Moon of Alabama Brecht quote
December 26, 2006

the chicken and the egg iii

by slothrop

What interests me, though, are the structural causes (if any) of the steady decline in savings and investment rates in the industrialized countries – and why those trends have saddled the global economy with such enormous imbalances. So that will be the subject of the next installment in this series.
billmon: the chicken and the egg ii

what follows is my own contribution to the political economy of capitalist globalization., invited by billmon’s failure to answer his own question in the unwritten third installment of his “chicken and egg” entries.

now, i’m basically an english major who has read a few macro-econ books. this is not so much a proviso needed to excuse a bad analysis, but a defiance that any social science can be accounted for by those of us willing to step into the rhetoric the dismal science uses to justify itself.

a prolegomenon to subsequent tendentious oversimplifications

right off the bat, there are structural reasons for the decline of savings and investment in the g-7 economies. secondly, these “imbalances” in the global economy (really, the “global market for goods, services, and finance”) are both usual effects of the ebb and flow of the business cycle made analytically complex by the shifting social relations created by the mobility of a global capitalist class unfettered by vestigially national barriers on investment and accumulation. the product of this shift is nothing special from what has gone on throughout the postwar period. typically, the core/periphery paradigm of comprador ripoff in which “third-world” vassal states exported capital and imported finished goods from the industrialized north, has been complicated for a handful of newly industrializing zones: coastal china, southern india, coastal brazil, moscow and st. petersburg, etc. – complicated because the core/periphery relation is fragmented by globalization so that economic growth occurs in eruptions in places in which the return on investment is assured by low variable costs of production (labor, transaction costs). rather than the core nations absorbing capital created by cheap labor elsewhere, more and more, the flows of surplus are captured by a semi-stateless capitalist class. the “core” is a virtual power of financiers. the “periphery” is the globalizing workforce. the tradeoff for the industrialized core is painful: underemployment, inflation, stagnant and falling wages, crumbling healthcare and infrastructure. but the ostensible benefits to these industrializing zones (not countries, but zones) is uneven and precarious for reasons explained in more detail below. thus, “the structural reasons for the decline of investment” are better understood as the effects of the usual contradictions of capitalist accumulation expressed by the virtual formation of a global capitalist class.

an english major’s take on the business cycle

the fundamental contradiction of capitalist development is the problem of excessive production. because the capitalist mode of production (MoP: generalized commodity production, generalized wage-labor, generalized competition among many capitals) unfairly distributes productive factors and surpluses, production of commodities exceeds the ability of consumers  to consume. the result of this overaccumulation of surpluses is declining profits, declining wages, and recession. the business cycle recovers when the surplus is finally depleted, and surviving companies can then invest what surplus is needed to begin another cycle. it seems there’s no way to manage the prevailing MoP to avert recession.

the division of the social product between consumption (wages+benefits) and investment (profits) has historically been 65% wages, 35% profit. one obvious way to smooth the turbulence of the cycle is to fairly distribute wages and profits. this would help to stabilize aggregate expenditures and demand, while more rationally directing investment. but this is not what capitalists do, of course. rather, in order to avert painful adjustment needed to jumpstart the cycle, including creative destruction of independent capitals (no fun there), capitalists have tried all kinds of tricks: increasing government expenditure and aggregate demand (Keynesianism), militarism as a way to boost expenditure (bushism), theft (another bushism), bubble economy in which “correction” militates favorably to capitalists, austerity policies (good old fashioned capitalism for the “developing world”).

this last form of recovery is the most efficient. but in the (de)industrialized world, austerity is political suicide, and socially destabilizing, as recent experience in argentina shows. so, savvy politicians have turned to policies prolonging the inevitable: permanent inflation. in the effort to sustain profits and expansion of markets, capitalists resort to expansion of credit needed for investment and consumption. for monetarists, this leads to inflation: prices move up and down depending of the quantity of money. too much money increases demand and supply of commodities beyond what people can pay. inflation is bad because the value of holding money decreases. savings decline, and because of uncertainty about the future, fewer investments are made to resume robust growth. the result for workers is stagnant wages and rising prices, and for capital a decline in profits. things are made still worse by growing trade deficit spurred by the inflationary induced demand for commodities. indeed, for capital, the rate of profit among the 500 largest tncs has plummeted from nearly three times what it was in the early 50s (tendential fall in the rate of profit, comrades). inflation-inducing policies detain recession, but the cost of doing so is overaccumulation, lack of investment, and underconsumption solved only by more inflation-inducing debt. sound familiar?

an old wine in a new bottle: neoliberal globalization

but prolonging the inevitable only makes things worse. and such prolongation of gain, without too much pain, is the sine qua non of the latest trick: globalization. the interrelation of national northern economies was defined in the postwar period by american dominance. as the defacto creditor for Europe, the u.s. remained the dejure center of economic power via pegging the value of the dollar to a fixed price on gold and use of the dollar as a global reserve currency (the bretton woods agreement). this arrangement worked well until the sixties when the costs of vietnam and increasing international competition from revived production in europe and japan made the dollar a less desirable asset. the system collapsed in ’71. from then on, most currencies are valued according to a floating exchange rate, effectively removing control of valuation from single countries and removing the regime of cooperation that to a large extent managed the usual crises of overproduction and underconsumption. in this arrangement, the rest of the capitalist world would have to absorb u.s. debt by holding the fiat currency of the dollar. needless to say, this often resulted in capital flight as wealth circulated through the u.s. bond market and wall street rather than domestic investment into struggling economies—a winning solution for a burgeoning international capitalist class retaining excellent lawyers and brokers.

this shift opened up the financialization of global capital. by “finance” is meant the ways in which the value is created from already existing value, via speculative investment. the solution to stagnating investment in productive capital has since especially the clinton era to create “instruments” of investment (all those “derivatives”) which expand liquidity used for speculation. this “whorehouse capitalism” was further accommodated by “liberalization” of foreign economies—multilateral trade agreements like gatt and later the wto—which opened up member economies to foreign direct investment and ownership. the explosion of finance capital penetrated new markets in especially the far east, but the surfeit of investment proved to be unsustainable. the crash of the mexican peso followed by the collapse of asian economies were owed in large part to imf elimination of capital control needed to open economies to investment. the great swindle was also manifested in the market capitalization of information technologies culminating in the bubble burst of 2000-01 and $7 trillion of “paper” wealth gone, just like that.

so, financialization of global capital has made matters worse. and the extraordinary growth of credit continues, as any read through one of prudentbear’s mitonic screeds will prove. all that investment poured into asian production, and still more credit needed to absorb the surfeit of commodities in the west. a fool’s pursuit because investment only leads to mountains of goods consumed at lower prices strangling profits, and foolish because in places like china, the surplus cannot be absorbed by domestic market whose growth depends on low wage labor not expanded consumption. the global economy is plagued by the usual contradiction of overinvestment—overproduction—underconsumption—recession. and waylaying the needed adjustments painful recession brings is the inflationary expansion of credit needed to induce more consumption. what a trap.

Posted by b on December 26, 2006 at 20:33 UTC | Permalink

Comments

Interesting post. Do you think there is any correlation between the run up in real estate prices and the decline in savings?

Posted by: China Law Blog | Dec 26 2006 21:07 utc | 1

i'm not a banker, obviously, and no expert. but home equity accounts for a kind of savings for homeowners so long as values keep up w/ general inflation. the problem is in many regions real estate is massively overvalued.

Posted by: slothrop | Dec 26 2006 21:17 utc | 2

my obsession to retain the lowercase style--as a political resistance to typographical hierarchy of the noun and subject, doesn't look all that great in longer prose. damn. i like the idea though.

Posted by: slothrop | Dec 26 2006 21:19 utc | 3


slothrop- I've gone back to reading Confessions of an Economic Hit Man over the holidays.

whatever the theoretical construct, Perkins' notes that his job was to inflate (lie) about growth projections for nations the U.S. wanted to control. This model is no doubt sop for many western nations/financial entities, but Perkins worked for the NSA via a "private" corp.

These economic figures had nothing to do with reality, and everything to do with creating indebtedness in nations or areas around the globe...indonesia, central america...lending based upon these bogus figures so that loans would created indebtedness that could not be repaid.

The military/industrials could then extract nat'l resources cheaply... these nations were "bought" by the US and others. In exchange for this debt, the US could/can get UN votes to sanction this country or another and control internal policies pf indebted nations via a strongman whose election is not up to the will of the people.

and, fwiw- I don't think it's the non-use of caps that makes the reading more difficult than need be. when someone reads, the use of white space at variable intervals helps to let readers "take a breath."

sort of like singing, catlady?

this white space also creates emphasis so that concepts can be more easily sorted. it's "user friendly."

Posted by: fauxreal | Dec 26 2006 22:49 utc | 4

@slothrop #3:

Please choose your battlefields more carefully! :)

The capitalization of the first character in a sentence is part of the protocol that enables easy detection of typographic errors by us non-machines. Especially where jargon of this depth is used, complex sentence structure is almost necessary, making adherence to the protocol all that more important.

