May 8, 2013
Book Review: Paul Cantor & Stephen Cox (eds.), “Literature and the Economics of Liberty”
It has often been remarked that if Marxism is still dominant somewhere, it must surely be in cultural studies and in literary criticism, especially in academia. For whatever historical contingencies have made it so, it is undeniable that, at least within the Anglosphere, these disciplines have proven particularly pervasively and stubbornly Marxist in their approach since that body of thought was introduced within them. While the methods have been very divergent, between cultural materialism and the New Criticism, and by no means all of the scholars in these fields have been Marxists, it seems that Marxism left a bigger and more lasting stamp on them than on any other. One may wonder what Marx would have made of this – while he was fond of literature and he and his family often discussed novels, poetry, and theatre, surely he would have found the scientific conquest of history and what is now called economics more important. However that may be, one interesting product of this influence of Marxism has been the school of literary criticism interested in ‘economics and literature’ – in a broad sense, both the application of economic ideas to the study of literature or its production as well as the reflection of such ideas in the content of the literary works themselves. This, too, has often been Marxist in its approach, or at least socialist in its sympathies.
For this reason, it is interesting to see something quite rare: a work of literary criticism, explicitly with an economic mode of interpretation, written from the political-economic right. It is rare enough to have economists who read anything, as is easily revealed by the profound lack of humane imagination that prevails in the charmed circles of neoclassical economics disputes (as for example Philip Mirowski has observed). It may be for this reason that such a book has been written by a series of economically informed literary critics: all but one of the contributors to Paul Cantor and Stephen Cox’s volume, Literature and the Economics of Liberty, are professors of English lit. It also seems suitable that they are not, in fact, writing from a neoclassical point of view, but explicitly with the purpose of promoting the Austrian School of economics in and through their analysis of literature. This school distinguishes itself in several respects from neoclassical economics, and is properly considered heterodox: mainly because, while it is even much more strongly free trade in orientation, its epistemology and methods are vastly different. It rejects modelling, econometrics, and quantification as the guiding principles of economic theory, and rejects equilibrium ideas, preferring instead to understand markets as inherent results of human activity, naturally created heuristics for the discovery of information under conditions of uncertainty. It sustains such an approach through some strong axiomatic notions of human nature, and much of the Austrian School literature is a working out of the philosophical consequences of this view of human nature: the Smithian person – with the natural tendency to ‘truck, barter, and exchange’ – writ large. All the accoutrements of modern capitalism are merely the result of letting this natural habitus of humanity do its thing, and therefore the more free the markets, the more free the people.
It should not come as a surprise to the reader that my views are quite diametrically opposite to these, and if any doubt remained, this review should help dispel them. That said, this book is an intriguing approach to the discussion of economic theory. There is no question about it that that is its purpose: literary criticism is important, but it is clearly presented as a means to an end. The main target of the criticism, as often with Austrian School thinkers, is Marxism, which in some respects is that school’s mirror image and its perpetual object of hostility. The introduction by Paul Cantor, who holds the chair in English Literature at the University of Virginia, is from the get go addressed at the perceived dominance – far past its prime, of course – of Marxism in academe. The suggestion is that while the economics and literature approach rightly puts economic ideas central, it, and by implication cultural studies generally, could be much improved if everyone jettisoned the old baggage of Marxism and adopted the favored principles of Austrian economics instead. As Cantor and Cox write: “His materialistic, deterministic, and mechanistic view of reality stamps him as very much a man of the mid-nineteenth century. A great deal has been discovered in the sciences since Marx’s day, including the science of economics…”(1) This science, we are to understand, is that of the Austrian School, not that of any of its rivals. We should choose the latter over the others because of its emphasis on spontaneous order by the interaction of chaotic micro-elements, something fitting the modern age of quantum mechanics and chaos theory. “Austrian economics, with its emphasis on chance, uncertainty, and unpredictability in human life, is far more in tune than Marxism with these trends in modern science.”(2)
In fact, something can be said for this. It is true that what has often been lacking in the apparatus of Marxist economic thought is a substantive understanding of systems theory, in particular organizational theory and the generation of various ordered systems through the random or arbitrary interaction of different elements, allowing for various possible equilibria. Neoclassical economics has much made use of this, through (evolutionary) game theory and developments in microeconomics, and it has formed a major theoretical bulwark for the development during the Cold War of what became known as the ‘military-industrial complex’ underpinning the postwar liberal order, as Adam Curtis has argued in his documentary reconstruction.(3) However, it remains to be seen whether these ideas, or concepts of evolutionary economics, will prove incompatible with Marxist ideas altogether, and to the degree that the latter must be abandoned. The epistemological notion of spontaneous order may not play the role Austrian economists think it does. It is all the more a shame therefore that in their engagement with Marxism on this basis, the Austrian-inspired thinkers make such a hash of their representation of Marxist ideas and approaches themselves. Instead of informing themselves about their opponent, they consistently prefer to knock down straw men, and their criticisms are therefore often quite beside the mark. That the discourse is laden with references to ‘freedom’, the ‘individual’, and the supposedly humane nature of Austrian thought serves no more than a decorative purpose, a way to keep up the morale of the fans. In this way, an opportunity for fruitful engagement on the relatively neutral terrain of literature was missed.
