October 18, 2011

The People versus the Stock-Jobbers II: Some Lessons

Posted in Class Struggle, Communism, Economics, Europe, Politics, United Kingdom, United States tagged , , , , , , , at 03:55 by Matthijs Krul

Two weeks on from my previous article on the ‘Occupy Wall Street’ movement, it is useful to comment on some of the developments since that time; as a wit might say, to take stock of events. Most heartening and most immediately obvious is the great spread of movements of a similar nature in other countries. This is not so much because the Occupy Wall Street movement was itself the first major response to the current great depression; the Spanish and Greek peoples had been moving onto the streets and mobilizing strikes in their hundreds of thousands before it. But it gave the very idea of a popular movement against our prevailing economic system, however widely or narrowly defined, a visibility and a focus that it had not had before. The Western media is chauvinistic and superficial, and easily writes off class struggle even in countries like Greece and Spain as mere indignation from lazy rabble in inefficient countries. Having, for the first time in the living memory of many, a mass movement that is very close to open anti-capitalism in the lion’s den itself is a different thing, and is bound to draw the attention even of the ‘great and good’.

This is not to dismiss the significance of the struggles in southern Europe and elsewhere. They play not only a major role in showing how class struggle can and should be done, and that it can be done anywhere; but they also have a significant effect on the political-economic constellation of forces, since in many ways the very fate of the European Monetary Union depends on the willingness of the peoples of southern Europe to accept any imposition by the north. Their resistance is therefore more than a ‘merely domestic’ affair. A rebellion in Judea will never quite be the same as a rebellion on the streets of Rome, as Jesus was never as much a threat as Spartacus was; at the same time, the latter’s ideological power has greatly outlasted the former’s. So it may well be here. One of the conclusions that must be drawn from events today is the absolute importance of the international dimension of the movement, not just in terms of political strategy, but also in terms of the battle of ideas. So far, one of the weaknesses of the movement has been its character as the ‘awakening of the white people’, the emphasis on the rebellion being an event in the rich countries: but this is only a major event precisely because of its rarity. That it happens at all is to be applauded, but if this movement is to survive, it must become a movement at least as much of the truly oppressed of the globe as it is a movement of the indebted and dissatisfied workers of the West. This holds true at least for as long as the protestors in New York, London and Berlin do not move their demands beyond their own immediate, domestic interests, and as long as they have no intention of actually threatening the rule of international capital in any way. Merely camping outside St. Paul’s does not harm anyone, and therefore achieves nothing.

But here also lies an opportunity. As Marx wrote, “one step of real movement is better than a thousand programmes”, and this movement has taken several major steps in a very short time. Splits and contentions in such a movement are inevitable and a sign of health rather than weakness, insofar as they lead to the further and further confrontation of those involved with the true nature of the prevailing system and its defensive structures. Every further step will lead some to halt in fear of what lies ahead, but it will also lead some to identify and overcome barriers where they had never known them before, and in so doing to grasp more and more clearly the full outline of our capitalist maze. While the nature of the First World is such that it’s ‘aristocracy of labor’ is the least likely to rebel against the dominion of capital, it is also true that if and when they do, it has the greatest impact. The current crisis, as crises tend to do, has opened the eyes of millions to the reality of the system in a way that no socialist pamphlet or labor conference could possibly do. This alone is invaluable. The real nature of this movement is shown precisely by the fact that even in the United States, the tendency within it towards fascism, chauvinism, and petty-bourgeois white populism has been insignificant in the extreme. Neither the ‘Tea Party’ nor the fanboys of Ron Paul have had any success in diverting it from its fundamental political understanding, however undeveloped that may yet be. This, again, is encouraging in the extreme.

