Saturday, March 03, 2012

the asymptotes of power

bnarchives | My presentation today is a follow-up to a talk I delivered last year at the 2010 inaugural conference of the Forum on Capital as Power. Both presentations are part of my joint research with Shimshon Bichler on the current crisis. Last year, my purpose was to characterize this crisis. I argued that it was a ‘systemic crisis’, and that capitalists were gripped by ‘systemic fear’. This year, my goal is to explore why.

Begin with systemic fear. This fear, we argue, concerns the very existence of capitalism. It causes capitalists to shift their attention from the day-to-day movements of capitalism to its very foundations. It makes them worry not about the short-term ups and downs of growth, employment and profit, but about ‘losing their grip’. It forces on them the realization that their system is not eternal, and that it may not survive – at least not in its current form.

Last year, many in the audience found these claims strange, if not preposterous. Capitalism was obviously in trouble, they conceded. But the crisis, though deep, was by no means systemic. It threatened neither the existence of capitalism nor the confidence of capitalists in their power to rule it. To argue that capitalists were losing their grip was frivolous.

That was twelve months ago.

Nowadays, the notions of systemic fear and systemic crisis are no longer farfetched. In fact, they seem to have become commonplace. Public figures – from dominant capitalists and corporate executives, to Nobel laureates and finance ministers, to journalists and TV hosts – know to warn us that the ‘system is at risk’, and that if we fail to do something about it, we may face the ‘end of the world as we know it’.

There is, of course, much disagreement on why the system is at risk. The explanations span the full ideological spectrum – from the far right, to the liberal, to the Keynesian, to the far left. Some blame the crisis on too much government and over-regulation, while others say we don’t have enough of those things. There are those who speak of speculation and bubbles, while others point to faltering fundamentals. Some blame the excessive increase in debt, while others quote credit shortages and a seized-up financial system. There are those who single out weaknesses in particular sectors or countries, while others emphasize the role of global mismatches and imbalances. Some analysts see the root cause in insufficient demand, whereas others feel that demand is excessive. While for some the curse of our time is greedy capitalists, for others it is the entitlements of the underlying population. The list goes on.

But the disagreement is mostly on the surface. Stripped of their technical details and political inclinations, all existing explanations share two common foundations: (1) they all adhere to the two dualities of political economy: the duality of ‘politics vs. economics’ and the duality within economics of ‘real vs. nominal’; and (2) they all look backward, not forward.

As a consequence of these common foundations, all existing explanations, regardless of their orientation, seem to agree on the following three points:

1. The essence of the current crisis is ‘economic’: politics certainly plays a role (good or bad, depending on the particular ideological viewpoint), but the root cause lies in the economy.

2. The crisis is amplified by a mismatch between the ‘real’ and ‘nominal’ aspects of the economy: the real processes of production and consumption point in the negative direction, and these negative developments are further aggravated by the undue inflation and deflation of nominal financial bubbles whose unsynchronized expansion and contraction make a bad situation worse.


3. The crisis is rooted in our past sins. For a long time now, we have allowed things to deteriorate: we’ve let the ‘real economy’ weaken, the ‘bubbles of finance’ inflate and the ‘distortions of politics’ pile up; in doing so, we have committed the cardinal sin of undermining the growth of the economy and the accumulation of capital; and since, according to the priests of economics, sinners must pay for their evil deeds, there is no way for us to escape the punishment we justly deserve – the systemic crisis.