Austrian economics seems to rest mainly on strong assumptions. Not just about human nature, and what this may imply – in which it indeed differs strongly from Marxism – but also about its opponents’ views. In his introduction, Cantor and Cox outline what they perceive the prevailing Marxist approach to literary criticism to be: “Marxist critics often practice what is known as the hermeneutics of suspicion—that is, they question the motives of authors and seek to explain why some would ever choose to support capitalism.” Against this, this collection is supposed to offer the opposite viewpoint, that is to analyze whether particular authors were socialists and if so, why that may be. But I venture that few Marxist literary critics would recognize themselves in this description in the first place, making the contrary enterprise appear spiteful. Another major target of the Austrians is to depict Marxism as ‘reductive’ and ‘collectivist’, making economic analysis about the operation of macro-level forces on the interests of individuals. In contrast to this, Austrian economics supposedly offers a more contingent and humane vision of individual freedom. No doubt this has a strong romantic appeal. But if this boils down to the statement that “our analyses are based on detailed, careful readings of individual texts treated in their integrity—in sharp contrast to the Marxist tendency to disregard authorial intention and, in the style of Fredric Jameson, to seek to ferret out the “political unconscious” in literary works”, Jameson as well as other literary critics of a Marxist bent (such as, say, Raymond Williams or Aijaz Ahmad) may rightly protest that this depiction of their views will make the present collection stand out a little bit too easily couleur de rose. The authors would have done better to actually read some Marxist literary criticism, beginning with Marx himself, in order to understand what it is they want to argue against, and to do so with the same care and as “worthy of being taken seriously and treated with respect” as they claim is appropriate for the literary authors themselves.(4)
Paul Cantor’s first chapter continues in this vein. Here, the general notion of Marxism seems to be derived from the most skeptical works in the early Frankfurt School, as in Adorno and Horkheimer’s wariness of ‘the mass’ in the wake of fascism. Counter to this, he suggests taking the wishes and demands of consumers seriously, and opposes the Frankfurter picture of a mass culture artificially imposed as a vehicle for false consciousness, preferring to see cultural production as responding to legitimate market demands. Hayek already remarked that one cannot meaningfully distinguish ‘real’ from artificial tastes, and the implication is that attempting to do so in the name of Marxist theory risks being condescending and misunderstanding the popular culture itself. This criticism, again, has some genuine merit, and I share its wariness of the elitism that is the consequence of especially Adorno’s distancing from mass activity and interests (Marcuse, for all his faults, at least did not report the 1968 student movement to the police.)
But again, the sneering tone and the triumphal assaults on straw opponents Cantor indulges in weaken my ability to take this seriously as an Austrian critique. Marxism is accused of “crudeness”, of having “lost prestige” everywhere, of having “done damage to our understanding of literature.” Yet what is this based on? A number of total misreadings of Marxist economic theory, just as the rest of the collection tends to misread Marxist cultural criticism. This is surely a serious flaw in a work of literary scholarship. Cantor, for example, offers the following argument: “It is one of the many ironies of literary criticism today that postmodernists, who deny all objectivity, have linked up with Marxism, a form of economics rooted in the labor theory of value, which seeks to determine value on the basis of an objective factor. The fact that Austrian economics clearly acknowledges that all economic value is purely subjective is one reason why it should be more attractive to literary critics than Marxism as an economic theory.”(5) One does not have to know very much about Marxist economic ideas to see the spuriousness of this line of reasoning. The use of ‘value’ in the sense of value theory in classical economics is by no means wholly the same as its colloquial meaning (or else no notion of labor value could possibly be entertained); conflating the two to argue that Austrian economics, supposedly having a ‘subjective theory of value’, is more amenable to (postmodern) literary criticism because postmodernism prefers subjectivity is surely a triple equivocation of terms! Similarly, we are invited to prefer Austrian approaches because Michel Foucault, at the end of his life, recommended his students at the Collège de France to read Hayek and Von Mises as examples of the ‘will not to be governed’. This is surely an odd kind of argument. One cannot escape the impression that many of the attacks on Marxism, and the elevated language of ‘freedom’ and ‘individualism’ used throughout the book, are designed to emotionally appeal to academics to gain their approval the Austrian thinkers desperately crave more than it is to seriously argue against Marxist conceptions.
