Doom and Gloom
That’s the perspective put forward by John B. Judis, in an article published recently in The New Republic. While he asserts that a “recovery has taken hold” (on the basis of what, the addition of 290,000 jobs in April?), the rest of his essay is devoted to arguing that global capitalism “will continue on the gradual downward slope that began in the 1970s.” In his view, continued economic instability will contribute to political instability and he is less than sanguine about the possible outcomes.
Judis bases his economic argument on a recent essay by the historian Robert Brenner, entitled “What is Good for Goldman Sachs is Good for America: The Origins of the Present Crisis.” As it turns out, I followed Judis’s link to Brenner’s piece the same day that four of the biggest banks in the United States—Goldman Sachs, JPMorgan Chase, Bank of America, and Citigroup—reported the eye-popping statistic that their trading desks made money each and every day of the first quarter of this year. (Morgan Stanley, for its part, actually lost money during four trading days in the quarter!)
Give Brenner credit for the appropriate title—and for the kind of complex, in-depth, historically informed analysis that is missing from much of mainstream economics and economic punditry. It’s a compelling narrative of the contradictions of capitalism in the postwar period, especially since the 1970s, and of the origins of the present crisis.
That said, I am not entirely convinced by Brenner’s story. What causes me pause is the fact that his argument rests on the idea that there has been a declining rate of profit in the manufacturing sector (because of global overcapacity, stemming from competition from China, India, and other newly industrializing countries beginning in the 1970s), and the growth of the financial sector was facilitated by the state to paper over the stagnationist effects of the long-term tendency of the rate of profit to fall. (That’s a quick, and too simple, rendition of his argument. The essay itself deserves a careful reading.)
I have my doubts both about the centrality of manufacturing to explain U.S. political economy since the 1970s and about whether, in fact, there has been a falling rate of profit. But the point I want to make here is that the assertion of a falling rate of profit does not make the analysis of the origins of the current crisis particularly left-wing, let alone Marxian. It was David Ricardo, not Marx, who argued that capitalism exhibited a tendency for the rate of profit to fall (because of the declining fertility of land and the consequent rise in land rents, cutting into profits). Marx’s argument, in chapter 13 of volume 3 of Capital, was that, if there is a tendency for the rate of profit to fall, it’s due to factors endogenous to capitalism (such as the rising organic composition of capital) and not, as Ricardo and others argued, due to exogenous factors. (And, of course, Marx then went on to write chapter 14, on “counteracting factors.”)
Even so, while I disagree with one of the central elements of the story told by Judis and Brenner, I do share their doom and gloom about the punishments that are being meted out—in Greece, the United States, and around the world—in order to save capitalism from its current crises.