Posted by: Dr. Wellington Yueh | Dec 26 2006 23:03 utc | 5

@fauxreal

You do realize, do you not? That Perkins 'Confessions of an Economic Hit Man' is a work of complete fiction.

Posted by: Uncle $cam | Dec 26 2006 23:29 utc | 6

Breathing is always recommended. Especially when playing percussion instruments like pianos. Or writing abstract essays on global economics.

To the tune of "God of Grace and God of Glory" (CWM RHONDDA):

Always eat when you are hungry;
Always drink when you are dry.
Always rest when you are weary;
Don't stop breathing or you'll die.
Don't stop breathing, don't stop breathing,
Don't stop breathing or you'll die (or you'll die).
Don't stop breathing or you'll die.

Posted by: catlady | Dec 26 2006 23:33 utc | 7

a shorter way of describing global capitalism in action:

"we break it; we buy it"

Posted by: catlady | Dec 26 2006 23:35 utc | 8

"as a political resistance to typographical hierarchy of the noun and subject"

?

But a capital q is so lovely.

Posted by: beQ | Dec 26 2006 23:38 utc | 9

UNcle,
how do you Know that perkins' book Dissimulates? can you Post any sources?

Posted by: citiZen | Dec 26 2006 23:54 utc | 10

i don't know. i just think it's kind of necessary to attack structures in any way. andrea dworkin's 1st book was repeatedly rejected because she omitted capitalization and punctuation. adorno's aesthetic was written without paragraph breaks. but, i realize i'm in no position to lead a vanguard of assault on rules of composition.

Posted by: slothrop | Dec 26 2006 23:54 utc | 11

yes. let's attack structures.

Posted by: BeQ | Dec 27 2006 0:15 utc | 12

hmmm. if i had to do it over again. why, i'd...do it exactly like you, beq.

Posted by: slothrop | Dec 27 2006 0:28 utc | 13

well, in any case, i'm glad my airtight argument survives the criticism that, as an object of art, it certainly sucks.

Posted by: slothrop | Dec 27 2006 0:32 utc | 14

now that is an effort, comrade slothrop, & there is lots of meat there

but today the body is weak & i'm sure my mind will surely follow

i hope i'm capable of offering you something substantial on the morrow

Posted by: r'giap | Dec 27 2006 0:56 utc | 15

nite giap.

Posted by: Q | Dec 27 2006 0:57 utc | 16

@Catlady #7: CWM Rhondda!! Oh what a wonderful, hilarious new take on that old hymn - I love it. Thanks for putting a longlasting big smile on my face as I hear the new lyrics sung over and over in my mind to a tune that has deep roots in an early period of my life.

Posted by: Maxcrat | Dec 27 2006 2:23 utc | 17

slothrop! There you have it, on the recent news. The structure of a pipeline is destroyed and 260+ people are incinerated. Destruction is the easiest endeavor, to generate, that is the trick.

Posted by: jlcg | Dec 27 2006 2:39 utc | 18

slothrop,

I’m more interested in your thesis than your style and your answer to the questions, “What are the causes of the decline in investment and savings...? ” and “how does this affect the global economy?” And I appreciate the contribution and thought you have brought here.

Having said that, I have to frankly admit that I often find it extremely difficult to follow your arguments and writings, probably mostly because of my own lack of intellectual sophistication but maybe partially because of the, what I find, awkward style you use. On the plus side, I look up many words I encounter here at the moon on a daily basis but your posts, as a rule, supply me the greatest wealth. Anyway...

My understanding and summary of what you are saying is, paraphrased in my words, “Capitalist are those with the money and clout (power) to effect essential control over the means of subsistence for most all humans (and many non human species as well). They (as in real live human individual beings) as a group tend to be unaware or totally callous to the plights and suffering of any other than their self and are unaffected by what are usually considered the more evolved attributes of humanity such as empathy, altruism, (Ayn is rolling in her grave. I have betrayed her) virtue, ethics, morality, etc. Thus they will use every method and contrivance, including the most brutal and barbaric, to increase their wealth and power. They, the few in the top 1000 or so on the planet, are vying among each other for essentially every thing they assume have economic value. There is no dirt, no depth, to which they will not descend to try to quell their insatiable lust for the power and control which is ultimately impossible but which their poor pathetic souls constantly envy.

What could be other than the result that there is less to go around for the rest of us as they plunder and defraud us of everything they can? We are being robed blind by unscrupulous but very effective gagsters and con artists. They have developed their theft into a scientifically supported technology. They have usurped the effective control of our political processes to shield their criminality. How could less for we the people not result in less savings and how could this not be generalized on a global basis as well?

So why do we need either erudite economic thesis or literary profundity to explain this? It seems pretty straight forward to me in my unsophisticated understanding.

My question is how to correct this dead end situation in a world with the power and technology to bring us to that dead end in the hands of the few who seem spiritually/emotionally/mentally incapable of transcending their own worst demons.

Posted by: Juannie | Dec 27 2006 3:13 utc | 19

juannie

thanks. the thesis is: the structural cause of declining investment and savings is the problem of overaccumulation on a global scale. this is important to understand i think because, if true, the claim this is solely a u.s. problem is made, uhm, problematic. this is something i hope we can talk about later.

Posted by: slothrop | Dec 27 2006 3:26 utc | 20

Juannie@19

very well said.

Posted by: jony_b_cool | Dec 27 2006 4:12 utc | 21

Uncle- no, I didn't think Perkins' book was fiction (which, btw, goes with my typo above...left out the book part so "perkins" is possessive for absolutely no reason..)

anyway, why do you say it's fiction? he's been on Democracy Now! and that show has been repeated...I would hope that they wouldn't continue to show a program with someone who was lying. He doesn't seem to say anything new, in terms of the working of the world, other than to give a face and details to activities that have been revealed through various sources, at least at the level of politics.

his story seems so "well d'uh, of course" when you consider Smedley Butler's rant in War is a Racket.

I helped make Mexico, especially Tampico, safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefits of Wall Street. The record of racketeering is long. I helped purify Nicaragua for the international banking house of Brown Brothers in 1909-1912 (where have I heard that name before?). I brought light to the Dominican Republic for American sugar interests in 1916. In China I helped to see to it that Standard Oil went its way unmolested.

Ida Tarbell certainly understood the workings History of Standard Oil, as well, even tho the monopoly she revealed was at the state level.

Butler and Tarbell were definitely not fiction. Robert Parry's work on central american strongmen was not fiction. He covered central american politics in Lost History and, other than putting a face to a name, I see nothing that Perkins says that contradicts Parry's work, for instance.

As far as corporations that act as fronts for CIA or NSA, etc... that's also clearly been established by hundreds of different books about govt. operations by various reputable ppl. Not to mention the recent Plame situation.

Argentina certainly realized IMF policies, etc. were designed just to extract the sort of undemocratic actions that Perkins describes...the lipstick on the pig is "free market capitalism." Which, as far as I can see, does not exist at many levels and places.

and All The Shah's Men demonstrated the outcome of a failure to comply with british and american oil interests...which Perkins said is the less desirable route to puppetship.

anyway, tell me what is fictional about Perkins' book.

Posted by: fauxreal | Dec 27 2006 4:38 utc | 22

i'll confess, perkins did fleece a lot of people who paid for a copy. that's more honest detail than you'll get out of his hack of a book. uncle posted at least one link a while back that deconstructed perkin's work. hopefully, he'll provide the link again.

Posted by: b real | Dec 27 2006 5:08 utc | 23

Slothrop, I don’t understand.

The problem is overaccumulation, by whom? by a small elite (1000 or so individuals, flesh and blood, with all or probably more of the frailties of mere mortals). And how does this make the claim that it is a US problem true? I thinks from the stats. I’ve read, the highest percentage of these individual elites are Americans. This probably gives the US the biggest clout with the best killing power globally but there are also other in the pissing match and as we’ve been witnessing over the last few years, the biggest bullies aren’t necessarily going to piss the furthest. But it is still those few individuals. I think the idea of nation states is defunct. It’s now individuals of small cadres of such that are at the helm of the few big ships (transnational corporations) in this world. Even if they don’t own the oceans they sure as hell control all ports.

So again my question is, what the hell can we who truly believe we are the more highly evolved, and recognize that cooperation and symbiosis is a better method for survival and fulfillment than the blade, do to either dissuade or heal or somehow convince those few disassociated individuals that it is even in their own best interest if they ... uh? .. if they what? If they just slow down and look for iceburgs? That’s the question I want answered.

Enough on my meanderings. I’ll sleep on it and try again to say something pertinent in the morning.