If these analyses may seem contradictory, it is because the movement itself is. In fact, it could not be otherwise. Its diversity of goals and aims, and of causes for protest, is potentially a weakness; it is also potentially a strength. As Vijay Prashad, hardly a First World petty reformist, put it about the American branch of the movement:

Our strength comes in our diversity, in our realization that no single issue discounts any other issue. The interconnected web of injuries draws us into our anti-systemic politics. Some see the sheer diversity of our movement as a failing, asking that we concentrate on one or two issues, on the main issue, which more often then not strips bare life into a cartoonish abstraction (is the “economy” really absent race and gender?). To such frivolous objections, here are at least two reactions. First, it is precisely that the American Left is constituted by this vastness that makes it imperative to recognize the right of the many to castigate all wrongs. More people should be welcome into the American Left,certainly into OWS, bringing with them their many complaints and dreams. Our movement must promise more to each of us than what is available in the present. Second, no one claim to human freedom is essentially more important than another. In time, there will be a serious debate in our movement over how to frame our core issues, and how to move one part of the agenda before another. That is inevitable. But that does not mean that at the start we should already be closing our doors to these or those issues.

(http://www.counterpunch.org/2011/10/06/zombie-capitalism-and-the-post-obama-left/)

All that said, anyone who thinks that at this point they know exactly what its historical significance will be, where it will go and whether it will succeed or fade out is deluding themselves. Nonetheless, I suggest a number of political points must be made and understood by all involved if success is to be more likely, at least.

1) We may safely assume that the current Depression will last for a considerable time still. In fact, there is no basic reason in political economy to expect living standards in the West to return to the levels they previously were, or even to expect anything other than slow but certain decline. As in all situations of crisis, this will lead to a radicalization of a considerable number of the population, both towards the left and the right. The natural instincts of the masses in the West may be fascist, but this is not a necessity, and can be opposed with right politics.

2) Such a politics has the absolute duties of both promoting any real movement that, whether it is aware of it or not, is aimed against the formal and real rule of capitalism. It does not in this context much matter under what banner or slogan such a movement operates, as long as its goals are in the fundament incompatible with the current capitalist order.

3) Where the demands of the movement are compatible with the current order, and are merely aimed at one or another form of domestic relief, they are insufficient. But as long as they are made in opposition to the capitalist class, and do not take on a chauvinistic or reactionary character, they can and should be moved to develop in the direction of anti-capitalism. Anything that finds its natural final outcome in opposition to capitalism has potential.

4) Insofar as the demands have chauvinist and labour aristocratic elements, these are to be opposed, but by demonstrating the incompatibility of such demands with true opposition to the rule of capital. This will, in the West, inevitably over time lead to splits in the movement. Such splits are healthy. For example, one must point out the significance of Western imperialism, and this will separate the wheat from the ‘patriotic’ chaff. To do this in such a manner that it promotes understanding of the interrelation between the death of millions in the Third World, the disempowerment of blacks and Native Americans, the endless warfare regardless of the will of the peoples of the West, and the independent power developed by the ‘military-industrial complex’ to the destruction of even any formal democracy: these are the tasks of the socialist in the West. They are not easy, but if even one-tenth of those on the march now and in future months will develop this political consciousness, it will be a very serious gain. It is imperative that we do not forget that for socialism to succeed politically, one does not need an absolute majority of any population being active Party members or the like. This has never happened and never will. All one needs is literally and figuratively a critical mass, and a constellation of political forces such that the great majority will prefer the victory of the socialists to that of their opponents.

5) For socialists outside the West, the task is a much more straightforward one, if not therefore any easier and considerably more dangerous. The popular democratic movements in the Arab world and the Maoists in Nepal and India have nonetheless shown these to be as potently pregnant with possibility as any other, and they have shown that they no more ‘necessarily’ lead to socialism than elsewhere. This is the real stuff of politics, which cannot be reduced to a static, mechanistic view of economic interests.

6) The final target must be to promote a politics which makes the connection between these movements clear: not by papering over the difference in economic and class position between a teacher in New York and a landless peasant in Chattisgarh, but by showing to the former that the target of their rightful anger is the same as which oppresses the latter. Even where their material position is widely divergent, the crisis and the popular response against it are great political and economic forces which push towards a convergence, even if it is nowhere yet near reaching that point. The future of such countries as China and India will determine the future of the United States; but they will no more succeed along the capitalist road than anyone else has, and in the zero-sum game of competition, there can only be so many winners. Any gain by them is a loss for the Americans and Brits and Germans and so forth, but one would be mistaken in seeing here only a problem for socialists in the West: as the current movement shows, this is equally a ripening of possibilities that have not been seen since the years between the great wars.