The first chapter also contains the only serious attempt at explaining the prevalence of Marxist approaches in cultural studies, surely important if it is so evidently wrong. “[The] materialist approach to culture is the distinctive Marxist contribution to the understanding of human history”, Cantor tells us. “Contemporary literary critics carry on the Marxist polemic against the “great man” theory of history, the supposed bourgeois propensity to overrate the importance of individuals in historical developments.”(6) In practice, this means that “In classic Marxist literary criticism, authors operating in a market system are routinely portrayed as captives of capitalist ideology.”(7) One may doubt whether there is much truth to this last statement – it certainly does once again little justice to the nuanced, detailed, and closely read interpretations of literature and its authors offered by figures such as Terry Eagleton, who himself defines the Marxist approach as “to explain the literary work more fully; and this means a sensitive attention to its forms, styles and meanings. But it also means grasping those forms, styles and meanings as the product of a particular history”.(8) This, of course, must be rejected. Marxism, we are told by our editor, “involves a fundamental category error—it tries to understand economic and social phenomena on the model of events in the physical world, that is to say, human events on the model of non-human events.” Moreover, “Marxism compounds the error by trying to understand cultural phenomena in terms of economic, and thus it becomes doubly reductionist in its treatment of art. In short, in the longstanding conflict between the natural sciences and the humanities, Marxism leans toward the former…”(9)
If this seems a strangely philosophical, perhaps even ethical critique, this is less odd than it may seem – this is precisely the mode of criticism most favored by Austrian thinkers. “As a form of historical determinism, Marxism undercuts the idea that the artist is free as a creator… [it] works to efface the distinction between the great author and the ordinary run of humanity.” And this, of course, the Austrian school cannot countenance. The cardinal assumptions of this school rest in its view of human nature and its unflinching commitment to methodological individualism, to the point of absurdity. Indeed, it emphasizes the axiom of ‘consumer sovereignty’, by which is meant taking the individual with her preferences, values, views, and actions as something of an uncaused cause: any attempt to inquire as to what forces determine or shape human values and preferences is explicitly forbidden. Only on this basis can the ethical-philosophical critique of Marxism as ‘collectivist’ (because concerned with macro-level phenomena) and ‘reductive’ be sustained. Reduction to classes is bad; reduction to individuals good. Promoting the historical is bad; promoting individual genius, independent or contingent with respect to time, is good.
The unstated assumption throughout all Austrian critiques of Marxism, including in this book, is then that Marxism is really just a stalking horse for the denial of the ethical significance of the individual versus the state, and of the value of freedom. Literature seems a clear terrain to illustrate the significance of both these phenomena, so Cantor et al. cannot be blamed for exploring it (indeed, it is testament to the narrow economic theory emphasis of most Austrian thinkers that it has not much been done before). But neither assumption is true, and therefore such critiques fall flat. Marxism is, in fact, not dedicated to the proposition that the state is more ethically important or superior to the individual, nor is Marxist economics a study in the achievement of total state control – as the final contributor, LSE political theorist Chandran Kukathas, better recognizes. Marxism is also before everything else a philosophy of freedom, seeking the direct social control over the total productive forces of society in a cooperative manner as the fulfilment of freedom: in other words, freedom as self-determination. This is not so far from the Austrian idea of the individual as the basis of freedom, except it is not oriented towards the private, but the fully social determination of freedom. This is the basis of its critique of private property in means of production, not the notion of “equality of wealth” as the ultimate socialist principle, as Cantor suggests in his essay on Shelley.(10)
These misconceptions pervade the discussion of the literature itself as well, which I will consider somewhat more briefly. A typical case is Dario Fernández-Morera’s discussion of Cervantes, whom he argues, supposedly against the grain, was a defender of free trade and ‘free markets’ against feudal and mercantilist impositions. This is possible, he reminds us: the Salamanca School of Spanish economic thinkers – considerably predating even the Physiocrats, let alone the classical economists like Smith – already established canonical arguments for free trade in commodities, abolition of high imposts and restrictive licenses, and so forth. Moreover, Cervantes’ own active involvement in state activities (as a tax collector, for example) and his military adventures that saw him enslaved by North Africans for several years may have given him a strong sense of liberty, which for the Austrians naturally tends towards the market.
This is explicitly presented as a literary reading contrasting with the Marxist: Fernández-Morera “[wants] to examine Cervantes not so much as a capitalist avant la lettre but as a writer whose works present situations, statements, and ideas that illuminate sympathetically important aspects of the market economy, while providing material for a critique of collectivism, statism, and redistributionism.” Not a word is breathed of the fact that Marx himself considered Cervantes one of his favorite writers; that he read him in the original Spanish; and that in Marx’s own literary interpretation, he explicitly considered Don Quixote to be a satire on feudalism and mercantilism on the part of the newly rising bourgeoisie, showing the foolishness and outdatedness of the old feudal holdovers and mentality.(11) Indeed, this fact was used profitably by Graham Greene in his contrasting of Catholic and Communist ideas and values in Monsignor Quixote, proving Greene a more astute reader of Catholic literature than Fernández-Morera.
