market: Zombies, Vampires and Global Capitalism. Chicago: Haymarket Books, 2011.
Nixon, Rob. Slow Violence and the Environmentalism of the Poor. Cambridge: Harvard University Press, 2011.
Saito, Kohei. Karl Marx’s Ecosocialism: Capital, Nature, and the Unfinished Critique of Political Economy. New Delhi: Dev Publishers, 2018.
Tombazos, Stavros. Time in Marx: The Categories of Time in Marx’s Capital. Translated by Christakis Georgiou. Chicago: Haymarket Books, 2014.
Wark, McKenzie. Molecular Red: Theory for the Anthropocene. London: Verso, 2015.
Late Imperialism
By John Bellamy Foster
July 1, 2019
The single most influential work on imperialism remains V. I. Lenin’s classic study of a century ago, Imperialism: The Latest Stage of Capitalism (better known by the title given to it following its first publication, Imperialism: The Highest Stage of Capitalism).1 Lenin employed the term modern imperialism or simply imperialism to refer to the age of concentrated capital, during which the entire world was being carved up by the leading states and their corporations, distinguishing the imperialist stage from the colonialism/imperialism of the mercantilist and freely competitive stages of capitalism that preceded it. “Colonial policy and imperialism,” Lenin insisted, “existed before this latest [imperialist] stage of capitalism, and even before capitalism.”2
The new imperialist stage, beginning in the last quarter of the nineteenth century and extending into the twentieth century, was seen as a product of the growth of giant capitalist firms with monopoly power, the close connection forged between these corporations and the nation-states in which they arose, and the resulting struggle for control of the world’s populations and resources—leading to intercapitalist competition and war. “If it were necessary to give the briefest possible definition of imperialism [as a “special stage”],” Lenin wrote, “we would have to say that imperialism is the monopoly stage of capitalism.”3
Lenin’s general analysis of imperialism belonged to a group of largely complementary theories in the Marxian tradition that included such works as Rudolf Hilferding’s Finance Capital (1910), Rosa Luxemburg’s The Accumulation of Capital (1913), and Nikolai Bukharin’s Imperialism and the World Economy (1915).4 Yet, Lenin’s own analysis was unrivaled in its ability to capture the dominant world conditions up through the Second World War, including accounting for the world wars themselves. A strong point in his analysis was its concrete, historical character, divorced from rigid theoretical formulae. It encompassed such varied phenomena as the growth of monopoly and financial capital, “division of the world among the international trusts,” capital export, the race for energy and raw materials, class struggle, geopolitical rivalry in the struggle for economic territory and spheres of influence, the emergence of a labor aristocracy in the capitalist core, and the contest for global and regional hegemony.5
While emphasizing intercapitalist competition, Lenin also pointed to the hierarchy of nation-states, which served to divide the core powers from the poorer nations of the periphery that fell within their imperial orbits. His analysis went beyond colonialism to discuss neocolonialism in relation to Latin America. In the 1920s, alert to the revolutionary struggles occurring in Mexico, Turkey, Persia, China, and India, Lenin pioneered in extending his analysis to the consideration of all “imperialist-oppressed colonies and countries” and all “dependent countries,” giving rise to revolution in the periphery against “international imperialism.”6
However, history in the Marxian conception is a dialectic of continuity and change. By the 1960s, Lenin’s analysis, despite its comprehensiveness, needed updating. In the post-Second World War era, the United States emerged with near absolute hegemony over the capitalist world economy. At the same time, the world saw the greatest revolutionary wave in history associated with the break with colonialism, the rise of neocolonialism, and the emergence of a rival sphere of post-revolutionary society, including states with socialist aspirations.7 In this changed atmosphere, corresponding with the Cold War, the United States and its allies presented a new ideology of economic growth, development, aid, and modernization within the capitalist ideological framework. An army of liberal and social democratic intellectuals, including such figures as Mark Blaug, Benjamin J. Cohen, Robert W. Tucker, and Barrington Moore Jr., were enlisted in the 1960s and ’70s to deny the existence of economic imperialism, if not imperialism more generally, aiming their analysis at various figures on the left and in the United States in particular, including Paul Baran, Paul Sweezy, William Appleman Williams, and Harry Magdoff.8
At the very center of the intense debate on U.S. imperialism in the 1960s and ’70s in the context of the Vietnam War was Magdoff’s The Age of Imperialism: The Economics of U.S. Foreign Policy (1969), written just over fifty years after Lenin’s great work. Taken together with Magdoff’s collection of historical and theoretical essays from the late 1960s and ’70s—Imperialism: From the Colonial Age to the Present (1978)—The Age of Imperialism stands as the single most integrated economic, historical, and theoretical analysis of U.S. imperialism at its peak, in the so-called golden age of monopoly capitalism.9
Magdoff, more than any other figure at the time, modeled the dialectic of continuity and change in the Marxian analysis of imperialism, linking his work to Lenin’s earlier analysis. Like other major Marxian theorists of imperialism from the mid–twentieth century to today, such as Baran, Sweezy, and Samir Amin, he continued to lay stress on the concentration and centralization of capital, along with the rise of monopolistic corporations, as the key to understanding late twentieth- and emerging twenty-first-century imperialism. In addition, Magdoff built on the complexity and multifaceted nature of Lenin’s original approach, attempting to replicate this for a later era. Magdoff had designed the statistical productivity measures (still used today by the U.S. Department of Labor) for the Works Progress Administration’s National Research Project on Re-employment Opportunities and Technological Development during the New Deal in the 1930s. He was a pivotal figure in the organization of U.S. war industry in the Second World War as chief of the Civilian Requirements Division of the National Defense Advisory Commission and in his role in the War Production Board, where he was put in charge of planning and controls in the machinery industries. He subsequently headed the Current Business Analysis Division of the Department of Commerce where he supervised the U.S. government’s Survey of Current Business and then served as economic adviser to U.S. Secretary of Commerce (and former U.S. Vice President) Henry Wallace. This extraordinary background in the construction and analysis of U.S. economic statistics and in wartime planning meant that Magdoff was well equipped to provide definitive empirical demonstrations of economic imperialism on the part of U.S. corporations and the U.S. state, along with its relation to the wider dimensions of world imperialism.10
In Magdoff’s treatment, imperialism could not be viewed at the high level of abstraction sometimes used for the analysis of the logic of capital. Rather, a reasonable approach to imperialism required attention to the inner workings of global capitalism, informed by theoretical abstraction, but ultimately confirmed and made meaningful at a concrete, historical level.11 This conformed to the method of Karl Marx himself, who developed his critique of political economy by means of successive approximations moving from the abstract to the concrete. Marx thus began his critique with Capital (originally slated as volume 1 in a six-volume work), representing the most abstract level of analysis, and intended to complete it with volume 5 on International Trade and volume 6 on The World Economy and Crises—that is, in terms of the concrete analysis of what today would be called the imperialist world system. However, he never got beyond volume 1 of the original plan, which turned into the three volumes of Capital.12
Imperialism, Magdoff argued, was inherently complex and changing in its configurations, reflecting both the centripetal and centrifugal forces governing the system. Where U.S. imperialism was concerned, it had to be interpreted in such a way that the “essential one-ness” between economic, political, and military-strategic objectives/tendencies was revealed. The role of multinational corporations abroad could not be separated from the role of U.S. military bases spread across the planet or the need to control oil and other strategic resources. Magdoff was at his best in refuting those who attempted to claim: (1) that foreign direct investment and trade were of little economic significance to the United States (he demonstrated that foreign direct investment had risen from around 10 percent of U.S. after-tax nonfinancial corporate profits in 1950 to about 22 percent by 1964); (2) that the U.S. economy was not dependent on oil or other raw materials located abroad and had no inherent geopolitical interests; and (3) that U.S. profits were only marginally affected by surplus extracted from the periphery of the world system.13 The fact that the other major capitalist countries all acceded to U.S. hegemony did not mean that intercapitalist competition had entirely disappeared or would not resurface in the future. Responding to those who questioned whether “imperialism was really necessary” to the United States, Magdoff explained that “imperialism is the way of life of capitalism.”14
For Magdoff, writing in the late 1960s and early ’70s, the main changes in the structure of imperialism since Lenin’s time—beyond decolonization and the rise of U.S. hegemony—were all related to the further development of monopoly capital: (1) the emergence of the military-industrial complex; (2) the rise of multinational corporations (including multinational banking) and their growing penetration of the periphery; and (3) “the priority of the interests of military-multinational industry on the affairs of state.” This description, he noted, applied first and foremost to the United States itself, but reflected relations also materializing among rival imperial powers. In essence, he was pointing to a tendency within the system toward the formation of a more generalized monopoly capitalism, beginning in the United States, but lording itself over the entire globe. A key element in Magdoff’s Age of Imperialism was his chapter on the growth of “The Financial Network,” investigating the whole phenomenon of multinational banking and finance in general—a treatment that he was to carry forward in the early 1990s in Globalization: To What End?, which included his analysis of “The Globalization of Finance.”15
It will be argued here that the globalization of production (and finance)—which emerged along with neoliberalism out of the economic stagnation of the mid–1970s and then accelerated with the demise of Soviet-type societies and China’s reintegration into the capitalist world system—has generated a more generalized monopoly capitalism, theorized by thinkers such as Magdoff, Baran, Sweezy, and Amin. This ushered in what can be called late imperialism.