7) The main power that can divert this movement in the West is the strength of social-democracy, the ideology of the aristocracy of labor. But the more the crisis endures, the weaker social-democracy is. It has no answers that are not either co-opted by the left or co-opted by the right, and the great mass of people is ever more aware of this. Hitherto, disillusion with social-democracy has translated mainly into disaffection with politics altogether. This movement has the potential to change that. The great virtue of mass movements for economic change, however underdeveloped, is that they reveal the workings of many things to many people. Once taught, these are lessons people do not soon forget. This is why all the charlatans and figureheads of social-democracy from Obama to Jeffrey Sachs have rushed to co-opt the movement and to imbue them with their own ‘lessons’, which all amount to nothing else but further debasement before the golden calf of parliamentary liberalism. The fact they saw the need to do so – and no need at all to do so in the case of the ‘Tea Party’ – shows precisely that they are well aware of the ability of movements of this kind to teach real lessons in political economy, once that cannot be found in the books of Krugman or Mankiw.

October 7, 2011

More on the Question of Orthodoxy in Economics

Posted in Economics, Theory tagged , , , at 23:21 by Matthijs Krul

In his recently published The Puzzle of Modern Economics: Science or Ideology? (1), the historian of economics Roger Backhouse discusses the question of orthodoxy and pluralism in the economics profession. (It’s an interesting fact that economists love calling their field a ‘profession'; one rarely hears about ‘the anthropology profession’ or ‘the zoology profession’.) This is interesting not so much because he says anything new on the topic, but precisely because he does not. Backhouse is a very mainstream economist with very mainstream views anno 2011, but to his credit, he differs from many of his colleagues in having an intellectual interest in the activities of economists of other times and approaches. He authored the Penguin History of Economics (2), which although impeccably mainstream in its analysis, is not at all bad as a popularization and shows precisely its strengths mainly where it comes to a willingness to give space and attention to economic thought outside the usual focus on the postwar era. In any case, his dealings with the strange realms of non-neoclassical thought inevitably force him to consider the question of the ideological nature and content of orthodox economic thought today, an issue which apparently troubled his conscientious mind enough to write a whole book on the subject. Sadly, most of the book deals with discussions of what mainstream economics is today, and some debate about really very minor debates within modern orthodox economics, such as around Keynesianism. Backhouse only comes to the meat of the matter in the chapter entitled “Heterodoxy and Dissent”.

In this chapter, Backhouse gives the most commonly heard responses to the charge of ideological narrowness and dogmatism levelled against the orthodoxy in economics. Because these are so much the standard answers, it is worth using the occasion to criticize them. This is not because Backhouse is particularly worse than other orthodox economists, but precisely because he formulated them so concisely in a book purportedly dedicated to this whole issue. Because of this, he is worth quoting at some length:

Heterodox economists frequently make two charges against their orthodox colleagues. The first is that ignoring their work means ignoring insights that are fundamental to understanding economic phenomena. The second is that the economics profession adopts an excessively narrow view of the methods that should be used in economics and that it needs to be more pluralist(…). The response to both these claims is that ‘insights’ about the economy are rarely useful unless economists also have tools with which to apply those insights. (…) Within the mainstream there is great suspicion of methodological claims that are not backed up by results. (…) It means that arguments about pluralism are more persuasive if they arise from examples of how new insights and methods can solve important problems.