Posted by: Juannie | Dec 27 2006 5:13 utc | 24

This thread may be the one that contains the Uncle $cam info you mention.

the Rigorous Intuition site, in fact, makes no claims that Perkins' book is not true. Rather, the site attacks Perkins as "liberal limited hang out" which is a term for telling just so much...

and then goes into his whacked out shaman beliefs. which, of course, means he couldn't have done anything he said, I suppose. Just like Bush didn't invade Iraq because "god told him too?" Or, maybe he was under the influence of some shamanic "medicine" and has a vision...or maybe he really believes what the says.

However, why should I trust what RI says (who calls himself a satirist and author) more than Perkins and sites like Mother Jones, Democracy Now!, Alternet, etc.? --who apparently have not said they discount what he has to say.

Are their other sites that back up what RI has to say that Uncle $cam linked to that I didn't find?

Posted by: fauxreal | Dec 27 2006 5:50 utc | 25

Okay, it is oft said, "the best propaganda has a bit of truth to it", --for those that do not know--, Perkins book truly is a bit misleading, it is fiction, 'Confessions of an Economic Hit Man', is not real. At least as I've come to understand it, however, having sd that -fiction or not-- these scenarios resonate and validate our collective knowledge of what we know is going on. It seems Perkins is a limited hangout, but limited hangouts are useful. They open mental doors to further inquiry.

So I question people's non questioning of Mr. Perkins, however the may ideals resonate.

Then there is this, "This site is produced and maintained by the U.S. Department of State's Bureau of International Information Programs.", among other things that I question for example, I tend to view a lot of New Ageism with much salt, especially the shamanism and channeling stuff. HE could very well be sincere in thinking that this stuff will save the world, however that is for you to decide.

Shapeshifting: Shamanic Techniques for Global and Personal Transformation with John Perkins

Posted by: Uncle $cam | Dec 27 2006 6:07 utc | 26

yes, Uncle $cam, I saw the US govt. site from your first thread (that I linked to in #25.) And I don't doubt that he has some whacked out beliefs. But why should I believe a US govt site that debunks someone when that person claims imperialist actions by the US?

and as far as whacked out moments... has US govt. been involved in experiments to try to walk through walls, as Jon Ronson's book, The Men Who Stare At Goats claims?

But this is somewhat beside the point. again, other than RI and a US govt. site, are their other sources that have said Perkins is lying? I suppose my question come down to this: who do I believe has more reason to lie...Mother Jones, et al or the US govt?

Posted by: fauxreal | Dec 27 2006 6:38 utc | 27

synchronicity #9

John Perkins is, as I type, on Free Speech TV.

Posted by: fauxreal | Dec 27 2006 7:04 utc | 28

I found the following in about ten seconds of searching...


Hit and Miss

There are good reasons "the mainstream media" has ignored John Perkins' Confessions of an Economic Hit Man.

What, you can't google around? Besides, Why does it have to be either or? I'm speaking for myself of course, but if I had to rank Perkins work on a 0-10 scale, I'd prolly give it about a four. Zero being not at all believable, to ten being highly believable. As I said above, it is up to people to make up their own minds to the matter. My main concern is he doesn't have any footnotes, or cited sources unlike people such as Antonia Juhasz.

Perhaps, I shouldn't have made such a definitive statement in my #6, I should have said I have my doubts as to wheather it is or is not fiction.

However, after reading it, and to reiterate again, what I said above, I have no doubt what he conveys indeed does happen, I merely question if his personal story has validity.

Posted by: Uncle $cam | Dec 27 2006 7:38 utc | 29

again, you link does not say that what he claims is fiction, beyond the person who hired him at Main, where he did, in fact work, and in his role he also worked as an economist, as he said, and he worked in nations he claims he did. from your link:

Part of the book's core message is demonstrably true. As chief economist for Chas T. Main, an engineering firm that has since gone out of business, Perkins was in a position to observe the economic policies that ensnared developing nations in a web of debt. The countries borrowed money from the World Bank and other international lenders to embark on ambitious infrastructure projects in the name of modernization: they built hydroelectric dams, port facilities, airports and highways. But they didn't reap the economic rewards expected, and soon the countries' leaders were forced to cut spending on social programs in order to keep up with interest payments on the loans.

Perkins certainly cites some damning examples. In Ecuador, he writes, "Since 1970, during the period known euphemistically as the Oil Boom, the official poverty level grew from 50 to 70 percent, and public debt increased from $240 million to $16 billion. Meanwhile, the share of national resources allocated to the poorest segments of the population declined from 20 to 6 percent."

But here his story veers into dubious territory. The international lenders wanted the countries to default on their loans, he writes, to put them in a position of subservience. When a nation defaults, the US, acting through the World Bank, can demand control over United Nations votes, the installation of military bases, or access to oil and other precious resources. Perkins says it was his job to come up with bogus economic projections that would convince these developing countries to take out the loans.

the issue in the article you linked to is not about what *happened* with IMF loans. the issue is whether or not the intent was good gone wrong or intentionally sabotaging economies in places like central america.

the author in the article you note also debunks Perkins by noting "the company he keeps" when he was giving a speech...these ppl were 9-11 conspiracists. the author also debunks his audience as "frizzy-haired berkeley types."

as a book written without sources cited, yes, there are questions. but, again, his basic premise does not contradict recent "lost history," and in fact, it is somewhat less drastic than CIA/contra cocaine (the frogmen, as Webb reported) coming into the US.

Stiglitz, who shared a nobel prize in economics, noted that the US is the only nation that has veto power with the IMF. And the "debt forgiveness" the US site claims might be a bit misleading if the original debt was created to pay for US companies to get paid to do biz in those other countries... so, they're saying, okay, we're forgiving the money launderer...thanks for your help?

so, yes, I can google around. I've yet to find anyone who can dismiss his claims beyond doubting the company he keeps, or his whacked religious beliefs, or his boss who, if Main was a CIA front, would also have an interest in denying the malicious nature of the IMF's actions.

sorry if I upset you, but your initial claim that it was total fiction was very misleading. I think the outcome of questioning your claim is more clarity.


his claims are much less outrageous concerning central america than Gary Webb's were...and Webb was also telling the truth and he was also debunked by big news orgs. like the LA Times, etc. again, as Robert Parry noted on Consortium News.

Posted by: fauxreal | Dec 27 2006 8:13 utc | 30

Whatever fauxreal... You might want to reread my last few posts...I will not waste anymore energy on debating with you, sorry.

Posted by: Uncle $cam | Dec 27 2006 8:21 utc | 31

fine with me.

Posted by: fauxreal | Dec 27 2006 8:26 utc | 32

Citing insinuations by some clown writing for an "alternative weekly" rag, East Bay Express is beyond dubious. That rag hasn't had anything worth reading since it was taken over by some Repug. chain several yrs. ago. An article laced w/guilt by association is hardly worth taking seriously. And if you want to throw out the fruits of Perkins' lifes work based on his religious views, you'll have to consider tossing Sir Isaac Newton's laws as well. Where he becomes obnoxious is in the self-righteousness that accompanies his changes, which like Dan Ellsberg's, is the fruit not of personal courage, but of having married an heiress so he no longer has to worry about money - though it seems Ellsberg's wife is much richer & more independent.

Posted by: jj | Dec 27 2006 8:53 utc | 33

"you'll have to consider tossing Sir Isaac Newton's laws as well."

most people do when it suits their beliefs and rationalise it by claiming they are higher on the information food chain for doing so

Posted by: gmac | Dec 27 2006 9:19 utc | 34

I've heard Michael Manley, the former PM of Jamaica recount the deals offered and enforced by the IMF -- that parallel what Perkins is saying. And obviously (Iwould suppose), would caution against discounting what he has said because of his interest and writings on shamanism, a little understood phenomena. But, and because it has little understanding can be easily used to demonize, unless the same standard would be applied to, say, the president of the United States and his little "visions".

Posted by: anna missed | Dec 27 2006 11:15 utc | 35

The problem is overaccumulation, by whom? by a small elite (1000 or so individuals,

not the point, exactly. "overaccumulation" is a persistent feature of the capitalist mode of production. it is the basic contradiction unsolved by any globalization.

Posted by: slothrop | Dec 27 2006 16:17 utc | 36

slothrop - still digesting your post in small chunks, so no on-topic comment yet.

re the confessor:
perkins is still working the con, imo, relying on the well-meaning people's all-too-eager tendency toward selective distortion to boost his karma (read "distribution") in order to pad his bank account & continue living large. (one particular beef w/ perkins as an individual - he demands first-class airline tix for speaking engagements, which puts an unnecessary drain on a non-profit's coffers - hitting these organizations in the wallet.) many people are reading a lot more into the book than is actually there. esoterics aside, perkin's knows how to tantalize an audience yet leave them empty at the same time. no doubt that organized crime institutions such as the imf use large development projects to provide legitimacy for massive loans, which then get repatriated to the u.s. etc via capital flight, leaving the borrower populations (not those who actually authorized & rcvd the funds) holding the debt card. and no doubt that economic dependency has been a well-worn tactic in the united states since at least the times of jefferson. this is not new & has been covered in detail elsewhere. what does perkins bring to the table, other than himself? not much. the books used in the footnotes are fairly recent, much later than the periods he covers in the book. where is the documentation? where are the details? if perkins is confessing - admitting - to crimes, where is the evidence that would convict him? dude's not confessing - he's tossed out a treatment for an option on his big screen ego trip.