Paul Cantor’s essay on Shelley is more interesting. Here, Cantor makes a plausible and intriguing reading of Shelley, whose radicalism of political and economic views was notorious in his own day and whose reputation as a left-wing figure has persisted since. Cantor suggests that rather than being a forerunner of socialism, as is often suggested, Shelley’s overriding concern was actually with combating the mercantilist economic structure of absolutism. In particular, his works after the early Queen Mab (which Cantor admits as more socialistic) are aimed at the aggrandizement of the public debt caused by the warmongering of the ruling class, and its consequences in the middle class support for aristocratic rule – in exchange for interest – and the heavy taxation of the ‘productive’ population. Cantor ascribes this to the influence of William Cobbett; in particular his obsession with the gold standard as a friend of working people rather than its later perception as an imposition by a ruling class, as with W.J. Bryan’s ‘cross of gold’. The Austrian viewpoint is also in favor of metallic currencies, generally, as this prevents government power over banking, which they see as an illegitimate monopoly. For this reason, Cantor’s case would make Shelley appear more favorable to the Austrian viewpoint rather than the socialist.
But here again, a misreading of the Marxist idea of socialism mars the analysis. Far from being a question of opposing pure equality to capitalism, as Cantor seems to suggest, Marxists would readily recognize in figures such as Shelley the type of the ‘bourgeois radical’, aimed at the furthest extension of liberal principles against the ancien régime, wherever it may be – not dissimilar to the Jacobins in the French Revolution. The latter, too, preached revolution and yet emphasized free trade. It is that tradition that Shelley works in via Cobbett, and it is no strike against Marxism. Marx was a fan of Cobbett and recommended his Rural Rides to his correspondents. It also does not establish that Shelley’s radical liberalism could not have extended in a socialist direction, given his associations and ideas of the ‘productive’. Indeed, Michael Scrivener has shown the mutual influence between Shelley and “radical artisan poetry”, the work of self-taught craftsmen whose political radicalism tended towards ideas of freedom as increase of leisure and an opposition to the coercion to labor the market generates.(12) By the end of the 19th century, this early radical liberalism – satirizing monarchism, religion, and poverty – would morph into the anarchism of Swiss watchmakers as well as the Marxist idea of the reduction of necessary labor time.
Another essay of Cantor’s considers H.G. Wells, in particular his successful novel The Invisible Man (1897). One can tell that Cantor’s abilities as a literary critic are greater than the others in this collection, in terms of style, engagement with alternative readings, and empathetic understanding of the potentialities of meaning within the book. Indeed, perhaps even more so than the Shelley article, this piece is worth reading quite aside from the question of the right economic interpretation of literature. The interpretation of Wells’ book is based on a very Marxist-like reading of the relationship between Wells’ own position and intentions and the final product of the work, examining the contradictions produced in the book as reflections of those in Wells’ own social and economic ideas. If this seems contrary to the spirit of romantic individualism promised early on, it makes the critique all the better for it, perhaps inadvertently proving the opposition right. Indeed, with reason Cantor in the introduction is said to “turn Marxist ideology critique back on itself”.(13) This essay is perhaps the most successful of the critiques, as it demonstrates serious problems with Wells’ conception of his socialism, as revealed in The Invisible Man. As Cantor describes it, the book operates at two levels: the titular invisible man is the force of capital itself, pervading everything and disturbing all social order without being accountable to anyone or even directly visible as a force, and in this form Wells depicts him as the enemy of society. But the invisible man is also the lone hero-scientist who is neglected and unrecognized, despite being smarter than all others, and whose role is to prove his superiority through some invention (invisibility) that will force the urban crowds of modern life to recognize his individuality and genius.
This Nietzschean streak, and Wells’ positive depictions of the powers of the state and police in pursuing the invisible man, give an elitist and authoritarian streak to his ‘socialism’, one that makes it at times sound more fascist than socialist. Cantor notes Wells opposed fascism, but sees in his interest in Stalin’s USSR a reflection of the same ideals. Whatever that historical judgement may be, there is something striking about Cantor’s depiction of Wells’ interest in socialism mainly as a mechanism for the elevation of the underappreciated intelligentsia over the power of money – the parallels with G.B. Shaw and similar figures are strong, as is supported by various quotes by Wells to that effect. As Cantor writes: “If, then, I seem to have given a contradictory account of The Invisible Man, the reason is that a fundamental contradiction lies at the core of Wells’s thinking. He upheld a socialist ideal of community, and yet at the same time he saw a form of heroic individualism as the only way to bring about socialism… Wells’s socialism is ultimately aesthetic and aristocratic in nature; it is rooted in his conviction that, as an artistic visionary, he is superior to the ordinary mass of humanity.”(14) As a critique of the common aesthetic defenses of socialism, often so eerily similar to the aesthetic appreciations of fascism (say, by Pound), this is good stuff, and something many socialists can in fact find agreement with. Indeed, Wells’ and Shaw’s socialism seem quite akin to the ‘feudal socialism’ or ‘true socialism’ Marx and Engels already decried as ineffective or outright reactionary in the Communist Manifesto.