Late imperialism refers to the present period of monopoly-finance capital and stagnation, declining U.S. hegemony and rising world conflict, accompanied by growing threats to the ecological bases of civilization and life itself. It stands at its core for the extreme, hierarchical relations governing the capitalist world economy in the twenty-first century, which is increasingly dominated by mega-multinational corporations and a handful of states at the center of the world system. Just as it is now common to refer to late capitalism in recognition of the end times brought on by simultaneous economic and ecological dislocations, so it is necessary today to speak of late imperialism, reflecting the global dimensions and contradictions of that system, cutting across all other divisions, and posing a “global rift” in human historical development: an epochal crisis posing the question of “ruin or revolution.”16
The persistent failure of many on the left, particularly in the advanced capitalist states, to acknowledge these developments is largely the result of a growing abandonment of the theory of imperialism, substituting more reified conceptions related to globalization, seen as dissolving former imperial hierarchies. This is so much the case that a host of alternative frameworks are now offered suggesting: (1) the progressive and self-annihilating role of imperialism; (2) shifting hegemonies within the world system conceived as a substitute for the theory of imperialism; (3) “deterritorialized” (stateless, borderless) Empire; (4) abstract political imperialism led by the United States or rule by supranational organizations removed from economic forces; (5) the rise of transnationalism as an entity in itself largely independent of states and geography; and (6) the supposed reversal of imperialist dominance. Hence, before examining the historical phenomenon of late imperialism it is necessary to view some of these prevalent misconceptions on the left in the imperial countries themselves, resulting from a refusal to come to terms with the complex, many-sided structural realities of late imperialism in the twenty-first century.
The Western Left and the Denial of Imperialism
The issue of the abandonment of the critique of imperialism within much of the Western left was dramatically raised by Prabhat Patnaik in his November 1990 Monthly Review article entitled “Whatever Happened to Imperialism?” Writing two decades after Magdoff’s The Age of Imperialism and a little more than a decade after Imperialism: From the Colonial Age to the Present, Patnaik, an economist at Jawaharlal Nehru University in New Delhi, observed:
An outsider cannot help noticing a remarkable transformation that has taken place in the Marxist discourse in the United States over the last decade: hardly anybody talks about imperialism any more. In 1974, I left Cambridge, England, where I was teaching economics, and have now returned to the West, this time to the United States, after 15 years. When I left, imperialism occupied perhaps the most prominent place in any Marxist discussion, and nowhere was more being written about and talked about on this subject than in the United States—so much so that many European Marxists accused American Marxism of being tainted with “third worldism.”… Marxists everywhere looked to the United States for literature on imperialism.…
This is obviously not the case today. Younger Marxists [in the United States] look bemused when the term is mentioned. Burning issues of the day…are discussed, but without any reference to imperialism. Radical indignation over the invasion of Panama or military intervention in Nicaragua and El Salvador does not jell into theoretical propositions about imperialism. And the topic has virtually disappeared from the pages of Marxist journals, especially those of a later vintage.
Curiously, this is not because any one has theorized against the concept. The silence over imperialism is not the aftermath of some intense debate where the scales tilted decisively in favor of one side; it is not a theoretically self-conscious silence. Nor can it be held that the world has so changed in the last decade and a half that to talk of imperialism has become an obvious anachronism.17
At the time, Patnaik attributed the change in left perspectives in the United States to absence of a major war, such as the Vietnam War, in the 1975–90 period. But of equal importance in the 1980s and early ’90s, governing the mood in radical circles, was the evolving economic situation, with the U.S. economy, along with that of the other advanced capitalist countries, experiencing deepening economic stagnation in contrast to faster growth in some parts of Asia. On this shaky basis, the dependency thesis of the “development of underdevelopment,” made famous especially by Andre Gunder Frank, writing in Monthly Review, was designated as erroneous even by many on the left—in spite of the fact that the gap in national income between the leading imperial countries and the developing world as a whole continued to widen, with the share of world income received by the top 20 percent of the world’s population (divided into nation-states) rising from 66 percent in 1965 to 83 percent in 1990.18
Marxist theorist Bill Warren argued as early as 1973 in “Imperialism and Capitalist Industrialization” in New Left Review that dependency in poor countries was in “irreversible decline” due to “a major upsurge” in capitalist development in the third world. According to Warren, Marx, in articles such as “The British Rule in India,” had seen colonialism/imperialism as playing a constructive role in underdeveloped countries. This was later mistakenly “reversed” by Lenin in his Imperialism, which represented an “about-turn” in Marxist theory, giving rise to dependency theory. The problems of development facing the poorer countries, Warren argued, were not primarily external, as depicted by dependistas, but could be traced to “internal contradictions.” This outlook, though not widespread in the 1970s when Warren first introduced it, was to gain considerable influence within the Western left by 1980, when his posthumous Imperialism: Pioneer of Capitalism was published.19
A quite different departure from classical theories of imperialism appeared in the afterword to the 1983 edition of Giovanni Arrighi’s The Geometry of Imperialism. A leading Marxian-inspired world-systems theorist, Arrighi ended up abandoning the theory of imperialism, which he no longer considered relevant, replacing it with a more limited conception of struggles over world hegemony. The model of the capitalist world-system with its shifting hegemonies was seen by Arrighi as an adequate substitute for the more complex notion of imperialism. The decline of the nation-state in the wake of globalization meant that the old theories of imperialism had become “obsolete,” and the theory of monopoly capitalism was likewise seen as dated. What remained was a world-system and the jostling for hegemony.20
However, the most far-reaching left rejections of the Marxian critique of imperialism were to await the present century. In 2000, Michael Hardt and Antonio Negri published Empire, arguing that imperialism was now a thing of the past—with the Vietnam War representing “the final moment of the imperialist tendency”—only to be replaced by a new deterritorialized global constitutional order and world market modeled on U.S. political-economic relations, in a left version of Francis Fukuyama’s “end of history.” The hierarchical imperialism of old, Hardt and Negri argued, had been succeeded by the “smooth space of the capitalist world market”—a view that anticipated by five years neoliberal globalization pundit Thomas L. Friedman’s claim that “the world is flat.” Hence, it was “no longer possible,” they wrote, “to demarcate large geographical zones as center and periphery, North and South.” This transcendence of imperialism in favor of the stateless, borderless sovereignty of Empire, based in a world market consisting of mere network relations without a center and periphery, was seen as emerging out of the inner logic of capitalism itself. “Imperialism,” Hardt and Negri stated, “actually creates a straitjacket for capital,” the inner logic of which ultimately requires a “smooth space” or flat world in which to operate.21
Such ideas were hardly novel, except within Marxian circles. What was innovative was the use of Marxian and postmodern terminology to boost views long promoted within establishment U.S. foreign policy, which resulted in Hardt and Negri’s work being highly praised by the New York Times, Time magazine, Foreign Affairs, and other mainstream publications. It was this that led Ellen Meiksins Wood to refer to Hardt and Negri’s Empire as, in effect, “a manifesto on behalf of global capital.”22