Posted by: b real | Dec 27 2006 16:58 utc | 37

here's another stab by castells at explaining global finance capital:

Capital works globally as a unit in real time; and it is realized, invested, and accumulated mainly in the sphere of circulation, that is as finance capital. While finance capital has generally been among the dominant fractions of capital, we are witnessing the [472] emergence of something different: capital accumulation proceeds, and its value-making is generated, increasingly, in the global financial markets enacted by information networks in the timeless space of financial flows. From these networks, capital is invested, globally, in all sectors of activity: information industries, media business, advanced services, agricultural production, health, education, technology, old and new manufacturing, transportation, trade, tourism, culture, environmental management, real estate, war-making and peace-selling, religion, entertainment, and sports. Some activities are more profitable than others, as they go through cycles, market upswings and downturns, and segmented global competition. Yet whatever is extracted as profit (from producers, consumers, technology, nature, and institutions) is reverted to the meta-network of financial flows, where all capital is equalized in the commodified democracy of profit-making. In this electronically operated global casino specific capitals boom or bust, settling the fate of corporations, household savings, national currencies, and regional economies. The net result sums to zero: the losers pay for the winners. But who are the winners and the losers changes by the year, the month, the day, the second, and permeates down to the world of firms, jobs, salaries, taxes, and public services. To the world of what is sometimes called "the real economy," and of what I would be tempted to call the "unreal economy," since in the age of networked capitalism the fundamental reality, where money is made and lost, invested or saved, is in the financial sphere.--Rise of the Network Society, 471-72.

while i agree with castells take on the virtual circuit of global finance bypassing traditional national mediation, i disagree about the point here that "the net sum is zero." no. markets don't clear. this failure is caused by overaccumulation. overaccumulation exacerbates the kind of overinvestment made possible by finance capital in the "information society."

Posted by: slothrop | Dec 27 2006 17:11 utc | 38

Cough. Juannie, let me have a go... I'll get it all wrong and then the corrections of my errors will shed light, maybe.

People with money wish to see a return on their investment. If one puts money into a bank account paying 10%, £1,000 will, a year later, become £1,100. But that extra £100 comes from...

According to (what I understand of) the theory, Capital must constantly seek new markets because:

1) The new markets will have cheaper labour/materials = cheaper production = more profits ( = £100 on top of the starting £1,000)

and

2) Because the new markets contain workers who will earn money and...buy products ( = greater sales = greater revenue = more profits = that extra £100)

But...this has to happen continuously, unless everyone who expects their wages/investments/pensions...whatever they have invested in the system of Capital...unless everyone is happy for the process to suddenly...STOP.

What actually happens (according to slothrop's analysis) is that we end up producing too much stuff...too much of everything. We can't afford to buy it all, so stuff sits in factories, which means (after a short pause) that the workers in the factories don't get paid (no more profits AND no more money for wages), and then (after another brief period) workeres get laid off, they move onto benefits or spend their savings (instead of our wages, we have to spend that £100 we made a year ago)... and...

the capitalists (aka "everyone who has investments in the system" = you and me unless we are outside the system) have to wait until all the excess has been shifted, because to keep the system going we need to make EVEN MORE stuff.

But ah! A new market! They can make stuff cheaper, so we can buy more stuff, and they can buy products, so we can shift more stuff...the expansionist dream.

Except the limits are being reached for expansion. There may be a few more markets around, but there aren't enough raw materials (e.g. oil) for us all to make enough stuff to keep those £100 appearing in our accounts at the end of each year...not to mention that each year we need to make more money to stay even, percentage wise (at 10%: £1,000 > £1,100 > £1210 > £1321 > and then my head goes poof!)

But we can't stop the process, coz that's the capitalist process...that's the contradiction...that capitalism ends up destroying itself...only in the past the capital leapt onto new shores (Europe > U.S. > Asia > ?)

I suppose one answer to the question is that South America seems to be changing the nature of its use of wealth...ach...I'm filling in whiile rememberinggiap charges his batteries....

(Whistles...)

Slothrop!

(-- re art, I like the lowercase and the stodgy paragraphs...humour keeps them less stodgy.humour acts as a paragraph break.humour in the wordplay and overall a very enjoyable read. this is my longwinded way of saying that.)

Posted by: Argh | Dec 27 2006 17:17 utc | 39

yes! the creation of new markets is the problem. and the growth of consumer spending in china for example among a nascent bourgeosie cannot hope to absorb so much production. massive capital expenditures in infrastructure helps, but only the west can annihilate so much surplus--and this accomplished only by enormous consumer debt.

Posted by: slothrop | Dec 27 2006 17:29 utc | 40

Argh and slothrop: the last two posts remind me of a quote from Canadian Green Elizabeth May : "Belief in unlimited growth is the ideology of a cancer cell."

...or a pyramid scheme.

Posted by: catlady | Dec 27 2006 17:58 utc | 41

unfortunately, many cancer treatments--chemo, radiation--are as bad or worse as the cancer itself.

"And death shall be no more; death, thou shalt die."

(John Donne, via Margaret Edson's play W;t)

Posted by: catlady | Dec 27 2006 18:06 utc | 42

The really neat trick in all this is that increasing accumulation of capital actually demands war, because war is the only thing that can actually produce goods that not only get consumed into something basically unusable (another reason that radioactive armaments are vaguely inevitable) but that also destroys other accumulated capital too.

Only when capital accumulation is destroyed can high rates of profit be restored. Where the over-determination political economists go wrong is in assuming that politics CANNOT solve this problem by other means. It can solve by, for example, taxing capital accumulation at high rates. Why doesn't this happen? Because politics is generally commandeered by capitalists/capital, and these perspectives will always object to political solutions of the capiatalist dilemma.

But that doesn't mean that politics cannot change the game rules from capitalism to something else. It only means that at the moment capital is the dominant viewpoint, not culture/state politics.

Posted by: citzen | Dec 27 2006 19:12 utc | 43

I'm surprised no one has mentioned the idea of the Steady State economy. The No Population Growth group has a few things to say about this...and none of them sound like they'd happen by choice as power is allocated now.

Not to mention that their idea that population growth is the chief issue would raise the alarm of eugenics or some other such idea, and the anti-choice crowd would be wildly opposed, as well as all those who practice a religion in which women are subservient to men (because demographics point to higher education, greater freedom for women is THE way to smaller populations around the world.)

The NGPers want to address no growth by issuing "birth licenses" to women who, like carbon trading, could sell them to other women. that might be a start, but who controls the reproductive capacity of women, and how would this be regulated?

Additionally, they propose minimum and maximum wages, and large taxes on fossil fuel consumption.

With all this in mind, I think it's reasonable to expect a huge catastrophe rather than any planning to deal with the issues that global warming and an overstressed planet will force upon humans. Nature doesn't care if a democracy, theocracy or dictatorship "rules." Or what economic model is in place,, once the tipping point arrives.

maybe the tipping point is already here, with the disappearance of an inhabited island, polar bears as endangered species, DC now with the climate of North Carolina, birds that are not migrating from england...

we've seen, with Katrina, how this govt would deal with catastrophes.

Posted by: fauxreal | Dec 27 2006 19:58 utc | 44

slothrop- ...the rate of profit among the 500 largest tncs has plummeted from nearly three times what it was in the early 50s (tendential fall in the rate of profit, comrades)

where are you getting this figure from? and doesn't tendential means "possible"?

Posted by: b real | Dec 27 2006 20:31 utc | 45

well, i got that from a recent article on the mode of production by nick garnham. i have it elsewhere--better sourced and will find it.

"tendential fall in the rate of profit" is from vol 3 of capital.

Posted by: slothrop | Dec 27 2006 21:37 utc | 46

well, i got that from a recent article on the mode of production by nick garnham. i have it elsewhere--better sourced and will find it.

"tendential fall in the rate of profit" is from vol 3 of capital.

Posted by: slothrop | Dec 27 2006 21:48 utc | 47

I think I’m beginning to get a glimpse understanding. I was using overaccumulation in the sense of elites and wealthy acquiring and hoarding real goods of intrinsic value. Your use of overaccumulation refers to the items of production that are sitting in warehouses that nobody wants (thanks Argh), unless highly discounted.

So the capitalist system has created the structures/infrastructures, both physical and financial/legal that exert pressure on those working within the system to gobble up limited and valuable resources, turn these resources into everything from plastic toys to WMD, and store them in a warehouse when no one wants to buy them.