The last essay I will consider is the final chapter of the book, a reading of Ben Okri’s classic The Famished Road by Chandran Kukathas. This in some sense illustrates the book. Kukathas is, of all the authors, by far the best informed about Marx’s own writings and ideas, and avoids some of the silly interpretations of Marxism that Cantor and others maintain (such as the role of freedom in Marx’s work). As a Professor of Political Theory at the LSE, one would expect this of him. Yet his reading of Okri seems weak proportional to the degree that he attempts to establish the correctness of Austrian economic thought through it. Indeed, for those who complain of Marxism as an overly reductive reading fitting literature into a socialist scheme, the readings in this book, especially of Okri, are themselves sometimes remarkably simplistic. What’s more, any notion of chaos, contingency, or individual diversity in literature is immediately enlisted in the service of the concept of ‘spontaneous order’, underpinning the free market. Markets play a major role in Okri’s book, as Kukathas rightly notes, and the general tendency of the work is to outline the chaos of the market and the chaos of the political world as related phenomena. Indeed, since the protagonist is a teenage boy, it is no surprise chaos should reign. Much of the stuff of maturity consists in coming to comprehend the structures, regularities, and expectations of life, patterns which seem radically contingent when one is a teenager.
But there is more to it than that. As the protagonist, Azaro, is a spirit child, he is granted the ability to perceive the elements of this chaos – this-worldly and otherworldly – transparently in a manner normal people cannot, and it is through this lens that the world of the market, the world of consumption, the world of labor, and the world of politics are described. For Kukathas, the defining point of the book is to illustrate that these are all separate realms, with no necessary connection, and characterized by conflict emerging from human nature – therefore no historical materialism can make sense, and no socialism can work. It is a shame therefore that this collection was published in 2009, as in 2011 David McNally in his Monsters of the Market – itself a major work of contemporary Marxist literary scholarship – provided a lengthy reading of the same work by Ben Okri. Contra Kukathas, for McNally the very ghostly essence of the market, the place where Azaro repeatedly is swept away into the otherworld by the powers of the normally Unseen, and the unfolding reality of the this-worldly through his growing awareness of his father’s exploitation by back-breaking labor both combine to form a radical reading of the power of capital as money to subvert the settled patterns of life and to operate behind the backs of individuals.
As with Wells, the otherworldly power of capital is precisely that it does not depend on individuals, but acts as a social relation between them, into which they are born and which determines their incentives, behavior, and indeed whether they live or die. As Kukathas does not seem to be aware of, such Gothic novel elements in capitalism are already identified by Marx, when he writes about the process of commodification that makes money seem to command objects: “[a] table continues to be wood, an ordinary, sensuous thing. But as soon as it emerges as a commodity, it changes into a thing that transcends sensuousness. It not only stands with its feet on the ground, but, in relation to all other commodities, it stands on its head, and evolves out of its wooden brain grotesque ideas, far more wonderful than if it were to begin dancing of its own free will.”(15) In Okri’s context, this power of what Marx called ‘exchange value’ and the related fetishism of commodities expresses itself supernaturally in the market: “The market is a night-space, a world of violence and danger. The daylight world of ordinary perception obscures the true nature of the forces that inhabit the market. But, for those able to see in the dark, the market emerges as what it truly is, a forest world dominated by malevolent spirits of the night.”(16)
I leave it to the reader to judge which of these rival interpretations of markets in literature best reflects the reality of these social institutions.
1) p. x.
2) p. xi.
3) Adam Curtis, “All Watched Over by Machines of Loving Grace” (2011).
4) p. xvi.
5) p. 9.
6) p. 13, 15-16.
7) p. 17.
8) Terry Eagleton, Marxism and Literary Criticism (London 1976), p. 2.
9) p. 17.
10) p. 250.
11) See: Karl Marx, Capital vol. 1, Ch. 1, n34. http://www.marxists.org/archive/marx/works/1867-c1/ch01.htm
12) Michael Scrivener, “Shelley and Radical Artisan Poetry”. Keats-Shelley Journal 42 (1993), p. 22-36.
13) p. xvii.
14) p. 321-322.
15) Marx, op. cit., Ch. 1, section 4.
16) David McNally, Monsters of the Market (Leiden 2011), p. 239.
March 17, 2013
Book Review: Neil Davidson, “How Revolutionary Were the Bourgeois Revolutions?”