(3)

Variations on these answers are what every heterodox thinker in economics is inevitably confronted with when challenging orthodox-minded colleagues. In fact, ‘answers’ of this kind are nothing as much as simply a restatement of the existence of an orthodoxy in a particular field of science; they are the hallmark of the existence of an established method among a large proportion of the practitioners in that field, something often – in fashionable imitation of Thomas Kuhn – called a paradigm. But they fail to convince, precisely because of this tautological nature, despite the frequency with which economists have recourse to them to defend the orthodoxy. The reasons can be explained briefly and in a straightforward manner as follows, as concerns economic theory:

1) The charge that the heterodox theories fail to provide insights which can be transformed into tools for application is easily rebutted. Not so much because they do in fact so provide, but because neoclassical orthodoxy, or any economic theory orthodoxy whatever, also fails to do so. Neoclassical economic theory does not exactly stand out by its immediate predictive value, nor by its ability to give practical tools which have an immediate, traceable, and easily controlled effect on the economy or society as a whole. Since economics is a social science, it is doomed (at least for the time being) like all other social sciences to operate in the realm of the inexact and the general. While there are countless models for economic purposes, from monetary policy analysis by central banks to stock predictors for financiers, none of these have any obvious or immediate relationship to any particular economic theory. Rather, they are generally derivative of applied mathematics, not economic theory proper. This is proven moreover by the fact that such models and systems can be used in virtually any economic and political context, from Gosplan to Lady Thatcher. When it comes to economic theory, one is always dealing with theories about the dynamics of a whole society, and those are inherently so complex, rapidly changing, and affective of the evolution of their subject-matter, that one should not expect to be able to easily pass from theory-building to practical application in any particular case. Neoclassical economics does not in any way obviously perform better at such transferral than do competing theories.

2) Secondly, the whole phrasing deeply begs the question. For the insights of competing theories to be able to convince the mainstream of their ‘results’ and ‘solving problems’, there needs be agreement to a very large degree as to what constitutes the problems of the field in the first place and what sort of theoretical outcome or scientific product would count as a result towards solving them. In many fields of science, this is indeed the case: not just in most of natural science, but this is also broadly true for history, anthropology, archeology, (historical) linguistics and so forth. Economics is particularly remarkable precisely for the absence of such an agreement, whether now or in the past; as Backhouse himself points out repeatedly elsewhere in the book, many mainstream economists in their day also disagreed strongly on major questions relating to these without being thereby out of the mainstream per se. The fact the discipline reinvents not just its methods, but its entire purpose every couple of decades is unusual in social science as much as in the natural sciences it has tried so hard to imitate.

That being the case, one cannot reasonably expect there to be any way that an Austrian economist or a Marxist economist could produce results for problems that a neoclassical economist would be inclined to recognize, even one as relatively interested in heterodoxy as (say) Brad De Long, simply because there is no agreement about what the problems are and the methods used differ too much to allow much agreement over results either. A neoclassical economist thinks he has achieved a result when he has used mathematical techniques to derive a particular equilibrium outcome in, say, a fictional and simplified labor market. A Marxist economist thinks he has achieved a result when he has demonstrated a particular crisis phenomenon to be reducable to a fall in the rate of profit in value terms. While there is sufficient overlap in methods for it to be perhaps hypothetically possible, it is in practice not at all easy to see how there could be any meaningful communication between the two as to which counts as a result to which problem, and why the other should care.

3) Nor is it immediately clear why the insights proffered by the heterodox economist should be new. While one always strives for progress in science, this can only be measured by prevailing notions about results and problems, and by concrete changes in real phenomena effected by application of theory. The latter we have dealt with already. The former changes much more often in economics than elsewhere, as mentioned, perhaps with the exception of ethical and aesthetical disciplines. What’s more, to the eye of many of the heterodox, the history of economics from at least WWII onwards, if not WWI, is actually a history of a science going backwards rather than forwards. If one perceives economics as dealing primarily with questions of value, production, distribution, and trade, as both functions of whole societies and a historically woven social fabric they are made of, it is not at all clear that the development of economics between roughly 1918 and 2000 has avoided sheer retrogression on issues previously considered long dealt with.