Now since the resources have been purchased and labor paid (I think at least in Western industrial culture, Argh, workers are usually paid before the stuff is sequestered) the unsold items are a source of lost profit/capital for any vested in the ventures and this ultimately trickles down to the non-capitalist masses (now the workers get their turn for the shaft) and they are the big losers in the end.

The entrepreneur has to cyclically overproduce to keep up the illusion of unlimited growth (the cancer cell, thanks catlady, good analogy imo.)

The bottom line to all this as I see it is that the system of capitalism has to eventually self destruct as unlimited growth is not possible in a finite world. Capitalism is one of those dead enders, probably even for those who glean short term profit during the process.

So in my most humble audacity, I come to the conclusion that over production isn’t the problem, it is only one of the negative products of the dead end process of capitalism. (God, I hope Rand isn’t a vengeful type of spirit. I’ve totally sold out on one of my most treasured beliefs since Atlas Shrugged for me in 1960.)

Back again to my bottom line question, what can be done to help all those captains of industry see the looming iceberg? This may be an approach that could turn the ship around. I like to think back-to-the-land self-sustainable communities are the answer, but history has repeated itself often enough in forcibly eliminating or marginalizeing any non-capitalistic cultures that were successful or seemed likely to succeed, that I think the answer has to be in appealing to the humanity that has to exist somewhere within the souls of the 1000 or so. Finding a way to get power and wealth be an ally rather than the enemy.

Posted by: Juannie | Dec 27 2006 22:28 utc | 48

It's a ###damned make work project, don't you dimwits see it.

There has to be overproduction, it's the only thing that can save capitalism in the end.

Warehouses have to be leased to house the surplus production, all benefiting the unemployed, idle rentier class.

If surplus capital were not killed of daily in this manner, we would surely have a Depression.

Posted by: H. Ford | Dec 27 2006 23:38 utc | 49

breal

it depends on how profit "rate" is explained. as i understand it, the rate of profit is the difference between return & investment, and profit itself is what is left over after the payment of wages. so, basically, as i understand it, the rate of profit depends on the distribution of the surplus.

it's obvious profits can be decreased a number of potential ways, and my mishmash of causes was intended to reflect these: rising wages/declining productivity "solved" by inflation; the rising organic composition of capital (growing proportion of fixed vs. variable costs)--though it appears few economists support a necessary connection between this and the rate profit; worker fatigue and lack of motivation causing a decline of productivity and lower wages and underconsumption.

so, to try and answer your question. measuring the rate of profit depends on which causation one believes. so, it's contentious. weisskopf showed that in terms of the share of wages, rising strength of unions affected consistent decreases in the rate of profit between 1945-79. (cambridge j. of econ 3, 1979). there's much more recent stuff out there, and i'll hunt for something more definitive.

i'm just an english major. shit.

my presentation here of the source of declining investment

underconsumption is caused by rising surpolus or overinvestment, or both.

Posted by: slothrop | Dec 28 2006 2:58 utc | 50

oh...that last bit there shouldn't have been in the post. arrgh.

Posted by: slothrop | Dec 28 2006 3:02 utc | 51

oh...about "tendential"...as i understand the word as used by you know who does not mean "inevitable" but refers to the intrinsic "barriers"/contradictions in the capitalist MoP. falling rate of profit seems to be one of these "tendencies"

Posted by: slothrop | Dec 28 2006 3:07 utc | 52

juannie

i like everything up to: Back again to my bottom line question, what can be done to help all those captains of industry see the looming iceberg?

to be sure, "they" know this. so, they resort to permanent inflation to prop up investment and western consumption and also squeeze wages. but all these means of "solving" overaccumulation have inverse negative consequences.

Posted by: slothrop | Dec 28 2006 3:17 utc | 53

But knowing “they” know this and understanding “their” methods (inflation or whatever) doesn’t seem to slow the momentum of ship. We keep accumulating the results of their folly in ever increasing doses while they do obscenely well by skimming the top and the top keeps getting deeper as everyone else is being crammed to the bottom.

But there is nothing in this understanding that seems to offer any sort of solution or even attempt one. I want to know or at least hear more ideas about what positive steps I/we can take to not hit that fucking iceberg.

My probably naive suggestion is that somehow appealing to the captains sense of self preservation, we’re all dependant on the survival of the same ship, might have a chance of turning things around. So help me further this thought. In lieu of further theorizing about the causes and consequences, how about theorizing about possible ways out of this mess.

Posted by: Juannie | Dec 28 2006 4:04 utc | 54

juannie

thanks for being my homie for a bit. i am not an expert. i would very much welcome the event of my disabuse.

the solution, in my view, is equitable distribution.

"they" don't like "distributive justice."

"they" prefer the mass murder of brown people, as citizen notes.

Posted by: slothrop | Dec 28 2006 4:21 utc | 55

Juannie @48

"....the system of capitalism has to eventually self destruct
as unlimited growth is not possible in a finite world."

This caused me to recall an episode of "the Red Green Show"
when Red asked his nephew Harold,
"Hows it going?"
Harold replied;
"Everything was going great untill
the pyramid scheme I invested in morphed into a rhomboid."

Posted by: tescht | Dec 28 2006 4:34 utc | 56

As I understand your arguments slothrop, I don’t see much room for disabuse. I think you are probably right on and you’ve helped me in furthering my understanding. So I reflect your thanks back to you.

Posted by: Juannie | Dec 28 2006 4:41 utc | 57

tescht,

I'm going to sleep and hopefully dream on that one.

Posted by: Juannie | Dec 28 2006 4:45 utc | 58

Tragically, I am in deep agreement with slothrop.

The rules of the game and the capitalists who avatar the heartless heart of the game like killing people better than distributve justice.

And we won't change the game till we've been through enough hell to make us ill with the whole idea of living by religious faith in exchange as the source of justice. Till we don't allow avatars of capital to program our world.

The only game that makes sense to me now is trying to envision and represent some of the steps that could make us begin to be ill with the idea of seeking market hell. Oddly, Althusser's take on Machiavelli seems to offer some possibilities.

Posted by: citizen | Dec 28 2006 4:46 utc | 59

a fool’s pursuit because investment only leads to mountains of goods consumed at lower prices strangling profits, and foolish because in places like china, the surplus cannot be absorbed by domestic market whose growth depends on low wage labor not expanded consumption

Really? Wages (of the lucky) are skyrocketing in China and domestic consumption is following along. In fact, the total failure of the Chinese economy to follow the model in Kapital is so striking that it almost obscures the failure of wall street to follow that antique model. China, is a command economy where major investment decisions are made by - the STATE and the aim of those investments is not determined by profit rates. In fact the very consciousness that Marx explicitly states cannot be factored into the thinking of the capitalists - e.g. the effects on social stability, national prosperity, geopolitics and so on - is, along with self-enrichment by graft - at the core of Chinese investment decision process. Here we have an amazing world economy where two major poles are the Chinese factory and the Wall Street corporate banking machine that operates by skimming other people's money - not by making the kinds of decisions that Marx and Engels modeled on English textile magnates. And then there is the other US economy - the defense economy - which has a counterpart in Europe. Anyone who has ever seen the inside of a major arms manufactury in the US or Europe where congressional districts or constituent nations are proudly shown as contributing should have a clue that maximizing profit rates is NOT DETERMINATIVE. So why is there less saving? Damned if I know. But the effects of making risk fungible may be more important than these hoary "contradictions". Billions of dollars are daily shifted under the command of complex statistical algorithms for laying off risk. Where companies would have previously put $X in a "savings account" to protect against losses, they now "invest" some part of that money in countervailing opportunities - essentially buying insurance against losses. It is possible that the whole wacky black-sholes risk management structure is bullshit and it will fall apart with some stress, but I don't know that and you won't find the answers in a 19th century polemic.

Posted by: | Dec 28 2006 5:02 utc | 60

thanks slothrop- i'm no economist either, but then it's not really a science, and your remark that 'it depends on how it is explained' is basically what i was thinking of when i read that figure & what got me curious. it would seem to me that tnc's are making more money than ever while (relative) net income for workers has been sliding downwards. maybe the diff is taken up in overhead & expenses, etc (inc astronomical ceo salaries). but i'd imagine that, just as profits can be exaggerated (ala enron et al), they can also be hidden thru creative acctng so as to reduce tax liability or mask skimming. my impression from reading a variety of sources over the years is that there are more tricks out there now than there ever have been before, since so much in the world of finance is pure speculation nowadays & depends on whether there's enough suckers out there. so figures can usually mean whatever one wants to read into them.

what i think would be interesting is to keep tabs on the big oil companies & see how much they pay in taxes on these record-earnings they're declaring. and also to widely publish the names & all contact information for every official and board member of each of these companies, just so all curious citizens jaw w/ them on it.

here's an interesting passage from r.t. naylor's book hot money and the politics of debt


By the late 1960s Pentagon Capitalism had brought the financial world to the brink. The ultimate acceptability of the US dollar as the medium for effecting international payments lay in its convertability into gold. But the world's stock of gold was relatively fixed, while the worldwide volume of outstanding US government financial obligations grew as overseas military expenditures rose. Once the foreign total of US dollar obligations exceeded the official domestic value of the US gold reserves (then valued at $35 per troy ounce) it was evident that all claims could not be met if a 'run' occurred. In that eventuality, either only the earliest claims would be repaid in gold, or gold would have to be revalued upward. Both possibilities meant that a propensity to speculate against the US dollar and to cash dollars in for gold at the earliest opportunity was built into the system. The potential was particularly alarming after the French government of Charles De Gaulle started protesting American policy in Southeast Asia by demanding gold for its dollar holdings.