There are books which are of such kind that upon reading them, one immediately knows one is dealing with a future classic. Such a book is Neil Davidson’s How Revolutionary Were The Bourgeois Revolutions?. A sprawling, immensely erudite, and deeply impressive work spanning a good 650 pages of text, this work is a great exercise in Marxist historiography. It deals, as the title suggests, with the famous question of ‘bourgeois revolution’: what it is, when it does and does not apply, how it has been used, and what its political implications may be. The better part of the book is taken up with discussing the concept in the history of the historical discipline, both among Marxists and the mainstream, and with discussing the core examples that have served as ‘ideal types’ for bourgeois revolution: the French Revolution, the English Civil War and Glorious Revolution, the Dutch Revolt (which we call the ‘Eighty Years’ War’), and finally the American Civil War. Davidson has an almost unprecedented grasp of the immense amount of writing on the subject, from the reflections immediately after the French Revolution onwards to current-day historiography, and this book is invaluable alone for the overview it provides on the subject of how the concept of bourgeois revolution has been used and abused in history-writing during that span of time. Read the rest of this entry »
November 14, 2012
Book Review: Costas Lapavitsas et al., “Crisis in the Eurozone”
Costas Lapavitsas, Professor of Economics at SOAS, and a number of economists associated to one extent or another with the Research Group on Money & Finance, published this book as an examination of the effects and meaning of the economic crisis of our times for the countries in the Eurozone. They limit themselves quite specifically in this manner, not discussing the wider impact on the EU, the non-Euro member states, or the nature of the crisis insofar as it does not immediately relate to the issue of the Euro and the banks of the Euro system. What one does get, however, is a remarkably precise and detailed analysis of the constituent elements of the crisis in the Euro, the European banking system, the nature of the bailout and its failures, and the relationship between debtors and creditors within the Eurozone, which have emphatically been on the political foreground in the past two years or so.
The framework is that of examining the opposition of interests between the core countries of the Eurozone, the creditor states of France, the Netherlands, Finland, Austria, etc., and most importantly Germany, and on the other hand the intra-European periphery, Greece, Portugal, Spain, and Ireland (though Ireland is not the focus of this study due to its idiosyncrasies). As Lapavitsas et al. argue, the European Central Bank and the monetary union which it underpins are essentially constructs created to achieve these purposes: first, to create a European currency which can rival with the US dollar as the ‘world money’ Marx identified capitalism must have in the absence of a metallic standard; secondly, to unify the money market and thereby the competitive strength of the financial institutions of the Eurozone; thirdly, to facilitate the imposition on the EMU member states of a permanent system of austerity, inflation-targeting, and budgetary restraint which would make any serious national opposition to the interests of European finance capital (and industrial exporters and carrying traders) impossible. In this it has succeeded wonderfully well.
However, as skeptics pointed out from the start, the Eurozone contains a serious contradiction between the interests of the capitalists of the core (well served by this) and those of the periphery, for whom this does not work as well. The authors rather unusually emphasize Germany’s primary position within this system, and its dominance over the interests of the periphery, as following not so much from its export strength as from the fact it has had the longest and most enduring neoliberal wage repression of the Eurozone. This then combines with its absolutely high levels of productivity and its political power over the ECB (located there) to make it fundamentally more ‘competitive’ than the southern countries, which have seen rising nominal wages but insufficient corresponding productivity growth. This is supported and further examined by a great deal of graphs and data, unfortunately often not clearly visually presented.
A second major section of the book is to argue the effects of the financialization of the Eurozone, and how this has played out in generating much of the crisis. The crisis started, of course, with the collapse of interlinked financial bubbles in the United States – the real estate bubble and the multiply leveraged debt bubble. But the focus is here on the Eurozone only, and this has experienced similar phenomena. It is certainly worth remarking on how commonplace it has become for commercial banks to undertake financial ‘investments’, for consumer debt to skyrocket in response to stagnating real wages and an increased dependency on credit in the open market for previously ‘shielded’ consumption like education and housing, and to note the enormous expansions of fictitious capital luring in investment from institutional investors, domestic corporations, and so forth, exposing them to much greater degrees. However, this aspect remains somewhat undertheorized in this book. There is little explanation of the political economy of financialization itself, its origins and its relationship to the rate of profit in the overall economy – other than declaring it, rightly, as part of the neoliberal project. This is perhaps defensible as such considerations can be found in various other books, and one cannot expect one book to discuss everything. But a more political economic background might engage the work more with the criticisms of much of the distributionist theories and ‘crowding out’ explanations of financialization as offered by for example Andrew Kliman, and would contribute to that debate. As it stands, financialization appears as an exogenous cause explained merely in terms of ideological drives for deregulation and the economies of scale of large corporations that allow them to self-finance investment, as also summarized by Lapavitsas here.
The third subject of the book is probably of the greatest political-economic interest, namely a practical discussion of the trends in the current crisis and the attempts to resolve it on the part of the ‘troika’, and what the periphery countries can do about it. The focus here is, understandably and rightly, mainly on Greece, although no doubt much of the same applies to Portugal and perhaps also Spain. Lapavitsas et al. take a strong stand against what they see as the failures of the political left to properly understand and critique the presuppositions of the EMU system, thereby paralyzing left politics at precisely the moment it needs to intervene strongly. One might add that this also leaves open the door to other forces to do so instead, as already becoming visible in Hungary and Greece. The left’s response has been a muddled back-and-forth between on the one hand suggesting massive lending and investment by the ECB and Eurozone countries respectively as a simple stimulus programme, and on the other hand an inchoate resistance against the European system as a whole, proposing solutions which would involve a more ‘popular’ Euro policy.