Hardt and Negri’s rejection of any continuity with classical Marxian theories of imperialism opened the way to various sometimes insightful, but one-dimensional, approaches on the left, converging with mainstream ideology. In The Making of Global Capitalism in 2013, Leo Panitch and Sam Gindin stressed the ability of the U.S. state, primarily through actions of the Treasury Department and the Federal Reserve Board, to create a “world after its own image,” subordinating European capital to its influence. The argument, which was inspired in part by Peter Gowan’s critique of the “Dollar-Wall Street Regime,” while informative, was an almost exclusively political one, systematically downplaying the economic dimension of imperialism, including finance capital, multinational corporations, continuing international rivalry, and the deteriorating conditions of the underdeveloped world. Panitch and Gindin thus provided an analysis of U.S. empire, much more conversant with received views, as opposed to the classical conceptions of imperialism with their numerous critical dimensions. In The Making of Global Capitalism, the older structure of imperialist countries in the center and the dependent countries in the periphery gave way to smooth “networks of transnational production as well as finance” revolving around “American capitalism’s central place in global capitalism.” What was conveyed was a stable U.S. world hegemonic order, rooted in a Washington-Wall Street consensus and seemingly destined to continue indefinitely—a mirror image of the view prevailing within U.S. foreign policy circles but now emanating from the left. In this interpretation, global capitalism arising out of “American Empire” and managed by the U.S. state entirely subsumed the more complex and multifaceted, and at the same time more concrete analysis of imperialism offered by thinkers such as Lenin, Luxemburg, Magdoff, and Amin.23
If Panitch and Gindin emphasized the rise of political empire, largely dispensing with what John Hobson had called the “economic taproot of imperialism,” transnationalization theorist William I. Robinson went in the opposite direction, arguing that capital in the age of globalization has completely swallowed up nation-states and created a new transnational order dominated by free-floating transnational corporations, giving rise to a “transnational capitalist class” and the “transnational state.” Writing in A Theory of Global Capitalism in 2004, Robinson declared that “globalization involves a supersession of the nation-state as the organizing principle of social life under capitalism.”24
In 2018, in “Beyond the Theory of Imperialism” (a chapter in his Into the Tempest), Robinson made a clean break with classical theories of imperialism: “The class relations of global capitalism are now so deeply internalized within every nation-state that the classical image of imperialism as a relation of external domination is outdated” and must be abandoned, together with notions such as center, periphery, and surplus extraction. “The end of the extensive enlargement of capitalism is the end of the imperialist era of world capitalism.… It is not imperialism in the old sense either of rival national capitals” or the domination “by core states of precapitalist regions” that is needed, but “a theory of capitalist expansion” as a specifically transnational and supranational process characterized by shifting “spatial dynamics.”25
Meanwhile, Marxist geographer David Harvey leaped beyond all of these perspectives, claiming in 2017 that the flows of capital have so changed direction that “the historical draining of wealth from East to West for more than two centuries has…been largely reversed over the last thirty years” (emphasis added). He admitted: “I don’t find the category of imperialism that compelling.” Imperialism was a concept not to be found in Marx, but mainly attributable to Lenin. The whole notion of global “peripheries” was said to be unclear as to its boundaries, and Arrighi’s notion of “shifting hegemonies” could be seen as displacing earlier Marxian theories of imperialism.26
In his 2003 New Imperialism—a work he now says was not meant to promote the concept of imperialism so much as to combat neoconservative attempts to adopt the term as their own—Harvey praised Hardt and Negri’s depiction of “a decentered configuration of empire that had many new, postmodern, qualities.” His book ended by advocating a new “‘New Deal’ Imperialism,” viewed as a more progressive imperialism under a more enlightened Washington Consensus, replacing the current neoliberal/neoconservative global order. For Harvey, the left was to be chastised for its “icy reception” to Warren’s notion of the progressive character of imperialism.27
If Harvey’s position on imperialism over the years has been somewhat incoherent, his current rejection of the notion of an imperialist world system in the name of a supposedly more dynamic view focusing on constantly shifting spatial configurations, which have “reversed” traditional center-periphery relations, could not be clearer in its implications. Referring to contemporary globalization tendencies, he explains that “it didn’t even make sense to try to cram all of this into some universal concept of imperialism.” The entire Marxian analysis of imperialism has become a theoretical “straitjacket.”28 In conformity with Arrighi, he discards the “rigid geography of core and periphery…in favor of a more open and fluid analysis.”29 In the process, however, it becomes necessary to break with the entire historical-materialist critique of imperialism. In his 2014 The Seventeen Contradictions of Capitalism, imperialism does not even warrant inclusion amongst his list of capitalism’s double-digit contradictions. His chapter on “Uneven Geographical Developments and the Production of Space” does not once mention imperialism, nor center and periphery. The only direct reference to Lenin’s Imperialism is aimed at downplaying the structural role of monopoly capital, which Lenin had associated with imperialism.30
There is no question that world capitalism has changed in the century since the First World War, when Lenin developed his critique of the imperialist stage. Yet, this has to be seen in the context of a historical dialectic that embraces continuity as well as change. Imperialism is a historical as much as a theoretical category. If half a century ago it was still possible to refer, as Magdoff did, to “the age of imperialism,” even to the point of seeing this as imperialism’s “golden age,” today we are clearly in an era of late imperialism associated with: generalized monopoly-finance capital; the globalization of production; new forms of surplus extraction from the periphery to center; and epochal economic, military, and environmental challenges. The crises facing the system and human society as a whole are now so severe that they are creating new fissures in the state in both the advanced capitalist and emerging economies, with a rapid growth of protofascist and neofascist tendencies, on the one hand, and a revival of socialism, on the other.
Recognizing the continuity with earlier phases of imperialism is as crucial to our understanding of the present as our awareness of the distinguishing characteristics of the current phase. Each historical phase of imperialism relies on different means of exploitation and expropriation to feed accumulation on a world scale. Imperialist countries at the core of the system invariably attempt to restructure labor in the capitalist periphery (or in the precapitalist external areas) to reinforce power and accumulation at the center of the system. At the same time, the core imperial nations are often in competition with each other for global spheres of influence. The early colonial era in the mercantilist stage of capitalism during the sixteenth and seventeenth centuries centered not on free exchange but on “profit upon expropriation,” along with the “extirpation, enslavement and entombment in mines of the indigenous population” of the Americas and much of Africa and Asia.31
In the later, mid–nineteenth-century colonial era or stage of free competition under British hegemony, free trade operated in the core of the world economy, but this went hand in hand with colonialism in much of the world, where unequal exchange and outright robbery and plunder predominated. In 1875, Robert Arthur Talbot Gascoyne-Cecil, the 3rd Marquess of Salisbury, then secretary of state for British India, declared: “As India must be bled, the bleeding should be done judiciously.”32 Bled it was, but not “judiciously.” As Utsa Patnaik has demonstrated in detail, the present value of the “drain” of surplus from India to Britain from 1765 to 1938 amounts “on a highly underestimated basis” to £9.2 trillion, compared to a £2.1 trillion gross domestic product (GDP) for the United Kingdom in 2018.33
Nineteenth-century colonial capitalism evolved by the end of the century into what Lenin called the imperialist stage, characterized by the rise of monopoly capital in all the great powers, the decline of British hegemony, and rising tension over the division of the entire world among the core capitalist powers. These conditions led to two world wars among the rival claimants to hegemony over economic territory. Following the Second World War, the United States emerged as the world hegemon within the capitalist world, in a context that also included a Cold War with the rival socialist-oriented world. While promoting an ideology of free trade and development, the U.S. hegemon nonetheless put in place a system of neocolonialism enforced by multinational corporations, dollar hegemony, and a globe-spanning string of military bases—from which numerous military interventions and regional wars were to be launched. This was accompanied by the siphoning off of much of the economic surplus of the global South.
With the rise of monopoly-finance capital, the world has entered a new phase of imperialism, late imperialism, rather than a superseding of imperial relations. Late imperialism, as we have seen, represents an epoch in which the global contradictions of the system are revealed in ever starker forms and in which the entire planet as a place of human habitation is now at risk—with the catastrophic effects falling disproportionately on the most vulnerable of the world population. All of this is bound to generate greater geopolitical conflict as capitalism’s failure as a society becomes evident.
