The Twilight of Capitalism?

In recent years, radical geographer David Harvey has emerged as one of the leading theorists and popularizers of Marxian political economy in the English-speaking world.  In books such as The New Imperialism and A Brief History of Neoliberalism, as well as his popular online courses in Volume I of Marx’s Capital, Harvey has articulated a theoretically rich yet accessible analysis of the (il)logic of capitalism for a new generation of radical intellectuals and activists.  In his latest book, The Enigma of Capital, as well as associated writings and speeches, Harvey continues his deeply valuable work in Marxian popularization and advances a controversial thesis: capitalism may have reached a point at which endless growth and profitable investment is no longer possible, making it possible and necessary to begin talking about making an anti-capitalist transition to a new mode of production.

As Harvey is well aware, for over a century Marxists have repeatedly sounded capitalism’s death knell only to witness the system recover from its periodic crises and become stronger than ever.  As the old joke has it, Marxists have correctly predicted eleven of the last five recessions.  To his credit, Harvey does not claim that the death of capitalism is imminent, nor does he see an inevitable victory for the forces of the left in any transition away from capitalism as we know it.  While I find Harvey’s account of the sources of the financial crisis and the inner workings of the capitalist system to be convincing, I am not so convinced about his larger thesis regarding the impending limits to growth and profitability.  Let’s take these points in turn.

In a talk for a meeting of the American Sociological Association called The Enigma of Capital and the Crisis This Time, Harvey offers a précis of the argument advanced in the book.  As already noted, he argues that capitalism is reaching a point at which sustaining an annual rate of three percent compound growth worldwide is increasingly problematic.  This is an historical and geographical argument; in the early days of the system when the orbit of capitalist activity encompassed a couple of cities in the north of England and a handful of isolated spots around the globe, it was fairly easy for capitalism to attain at least three percent annual growth, the growth rate that most economists agree is needed to maintain a healthy capitalist economy.  But as the system has developed over time and expanded geographically to encompass the entire globe, capitalism must ensure compounding growth on all economic activities occurring on every continent, not just in small pockets of northwestern Europe or North America.  Drawing on Marx’s argument in the Grundrisse, Harvey describes capital not as a thing, but a fluid process of circulation and accumulation that cannot abide limits; when capital confronts a potential blockage point in this process, it must convert it into a barrier that can be transcended or bypassed.  He identifies seven blockage points that could prevent capitalism from attaining growth and profitability in the coming years, but here I want to focus on four of them: the financial system, the labor market, availability of the means of production and scarcities in nature, and effective demand.

Continuous economic growth requires a financial system that can put investment funds in the right place and the right time — what Harvey calls the assemblage of capital.  In the 1970s, capitalists became convinced that the finance sector was too heavily regulated and needed to be unleashed to initiate a new round of capital accumulation.  Why?  Because, by the early 1970s, labor in the advanced capitalist countries became so well organized and powerful that it could block the free circulation of capital through collective bargaining and political action.  So the neoliberal revolution carried out by Thatcher and Reagan smashed the power of labor and deregulated finance.  This solved capitalism’s labor problem, but, as we have seen in recent years, financial deregulation has created the conditions for massive financial crises that threaten the stability of the entire system.  At the same time the question of ecology has come to the fore, raising the possibility that capitalism’s plundering of the earth’s resources has brought us to the brink of ecological catastrophe.  Finally, and this point is related to the question of the labor market, there is the problem of effective demand.  In smashing the political power of the working class, capitalism also smashed the purchasing power of the working class.  If the workers don’t make the wages necessary to buy the products they make, they can only fund their consumption through debt.  Eventually mass indebtedness leads to a financial crisis, which leads to state intervention in the form of bailouts, which leads to a fiscal crisis of the state, which then leads to attempts by capital to pursue austerity measures that aggravate the problem of effective demand — a situation that perfectly defines the present conjuncture.  Harvey uses all this to make the point that capitalism never actually solves its crises, but rather moves them around from one place to another.

Harvey’s account of the crisis tendencies of capitalism and the relationships between them is convincing and does a lot of work in explaining the way the system operates at a fundamental level.  But I don’t think that his analysis necessarily supports the argument that capitalism is reaching fundamental limits to growth and profitability.  Indeed, his observations regarding the uneven geographical development of the current crisis can be used to offer a counterargument to his overarching thesis.  As Harvey recognizes, China has been able to largely avoid the economic problems seen in the West because it adopted a massive Keynesian stimulus program in 2009 and took immediate action to recapitalize its banks during the early days of the financial crisis.  It has also dealt with the problem of effective demand by tolerating the strike wave that hit auto and electronics plants earlier this year (which led to large wage increases for the workers involved) and implementing social programs that strengthen the bargaining power of labor.  The Chinese state has also promoted massive investments in green technology (sometimes in a fashion that violates global trade rules) that have resulted in profits and growth.

To me, the Chinese example demonstrates that the problems of growth and productivity are not primarily economic in origin, as Harvey seems to argue, but rather political.  To a significant extent, the Chinese have been able to pursue these industrial and labor market policies because their state has the ability to do so in a timely and effective fashion, and according to a long-term plan.  By contrast, the U.S. is saddled with a dysfunctional semi-state that seems utterly incapable of making the long-term investments in 21st-century infrastructure needed to provide avenues for profitability and growth, to say nothing of establishing social programs that raise the living standards and purchasing power of the working class.  What makes this so frustrating is that there is just so much that needs to be done.  For example, the American Society of Civil Engineers gives the country’s infrastructure a D grade and calls for trillions of dollars of investment in infrastructure projects that would have many beneficial multiplier effects.

Of course, there’s no way you could get an investment program of this magnitude through Congress today, dominated as it is by lobbyists and anti-spending nutjobs.  It seems to me that there is no economic reason why a new round of investment and growth couldn’t be pursued through massive infrastructural improvements and a transition to a clean energy system.  What’s missing is the kind of proactive state needed to lead the way and the political will to make it happen, things that will need to be won through popular struggle.  Perhaps after that we can talk about the twilight of capitalism.

Chris Maisano is a member of the Young Democratic Socialists New York City chapter.  He studied at Rutgers and Drexel University and currently works as a librarian at a large public library branch in Brooklyn.  This article was first published in The Activist on 16 December 2010 under a Creative Commons license.

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