For the authors, this is inadequate and incoherent, and they make a strong case. As they describe it, there are essentially three possible routes: the first is to continue the current policy. That is to say, the troika provides liquidy and limited debt relief to periphery countries in return for severe austerity policies. The purpose of this is purely to retain the credibility of the Euro as a whole and thereby benefit the financial institutions as well as the beneficiaries of the Euro as a world money, and the costs come down entirely on the shoulders of the working people of Europe and especially of the periphery. There is some discussion here, as in many post-Keyenesian arguments, about the inability of the austerity policy to actually revive growth and investment, but this strikes me from a Marxist angle as besides the point: its sole purpose in the short to medium run is to favor financial capital interests, as with Cameron-Clegg’s policies on behalf of the City of London, and the restoration of the investment climate for the national bourgeoisies is left to the mass devaluation that results from prolongued recession and unemployment. Here, Marxism and the theory of the transnational class have considerably greater explanatory power than the (post-)Keynesian analysis, which would have us believe the ruling class is simply unable to see its own interests, and that those interests can partially coincide with those of the population as a whole. We must resist such notions.
However, on rejecting the recipe of austerity and recession, two other options remain. The second is the ‘left-EMU’ option, that is, to attempt to use or reform the EMU institutions such that a genuinely ‘popular’ policy can be followed. This seems to be the notion favored by much of the social-democracy in Europe insofar as it is having second thoughts about the neoliberal turn, and also that favored by the trade union leaderships and the left ‘civil society’ and so forth. Here Lapavitsas et al. are very useful in their denunciation of this approach, at least for the periphery. As they rightly note, there is very little reason to believe even a reform like abolition of the Stability and Growth Pact would be able to overcome the contradictions inherent in the Euro project as currently conceived, and aside from that, it is virtually inconceivable that the ruling classes of Germany, France, the Netherlands and so forth would be willing to move any further in that direction. They have already permitted the ECB to make various direct interventions to restore liquidity, they have accepted partial defaults on creditors’ terms, and they have had to substantially finance the EMU-wide bailout funds like the EFSF – all of which entails in practical terms a distribution of value from the core to the periphery. The middle classes of northern Europe are well aware of this, and are exercising strong pressure not to budge any further. A left option within the EMU is therefore for the periphery actually a more utopian possibility than the third, the option of exit.
The exit strategy is the most politically significant and the most interesting, and especially for Greece appears as the only really viable option purely from the point of view of economic development. While restoration of national fiscal and monetary power and disembedding from the EMU on the part of the periphery might be seen by some as a concession to nationalism and contrary to the international interests of the workers, it is worth considering the substantial economic historical evidence for the importance of sovereignty in achieving developmental goals.(1) Moreover, as Lapavitsas et al. make clear, there is not much choice. The various calculated scenarios of the econometricians of the troika themselves indicate that Greece will not by the current course be able to sufficiently reduce its national debts, both public and private, and the severity of the depression in the country and capital flight are further undermining the state’s tax base. The ECB cannot indefinitely keep propping it up, simply because it is not backed by a federal or united European state of which it can be the monetary-fiscal incarnation, and therefore its risk position from the point of view of transnational finance capital is relatively unstable – one major reason why the ECB’s interventions have been much more conservative than those of the Federal Reserve. More importantly, the current prospect is indefinite high unemployment, negative growth, loss of real living standards, and loss of self-determination for Greece’s working people, never mind the looming spectre of Chrysi Avyi. This cannot be allowed to go on, especially as PASOK, ND, and the ‘Democratic Left’ are by no means capable of convincing the troika of EU, IMF, and ECB to act against their own interests and pressures and let Greece off the hook.
However, as the authors make clear, there are two ways in which exit could be undertaken, and their impact would be significantly different in each case. The first is the conservative exit, which would entail a creditor-led default along the lines of the ‘haircuts’ imposed so far. The creditors would then have to accept a swap of euro-denoted debt for drachma-denoted debt, for which they will impose considerable conditions in return. The Greek small savers, pension funds, middle class small investors and the like will be hit hard, while the primary financiers of the troika will demand exemption from default in return for this manoeuvre. Greek banks would have to be recapitalized, possibly on the basis of nationalization, but managed from the outside by the troika or their comprador forces domestically (as is essentially the case now in both Greece and Italy). The northern creditors would also be hit considerably, but if the exit involves just Greece, the costs would be limited and probably surmountable. However, continued participation in the EMU structure would almost certainly entail continued or more severe austerity as precondition for a later re-entry into the euro.
