Friday, 2 February 2018

Taking a Stroll Down Memory Lane.

It doesn’t take a sharp observer to realise things of late are going pear-shaped for capitalism, one needs only to follow the news: globalisation gone mad, financialisation, private debt growth, housing bubble burst, GFC, bailouts, repos, recession, unemployment, inequality in all shapes and colours, wage stagnation, the bloody aftermath to the Arab Spring, terrorism, rise of the surveillance state and the far right, Europe, US, South America. And that’s without mentioning climate change, ocean acidification, mass extinction, the risk of global pandemics, and now the growing likelihood of Cold War 2 or even a nuclear war.

Don’t believe me? Even as I wrote this, our reptilian plutocratic overlords were performing their ultimately inconsequential but newsworthy Davos annual hand-wringing ceremonies.


Things didn’t seem so bad twenty years ago, yes?

1999 Seattle WTO protests [A]

Well, yes and no.

Yes: Those were the days of the late Clinton Administration and early Tony Blair. In Oz we were transitioning from Bob Hawke/Paul Keating (Labor) to John Howard (Coalition). History had just ended, Francis Fukuyama had said a little earlier. It was a happy ending, too (Fukuyama never said anything about masseuses, btw).

No: Contra Fukuyama, the seeds of today’s troubles had been sown and some had noticed. A concrete example: 1999 Seattle WTO protests. Things weren’t all hunky-dory, matey.

But that was just the rabble, right?

Well, no. Not really.

To their credit, even some among the least likely were having second thoughts: for example, Paul Krugman, Joseph E. Stiglitz and Dani Rodrik (here’s Mark Thoma’s very comprehensive report on the Rodrik vs pretty much everybody else debate on globalisation; read with particular attention the Rodrik-Mankiw exchange, keeping Marx in mind).

The anti-neoclassic economics protest movement among economics students also dates from those seemingly long-ago days (Do you remember when Deirdre McCloskey (PDF) was playing the Princess Leia to the rebels, sorry, students? Well, since then she turned to the Dark Side).


Image Credits:
[A] "WTO protests in Seattle, November 30, 1999 Pepper spray is applied to the crowd". Nov. 30, 1999. Author: Steve Kaiser from Seattle, US. Source: Wikimedia. File licensed under the Creative Commons Attribution-Share Alike 2.0 Generic license. My usage of the file does not indicate its author endorsement of me or said usage. 


  1. You didn't mention that today we have globalised economic growth, much as we had in 2007, and growth that is currently increasing in pace contrary to all of the predictions of all of the permanent catastrophists. In parts of Africa like Ethiopia we have had growth rates of around 10% for the last decade and more.

    I don't think things look bad at all for industrial capitalism at the moment. That is not the case for money-lending capitalists however, as the stronger economic growth means that the demand for money-capital is rising, relative to its supply causing interest rates to rise, and the prices of financial assets to fall sharply as seen last week on global bond and stock markets.

  2. Thanks for your comment, Boffy.

    Maybe you are right. If Ethiopia has "had growth rates of around 10% for the last decade or more", then global capitalism must be doing real fine.

    That's why people feel so happy and carefree nowadays. After all, a year ago the Dow Jones Industrial Average was at 19,884.91, just this month it reached its peak of 26,616.7 (a gain of 6,731.79 points in 52 weeks!). The recent losses (1,365.74 points), to 25,520.96 (last Friday's close) surely means we've got rid of financial capitalism.

    That makes all the difference, yes? :-)

  3. This comment has been removed by a blog administrator.

    1. Boffy,

      I suggest you read the comments policy.

  4. I have read the comments policy, and can see no reason why you would delete the comment made. It contained no abuse, and I indeed make it a point of not using abusive language to anyone; it contained no suspicious links; it contained a factual presentation of the state of the world.

    So please explain exactly what aspect of the post you believe the comment breached. After all I have had a link to your blog on my own blogroll for some time, and would not like to think that I have been unwittingly directing my own readers to a censorious site, not open to serious debate.

    I would rather have this discussion here, than have to respond to your comments via my own blog.

    1. I no longer have your comment, Boffy, since I deleted it. Therefore, we'd have no basis to discuss my decision. In these circumstances there's little to gain from such an effort.

      Nor am I particularly inclined to discuss it: "My word is law and final". Or, as my grandfather used to say: "My house, my rules". It's up to me, and up to me alone, to determine when my rules have been breached.

      Nevertheless, in your case, I'm willing to make an exception. Do you keep a copy of your comment so that we can discuss on that basis? If you do, repeat the comment and I give you my word, I'll approve it.

      Is that acceptable? Otherwise, you are free to respond via your blog.

    2. I do usually keep a copy, but in this case didn't, as it was only a brief response that I saw no problem with. However, I do know the contents of the comment, and could paraphrase it. But, I am busy at the moment so it might take me until tomorrow to have time to write it again.

