• Embed Doc
  • Copy Link
  • Readcast
  • Collections
  • CommentGo Back
Download
 
Monopoly-Finance Capital and the Paradox of Accumulation
 
John Bellamy Foster and Robert W. McChesney
 This month marks the eightieth anniversary of the 1929 Stock Market Crash thatprecipitated the Great Depression of the 1930s. Ironically, this comes at the verymoment that the capitalist system is celebrating having narrowly escaped fallinginto a similar abyss. The financial crash and the decline in output a year ago,following the collapse of Lehman Brothers, was as steep as at the beginning of the Great Depression. “For a while,” Paul Krugman wrote in the
New York Times
 in August, “key economic indicators — world trade, world industrial production,even stock prices — were falling as fast or faster than they did in 1929-30. But inthe 1930s the trend lines kept heading down. This time, the plunge appears to beending after just one terrible year.”1Big government, through the federal bailoutand stimulus, as well as the shock-absorber effects of the continued payouts of unemployment and Social Security benefits, Medicare, etc., slowed the descentand helped the economy to level off, albeit at a point well below previous output.Yet if the Great Recession has leveled off before plunging into the depths of asecond Great Depression, it has nonetheless left the U.S. and world economiesin shambles. Official U.S. unemployment is over 9 percent, while realunemployment, taking into account all of those wanting jobs plus part-timersdesiring full-time work, is close to twice that. Capacity utilization in industry in theUnited States is at its lowest level since the 1930s. Investment in new plant andequipment has faltered. The financial system is a shadow of what it was only ayear ago. The recovery stage of the business cycle is widely expected to besluggish.Indeed, what economists most fear at this point is protracted economicstagnation or a long period of slow growth. “Though the economy may stabilize,”Thomas Palley has written for the New America Foundation, “it will likely beunable to escape the pull of stagnation. That is because stagnation is the logicalnext stage of the existing [economic] paradigm.”2Judging by the actions of theeconomic authorities themselves, there seems to be no way out of the presenteconomic malaise that is acceptable to the vested interests, but to restart thefinancialization process, i.e., the shift in the center of gravity of the economy fromproduction to finance — meaning further financial bubbles. Yet, rather thanovercoming the stagnation problem, this renewed financialization will only serveat best to put off the problem, while piling on further contradictions, setting thestage for even bigger shocks in the future.This paradox of accumulation under today’s monopoly-finance capital wasrecently captured in a column by Larry Elliott, economics editor of the London-based
Guardian
. He contrasted the Keynesian approach to the crisis,emphasizing fiscal stimulation and financial regulation, to the more conservative
 
approach favored by British Chancellor of the Exchequer Alistair Darling, whichsees the revival of a finance-driven economy as crucial. In Elliott’s view, thesupport for the restoration of unfettered finance on the part of leadinggovernmental authorities, such as Darling, may reflect the assessment (shared,ironically, with Marxian economics) that financialization is capital’s primaryrecourse today in countering a basically stagnant economy. As Elliott himself puts it:Darling’s more cautious approach [in contrast to Keynesian regulatory proposals]is, strangely perhaps, more in tune with the Marxist analysis of the crisis. Thisargues that it is not the financialisation of Western economies that explains thesluggish growth of recent decades; rather, it is the sluggish growth and the lackof investment opportunities for capital that explains financialisation. From thisperspective, the only way capitalists could increase their wealth was through theexpansion of a finance sector which, divorced from the real economy, becameever more prone to asset bubbles. Calling time on the casino economy does notmean balanced growth, it just means lower growth.Those interested in the Marxist perspective should get hold of 
The Great Financial Crisis
, written by John Bellamy Foster and Fred Magdoff, published byMonthly Review Press in New York. It is a fascinating read. Whether Darling hasread it, I don’t know. I suspect, however, that Treasury caution when it comes toreigning in big finance has less to do with Marx and rather more to do withinstitutional capture.3 There are two key points here: (1) the determination of the economic authoritiesto reinstall the old regime of essentially unregulated financial markets may bedue to a perception that the root problem is one of a stagnant real economy,leaving the casino economy as the only practical means of stimulating growth; (2)this attempt to restart financialization may also reflect “institutional capture,” i.e.,the growing power of financial interests within the capitalist state. These are notcontradictory, as (1) invariably leads to (2), as in the case of military spending.The extreme irrationality of such a solution is not lost on the
Guardian
’seconomics editor, who presents the following dismal, but realistic, scenario:“After a short period in which bankers are chastened by their egregious follythere is a return to business as usual. This is the most worrying of all the[various] scenarios [arising from the crash], since it will mean that few — if any —of the underlying problems that caused the crisis have been solved. As a result,we can now start counting down the days to an even bigger financial crisis downthe road.”4 All of this underscores the stagnation-financialization trap of contemporaryaccumulation, from which it is now increasingly clear there is no easy or complete escape within the system. Such an irrational economic condition and itslong-term significance cannot be explained by standard economic models, butonly in terms of its historic evolution.
Stages of Accumulation
 
 
There has long been a fairly widespread agreement among Marxian politicaleconomists and economic historians that the history of capitalism up through thetwentieth century can be divided into three stages.5The first of these stages is
mercantilism
, beginning in the sixteenth century and running into the eighteenth.In terms of the labor process and the development of productive forces, Marxdefined this as the period of “manufacture” (meaning the age of handicraftproduction prior to the rise of what he called “machinofacture”). Nascent factorieswere typified by the increasingly detailed division of labor described by AdamSmith in his
Wealth of Nations
. Accumulation took place primarily in commerce,agriculture, and mining. What Marx called Department I (producing means of production) remained small in both absolute and relative terms in this stage,while Department II (producing commodities for consumption) was limited by itshandicraft character.The second stage is an outgrowth of the industrial revolution in Britain, centeredat first in the textile trade and then spreading to industry generally. Viewed fromthe standpoint of the present, this is often conceived of as
competitive capitalism
 and as the original age of liberalism. Here the focus of accumulation shiftedsharply towards modern industry, and particularly the building up of DepartmentI. This included not only factories themselves, but also a whole hugeinfrastructure of transportation and communications (railroads, telegraphs, ports,canals, steamships). This is a period of intense competition among capitals and aboom-and-bust cycle, with price competition playing a central role in governingeconomic activity.The third stage, which is usually called
monopoly capitalism
or corporatecapitalism, began in the last quarter of the nineteenth century and wasconsolidated in the twentieth century. It is marked by the spiraling concentrationand centralization of capital, and the rise to dominance of the corporate form of business organization, along with the creation of a market for industrialsecurities. Industries increasingly come under the rule of a few (oligopolistic)firms that, in Joseph Schumpeter’s terms, operate “corespectively” rather thancompetitively with respect to price, output, and investment decisions at both thenational and increasingly global levels.6In this stage, Department I continues toexpand, including not just factories but a much wider infrastructure intransportation and communications (automobiles, aircraft, telecommunications,computers, etc.). But its continued expansion becomes more dependent on theexpansion of Department II, which becomes increasingly developed in this stage— in an attempt to utilize the enormous productive capacity unleashed by thegrowth of Department I. The economic structure can thus be described as“mature” in the sense that both departments of production are now fullydeveloped and capable of rapid expansion in response to demand. The entiresystem, however, increasingly operates on a short string, with growing problemsof effective demand. Technological innovation has been systematized and maderoutine, as has scientific management of the labor process and even of consumption through modern marketing. The role of price competition inregulating the system is far reduced.
of 00

Leave a Comment

You must be to leave a comment.
Submit
Characters: ...
You must be to leave a comment.
Submit
Characters: ...