The option favored by the authors instead is what they call ‘radical exit’, and this is the option which socialists within and without Greece ought to examine and discuss most seriously and earnestly. In all versions, this basically involves a unilateral declaration of default, i.e. bankruptcy, on the part of a Greek government willing to act decisively in favor of the interests of the Greek masses. There would be an enforced shift from the euro to the drachma, by unilateral declaration, and of course the necessary bank holiday and capital controls imposed upon the country to prevent bank runs and capital flight. The troika and the northern expropriators would be expropriated at a stroke, the banks nationalized under public control, and the overall debt audited as to its structure (which is not currently public knowledge) and liabilities. Such a course of action in the short term is only possible if the government is willing not just to intervene, but to intervene radically and immediately, with a clear plan. Any muddled or delayed action would worsen the situation by permitting more capital flight, steeper rises in the inevitable inflation, and worse dislocations and shocks to living standards.
It is almost certain the result would in any case be painful for the Greeks in the immediate term, with inflation, loss of lending facilities abroad, and rising costs of imports (oil, consumer goods, machine tools, and medication especially). But it would permit, as Lapavitsas et al. rightly note, an actual way out that is not permanent austerity. The restoration of national sovereignty in the political-economic sphere must be used immediately to redistribute the very unequal wealth of Greece, as it is no coincidence that the periphery nations are the poorest and the most unequal. An industrial plan must be developed to counteract unemployment, the bourgeoisie and Orthodox church seriously taxed for the first time, and the ossified political and civil society structures crushed. Depreciation can be expected to improve the ‘competitiveness’ of Greece over time, and it is a great opportunity for the modernization in productivity terms Greece has never properly undergone. The prospects for living standards in Greece would over 10 or 20 years be almost certainly considerably better than those under the current policy, and the authors use the example of Argentina’s default and state-led revival programme as analogy.
This book certainly makes a strong argument for why euro continuation is not compatible with the interests of the working people of the European periphery. However, as may be clear from the above summary, its perspective is still somewhat limited. It is in some respects still somewhat too simplistic – for example, the authors seem somewhat naive about the compatibility of the radical course with EU membership overall, handwaving this away in the sense of ‘who knows what will happen’. It seems to me such an exit would, unless shared by several countries at once, necessarily entail an exit from the EU as a whole, given the centrality the euro project now plays in it. Also, the authors do not address the political and ideological dimension adequately. Even among the Greek population there is a great reticence about the exit strategy. This is partially borne out of the real increases in wages and consumption since joining the Eurozone, fuelled considerably by the boom period’s cheap euro credit, but it is also a serious reflection of the sense that membership of the EU and its inner structures acknowledges Greece, Portugal, and similar countries as belonging to the modern, developed, and cooperative European project. Much of this is no doubt illusion, but it is a live one. The very fact that the EU to many people stands for a historically unprecedented peace between the major European states and for a guarantee of a certain formal freedom and equality – the formal equality of money – over the isolation and tyranny of Colonels and falangists cannot be ignored. Here, ideology plays an important role in holding back more radical critiques and strategies, out of fear of throwing the baby away with the bath-water. This is not a wholly unfounded fear, and any left programme of exit must address it.
Another political economic limitation is that the book’s analysis and strategic considerations do not go beyond the immediate logic of the developmental state. Indeed, much of this is no doubt intended to function as transitional demands towards a more lasting change of social formation; this is certainly true for a Marxist economist like Lapavitsas, although perhaps less so for a Keynesian like James Meadway. However this may be, the use of for example Russia’s recovery strategy after 1999 as proof of the possibility of a radical option shows the strength but also the limitation of this strategic idea. After all, how radical is Putin’s militarist, oligarchic developmental nationalism? There is little room here for at least critically discussing the traditional left critiques of nationalism and of the idealization of work, in short, the critique of productivism.
Certainly the conditions of the Eurozone and the crisis are such that the ‘development in one country’ route cannot be avoided – whatever the Trotskyist clichés may be, one must either act or not, and someone has to make the step. One could not blame Greece for a developmental nationalism in this way. But the logic of competition between nation-states under capitalism necessarily forces a contradiction between such developmental nationalism and the interests of the domestic working class, not to mention the working classes of other nations. A more thoroughgoing socialistic approach would be needed to disembed the exiting countries from these logics as well. The difficulty there is, however, that unlike China or the USSR a country like Greece or Portugal has few major resources and a small economic base to start from, and an autarkic developmental state capitalism is likely not a viable option. Here the necessity of solidarity between nations, not just in words but in actually mutually supportive political-economic strategies, is paramount; else a new Greece risks ending up a new Cuba. In saying this, I have by no means solved the strategic problem, and it is one fraught with political and economic difficulties. But in writing Crisis in the Eurozone, Lapavitsas et al. have made a major contribution to the sober and concrete consideration of the possible ways forward; it is now up to other socialist critics to join this debate.
1) See for example M. Shahid Alam’s excellent book Poverty from the Wealth of Nations (Basingstoke 2000) on this subject.