None of this was a complete surprise for the more astute analysts of globalization. In 1992, Magdoff wrote that,
contrary to widespread expectations, sources of tension among the leading capitalist powers have increased side by side with their growing interdependence. Nor has the geographic spread of capital reduced the contradictions between the rich and poor nations. Although a handful of third world countries, benefiting from the globalization process, have made noteworthy progress in industrialization and trade, the overall gap between core and periphery nations has kept on widening.… The process of globalization has produced much that is new in the world’s economy and politics, but it has not changed the basic ways capitalism operates. Nor has it aided the cause of either peace or prosperity.34
Indeed, there is something deeply ironic about the growing rejection of the theoretical critique of imperialism in the present global context. As Argentinian Marxist Atilio Borón observed in 2003 in “Empire” and Imperialism, imperialism today reflects those “fundamental features” with respect to the concentration and centralization of capital on a global scale portrayed by the classical Marxist theorists of imperialism, but in more developed forms:
This new stage [of imperialism in Lenin’s sense] is characterized, now even more than in the past, by the concentration of capital, the overwhelming predominance of monopolies, the increasingly important role played by financial capital, the export of capital and the division of the world into “spheres of influence.” The acceleration of globalization that took place in the final quarter of the last century, instead of weakening or dissolving the imperialist structures of the world economy, magnified the structural asymmetries that define the insertion of the different countries in it. While a handful of developed capitalist nations increased their capacity to control, at least partially, the productive processes at a global level, the financialization of the international economy and the growing circulation of goods and services, the great majority of countries witnessed the growth of their external dependency and the widening of the gap that separated them from the centre. Globalization, in short, consolidated the imperialist domination and deepened the submission of peripheral capitalisms, which became more and more incapable of controlling their domestic economic processes even marginally.35
The new phase of imperialism that arose at the very end of the twentieth and the beginning of the twenty-first century has been described by Amin and various authors associated with Monthly Review as a system of global monopoly-finance capital or a capitalism of “generalized monopolies.”36 In this more integrated imperialist system, five hundred corporations account for nearly 40 percent of world revenue while most other firms in the world economy are entangled in the webs of these giant firms and exist as mere subcontractors.37 Production and circulation are now organized in the form of global commodity chains, serving to highlight the different roles of center and periphery within these commodity chains. This is in line with the global labor arbitrage, which serves to promote the intensified exploitation/expropriation of labor in the global South, leading to the capture of much of this extra value by the North. The heightened imperialist controls of global finance and communications are inherent parts of this process without which the globalization of production would not be possible.38
The late 1970s and ’80s saw the growth of neoliberal globalization, which sought with considerable success to subordinate states, particularly in the global South, to the rules of a world market where, by definition, the financial center rules. Late imperialism can thus also be seen as the period in which economic stagnation, financialization, and the planetary ecological crisis all emerged as widening, irreversible fissures, inseparable from the system of monopoly-capitalist accumulation itself and finding its ideological justification in neoliberalism.
A distinguishing feature of globalized production and finance in the current century is the systematic exploitation of low unit labor costs in the South, a product of the fact that wages are kept at levels far below those of the North due to: (1) the enormous global reserve army located primarily in the South; (2) restrictions on the movement of labor between countries, and particularly from poor to rich countries; and (3) the force of imperialist pressures past and present.39 As economist Tony Norfield, former executive director and global head of foreign exchange strategy in a major European bank, explained in 2015 in “T-Shirt Economics: Labour in the Imperialist World Economy,”
everybody knows that workers in developed capitalist countries are paid more than those in poorer countries. However, the divergence in average wages can nevertheless be surprising: not just 20 percent or 50 percent, but more like a factor of 2, 5, 10 or 20 between the richer countries and the poorer countries. Mainstream economic theory explains this—and justifies it—by arguing that workers in richer countries are more productive than in poorer ones, because the former are more educated and skilled, working with higher levels of technology. Yet this explanation does not sit well with the reality that many manufacturing employees in poor countries are employed, directly or indirectly, by major corporations, and working with technology that is often comparable to that in the richer country.40
Production by (or contracted out by) foreign multinationals in poor countries relies on the same or near to the same technology utilized in the rich economies, leading to comparable levels of productivity. The result, combined with extremely low wages, is that unit labor costs in manufacturing in the so-called emerging economies of China, India, Indonesia, and Mexico in 2014 were only 46, 37, 62, and 43 percent, respectively, of U.S. levels.41 This generates vastly inflated gross profit margins for multinationals located in the North. The total production cost (reflected in the export price) for a T-shirt produced in 2010 through a subcontractor in Bangladesh working for the Swedish firm Hennes & Mauritz (H&M) was 27 percent of the final sales price in Europe, with the workers in Bangladesh receiving a mere pittance for their labor. One worker at the factory received €1.36 for a ten to twelve hour day.42 The price markup (or gross profit margin) on an iPhone assembled in China in 2009 was over 64 percent.43 The widening gross profit margins associated with the global labor arbitrage have led to a rapid globalization of production, with the world share of industrial employment located in developing (including emerging) economies rising from 52 percent in 1980 to 83 percent in 2012.44
Today, a large and rapidly growing portion of production is outsourced to the periphery in the form of arms-length contracting or what is known as the non-equity modes of production (such as leasing, licensing, franchising, and management-service contracts), constituting a kind of middle ground between foreign direct investment by multinationals and actual trade. In 2010, the non-equity modes of production generated over $2 trillion in sales.45
Still, not all value-chain production exploiting low unit labor costs in the global South takes the form of subcontracting or the non-equity modes of production. Much of it occurs in the form of more traditional foreign direct investment by multinationals. In 2013 alone, U.S. receipts from investments abroad in foreign companies, equities, bonds, etc., amounted to $773.4 billion, while U.S. payments on its liabilities from investments that foreigners made in the United States added up to only $564.9 billion, resulting in a net gain of some $209 billion (equal to about 35 percent of total U.S. net private domestic investment for that year). This only accelerated problems of surplus capital absorption.46 As Baran and Sweezy wrote in 1966 in Monopoly Capital, “foreign investment, far from being an outlet for domestically generated surplus, is a most efficient device for transferring surplus generated abroad to the investing country. Under these circumstances it is, of course, obvious that foreign investment aggravates rather than helps to solve the surplus absorption problem.”47
Other factors as well enter into the transfer of value from developing countries, including capital flight from the global South estimated at more than a $1.7 trillion dollars in 2012.48 Indeed, every single form of financial transaction between the global North and South includes an element of what Marx called “profit upon expropriation” or simple robbery, reflecting the uneven power relations.49 As Norfield writes, finance “is a way for rich countries to draw income from the rest of the world economy.”50 A 2015 report by the Centre for Applied Economics of the Norwegian School of Economics and the United States-based Global Financial Integrity estimates that net resource transfers, many of them illicit, from developing countries (independent of the hidden transfers associated with unequal exchange) amounted to $2 trillion in 2012 alone—rising to $3 trillion if estimates of same-invoice faking are included.51
A number of studies have been carried out to estimate the extent of the hidden value transfers due to unequal exchange relations between global South and North, whereby the latter gets “more labour in exchange for less.”52 One approach, pioneered by Canadian economist Gernot Köhler, utilized purchasing power parity (PPP) data to show how labor incorporated into export products from the global South—given the difference between nominal and real exchange rates—failed to reflect what that labor would be worth in terms of local purchasing power in the emerging economy. In the words of Jason Hickel in The Divide:
Köhler’s method is to calculate the difference between nominal exchange rates and real exchange rates (i.e. corrected for purchasing power) for goods traded. For example, imagine a nominal exchange rate between the US dollar and the Indian rupee of 1:50. Now imagine that India sends R1,000 worth of goods to the US, and receives $20 in return. That would be a perfectly equal exchange. Or at least so it would appear. The problem is that the nominal exchange rate isn’t exactly accurate. In India, R50 can buy much more than the equivalent of $1 worth of goods. For instance, perhaps it can buy closer to $2 worth. So the real exchange rate, in terms of purchasing power, is 1:25. This means that when India sent R1,000 worth of goods to the US, it was really the equivalent of sending $40 worth, in terms of the value that R1,000 could buy in India. And yet India received only $20 in return, which in real terms is worth only R500. In other words, because of the distortion between real and nominal exchange rates, India sent $20 (R500) more than it received. One way to think of this is that India’s export goods are worth more than the price they receive on the world market. Another way is that India’s labour is underpaid relative to the value that it produces.53
Köhler’s empirical results, relying on PPP, could thus be seen as a rough measure of the transfer of value generated in the South (non-Organization for Economic Cooperation and Development [OECD]) countries, but credited to the North (OECD) countries, via what economists call unequal exchange. In this way, he was able to estimate that such value transfers in 1995 alone amounted to $1.75 trillion, representing losses equivalent to almost a quarter of total non-OECD GDP.54 Although such empirical estimates are open to question in a number of respects, there can be little doubt about the underlying reality or the order of magnitude of the “imperialist rent.”55
As John Smith argues, “the vast S-N flows of value” associated with unequal exchange are “rendered invisible in statistics on GDP, trade, and financial flows” precisely because the value generated in the South is “captured” in the North. All sources of income, whether wages, profits, rent, or interest, arising from the enormous gross profit margins on Southern production are simply booked as value-added in the global North, contributing to Northern GDP.56
The huge profits from outsourcing and other means of global value capture further exacerbate problems of surplus capital absorption. Much of this imperialist rent ends up in tax havens and becomes a means of amassing financial wealth concentrated in a small number of corporations and wealthy individuals, while largely disconnected from the ongoing and increasingly problematic process of production, investment, and growth in the United States and other imperialist nations.57 This then worsens the overall problem of stagnation, characterized by excess capacity, underemployment, slow growth, rising inequality, and periodic financial bubbles and crises.