By 1971, on top of the war-induced capital outflow, the US economy saw its first commodity-trade deficit since the Second World War. That finally forced the US to stop all conversions of its currency into gold (a partial suspension that had been in force since 1968), and to submit to the political indignity of devaluation. In effect, the world passed from a dollar standard backed by gold to a US dollar standard backed by US dollars, and a massive flight of capital from the US followed. The capital fligh eased in 1972, but accelerated again the next year, forcing another major devaluation. But by then the US government had found another standard to which the dollar could be pegged.

In 1973, after years of bickering and ineffectuality, OPEC finally agreed to quadruple the world price of oil. There were two distinct elements involved: the largely symbolic, and virtually ineffectual, Arab embargo of the US because of its support for Israel during the October 1973 war; and the closing of OPEC ranks behind the traditional price hawks, Venezuela and Iran.

The success of the price hawks had less to do with immediate Middle Eastern politics than with long-term economic trends. For nearly three decades after the Second World War, the developing countries suffered a steady deterioration of their terms of trade with the West. The prices of their commoditity exports from alumina to zinc rose, but the price of manufactured goods from the industrialized countries taken in exchange rose even faster.

For oil exporters the situation was worse; oil was the only major commodity to fall in absolute as well as relative price during the twenty-five years that followed the Second World War. And unlike avocados, bananas, and coffee, oil was nonrenewable. Thus, oil producers were consuming their national wealth to meet the demand of the West for cheap energy. Much of the rapid economic growth and rise in living standards in the postwar West was directly due to the free ride, or at least cheap trip, that the industrialized world enjoyed at the expense of the oil-producing countries.

Furthermore, as oil was traded largely (and, after 1975, exclusively) for dollars, its relative price dropped even further when the US dollar was devalued in the early 1970s. If oil's real purchasing power vis-a-vis essential Western-supplied goods had kept pace with that of other major commodities, its price would have reached just about the level that a tight market permitted the oil-exporting countries to push it to in 1973. Even so, the leading Arab producer, Saudi Arabia, lobbied in 1974 to try to push down the world price of oil, only to have its efforts apparently sabotaged by certain American interest groups.

While the oil-price hike was painful for most consumers and producers in the US, it did confer on some interest groups a number of economic, financial, and political advantages. Until 1973, American industry depended largely on domestically produced oil. But because of import restrictions, domestic oil cost more in the US than the Middle Eastern oil that the big US and British oil companies sold throughout the world. With the balance of payments under seige and American exports being increasingly threatened by the products of Japan and West Germany, the difference in energy costs was a luxury that the US could no longer afford. The 1973 price changes eliminated the differential that had long disadvantaged American industry in export markets.

The major oil companies were not inclined to protest, as profits per barrel reportedly doubled. Those profits were justified in public by the insistence that they allowed the oil companies to finance the development of alternative sources of energy, thereby freeing middle America from the grasp of rapacious A-Rabs. In reality the profits funded a huge asset grab, as the big oil companies bought up vast existing holdings of coal, uranium, copper, and other minerals at home and abroad. [pp.48-9]

and here's one somewhat relevant to the first paragaph of your old wine, new bottle section

During the Vietnam War, the US had faced the problem of the war-bloated budget deficit and the gap in the balance of payments caused by US direct foreign investment and military expenditure overseas. The answer lay in the transformation of the international financial system, shifting it to a US-dollar standard and forcing the central banks of the major Western countries to accumulate unwanted inventories of US treasury bills.
...
During the Reagan era, the US merchandise-trade deficit deepened. Exports to developing countries plummeted as a result of the debt crisis, and falling oil prices hurt US markets among the OPEC group. Much of the former strong surplus in 'service' items dried up. Yet the US dollar continued to appreciate, rising by 80% against a basket of other major convertible currencies between 1980 and the end of 1984. Not until well into 1985 did the US and other major Western central banks coax and bludgeon it down again. The perverse performance of the dollar reflected the fact that the US currency unit had added to its traditional role of the main international medium of trade and financial flows increased demand as the currency of refuge.

Between 1977 and 1982 US banks had been net capital exporters of $140 billion; in 1983 they became net importers of more than $26 billion. Developing debtor countries saw their foreign exchange reserves depleted by flows of hot money into the US. Other financing came from the savings of industrialized countries: during the 1970s central banks of Western Europe, Canada, and Japan had bought up huge amounts of surplus US dollars and recycled them into US treasury bills; but by the early 1980s, the movement of funds into the US, into public- and private-sector securities and in direct investment, came increasingly from private investors abroad. Despite strong trade surpluses with the US, major Western countries found their foreign-exchange reserves stagnant, as they sold off billions of dollars to combat the rise of US currency against their own. The dollars sold were then recycled by private investors back to the US.

From January 1980 to June 1984 an estimated $417 billion in foreign capital flowed into the US, from Europe, Canada, Japan, and the developing countries. The share of Japan, and of the developing countries, was rising fastest. After all, according to a top-level Moonies, between 1975 and 1984 the sect moved no less than $800 million from Japan to the US. In 1984 Japan financed nearly half the US trade-balance deficit, pouring into the US $33 to $50 billion per annum; much of it moved into US treasury debt.

Than led to a new Yellow Peril to compete with the Islamic Hordes as a threat to the American Dream. Fed Chief Paul Volcker warned of America's 'addiction' to foreign capital. CIA chief William Casey denounced Japanese investment in the US computer industry as a Trojan horse. GOvernor Richard Lamm of Colorado told American to as themselves, 'How much can we afford?' without suggesting the rest of the world do likewise. WIlliam Proxmire, the ranking Democrat on the Senate Banking Committee, adopted the philosophy of the radical left in Latin America: 'As time goes on,' Proxmire intoned, 'as foreign investors get a larger and larger share of the national debt, they get into a position where they can impose tough terms or cut off credit. You lose part of your sovereignty under those circumstances. You lose your independence.' To these sentiments Felix Rohatyn, of the Lazard Freres merchant-banking firm, added the fear than Japan could suddenly yank out its money, causing the US dollar to plummet, and the return to buy up American industry at fire-sale prices. Perhaps he had been observing the activities of US commercial banks in the Latin America.

In reality, the percentage of foreign-held to total US government debt was no larger in the mid-1980s than it had been a decade before - perhaps smaller. Less than 1% of US tangible assets and real estate were in foreign hands, along with 5% of all private and public securities. And the US was the world's only 'debtor' country that could pay off its foreign debt simply by cranking out more paper. Irving Kristol of the American Enterprise Institute called for the Federal Reserve to accomodate the demand for US dollar assets: 'If foreigners are so eager to buy dollars, a commodity we can produce very cheaply, why should we obstinately frustrate them.' [p.275-7]


still looking for that omnipotent "international capitalist class". i'll let you know what i find.

Posted by: b real | Dec 28 2006 5:06 utc | 61

b real

i would think you will find that the oil companies pay relatively little in real taxes as is their habitude

these high queens of melodrama - who would talk in the name of profit & decry any effort at welfare - anywhere on earth - are the first with their pigs snout in the trough of public monies

it is you & i - always - who pay directly or indirectly - any real research & development

the principal problem i have with our friend slothrop - is that i understand - social realtions, all social relations in our times as something complex - but economics i find crude & getting cruder -neo liberalism is not a smarter version of capitalism rather it is a cruder capitalism in a period where all institutions that have existed in defence of people - have in many continents been smashed beyond rehabilitation

i see neither subtlety or invention in its formation - on the contrary - there are parallels, evident parallels that can be be made to capitalist economics of the 19th century & useful tools can be found from political economists from that century & the 20th

it is social relations which have become infinitely more complicated tho when push comes to shove - as slothrop's argentinian example exhibits - even they become very simplified on the street - when the collapse seems likely

in brief i think there is an undercutting here of both imperial & national imperatives - on the ground in iraq the facts are clear - about who benefits economically, & principally - something like 98% is the empire & yes i understand my friend slothrop hedgefunds & european superanuation etc etc but they are following, always following decisions made at a national level

so i'm not prepared to drop now or in the near future an anti imperialsim that is highly specific tho in a future i cannot now imagine but sense - the mammoth forces of china & india will turn over all the tables

Posted by: remembereringgiap | Dec 28 2006 18:52 utc | 62

Impending Police State in America*. You know, after the The [Our] Self-Deception of Economics:

Formalization has led contemporary economics to turn its back on the study of capitalism as the social order to which it owes its origins and its intrinsic analytical focus. As a consequence, contemporary economics turns a blind eye to the empirical analysis of capital accumulation, the real-world properties of markets, and the bifurcation of political power that endow capitalism with its unique historical properties. Instead, economics takes scientific, not social, analysis as its model, a view that gives an ideological cast to its findings.