      However, whilst I accept that its up to you to make the rules, the is surely a requirement that the rules should be easily understood by everyone, and that they be applied consistently rather than arbitrarily, otherwise we end up with a repetition of the Stalinist system of making up rules as and when.

    3. I'm sure you don't realise it, Boffy, or you wouldn't have done it again.

      But the thing is, you've done it again (as I suspected you would).

      Breath deeply and think about it for a moment. Consider this bit:

      otherwise we end up with a repetition of the Stalinist system of making up rules as and when

      Deep down, after a little reflection, you do realise that makes no sense, yes?

      I'm no Stalin, there's no Cheka behind me. To delete your comment is in no way commensurate with the Gulag. This is not the URSS in the 1930s and this is not a purge.

      This is a blog. We are in 2018. You see the difference, don't you?

      I don't have your original comment, but I do remember you commenting on this: "If Ethiopia has "had growth rates of around 10% for the last decade or more", then global capitalism must be doing real fine."

      The fact I find whatever growth Ethiopia may have experienced in the last decades irrelevant is no evidence of my contempt for Ethiopians (note the two words: Ethiopia and Ethiopians). It's nothing to do with the fact I'm a worker in Australia.

      You can't safely conclude from that that I'm reflecting the point of view of the aristocracy of labour.

      There's a simpler, much more pedestrian explanation. It's evidence of Ethiopia being a small economy:

      "The GDP value of Ethiopia represents 0.12 percent of the world economy. GDP in Ethiopia averaged 18.65 USD Billion from 1981 until 2016, reaching an all time high of 72.37 USD Billion in 2016 and a record low of 6.93 USD Billion in 1994."

      It's evidence that the growth Ethiopia experienced have no bearing whatsoever with this:

      "It doesn’t take a sharp observer to realise things of late are going pear-shaped for capitalism, one needs only to follow the news: globalisation gone mad, financialisation, private debt growth, housing bubble burst, GFC, bailouts, repos, recession, unemployment, inequality in all shapes and colours, wage stagnation, the bloody aftermath to the Arab Spring, terrorism, rise of the surveillance state and the far right, Europe, US, South America. And that’s without mentioning climate change, ocean acidification, mass extinction, the risk of global pandemics, and now the growing likelihood of Cold War 2 or even a nuclear war."

      You see why I'm reluctant to extend this discussion?

    4. Actually, no I don't see why that follows from what you have said. My original post was not abusive, contained no dodgy links etc. or anything else that breached your comments policy. I have no desire to engage in a discussion of your comments policy. My original comment only related a series of facts about the global economy, which I would have been much happier to have been discussing instead. That you might not like those facts, or that you disagree with those facts, or wished to challenge and debate them is one thing, and is surely the whole purpose of comradely debate, and of scientific advance. To have instead prevented such discussion by simply deleting the comment without explanation is quite another!

      Having done so, I don't think it is at all unreasonable to then enquire as to exactly what your reason for deleting the comments was, isn't it, when in fact the comment did not break any of your comments rule. If you're only real reason for deleting the comment was that you disagreed with the content, but either couldn't or were not prepared to put up a counter argument, then I think your readers should be aware of that fact, and so should I, because, you are quite right - (you are not Stalin, with a huge state behind you, and I never said you were) and so I would then be quite free to recognise the nature of your blog, and to remove it from my blog roll, and your readers would also be free to make up their own minds about the veracity of the ideas and discussion you allow, and to respond accordingly.

      But, as i said, I would much prefer to be discussing the actual points I made, before you deleted them than discussing your protocols for censorship. If you are now prepared to discuss the substantive points rather than your comments policy I will resubmit the thrust of my deleted comment, but I do really need to know that comments will not be willy nilly deleted, otherwise, if I was going to be bothered to challenge any of the posts in your blog, it would be simpler for me to do so on my own blog.

  5. I was expecting a response to say that if I submitted a post reprising the contents of my original deleted post it would not be deleted willy-nilly. As you have not responded I will take it that such a post will not be deleted, as per your previous commitment.

    I will accordingly deal with the point you have raised in relation to Ethiopia, as part of that comment. It may take me until tomorrow to do so.

  6. Here is my comment as promised, reiterating the thrust of the previously deleted comment, and with a response to your point about Ethiopia, which unfortunately took it beyond the character limits, so that it is in two parts..

    Global surveys, do in fact, reveal higher levels of “happiness”, although that is not a good measure of the state of global capitalism for various reasons. Firstly, above a minimum level, the degree of “happiness” does not seem to be strongly correlated to wealth or income. Secondly, its wrong to see the health or strength of capitalism as synonymous with general levels of prosperity, because capital is generally strong, when labour is weak, and vice versa.