Amin argued that imperialist rent had two distinct components. The first was the rent derived from the imperialist exploitation of Southern labor. The second was the draining of natural resources from the South and violations of its sovereignty in this respect by multinational corporations and imperialist states. Although the first form of imperialist rent was, at least in principle, measurable in value terms, the second form of rent, since it concerned use values (and capital’s appropriation of free gifts of nature), rather than exchange values, was not.58 Nevertheless, Marx, he insisted, had provided ways of perceiving ecological contradictions and ecological imperialism.
Imperialism engages in an enormous struggle for the control of strategic resources. It has been estimated that the U.S. military spends approximately 16 percent of its base budget on directly safeguarding global oil supplies alone.59 It is difficult to exaggerate, as Magdoff emphasized, the extent to which military and natural resource interests are interrelated. Military hegemony plays a key role in all issues of securing economic territory and strategic resources.
Multinational corporations are inextricably tied to the financial and political-military power of the particular states in which they are based, without which they could not exist for a moment, and on which their ability to engage effectively in international competition depends. In the case of the top hundred nonfinancial corporations in the world, three quarters have their home in just six countries: United States, United Kingdom, France, Germany, Japan, and Switzerland. According to Norfield,
what distinguishes an imperialist company is not its size or competitive success, or even its global importance as a major producer of goods or services, although it will often be a big company given the advantages it enjoys. What distinguishes it is the backing it receives from a powerful nation-state in the world economy, and any advantages it gets because it is located in and identified with that imperialist state. Likewise, what in economic terms distinguishes an imperialist state is its ability to exert power in the world economy on behalf of its “national” capitalist companies.”60
End Times
Imperialism today is more aggressive and boundless in its objectives than ever.61 In the present period of declining U.S. hegemony, as well as economic and ecological decline, the dollar-oil-Pentagon regime, backed by the entire triad of the United States/Canada, Europe, and Japan, is exerting all of its military and financial power to gain geopolitical and geoeconomic advantages.62 The goal is to subordinate still further those countries at the bottom of the world hierarchy, while putting obstacles in the way of emerging economies, and overthrowing all states that violate the rules of the dominant order. Intercore conflicts within the triad continue to exist but are currently suppressed, not only due to the overwhelming force of U.S. power, but also as a result of the perceived need in the core to contain China and Russia, which are seen as constituting grave threats to the prevailing imperial order. In China and in Russia, for different but related historical reasons, global monopoly-finance capital lacks the dominant combination with the national capitalists within their political economies that is present in the other BRICS countries. Meanwhile, the European Union is in disarray, experiencing centrifugal, as opposed to centripetal tendencies, arising out of economic stagnation and the instability generated by imperial blowback emanating from adjacent regions, particularly the Middle East and North Africa.
Under these circumstances, global value/supply chains, along with energy, resources, and finance, are more and more viewed in military-strategic terms. At the center of this interlocked, globalized world order is the unstable hegemony exercised by Fortress America over both Europe and Japan. The United States today is pursuing a strategy of full-spectrum dominance, aimed at not only military, but also technological, financial, and even global “energy dominance”—against a backdrop of impending planetary catastrophe and economic and political disarray.63
In these deteriorating conditions, neofascist tendencies have reemerged once again, constituting monopoly-finance capital’s final class-based recourse—an alliance between big capital and a newly mobilized reactionary lower-middle class.64 More and more, neoliberalism is merging into neofascism, unleashing racism and revanchist nationalism. Anti-imperialist peace movements have waned in most of the capitalist core, even in the context of a revival of the left, raising once again the question of social imperialism.65
There is a sense, of course, in which much of this is familiar. As Magdoff noted,
centrifugal and centripetal forces have always coexisted at the core of the capitalist process, with sometimes one and sometimes the other predominating. As a result, periods of peace and harmony have alternated with periods of discord and violence. Generally the mechanism of this alternation involves both economic and military forms of struggle, with the strongest power emerging victorious and enforcing acquiescence on the losers. But uneven development soon takes over, and a period of renewed struggle for hegemony emerges.66
Late imperialism, however, represents a historical end point for the capitalist world order, presaging either planetary catastrophe or a new revolutionary beginning. Today’s Earth System emergency gives new urgency to the age-old collective struggle for “freedom in general.”67 The wider human struggle must build on the continuing revolutionary resistance of the workers and peoples in the global South, aimed first and foremost at overthrowing imperialism, as the global manifestation of capitalism. Labor in core nations cannot be free until labor in periphery nations is free and imperialism is abolished.68 What Marx called socialism, a society of sustainable human development, can only be constructed on a universal basis. All narrow, invidious, exploitative relations must go, and humanity must at last confront with sober senses its relations with its kind and its unity with the earth.69
Notes
- I. Lenin, Imperialism: The Highest Stage of Capitalism (New York: International, 1939). When published in 1917, the title of Lenin’s pamphlet was Imperialism: The Latest Stage of Capitalism. See V. I. Lenin, Selected Works in Three Volumes (Moscow: Progress, 1977), 640–41, 801. Emphasizing this fact, Witold Kula, a Polish historian, wrote in 1963: “The methodological differences between these formulations are fundamental. The determination ‘the newest [latest] stage’ refers to the past…whereas the determination ‘the highest stage’ says something more, also about the future; that in the future there will be no ‘higher stage’ than this one.” Kula quoted in John Bellamy Foster and Henryk Szlajfer, introduction to The Faltering Economy (New York: Monthly Review Press, 1984), 21. Consistent with this, Lenin generally refers in the actual text of his pamphlet to imperialism as the “latest phase” or “latest stage” of capitalism, in conformity with the subtitle to Rudolf Hilferding’s Finance Capital: The Latest Phase of Capitalism.
- Lenin, Imperialism, 78, 81–82, 88, 92. It was in his October 1916 article “Imperialism and the Split in Socialism” that Lenin for the first time placed primary emphasis on the conception of imperialism as the highest stage, as opposed to the newest or latest stage, based on what he viewed as the “moribund” character of capitalism in the early twentieth century. This helps explain the later change in the title of his pamphlet, after its first publication in 1917. V. I. Lenin, Collected Works, vol. 23 (Moscow: Progress, 1964), 105–20. In response to Lenin, Samir Amin has written that “imperialism is not a stage, not even the highest stage of capitalism: from the beginning it is inherent in capitalism’s expansion.” Samir Amin, “Imperialism and Globalization,” Monthly Review 53, no. 2 (June 2001): 6. Lenin, however, used the term in a double sense, to refer both to imperialism in general, going back to the beginning of capitalism, and also (in a more focused way) to refer to what was called in his time the “new imperialism” or imperialist (monopoly) stage of capitalism.