*Note on FAB: Professor Boyle teaches international law at the University of Illinois, Champaign. He holds a Doctor of Law Magna Cum Laude as well as a Ph.D. in Political Science, both from Harvard University. He has also served on the Board of Directors of Amnesty International (1988-1992), and represented Bosnia- Herzegovina at the World Court.

Posted by: Uncle $cam | Dec 28 2006 19:03 utc | 63

the aim of those investments is not determined by profit rates.

well, this isn't true, even for the grand purpose of detaching china as an example of the capitalist MoP--all done i suppose to decry this or that marxism.

Really? Wages (of the lucky) are skyrocketing in China and domestic consumption is following along.

by most measures, the miserable poverty of rural china has been alleviated--most of this accomplished in the eightees after agricultural reforms featuring lower taxation. urban development has been, from the stuff i read (j. of development 82 (2007) 1-42, for example) a drain on rural resources including labor, and a main driver of inequality, environmental destruction, corruption.

but I don't know that and you won't find the answers in a 19th century polemic.

sure. some problems there my little essay intended to acknowledge. we'd probably do better than to read capital vol. 3 and rathe look at the overaccumulation crisis as a way to explain what's going on. so: overinvestment-overaccumulation-undercomption solved by inflationary credit which drives down savings.

Posted by: slothrop | Dec 28 2006 22:30 utc | 64

b real

i'm gonna read that. sounds interesting.

whether or not tncs pay taxes addresses the problem of distribution, but not the crisis of overaccumulation. at least i don't think it does. nor does sectoral leaps and bounds in profits--the point is aggregate profits have declined by a lot since esp. 1973. but, i'm still hunting for more comp. data.

i'd like to take a stab writing something about the "int'l capitalist class."

all it does is snow here. christ on a popsickle stick. i went to the market today, and there are no potatoes. none. it looked like a scene out of the road. i wish we could get one of those control economies, quick. so maybe, more time to kill.

Posted by: slothrop | Dec 28 2006 22:41 utc | 65

it is social relations which have become infinitely more complicated

i agree w/ this and there are all those pschological "propensities" to consume or not, and complex web of symbols steering ideological justifications of inequity. but we can't possibly hope to know why this happens, until we understand how the system (re)produces social relations. as our favorite anthropolist david graeber says, the MoP produces humans too. but that's another detail. my aim here was much more modest.

Posted by: slothrop | Dec 28 2006 22:48 utc | 66

still having trouble finding those int'l capitalist overlords ;-)

walden bello: Globalization in Retreat

When it first became part of the English vocabulary in the early 1990s, globalization was supposed to be the wave of the future. Fifteen years ago, the writings of globalist thinkers such as Kenichi Ohmae and Robert Reich celebrated the advent of the emergence of the so-called borderless world. The process by which relatively autonomous national economies become functionally integrated into one global economy was touted as “irreversible. ” And the people who opposed globalization were disdainfully dismissed as modern day incarnations of the Luddites that destroyed machines during the Industrial Revolution.

Fifteen years later, despite runaway shops and outsourcing, what passes for an international economy remains a collection of national economies. These economies are interdependent no doubt, but domestic factors still largely determine their dynamics.

Globalization, in fact, has reached its high water mark and is receding.

During globalization’s heyday, we were told that state policies no longer mattered and that corporations would soon dwarf states. In fact, states still do matter. The European Union, the U.S. government, and the Chinese state are stronger economic actors today than they were a decade ago. In China, for instance, transnational corporations (TNCs) march to the tune of the state rather than the other way around.

Moreover, state policies that interfere with the market in order to build up industrial structures or protect employment still make a difference. Indeed, over the last ten years, interventionist government policies have spelled the difference between development and underdevelopment, prosperity and poverty. Malaysia’s imposition of capital controls during the Asian financial crisis in 1997-98 prevented it from unraveling like Thailand or Indonesia. Strict capital controls also insulated China from the economic collapse engulfing its neighbors.

Fifteen years ago, we were told to expect the emergence of a transnational capitalist elite that would manage the world economy. Indeed, globalization became the “grand strategy” of the Clinton administration, which envisioned the U.S. elite being the primus inter pares -- first among equals -- of a global coalition leading the way to the new, benign world order. Today, this project lies in shambles. During the reign of George W. Bush, the nationalist faction has overwhelmed the transnational faction of the economic elite. These nationalism-inflected states are now competing sharply with one another, seeking to beggar one another’s economies.
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Why did globalization run aground? First of all, the case for globalization was oversold. The bulk of the production and sales of most TNCs continues to take place within the country or region of origin. There are only a handful of truly global corporations whose production and sales are dispersed relatively equally across regions.

Second, rather than forge a common, cooperative response to the global crises of overproduction, stagnation, and environmental ruin, national capitalist elites have competed with each other to shift the burden of adjustment. The Bush administration, for instance, has pushed a weak-dollar policy to promote U.S. economic recovery and growth at the expense of Europe and Japan. It has also refused to sign the Kyoto Protocol in order to push Europe and Japan to absorb most of the costs of global environmental adjustment and thus make U.S. industry comparatively more competitive. While cooperation may be the rational strategic choice from the point of view of the global capitalist system, national capitalist interests are mainly concerned with not losing out to their rivals in the short term.

A third factor has been the corrosive effect of the double standards brazenly displayed by the hegemonic power, the United States. While the Clinton administration did try to move the United States toward free trade, the Bush administration has hypocritically preached free trade while practicing protectionism. Indeed, the trade policy of the Bush administration seems to be free trade for the rest of the world and protectionism for the United States.

Fourth, there has been too much dissonance between the promise of globalization and free trade and the actual results of neoliberal policies, which have been more poverty, inequality, and stagnation. One of the very few places where poverty diminished over the last 15 years is China. But interventionist state policies that managed market forces, not neoliberal prescriptions, were responsible for lifting 120 million Chinese out of poverty. Moreover, the advocates of eliminating capital controls have had to face the actual collapse of the economies that took this policy to heart. The globalization of finance proceeded much faster than the globalization of production. But it proved to be the cutting edge not of prosperity but of chaos. The Asian financial crisis and the collapse of the economy of Argentina, which had been among the most doctrinaire practitioners of capital account liberalization, were two decisive moments in reality’s revolt against theory.

Another factor unraveling the globalist project is its obsession with economic growth. Indeed, unending growth is the centerpiece of globalization, the mainspring of its legitimacy. While a recent World Bank report continues to extol rapid growth as the key to expanding the global middle class, global warming, peak oil, and other environmental events are making it clear to people that the rates and patterns of growth that come with globalization are a surefire prescription for ecological Armageddon.

The final factor, not to be underestimated, has been popular resistance to globalization. The battles of Seattle in 1999, Prague in 2000, and Genoa in 2001; the massive global anti-war march on February 15, 2003, when the anti-globalization movement morphed into the global anti-war movement; the collapse of the WTO ministerial meeting in Cancun in 2003 and its near collapse in Hong Kong in 2005; the French and Dutch peoples’ rejection of the neoliberal, pro-globalization European Constitution in 2005 -- these were all critical junctures in a decade-long global struggle that has rolled back the neoliberal project. But these high-profile events were merely the tip of the iceberg, the summation of thousands of anti-neoliberal, anti-globalization struggles in thousands of communities throughout the world involving millions of peasants, workers, students, indigenous people, and many sectors of the middle class.
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From today’s vantage point, globalization appears to have been not a new, higher phase in the development of capitalism but a response to the underlying structural crisis of this system of production. Fifteen years since it was trumpeted as the wave of the future, globalization seems to have been less a “brave new phase” of the capitalist adventure than a desperate effort by global capital to escape the stagnation and disequilibria overtaking the global economy in the 1970s and 1980s. The collapse of the centralized socialist regimes in Central and Eastern Europe deflected people’s attention from this reality in the early 1990s.

Posted by: b real | Dec 29 2006 5:49 utc | 67

the aim of those investments is not determined by profit rates.

well, this isn't true, even for the grand purpose of detaching china as an example of the capitalist MoP--all done i suppose to decry this or that marxism.


So you think that when the Chinese goverment directs investment to e.g. building subways in Beijing, engineering schools, and financing telecommunications firms, it makes these decisions in hopes of maximizing profit?

