Commentaries on the recent ‘financial crisis’ of the past year abound, but rarely do they reflect a perspective outside of the economic orthodoxy that has become the status quo. David Harvey, a Marxist anthropologist at the City University of New York, however, offers an alternative account of the contemporary economic depression.

Harvey’s analysis,  departs from other accounts as it is informed by Marxian political economy. According to Harvey, an understanding of what has given rise to the present crisis must be rooted in the historical situations which have given rise to the present. “There is nothing new to the idea that capitalism is prone to crises”: for example, the 1930s and the stagnation-stagflation of the 1970s. For a Socialist account, crises are not simply ‘errors’ of applying free market principles incorrectly, but something essential to the social movement of privatized capital itself, which must always expand to sustain itself. The ‘market equilibrium’ which ‘adjusts itself automatically’, is something that occurs through those very crises, often all but humanely. But, frequency and magnitude have not always been the same. In recent times, crises in the capitalist world have only become bigger and more globalized, depending on the way in which capital is directed and the fact that the United States has been the most recent epicenter. For example, between 1945 and 1970 approximately 50 economic crises occurred in the capitalist world. After 1975, and the “neo-liberal turn”, there have been 300 crises which were previously localized and contained.

Harvey compares the present to the “effective demand” crisis of the 1930s. That is, simply having a population with a demand for a supply of commodities is not adequate for market circulation – a population must have effective means to purchase goods: employment and money, for effective consumption to keep overproduction down, which otherwise would cause value to fall and market stagnation. While this sounds obvious, its implications are not. The economy must be treated systemically. The solution to the crisis of the 30s was thus Keynesian debt financing of government programs, which stimulated the economy by government spending in public employment, while regulating markets. But also, it was the Second World War – which as a temporary fix has created obvious dependence problems, and “suburbanization” of living spaces.

A dramatic change occurred after the period of strong economic growth and political power of labor in the 1950s and 60s. This broke down due to absence of effective investment opportunities in production, for the surplus capital created in the post war period. “Neo-liberalism” – the policy of Ronald Reagan, Margaret Thatcher, and Augusto Pinochet – challenged Keynesian economics in response, in that it claimed that only deregulated “free markets” are sound policy. This means costs can be cut and profits can be made by permitting immigration of workers for cheaper rates; the exporting of capital and “offshoring”; and, by the political dismantling of labor. It replaces the consumptive capacity of a population with cut production costs and debt financing of consumption, or “credit cards”. Its central tenet (“Reaganomics”) is that placing capital in the hands of wealthy classes, rather than labor and government regulation, will invest in the economy, producing jobs and generating wealth.

It is with this that Harvey takes issue. As economies produce surplus capital in times of growth, and this surplus must be effectively reinvested in production to continue, it is imperative that capital is not invested into assets which are not able to be translated back into capital. Harvey points out, that unlike neo-liberal claims, what was actually invested in by capitalist classes in the 1970s and 80s, and again before the last crisis, were unproductive assets and property – or, finance interest and speculation bubbles. This replacement of labor’s effective demand with imaginary “Ponzi character” markets, international currency speculation, and debt financing of normal commodity consumption has built up to a level which can often neither be maintained, repaid, nor even leave households capable of spending enough to prevent market stagnation. However, Consensus politicians like Barack Obama or Gordon Brown promise a return to 3 % growth situations via bailouts, effectively saving the institutions that caused thousands of individual foreclosures. Harvey points out that this is an extremely “tall order”, if not “impossible”. Although the average rate of growth of the capitalist world since 1750 (when the world economy consisted of 16.5 billion Dollars) has been 2.25 %, 3% growth now (56.2 billion) is something much different than what it meant in postwar or Manchester and Birmingham England days. This kind of “growth” may not be sustainable.

Harvey tells us, that as the neo-liberal solution was one that tried to recover the last crisis, setting up the present, if we respond to its own crisis in a neo-liberal way, we shall repeat these events, or end up somewhere unforeseen. He implores us to understand economy systemically, and crises as not simply effects of “human greed”  – human greed has existed as long as humans, but the current proportions of exploitation only as long as a system permitting them to run wild. Coming up with a “real alternative” to market anarchy, or a “zero growth model, while difficult, is the task he says must be undergone. And, as neo-liberal hegemony remains unchallenged in universities this will prove to be an extremely daunting task. For Harvey, however, it is most often a refusal to admit social situations of “class” and interest in politics and economy which hinder one’s ability to analyze situations such as bank bailouts. Few would approve of a return to the more brutal political moments of the last century, yet an alternative to economic orthodoxy which has given rise to a comparable amount of turmoil throughout the world may be in order. One need not be a “Marxist” to be critical of the status quo and expect responsible social planning. |