- Lenin, Imperialism, 13–14, 85, 88, 91. For those who think Lenin’s Imperialism was the work of a moment, it is useful to look at the more than 700 pages of notes, containing extracts from 148 books and 232 articles in English, French, and German, that he took in preparation for writing it. See V. I. Lenin, Collected Works, vol. 39 (Moscow: Progress, 1968), 20.
- Rudolf Hilferding, Finance Capital (London: Routledge, 1981); Rosa Luxemburg, The Accumulation of Capital (New York: Monthly Review Press, 1951), Nikolai Bukharin, Imperialism and World Economy (New York: Monthly Review Press, 1929). Although in many ways complementary to Lenin’s later analysis, Luxemburg’s emphasis on imperialism as primarily destruction and assimilation of precapitalist external areas enormously weakens her theory, Utsa and Prabhat Patnaik note, “as an abiding relationship under capitalism.” Utsa and Prabhat Patnaik, A Theory of Imperialism (New York: Columbia University Press, 2017), 87.
- ↩ Lenin, Imperialism, 89. With respect to the labor aristocracy, Lenin insisted that “a privileged upper stratum of the proletariat in the imperialist countries lives partly at the expense of hundreds of millions in the [so-called] uncivilized nations” (Collected Works, vol. 23, 107). (Note: While distinguishing between civilized and uncivilized nations, Lenin put scare quotes around the former and treated it, as in the socialist tradition, as a euphemism for capitalism.) For the historical basis of Lenin’s treatment of the labor aristocracy, see Eric Hobsbawm, “Lenin and the ‘Aristocracy of Labor,’” in Lenin Today, ed. Paul M. Sweezy and Harry Magdoff (New York: Monthly Review Press, 1970), 47–56.
- ↩ I. Lenin, Selected Works in Three Volumes, vol. 3 (Moscow: Progress, 1975), 246, 372–78. Lenin’s analysis of imperialism has often been converted into a simplistic theory of excess surplus in the advanced capitalist states and capital export, rooted in underconsumption. This excessively crude interpretation of Lenin is exemplified by Bill Warren’s influential Imperialism: Pioneer of Capitalism (London: Verso, 1980), 50–83. For a strong critique of this simplistic view, see Prabhat Patnaik, Whatever Happened to Imperialism and Other Essays (New Delhi: Tulika, 1995), 80–101.
- ↩ S. Stavrianos, Global Rift (New York: William Morrow and Company, 1981), 623–24.
- ↩ Mark Blaug, “The Economics of Imperialism,” in Economic Imperialism, ed. Kenneth E. Boulding and Tapan Mukerjee (Ann Arbor: University of Michigan Press, 1972), 142–55; Benjamin J. Cohen, The Question of Imperialism (New York: Basic, 1973), 99–141; Barrington Moore, Jr., The Causes of Human Misery (Boston: Beacon, 1972), 117–32; Robert W. Tucker, The Radical Left and American Foreign Policy (Baltimore: Johns Hopkins University Press, 1971).
- ↩ For an indication of how much more adept Magdoff was in the use of economic statistics than his critics, see “A Technical Note,” in Imperialism, 11–14.
- ↩ Magdoff, The Age of Imperialism, 18–19.
- ↩ Ernest Mandel, introduction to his planned Critique of Political Economy, vol. 1, Karl Marx (London: Penguin, 1976), 27–28; John Bellamy Foster, “The Imperialist World System,” Monthly Review 59, no. 1 (May 2007): 1–16. Samir Amin saw his work as addressing the range of questions that Marx intended for volumes 5 and 6 of Capital, but not as Marx would have approached it in the mid–nineteenth century but rather in relation to the late twentieth and early twenty-first centuries. See Samir Amin, Modern Imperialism, Monopoly Finance Capital, and Marx’s Law of Value (New York: Monthly Review Press, 2018), 131–35.
- ↩ Magdoff, Imperialism, 239; Bernard Baruch, foreword to The Revolution in World Trade and American Economic Policy, Samuel Lubell (New York: Harper, 1955), xi; Magdoff, The Age of Imperialism, 182.
- ↩ Magdoff, Imperialism, 260–61.
- ↩ Magdoff, Imperialism, 110–11; Magdoff, The Age of Imperialism, 67–113; Harry Magdoff, Globalization: To What End? (New York: Monthly Review Press, 1992), 17–25.
- ↩ Stavrianos, Global Rift. On “ruin or revolution,” see Karl Marx and Frederick Engels, Marx and Engels and the Irish Question (Moscow; Progress, 1971), 142.
- ↩ Prabhat Patnaik, “Whatever Happened to Imperialism?,” Monthly Review 42, no. 6 (November 1990): 1–14.
- ↩ Andre Gunder Frank, “The Development of Underdevelopment,” Monthly Review 18, no. 4 (September 1966): 17–31; Harry Magdoff, “A Note on the Communist Manifesto,” Monthly Review 50, no. 1 (May 1998): 11–13, reprinted in this issue.
- ↩ Bill Warren, “Imperialism and Capitalist Industrialization,” New Left Review 181 (1973): 4, 43, 48, 82; Warren, Imperialism: Pioneer of Capitalism, 48. Warren, unlike many later Marxist theorists, was aware of Lenin’s role in the rise of dependency theory in the Second Congress of the Communist International in 1919. See Warren, Imperialism: Pioneer of Capitalism, 97–98; Research Unit for Political Economy, “On the History of Imperialism Theory,” Monthly Review 59, no. 7 (December 2007): 42–50. Warren’s claim that Marx saw imperialism as playing a constructive role with respect to industrialization was refuted in Kenzo Mohri, “Marx and ‘Underdevelopment,’”Monthly Review 30, no. 11 (April 1979): 32–42; and Suniti Kumar Ghosh, “Marx on India,” Monthly Review 35, no. 8 (January 1984): 39–53. A more recent refutation, relying on some new materials, is Kevin Anderson, Marx at the Margins (Chicago: University of Chicago Press, 2016).
- ↩ Giovanni Arrighi, The Geometry of Imperialism (London: Verso, 1983), 171–73; Giovanni Arrighi, “Lineages of Empire,” in Debating Empire, ed. Gopal Balakrishnan (London: Verso, 2003), 35. In The Long Twentieth Century, Arrighi dispensed entirely with the analysis of monopoly capital and monopoly power in the evolution of the modern giant corporate enterprise—thereby abandoning the monopoly stage of capitalism that Lenin had identified with imperialism—choosing rather to substitute neoclassical transaction-costs analysis as an adequate explanation for the growth of multinational corporations. Giovanni Arrighi, The Long Twentieth Century (London: Verso, 1994), 218–19, 239–43.
- ↩ Michael Hardt and Antonio Negri, Empire (Cambridge, MA: Harvard University Press, 2000), 178, 234, 332–35; Thomas L. Friedman, The World Is Flat (New York: Farrar, Strauss, and Giroux, 2005); Francis Fukuyama, The End of History and the Last Man (New York: The Free Press, 1992).
- ↩ Ellen Meiksins Wood, “A Manifesto for Global Capitalism?,” in Debating Empire, 61–82; John Bellamy Foster, “Imperialism and ‘Empire,’” Monthly Review 53, no. 7 (December 2001): 1-9.
- ↩ Leo Panitch and Sam Gindin, The Making of Global Capitalism (London: Verso, 2013), 12, 26, 275; Tony Norfield, The City (London: Verso, 2017), 14–17; Peter Gowan, The Global Gamble (London: Verso, 1999), 19–38.
- ↩ William I. Robinson, A Theory of Global Capital (Baltimore: Johns Hopkins University Press, 2004), 44–49; John A. Hobson, Imperialism: A Study (London: James Nisbet and Company, 1902).