    However, we could see why hundreds of millions of people across the globe would be “happier” today than previously, because since the 1980's, the global working-class has doubled, and it has risen by around a third just since 2000. In other words, hundreds of millions of people have been, to use Marx's phrase, rescued from the idiocy of rural life. It is one reason that on pretty much every metric, from literacy, to child mortality, to life expectancy conditions have continued to improve for a large part of the world's population. Despite all of the eternal catastrophists warning every year of impending doom, the global economy continued to grow, after 2009, despite attempts in places to prevent it, via measures of austerity, and the policy of QE, which was designed to drain money away from general circulation, and real capital accumulation, and to divert it into the reflating of asset price bubbles.

    The growth of 10% p.a. in Ethiopia, for more than 10 years, is emblematic of that development, in a country that 20 years ago, the world was writing off, and singing songs about, as a means of raising charitable funding for the relief of famine. And, Ethiopia is not alone in experiencing such industrialisation and economic development in Africa, just as thirty years ago, a similar development arose in Asia.

    For the hundreds of millions be it in Ethiopia, and other developing African economies that have been rescued from the idiocy of rural life, and who have experienced a rise in their living standards, its not hard to see why they would have a reason to be happy. Indeed, it has been that rise in living standards, as a result of the growth of the global working-class that not long ago created shortages of various foodstuffs, as diets improved.

    In 2005, Chinese consumption of Meat was 2.4 times what it was in 1990, Milk 3 times, Fruit 3.5 times, Vegetables 2.9 times, Fish 2.3 times, whilst its consumption of cereals, mostly rice, fell by 20%. The large rise in demand from China and other developing economies, was part of the reason for the spike in global food prices at the end of 2007 and beginning of 2008. Demand for food rose so sharply that shortages began to appear, which, along with the price spikes, caused riots in a number of countries in 2008. Although global food demand is higher, today, no such shortages are likely, as the higher prices have led to an expansion of supply, including the development of large scale, industrialised farming, in a number of parts of Africa, such as Angola. In fact, just as with the increased investment in oil production, a similar process has led to a global milk glut, pushing the price of a litre of milk down below the price of a litre of water!
    This continued growth, and the fact that, again contrary to what all of the perma-catastrophists have predicted each year, that growth is actually strengthening across the globe, is the reason that stock markets have sold off, because that increased economic growth is creating a greater demand for money-capital, and an increased demand for labour-power, which will start to cause wages to rise, and profits to fall, both of which lead to higher interest rates, which thereby reduces the prices of revenue producing assets. The data now shows that 90% of global economies are growing at above trend rates of growth.

  7. Last week alone we saw US stock markets fall by around 9%, and yet it has had no impact on the real economy. In 1962, in similar economic conditions of increasing economic growth, US stock markets fell by 23%, without any impact on the real economy. And as Marx sets out, nor is there any reason why such financial crashes should impact the real economy, because it amounts only to one group of speculators losing money, whilst another group of speculators takes that money off them. The rise or fall of a company's share price makes not one jot of difference to that company's ability to keep producing whatever it produces, and to keep making profits from doing so, or to keep paying wages to the workers that engage in that production. As Marx sets out the fictitious capital is completely different to real capital, and indeed the interests of the owners of the former are directly antagonistic to the interests of the owners of the latter.
    There is no more reason why a fall of 9% in stock markets, or 25% in stock markets should in any way be confused with the health of the real global economy, any more than the tripling of stock markets after 2009, had any positive impact on the real economy, or real capital. On the contrary, that rise in asset prices after 2009, had negative consequences for the real economy, because fuelled by QE, it diverted money-capital away from real capital accumulation into financial speculation. The fall in stock and bond markets may be bad for those money-lending capitalists who owned stocks and bonds, but that in no way is bad for real capital, or the real capitalist economy.
    I don't know what you mean by financial capitalism, but if you mean by it these owners of loanable money-capital, then no this financial crash will not have got rid of them any more than did previous crashes. But, if you are implying that this crash in some way reflects a crisis for capitalism that is the opposite of the truth, for the reasons that Marx describes. It is a crisis only for those particular share and bond holders who lose money by it. For real capital, the fall in share and bond prices, means that it is cheaper to buy them back, and thereby avoid future dividend and interest payments as a deduction from profits; it means that workers pension contributions buy more of them, thereby firming up the capital base of those pension funds, so as to provide the future revenues required to meet pension liabilities, which thereby reduces the cost of providing workers' pensions (deferred wages), which reduces the value of labour-power, and facilitates a rise in the rate of surplus value, and profit; by reducing the astronomical level of house prices, it makes the cost for workers to buy and rent houses much lower, again thereby reducing the value of labour-power, pushing up the rate of surplus value, and profit, and thereby strengthening real capital.
    So, all in all, the fact show that far from things goin pear shaped for it, real capital today IS in a better place than it was ten years ago, and despite the attempts to slow down global growth, that strength is increasing, which is why interest rates are rising, and asset prices are falling.