Really? Wages (of the lucky) are skyrocketing in China and domestic consumption is following along.

by most measures, the miserable poverty of rural china has been alleviated--most of this accomplished in the eightees after agricultural reforms featuring lower taxation. urban development has been, from the stuff i read (j. of development 82 (2007) 1-42, for example) a drain on rural resources including labor, and a main driver of inequality, environmental destruction, corruption.


Did I say it was nice, pleasant, or environmentally correct? No. I said that the Chinese domestic market is growing rapidly and the Chinese government is explicitly building this domestic market - perhaps in anticipation of a collapse of the US market. That they are building the domestic market by hammering the peasants and the environment is true, but not really the point. The point here is that the model of overaccumulation makes no sense when you have a state directed investment program that is deliberately growing the domestic marketplace. Marx draws a picture of a class of individual investors, each motivated by the desire of maximizing individual short term return, inexorably driving down profit rates and saturating markets. But a lot of China investment is directed by engineers and economists who have READ MARX and who are using complex economic and social models to try to build up a sufficient urban middle class as a domestic market before the countryside rebels and who explicitly use 30 year or more time lines - and are motivated by such ideas as state power and nationalism as well as personal enrichment.

but I don't know that and you won't find the answers in a 19th century polemic.

sure. some problems there my little essay intended to acknowledge. we'd probably do better than to read capital vol. 3 and rathe look at the overaccumulation crisis as a way to explain what's going on. so: overinvestment-overaccumulation-undercomption solved by inflationary credit which drives down savings.

To me this is ridiculously naive. Compare the Chinese domestic market today to 1980 - we have seen the overnight creation of a huge domestic market without "inflationary credit" and, in fact, accompanied by a massive accumulation of savings by the state - the primary investor. The US economy is similarly not working along lines where profit rates determine investment. Why did every major US airline borrow money to grow recklessly in spite of falling profits - and, in fact, explosive losses? Because decisions are not made by individual investors in the airline, but by interlocking managements that are maximizing earnings of themselves and financial firms. The vast losses of these airlines have not at all made the investments unprofitable for the people and companies that made the decisions.

Posted by: citizen k | Dec 31 2006 3:21 utc | 68

So you think that when the Chinese goverment directs investment to e.g. building subways in Beijing, engineering schools, and financing telecommunications firms, it makes these decisions in hopes of maximizing profit?

oh yes! massive capital expenditure is a means of absorbing the surplus, while also socializing costs capitalists are unwilling tobear. in a country of a billion point two people.

i would like to know more about this dynamic. but, i can't imagine with the kind demographic problems china has, even this kind of expenditure will decrease rising inequities. but, i'd like to know more.

I said that the Chinese domestic market is growing rapidly and the Chinese government is explicitly building this domestic market - perhaps in anticipation of a collapse of the US market.

i'm skeptical of this claim. as i said, there's a lot of evidence that distribution of surplus and reduction of inequality is achieved by land reform, not expansion of urban consumption.

we have seen the overnight creation of a huge domestic market without "inflationary credit"

now, now. this isn't true. the yuan is in big need of "devaluation"

Why did every major US airline borrow money to grow recklessly in spite of falling profits

for me, this objection is wholly unconnected w/ the crisis of overaccumulation. transportation is historically plagued by excessive competition because of "network effects." an anomaly.

you the man, ck.

Posted by: slothrop | Dec 31 2006 4:02 utc | 69

oh yes! massive capital expenditure is a means of absorbing the surplus, while also socializing costs capitalists are unwilling tobear. in a country of a billion point two people.
Let's not touch the problem of absorbing a surplus they didn't have 20 years ago, and go to the "socializing costs" part. Even this is incompatible with the thesis in Capital Vol3 where capitalism is postulated to have no mechanism to deal with cost socialization. Unless you want to claim that China is not capitalist, in which case you have to discard the accumulation analysis anyways since it only claims to apply to capitalism.
i'm skeptical of this claim. as i said, there's a lot of evidence that distribution of surplus and reduction of inequality is achieved by land reform, not expansion of urban consumption.

But I don't claim that the Chinese government is primarily concerned with reducing inequality. They appear to concerned with economic growth, social stability, and national and class power. As such, extreme social inequality and the attendent instability is a problem for them, but they appear to be happy to deal with it by titrating the mix of repression and economic growth. If they get the mix wrong, they will die, but that's the game they are playing.

we have seen the overnight creation of a huge domestic market without "inflationary credit"

now, now. this isn't true. the yuan is in big need of "devaluation"


The yuan "needs" devaluation just as Iraq "needs" a US army in it. Obviously there is no economic law that forces devaluation, otherwise devaluation would not be the topic of dispute between US and Chinese state managers. The point I was making is that China 20 years ago had no domestic market. It has a monster domestic market now - one created by deliberate application of state investment and changes in domestic economic operation. In fact, even the economy of 19th century UK was nothing like what the economists claimed - because all that capitalist investment took place in a context created by the British Imperium. The whole theory of accumulation crisis depends on the obviously false premise that there is a fixed international economic system in which these purely economic "investors" blindly seek to maximize rates of return. In the actual world, the employed managers of Wal-Mart now invest the money they manage for other people to open stores in China to sell goods to the Chinese workers who have money to spend because they make the goods that Wal-Mart sells in the US - that is, the domestic market in China, deliberately created by the Chinese government subsidy of export industries, now attracts investment as planned.

Posted by: citizen k | Dec 31 2006 14:38 utc | 70

a bit on china's development visavis overaccumulation:

The huge potentiality of the internal market in China is not, therefore, to be ignored and some of the foreign direct invest [123] ment in, say, microelectronics is as much oriented to selling internally as it is to exporting to the rest of the world. But even more dramatic are the prospects for long-term infrastructural investment. Since 1998, the Chinese have sought to absorb their vast labour surpluses (and to curb the threat of social unrest) by debt-financed investment in huge mega-projects that dwarf the already huge Three Gorges dam. They are proposing a far more ambitious project (costing at least $60 billion) to divert water from the Yangtze to the Yellow River. New subway systems and highways are being built in major cities, and 8,500 miles of new railroads are proposed to integrate the interior to the economically dynamic coastal zone, including a highspeed link between Shanghai and Beijing and a link into Tibet. Urban infrastructures are everywhere being upgraded. The Olympic Games is prompting heavy investment in Beijing. This effort is far larger in toto than that which the United States undertook during the 1950s and 1960s, and has the potential to absorb surpluses of capital for several years to come. It is, however, deficitfinanced, and that entails high risks since if the investments do not return their value to the accumulation process in due course, then a fiscal crisis of the state will quickly engulf China with serious consequences for economic development and social stability.22 Nevertheless, this proposes to be a remarkable version of a spatiotemporal fix that has global implications not only for absorbing overaccumulated capital, but also for shifting the balance of economic and political power to China as the regional hegemon and perhaps placing the Asian region, under Chinese leadership, in a much more competitive position vis-a-vis the United States. All the more [124] reason, therefore, for the United States to get a handle on the oil supplies that China increasingly needs from the Caspian Basin and from the Middle East.

A second possible outcome, however, is increasingly fierce international competition as multiple dynamic centres of capital accumulation compete on the world stage in the face of strong currents of overaccumulation. Since they cannot all succeed in the long run, either the weakest succumb and fall into serious crises of localized devaluation or geopolitical struggles arise between regions. The latter can get converted via the territorial logic of power into confrontations between states in the form of trade wars and currency wars, with the ever-present danger of military confrontations (of the sort that gave us two world wars between capitalist powers in the twentieth century) lurking in the background. In this case, the spatiotemporal fix takes on a much more sinister form as it transmutes into the export of localized and regional devaluations and destruction of capital (of the sort that occurred on a massive scale in East and South-East Asia and in Russia in 1997-8). How and when this occurs depends, however, just as much upon the explicit forms of political action on the part of state powers as it does upon the molecular processes of capital accumulation in space and time. DAVID HARVEY, THE NEW IMPERIALISM (2003).

and remember too asian development depends on a fairly strong dollar--reducing u.s. current accounts deficit would require a big devaluation of the $ really hurting asian/global productivity growth. no good solution there. the developing world's growth is subordinated to u.s./european debt-financed consumption.

and there's the "overheating" of the chinese domestic economy. all that debt-financed expansion, something like 10% gdp growth per year, is inflationary. if you read through the business press, it seems like inflation should be much higher than is officially reported. maybe mitigating explosive inflation there is the quite high savings rate in china (something like 40% of personal income vs. our sub-1%)?. i don't know. but inflation is a problem solved by devaluation of yuan as happened i believe in the early ninetees. of course, the u.s. wants revaluation of the yuan in order to reduce the trade deficit. but, given the problem of inflation in china, the reverse may happen, adding to the imbalance of trade and continued crisis of overaccumulation.

and we see this replaying in different ways throughout the global economy.

learning as i go. thanx ck. i'm just a fucking english major.

Posted by: slothrop | Dec 31 2006 17:52 utc | 71

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