- ↩ David Harvey, “A Commentary on A Theory of Imperialism,” in A Theory of Imperialism, Patnaik and Patnaik, 169, 171; David Harvey, “Realities on the Ground: David Harvey Replies to John Smith,” Review of African Political Economy blog, February 5, 2018; David Harvey, “Imperialism: Is It Still a Relevant Concept?,” (contribution to discussion on this topic presented at Center for Public Scholarship, New School for Social Research, New York, May 1, 2017), available on YouTube. In his earlier works, Harvey was quite sympathetic to the notion of imperialism, as in his 1975 article on “The Geography of Capital Accumulation,” reprinted in David Harvey, Spaces of Capital (New York: Routledge, 2001), 260–61. See also David Harvey, The Limits to Capital (1982; repr., London: Verso, 2006), 439–42.
- ↩ David Harvey, The New Imperialism (Oxford: Oxford University Press, 2003), 7, 27, 163, 209–11; Harvey, “Imperialism: Is It Still a Relevant Concept?”
- ↩ Harvey, “Imperialism: Is It Still a Relevant Concept?”; Harvey, “A Commentary on A Theory of Imperialism,” 169.
- ↩ Harvey, “Realities on the Ground.”
- ↩ David Harvey, Seventeen Contradictions of Capitalism (Oxford: Oxford University Press, 2014), 135. Harvey says that “rent seeking,” as used by Joseph Stiglitz to refer to the taking of wealth rather than its creation, “is nothing more than a polite and rather neutral-sounding way of referring to what I call ‘accumulation by dispossession’” (Harvey, Seventeen Contradictions of Capitalism, 133). One might say, in turn, that “accumulation by dispossession” is merely a polite and rather neutral-sounding way of referring to what Marx called expropriation (or profit upon expropriation).
- ↩ Karl Marx, Capital, vol. 1 (London: Penguin, 1976), 915. On Marx’s concept of “profit upon expropriation” (or profit upon alienation), see John Bellamy Foster and Brett Clark, “The Expropriation of Nature,” Monthly Review 69, no. 10 (March 2018): 1–27.
- ↩ Utsa Patnaik, “Revisiting the ‘Drain,’ or Transfers from India to Britain in the Context of Global Diffusion of Capitalism,” in Agrarian and Other Histories, ed. Shubhra Chakrabarti and Utsa Patnaik (New Delhi: Tulika, 2017), 311.
- ↩ Magdoff, Globalization, 4, 41.
- ↩ Atilio Borón, “Empire” and Imperialism (London: Zed, 2005), 3.
- ↩ Amin, Modern Imperialism, 162, 193–95.
- ↩ Intan Suwandi, R. Jamil Jonna, and John Bellamy Foster, “Global Commodity Chains and the New Imperialism,” Monthly Review 70, no. 10 (March 2019): 1–24.
- ↩ On the global reserve army, see Foster and McChesney, The Endless Crisis, 125-54.
- ↩ Suwandi, Jonna, and Foster, “Global Commodity Chains and the New Imperialism,” 14–15.
- ↩ Norfield, “T-Shirt Economics,” 25–26.
- ↩ Foster and McChesney, The Endless Crisis, 140–41.
- ↩ International Labour Organization, Table 4a. Employment by Aggregate Sector (by Sex), in Key Indicators of the Labour Market (KILM), 8th ed. (Geneva: International Labour Office, 2014); “Economic Groups and Composition,” United Nations Conference on Trade and Development, http://unctadstat.unctad.org.
- ↩ Norfield, The City, 9, 169; Federal Reserve Bank of St. Louis Economic Research, FRED,Net Domestic Investment: Private: Domestic Business, accessed May 18, 2019; Stephanie E. Curcuru and Charles P. Thomas, “The Return on U.S. Direct Investment at Home and Abroad,” International Finance Discussion Papers, no. 1057, Board of Governors of the Federal Reserve System, October 2012.
- ↩ Karl Marx and Frederick Engels, Collected Works, vol. 30 (New York: International, 1975), 59.
- ↩ Norfield, The City, 76.
- ↩ Kar and Schjelderup, Financial Flows and Tax Havens, 15–17.
- ↩ Karl Marx, Capital, vol. 3 (London: Penguin, 1981), 345.
- ↩ Hickel, The Divide, 290–91.
- ↩ Gernot Köhler, “The Structure of Global Money and World Tables of Unequal Exchange,” Journal of World-System Research 4 (1998): 145–68; Gernot Köhler, Global Keynesianism: Unequal Exchange and Global Exploitation (New York: Nova Science, 2002), 43–100; Gernot Köhler, “Unequal Exchange 1965–1995,” November 1988; Hickel, The Divide, 290–91. Zak Cope, relying on a number of different ways of calculating the transfer of value via unequal exchange, came up with figures for 2009 of $2.6–4.9 trillion depending on the method used. Zak Cope, Divided World Divided Class (Montreal: Kersplebedeb, 2012), 262.
- ↩ Amin, Modern Imperialism, 223–25.
- ↩ John Smith, “Marx’s Capital and the Global Crisis,” in The Changing Face of Imperialism, ed. Sunanda Sen and Maria Cristina Marcuzzo (London: Routledge, 2018), 43-45; Imperialism in the Twenty-First Century, 252; Tony Norfield, “Imperialism, a Marxist Understanding,” Socialist Economist, March 22, 2019. On the wider issues of value capture, see Mariana Mazzucato, The Value of Everything (New York: PublicAffairs, 2018).
- ↩ The role of “treasure islands,” primarily in the Caribbean, highlights the enormous offshore capital in tax havens. See Nicholas Shaxson, Treasure Islands (New York: Palgrave-Macmillan, 2011). Thomas Piketty has also highlighted the growing gap between investment/growth (the traditional role of capital) and the amassing of wealth. Thomas Piketty, Capital in the Twenty-First Century (Cambridge, MA: Harvard University Press, 2014).
- ↩ Amin, Modern Imperialism, 110–11.
- ↩ “The Military Cost of Defending the Global Oil Supply,” Securing America’s Future Energy, September 21, 2018.
- ↩ Norfield, The City, 123, 126.
- ↩ Geoeconomics stands for the revival of economic warfare. For the grand strategy in this respect emanating from the Council on Foreign Relations, see Robert D. Blackwill and Jennifer M. Harris, War by Other Means (Cambridge, MA: Harvard University Press, 2016).
- ↩ Donald Trump, “President Trump Vows to Usher in Golden Era of American Energy Dominance,” June 30, 2017, http://whitehouse.gov.
- ↩ On the history of social imperialism, see Bernard Semmel, Imperialism and Social Reform (Garden City, NY: Doubleday, 1960).
- ↩ Magdoff, Globalization, 4–5.
- ↩ Marx and Engels, Collected Works, vol. 1, 180.
- ↩ “A radical labor movement [in the North] cannot become a reality unless it is adamantly opposed to imperial wars, arms production and sales, the infiltration of the military into local economies and daily life, the patriotism of flags and national anthems, the mantra that we must all support the troops. In the Global North nationalism is a disease that impedes the global working-class solidarity essential for human liberation.” Michael D. Yates, Can the Working Class Change the World? (New York: Monthly Review Press, 2018), 160.
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Mr. Rows Namoura Coffee 
Pedagogy for Profit: Education Under Capitalism
Gus Bagakis, Truthout
October 23, 2018
Public schools are under attack by billionaires, conservative think tanks, philanthropists, business lobbying groups like the American Legislative Exchange Council (ALEC) and the Trump administration. These attackers argue that public schools are an ineffective, needless tax expense that can be replaced by privatized, profit-making charter schools that they claim are “more efficient.”
In Waiting for Superman, a film critical of public schools, this outlook was stated thus: “For generations, experts tend to blame failing schools on failing neighborhoods. But reformers have begun to believe the opposite — that the problems of failing neighborhoods might be blamed on failing schools.”
This debate — between the “reformers” who blame “bad” schools, teachers and teachers’ unions for a decline in education, and the defenders of public schooling (such as teachers, teachers’ unions and community activists) — is important because it exposes the self-serving actions of many of the “reformers,” as well as the struggles of the defenders. The debate is also deceptive, for, with few exceptions, it ignores the fact that public education is an integral part of the political economy, and that many problems involving public schooling reflect problems within capitalism. Over the years, as US capitalism has changed, public education has also changed.