Orthodox neoclassical economics, being the use of applied mathematics to solve problems of interactions between stylized individuals in modelled equilibrium settings, will appear to an economist interested in the questions debated in the century before as utterly inadequate to making any progress in the tasks at hand, if not outright ridiculous. The presumption that the insights of the heterodox economist should follow newly upon the already established current foundation already tilts the scale in favor of the orthodoxy. This is exactly because economics has not only changed significantly in agreed-on methods and its notions of problem and result, but that this in turn is the product of a larger change: a change in the subject matter. This is even more unusual in other sciences, but one does not do the historical record much violence to state that in the 19th century, economics (political economy) was generally regarded as dealing with economic production and distribution processes as social phenomena, and in the 20th century, economics was generally regarded as dealing with the interaction of individuals’ preferences in monetary transactions between them. Even a very naive undergraduate in social sciences will immediately observe that this involves a very significant shift in the actual subject of the discipline, never mind all the attendant ideas about what the problems of the day are.

Perhaps this century will see yet another such shift – one could plausibly hypothesize an economics of this century revolving around the relationship between personal identity (psychology) and revealed preferences in experimental and observed social exchange more broadly, pushing the field away again from mathematics and in the direction of anthropology. But each of these three economics disciplines deal in their own way with interesting and relevant subjects, and none of them are likely to produce methods and questions that would be of much help for each of the others. This is very strongly an argument, therefore, in favor of supporting a pluralistic, interdisciplinary and open-minded approach, rather than an approach based on orthodoxy wedded to novelty.

1) Roger Backhouse, The Puzzle of Economics: Science or Ideology?. Cambridge 2010: Cambridge University Press.
2) Roger Backhouse, The Penguin History of Economics. London 2002: Penguin.
3) Backhouse 2010, p. 163.

October 3, 2011

The People versus the Stock-Jobbers

Posted in Class Struggle, Economics, United States tagged , , , at 18:38 by Matthijs Krul

It has often been said that the United States is a country singularly unsuited for ‘European-style’ protest movements. Its police has no fundamental respect for the right to protest and demonstrate; its government strikes faster and harder than that of other countries; its broad lanes and avenues, often without pavements, do not lend themselves well to pedestrian occupation; the suburban fragmentation and individualisation in spatial-ideological terms impede the kind of collective consciousness required. Yet the United States has no less an impressive history of labor action, protests and rallies than any other country, from the Bonus Army to Martin Luther King’s speech in Washington, DC. The demonstrations against the war on Iraq in 2003 drew tens of thousands in various American cities, if not more. Now a new protest movement is avoiding the usual ‘designated’ protest places like the Mall in Washington, and instead striking the heart of global capitalism itself: the financial center in New York City, centered on the old Dutch fortification line known as Wall Street. (The word ‘wall’ here refers to the Dutch ‘wal’, an earthenwork fortification, not a wall in a modern sense.) This is one of the world’s most iconic urban places, and the movement “Occupy Wall Street” has chosen its target well in terms of public relations.

Although only several thousand people have taken part so far, the persistent presence distinguishes it from the usual ‘show up, chant and leave’ approaches of American demonstrations, and consciously hearken to the kind of continuous ‘occupation’ that has characterized the recent uprisings in Europe and the Arab world. This is a phenomenon not as often seen in the United States, and this alone has garnered it much attention. Under the current circumstances of economic crisis, public sympathy is on its side in a way that it rarely is for demonstrators of any kind in the country. Although the New York Police Department has used the usual repressive measures against the demonstrators, they have already gained the support of several American unions and prominents, in particular the Transport Workers Union; this union has filed suit to prevent the NYPD from transporting arrested demonstrators on the city’s buses. Also unusual is the visible presence of military personnel in support of the demonstrators, something only Iraq Veterans Against the War consistently managed to achieve (and to little effect). With solidarity demonstrations arising in other American cities and with polling indicating general support for the demonstrators, and with the Obama administration at a historic weak point in the face of mass unemployment, loss of living standards, and general dissatisfaction, this is an encouraging sign for all on the left, and has been recognized immediately as such.

