04 July 2010

The Crisis of Capitalism, and Effective Theory

Those who know me well know that I do not particularly hold with Marxist discourse, nor do I believe that revolution of the proletariat (often performed as absurdist theatre via labour unions of the privileged) is entirely appropriate for the contemporary world. Therefore, none would be more surprised than I to realize that David Harvey's message of The Crisis of Capitalism (via the wonderful RSA Animate series) resonates completely with where I'm standing lately. Taking a neo-Marxist analysis of the latest, recent global financial crisis - an analysis that is too often lacking among mainstream economic and business journalism - Harvey observes that the crisis stems from what he calls, "the internal contradictions of capital accumulation ... and the role of crises in the whole history of capitalism." He notes that the last global financial crisis in the 1970s arose from the excessive power of labour, and the solution was to discipline labour in domestic markets (essentially by shipping labour production to markets that could be more easily exploited, a.k.a., so-called offshoring, as well as through neo-liberal political economies championed by Margaret Thatcher in the UK and Ronald Reagan in the US). But the problem this time is considerably different. The root of the problem is "the excessive power of capital, and in particular, the excessive power of finance capital."

Harvey goes on to explain that part of labour's punishment since the 1970s is to repress wages globally. This, however, has the unfortunate effect (if you're a capitalist) of also repressing demand. Hence, in order to bolster demand, capitalists pump up the credit economy to such an extent that it becomes unstable, and boom...  He goes on to explain the theory, "that capitalism never solves its crisis problems. It moves them around geographically." It becomes obvious, of course, that in the contemporary reality of a global economy (from which we truly cannot retreat), there are no more shells under which to hide the peas!

There is another problem, as well. In an Industrial Age mentality, there was an alliance between the financiers and the true capitalists - the ones who assembled labour, capital, and means, created production (yes, on the backs of the workers... sigh...) and earned profit, part of which was subsequently reinvested to increase production ability and access to markets. Today, however (and this is where Marxist analysis hits its limit), the original alliance between finance and capital breaks down as the financiers become (even more) greedy (than they originally were), and realize that the Marxist cycle that requires production to produce capital no longer applies. As money is now a cyber commodity, reproducing among electrons as they flow around the globe, financiers actually become richer as both labour and (traditional) capital become poorer through loss of real earning power and hence, real demand.

Harvey, although claiming to know the nature of the problem (with which I agree), also says quite explicitly that he doesn't know the nature of the solution. Well, that's not entirely true. He states very clearly that, we have a duty, those of us who are academics and seriously involved in the world, to actually change our mode of thinking." Yes! Absolutely! That is why I developed Valence Theory - to change our collective mode of thinking about how people come together, not merely in (conventionally thought of) organizations, but in the larger, global organization that comprises all of business, all of governments, all of civil society, all of indigenous peoples, all of the environment - all of everyone. We're all in this together.

The first step, I think, is to change our notion of what it means to be effective. Rather than simply limiting an understanding of effectiveness to accomplishing predetermined goals and objectives, or accessing and deploying ways and means, or both, effectiveness means being cognisant of the multiple levels of effects we enact through the decisions we make and the actions we take. For example, an effective analysis of Reaganomics, and the absurd subprime lending practices would have allowed policy makers to anticipate the inevitable outcome, as opposed to economists falsely claiming that no one could have predicted the fall. An effective analysis of offshoring policies and practices would have anticipated the demise of the very businesses that gloated about the efficiency of offshoring labour, and the coming crisis that has resulted from Western enterprises also (if inadvertently) offshoring its design, engineering, research, and innovation practices - those aspects of business that, in the 1980s, were claimed to be that which differentiated American industry from Chinese or Indian manufacturing.

A change of thinking? Absolutely. And absolutely necessary to think in terms of effects as Effective Theory demands, rather than in terms of simple outcomes - and certainly instead of money-as-scorecard. It is quite simply a matter of the type of world in which you want to live.

Here's the video. It is certainly worth the eleven minutes to watch.

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Unknown said...

I've not yet read through your Valence Theory website (although I intend to), so you may already know about this:

Barry Allen seems to be suggesting a related theory in his idea of Superlative Artifactual Performance. I read it in Knowledge and Civilization (2004 iirc), although he may have more recent books out by now. Definitely worth a read.

Another thing that was brought up in the lecture that has me thinking is whether I should be bothered about working towards owning a home. I kinda always assumed I should (hence being an ideology), although I've never quite known why I should. What's your opinion? Is it just a trap to make us good workers, combined with a psuedo-logic of always having something to fall back on ("at least if I lose my job I still have a roof over my head")?

Another, off the topic point is that it's worth checking out the lecture: First as Tragedy, Then as Farce: The Double Death of Neoliberalism and the Idea of Communism by Slavoj Zizek. Found on http://www.lse.ac.uk/resources/podcasts/publicLecturesAndEvents.htm about 1/4 of the way down the page. :)

I'd be interested in hearing back from you. Cheers. facebook.com/thugsb

Mark Federman said...

I was not familiar with Barry Allen's work (not being grounded in philosophy), but I did read a reasonable good summary review of Knowledge and Civilization. In many ways, Allen's claim that knowledge is artefactual - that is, reified in the artefacts and their consequential effects in human societal and social development - is quite consistent with McLuhan's contention that "the medium is the message." My notion of Effective Theory is derived from McLuhan, and is thus related to Allen's construction of knowledge. Essentially, what we know is entirely the effect(s) of the things/ideas/institutions/organizations we conceive and create. (There's also an interesting connecting line to Foucault and Power/Knowledge.)

Anonymous said...

Re: thugsb "Should I buy a home?"

First, I'm not an economist, and have little practical experience in the matter. Take my words with that grain of salt.

I would still posit that owning a home/property has value. When one owns a home, one has a bank of capital from which to borrow from. A family without such a nest can of course invest in other ways and so have something to borrow against. For most people, though, homes are a sensible investment due to the fact that they serve a vital purpose as well: shelter. Then, when and if the person no longer needs such an investment, it can be sold.

However, I believe all these benefits are only values if the purchaser is serious about actually owning a home, meaning that person is serious about paying off the mortgage and not just continually making payments that will probably never result in ownership. If a person has the means and is able to make larger payments to start with, with a sustained plan of paying the debt off, then he or she is in a position to enjoy the benefits of ownership. If something disrupts those plans, whether through unforseen complications or unwise planning, the benefits are nullified to an extent.

Obviously I'm speaking in very simplistic terms, which do not take into account all experiences/situations. But I think a great part of the housing crisis is the desire to appear as if one is owning a home when, in fact, one is most certainly not. Ownership means actually possessing, and seriously paying off debt or reaching the point of zero debt. Without such conditions, one is not truly an owner, one is merely a glorified renter. A renter in practice but not name is subject to the same pitfalls of such an existence without any of the legal/economic protections involved.