New South African Review 1. Anthony Butler
which grew the word ‘economy’. Neoclassical economics, as Karl Polanyi (1944) argued, have sought to dis-embed economics from society, as well as nature, to produce what the political economist Ben Fine1 has called economics imperialism – the subordination of society and nature to a narrow, mathematised and dismal pseudo-science. The poly-crisis points to the necessity to re-embed and subordinate the economy to society and nature.
These crises are rooted in a centuries-long process of what David Harvey (2005), following Rosa Luxembourg, calls ‘accumulation by dispossession’ – the dispossession of people’s land and livelihoods, of the commons, of the natural environment. We are witnessing, in South Africa and globally, the commodification of all that is valued, where wealth is measured not in terms of the intrinsic value of things and relationships, or for Karl Marx their ‘use-value’, but in terms of their exchange value (what they can be bought and sold for – that is, for money).
This process began as merchant capitalism in fourteenth century medieval Europe (Mielants 2007) and, through the dispossession and plunder of people and resources in Africa, the Americas and Asia, wealth was accumulated in Western Europe, providing the capital for the industrial revolution of the seventeenth century. This, of course, required further waves of colonial plunder and dispossession in the search for cheap labour, resources and markets for an ever-expanding global regime of accumulation.
Capitalism, in other words, is characterised not merely by the marvels of innovation, entre-preneurship, modernisation, higher standards of living and increasing consumer choice. This is only one side of the coin, which the insiders (like readers of this volume) enjoy. More accurately, capitalism is a system of uneven or enclave development – namely a world system comprising islands of privilege and power, surrounded by seas of alienated poverty, pollution and plundered resources. The promise of ‘modernisation’ and its ‘neoliberal’ or free market variant, that expanded growth will eventually bring ‘development’ to all the world’s population, has proven to be more myth than reality. Instead, poverty and inequality between and within nations has increased significantly (Bieler et al 2008). Capitalism, as Marx once said, develops and destroys. It simultaneously enriches (the few), and impoverishes (the many). The development of Europe and later North America (the core countries) rested to a significant extent on the underdevelopment of the rest of the colonised world (the peripheral or semi-peripheral countries) (Wallerstein 1979; Frank 1966).
The current capitalist crisis has evoked a variety of responses: from the very narrow, one dimensional approaches (free market and Keynesian-lite) which see the crisis purely as a financial one, to broader Marxist (and Keynesian-Marxist) approaches which conceptualise the crisis as economic, rooted in the stagnation of the real economy (particularly the manufacturing falling rate of profit), to the very broad, multidimensional eco-Marxist approaches which see the crisis as a complex interaction between economic, ecological and social crises that has its roots in a pattern of industrialisation that relies on the exploitation of fossil fuels – what Altvater (2006) calls ‘fossil capitalism’.
In Marxist terms, an economic crisis refers to deep-seated, system-threatening breakdowns in the accumulation process. They can be short-term (for example the Asian crisis of 1997) or long-term (the Great Depression of the 1930s). The current financial crisis is not financial in origin, but has its roots in the stagnation of the real economy (Foster and Magdoff 2009; Brenner 2009; Arrighi 2007). This is due to the falling rate of profit, as a result of two things:
Firstly, the struggles of subordinate classes, including the working class at the workplace, as well as the working class and other classes in society at large, to extract as much of the surplus produced as possible, either directly from the employers through higher wages and benefits, or indirectly from the state through higher taxes to fund a higher social wage (in the form of public health care, education, subsidised transport, subsidised food, welfare benefits and other social services).
The second factor, closely interrelated to the first, is inter-firm competition, both at the national and the international levels. Rising costs make firms uncompetitive in relation to their competitors, unless they are subjected to the same rising costs. Increased competition spurs on innovation and the accumulation process, giving rise to a crisis of ‘over-production’, which drives down the unit price of commodities. This exacerbates the crisis of profitability, forcing firms to cut back and leading to the under-utilisation of productive capacity. Firms go bankrupt, workers are laid off, and stronger firms take over weaker ones, leading to the monopolisation of capital2 (Baran and Sweezy 1968).
One way out of the cycle of declining profitability, at least temporarily, is to find cheaper sources of labour elsewhere, cheaper raw materials and new markets for excess products. Drawing on David Harvey, Beverly Silver (2004) identifies various ‘fixes’ that capitalism uses to navigate its way out of continuous crises of profitability. These include the spatial fix, where capital moves to cheaper and cheaper locales of production; the product fix, where capital moves from one niche product to another, chasing increased profitability (for example, from textiles to automobiles to information technology); and the technology fix, where through innovation labour-saving technology increases the productivity of labour. These fixes, however, only partially or temporarily address the accumulation crisis.
As in the past, a crisis in profitability in manufacturing boosts the financialisation of capitalism. This time, however, with a more globalised economy and new computer technology at their disposal, investments in ‘fictitious’ capital to increase profit rates rapidly overtook investments in the real economy. In the USA, the heart of global capitalism, the percentage of financial profits over total domestic profits in 2007 was just below 40 per cent, compared to well below 20 per cent in the early 1980s and below 15 per cent in the 1960s (Foster and Magdoff 2009: 93). By contrast, manufacturing profits steadily declined from over 50 per cent of domestic profits in the late 1960s to less than 15 per cent in 2005 (Foster and Magdoff 2009: 55).
To cut a long and complex story short, the financialisation of capitalism is not the cause of the capitalist crisis, but was itself a response to the crisis of the 1970s (Brenner 2009; Arrighi 2007). This is what Beverly Silver (2004) calls the financial fix. Inherently crisis-ridden, this ‘fix’ spawned a number of short-term crises in different parts of the world over the past two decades, including the US savings and loan crisis (1989–91), the Japanese asset price bubble collapse (1990), the Scandinavian banking crisis (early 1990s), the European exchange rate crisis (1992–3), the Mexican debt crisis (1994–5) the East Asian crisis (1997), the Russian crisis (1998), the Argentinian meltdown (2001), and the dot com bubble burst (2001). The current financial crisis, which hit the core developed countries directly, is the deepest since the Great Depression.
Foster and Magdoff (2009), in an extension of the Sweezy and Baran analysis, characterise the new stage of capitalism as monopoly-finance capitalism. It is based on ever-increasing concentrations of capital, under the rule of mega-financial institutions that straddle the globe, where manufacturing firms are intermeshed with financial firms