Yet the American people’s justified anger against the stock-jobbers and charlatans of Wall Street is not a sufficient basis for a meaningful popular movement that can affect the economic structure underlying the crisis. While it makes for a good political slogan, “bankers’ greed” is on reflection not the most relevant cause of the crisis, nor is it likely to be in any way impeded or prevented by demonstrations of this kind. We know the stock-jobbers did everything in their power to profit at public expense, to prevent regulation of their activities, and even now dole out millions to themselves despite having received unprecedented financial support from the public coffers. But this is what we should expect them to do: in a system which rewards only competitive possessiveness, it is what all humanity is drilled from the very youngest age to do. Putting the blame on intangibles of human nature like ‘greed’ is not a political recipe of any kind, and will allow real systemic causes to go underexamined. In fact, this naturalisation of the causes of the crisis is itself a product of the neoliberal order, which attempts – as capitalist ideology always and everywhere does – to naturalize capitalism itself as an inevitable, inescapable social reality which has always existed and will always exist no matter our intentions. Any meaningful political protest movement must resist this logic and go beyond such explanations to take aim at capitalism itself.

Of course this is easier said than done, especially in a country like the United States which by and large only sees the benefits of international capitalism and besides is so ideologically dominated by liberal thought that the very notion of socialism appears as an insult more often than as a political referent. But as it stands, the Occupy Wall Street movement is as liberal as the phenomenon it opposes – it’s an ad hoc response, a grab-bag of slogans and individual gripes, with no coordination and no leadership and which attacks only the most proximate and superficial causes of the crisis. In the final analysis, this crisis was not a failure of regulation (which is a right-Keynesian slogan), nor was it solely the collapse of a financial bubble in the housing and banking sectors, although it was all of these things. Most fundamentally, it is the outcome of the decades-long inability of capitalism to restore profitability to the worldwide production of value. The so-called globalization of worldwide manufacturing follows the classic Marxist law of the rate of profit to fall, as the cheaper prices enforced by the downward competition at once expands the ‘growth’ of the economy and undermines the worldwide rate of profit. This cannot be compensated for by the parasitical expansion of the so-called ‘services economy’ in the West, which exists only insofar and to the extent that the First World’s inflow of value is dominated by Third World production with a high rate of net exploitation. Some have made the underconsumptionist argument that the repression of organized labor and of the working class’ self-organization by the neoliberal offensive since the 1980s has made the working class’ consumption insufficient to valorize this expanded capitalist production. But although the Thatcherite-Reaganite political offensive against the working class was and is a real thing, in the end supra-political economic factors have determined the current outcome. The shift of capitalist value-producing activity to the Third World is the inevitable outcome not of too low, but of too high living standards for workers in the West, from the point of view of capitalism. The current crisis appears therefore as a classic Marxist case of capitalism’s inability to expand beyond its own given boundaries indefinitely, as it always creates new boundaries which it crashes headlong into, and always at a higher and greater level both spatially and quantitatively. Therefore, we should expect this crisis to be deeper and more prolongued than any since the Great Depression, and we should expect its global reach to persist, one which none subject to capitalist logic can escape (expressly including China).

All this is of course not easily encapsulated for a mass public in political notions that get people moving, and any movement is better than none at all. But the deliberate abstention from program and leadership on the part of the Occupy Wall Street movement hampers it to a degree that it is more likely to invite a sympathetic pat in the head by the ruling class than to inculcate fear. This stands in sharp contrast not only to the direct political challenges, by locally determined and led popular fronts of political groups, in the Arab Spring. It also stands in sharp contrast to the heroic resolve of the Greek nation, which has fought to preserve the very economic existence of their country and their people, and who have shown a strength of organisation against all odds not seen since the days of Plataeae and Thermopylae. We should all encourage any sign of serious organisation against the effigies of capitalism in the United States, and “one step of real movement is worth a thousand programmes”. But the onus is now on the American left to make the case for anti-capitalism, rather than merely a rhetorical demonstration against the inequities of the stock market.

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