Laissez-Faire Capitalism
The era of laissez-faire capitalism ending in the Gilded Age was a time of unregulated capitalism that brought forth the creation of public schools needed to train compliant workers and citizens as industrial capital rapidly grew. It was a time when transactions between private parties were free from government intervention.
This was an era of rapid industrialization, immigration, labor strife, no income tax and enormous income inequality. Capitalists like John D. Rockefeller and Andrew Carnegie made fortunes and preached “survival of the fittest” in business. US education moved from private to public schooling. Reformers Horace Mann and Henry Barnard created the first statewide common schools. They believed education for the masses would “preserve social stability and prevent crime and poverty.”
By 1900, compulsory attendance for students from ages 8 to 14 was required in 31 states; by 1918, for every state. At this time, US high schools expanded: 200,000 students attended high schools in 1890 and almost 2 million in 1930. This increase was related to the arrival of European immigrants who needed to be trained for the strict discipline of factory life. Public education became class education devised to retain the economic class divisions maintained by capitalism. This unregulated economy led to corruption, extreme exploitation of labor and vast income inequality. Capitalists recklessly grew their power and wealth, eventually leading to the Great Depression.
The Great Depression ended laissez-faire capitalism. The US government stepped in to regulate the economic system, creating the New Deal, president Franklin D. Roosevelt’s (FDR) attempt to save capitalism from itself.
FDR and the New Deal
FDR saw unrest among the unemployed, organized labor and leftist political parties, and feared that this could lead to a revolution. Pressure from below led him, as well as a portion of the wealthy, to promote changes: higher taxes for the rich and programs giving relief to the working class (ignoring the plight of people of color).
US public schools suffered from the Great Depression. Many rural schools shut down. In New York City, an estimated 20 percent of students suffered from malnutrition. The Roosevelt administration responded, providing funds to relieve those schools and districts most in danger of collapse, but was against federal funding for education because FDR (still holding some patrician views and having little respect for educators) felt public school teachers and administrators failed the nation’s low-income youth.
The New Deal and the victory in World War II gave the United States an economic advantage and control of the world’s economy since its industrial and trade rivals were destroyed. The years between 1948 and 1973 were the golden age of capitalism and the golden age of universal education when public schools were better funded. In the ’70s, the New Deal began to gradually lose its effect as the business community pushed back, reacting to rising inflation, unemployment, several sharp recessions, and competition from Japan and Western Europe.
Capitalism, in its need for new sources of profit and maintaining control, began to see public education as a new source of moneymaking that could provide compliant workers and passive citizens, ushering in our current era of neoliberalism.
Neoliberalism
The US business community seized the offensive in the early ’70s. In order to increase profits, US companies began to outsource industry and find cheaper labor in other countries. The effect in the US was unemployment, the loss of high-paying manufacturing jobs and, ultimately, the Rust Belt.
The 1970s economic crisis further encouraged the business movement, later inspired by the presidency of Ronald Reagan, to advocate “free-market” policies, deregulation and privatization. This shift was called neoliberalism, and it led to massive tax cuts for the rich, a destruction of trade unions, wealth inequality, a growing military budget and the dismantling of government safety nets.
One of the most essential privatization projects was the replacement of public schools with profitable private charter schools. To encourage this shift, corporate lobbyists, as they pushed for cost-cutting measures, tried to convince the population that public schools were failing. To support their allegations, they covertly pushed for changes like increasing class sizes, online instruction, lowering accreditation standards for teachers and getting rid of elected school boards. The most effective strategy was to use a deceiving report presented in 1983 by the National Commission on Excellence in Education. Titled, “A Nation At Risk: The Imperative For Educational Reform,” the report falsely warned that public schools were failing and hurting the economy. Its intention was to replace public schools with private profit-making charters that focused on teaching, studying and testing for jobs, while sidelining humanities for the majority.
The push for charter schools continues even though data show that the charter model has done nothing to improve test scores, which have been essentially unchanged since the 1970s. Countries like Finland that focus on community-based schooling, which values equality, have consistently higher Program for International School Assessment (PISA) scores than US schools, both public and charters. (PISA is a program that evaluates educational systems worldwide by testing the skills and knowledge of 15-year-old students.) Of course, there are a few charters that, with parent participation, wealth and inspired leaders, are excellent, but most are large corporate franchises based on knowledge transfer, testing and profit.
Ten years after neoliberalism’s 2008 crash, the benefits of the “economic recovery” have gone to a tiny portion of the superrich who claimed success for everyone. But success amounted to creating a new serfdom, replacing unemployment with underemployment, a declining infrastructure, a declining middle class, increasing homelessness, poverty, wage theft and growing inequality. “Limited funding” and “budget crunch” became catchphrases for addressing public school issues. The future doesn’t look so good either.
The US Bureau of Labor Statistics work projections are that low-wage jobs will grow the fastest, while middle-wage work will continue to decline. The corporate class recognizes that unskilled, low-payed work exacerbates income inequality and creates a potential for uprisings. This danger was partly solved in the 1930s by FDR’s New Deal. But conditions today are quite different.
The neoliberal approach — under pressure from the corporate elite and with little pushback from a depleted labor movement — combined with systemic diversion through updated “bread and circuses” has pacified the public and allowed children to languish in charter schools and declining public schools, using curricula designed by the corporate elite. As Einstein said, “The ruling class has the schools and press under its thumb. This enables it to sway the emotions of the masses.”
In the meantime, the wealthy train their children to become future leaders in the elite schools reserved for the US’s ruling class, and some prestigious private elementary and secondary schools and universities.
However, when capitalism doesn’t sustain growth, it is forced to use crisis, conflict, chaos and corruption instead of production as its source of profit. Wrecking public schools is a form of profiting by catabolizing the public sector.
Catabolic Capitalism
Worldwide energy and financial crises are beginning to strangle growth, heading us into the age of “catabolic capitalism.” Without the energy needed to generate growth and profit, catabolic capitalists find profits by feeding on failing institutions and selling them. As described by Craig Collins:
As tax-starved public services and social welfare programs bleed out from deep budget cuts, profit-hungry capitalists pick over the carcasses of bankrupt governments. Revenues for Social Security, food stamps and health care programs are chopped to the bone…. Schools and libraries go broke, while exclusive private academies employ a fraction of the jobless teachers and university professors to educate a shrinking class of affluent students.
These changes are hastened by the policies of the Trump administration through its systematic attack of public school funding and support of charter schools, championed by Secretary of Education Betsy DeVos.
Naomi Klein’s book, Shock Doctrine: The Rise of Disaster Capitalism, is portrayed as a “shock” to neoliberalism. Her description of Hurricane Katrina as the cause of the destruction of the New Orleans public schools, while correct, mistakes a shock for the early stages of a new form of capitalism seeking profit without the energy needed to generate growth — catabolic capitalism. Hurricane Katrina merely accelerated the change that Klein perceptively portrayed, which led to the destruction of public schools, the firing of unionized teachers replaced by inexperienced low-wage teachers willing to work long hours in privately managed charter schools.
Currently, the New Orleans charter system remains segregated by race and economic status. Most African American teachers have been dropped from the system, administrative costs have risen and teaching resources have declined. The poorest students are in the few remaining public schools that are run down. New Orleans is the most privatized school system in the US with the most charter schools per capita. Other examples of catabolic capitalism attacking public schools are in Detroit, Michigan, second in the nation for its number of charter schools behind New Orleans; Newark, New Jersey a victim of arrogant philanthropists; and Puerto Rico, where a return of the “shock doctrine” has seen 84 percent of public schools shut down after Hurricane Maria.
Conclusion
Debate about the need for public schools should continue, while recognizing that under capitalism, state and federal funding are controlled by the wealthy few, who, driven by greed and profits, control tax policy, lobbying and the military budget, which maintains protection for corporations around the globe while turning world education systems into corporate controlled structures.
The recent wave of teachers’ strikes and the growing rejection of charter schools gives some hope for change, but actions must incorporate an understanding of how capitalism creates passive victims, poverty, income inequality and ecological disaster around the world, harming school systems, workers, communities and the Earth. If there is any hope, it lies in educating students and citizens for survival, which requires criticizing capitalism and its social, psychological, educational, class divided, patriarchal, racist and military outcomes, while seeking its replacement.
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