David Harvey, who teaches at the Graduate Centre at the City University of New York, has become the leading exponent of classical Marxist political economy today. In two recent books, A Companion to Marx’s Capital (Verso, £10.99) and The Enigma of Capital and the Crisis of Capitalism (Profile Books, £13.49), he tries to explain the recent crisis of capitalism from 2007 to the present — as well as the example of past crises — to make his argument against capitalism. With exceptional clarity and integrating spatial categories into the theory of capital accumulation. Harvey’s thesis is this: capitalism functions and feeds on itself by constant growth which means “3 per cent compound growth for economic satisfaction”. This growth rate is impossible to sustain over the long run and leads, Harvey says, to increasingly severe crisis. The recent crisis fuelled by property speculation shows up the weaknesses and problems with capitalism, as does the growth of the financial sector which has cornered a large share of the economic gains (corporate profits came from the financial sector) while the working class has seen no gains over three decades in the US.
For Harvey, the crux of the vicious circle of capitalism is the problem of surplus capital which has to go somewhere (to earn the magic 3 per cent) to keep the cycle ticking over. The American financial crisis, Harvey says, even in 2010 has nothing to do with the lack of liquidity — corporations, banks, financial institutions are awash with cash but underpaid workers and consumers aren’t spending enough to get the business cycle moving again. For one thing they don’t have the money; for another, the gap between what labour earned and what it would like to spend on could only be covered by credit which they were wary about because of their sense of insecurity about their jobs. The surplus capital is clearly in the wrong hands, as he notes: “In midsummer of 2009, one-third of the capital equipment in the United States stood idle, while 17 per cent of the workforce were either unemployed, enforced part-timers or ‘discouraged’ workers. What could be more irrational than that.”
Under the circumstances, capitalism has to find a way out which means going abroad or globalisation in various ways and every now and then relapsing into protectionism. Another was the explosive use of opaque derivatives but with the writing on the wall where this could eventually lead to, labour hesitates either to borrow or invest in the economy.
So, Harvey gives a grim picture of a future that doesn’t work. Capitalism can only survive by socialising losses and distributing profits to private hands. This can be done because of the close collaboration between the state and high finance which Harvey describes as “state-finance nexus”. Harvey doesn’t see this as a kind of conspiracy; both sides need each other and support each other. Often there is a friction between the two but in the end differences are sorted out as neither side has an alternative model that would work.
All the same, Harvey warns that the “accumulated rigidities” over the last cycle of 1970s have become so great that only a fundamental restructuring can restore the basis for renewed economic growth. But until this is done, the pressure for a return to credit and debt to refuel the economy would be considerable. And this will be a recipe for another crisis of a larger magnitude in a few years.
But the question is whether there is a realistic alternative to capitalism as a way of organising the economy. Everywhere the anti-capitalist left is fragmented and rapidly losing ground; in fact, radical political responses during repeated capitalist crises have invariably favoured the right. The rise of China and India, both of which continued to grow during the recession and that might well bring about a shift in the balance of the global economy, holds out the promise of a huge potential for the absorption of surplus. But this is a distant dream provided certain political conditions were satisfied.
Besides, it won’t be easy. Harvey reminds his readers that Marx himself thought that no social order ever perishes before all the productive forces for which there is room in it have developed. And Harvey admits that capitalism has still a long way to go before it gives up the struggle. In his final chapter, Reflections and Prognosis in Marx’s Capital, Harvey ends on a philosophical note with a verse by Bertolt Brecht:
It takes a lot of things to change the world:
Anger and tenacity. Science and indignation,
The quick initiative, the long reflection,
The cold patience and infinite perseverance,
The understanding of the particular case and the understanding of the ensemble:
Only the lessons of reality can teach us to transform reality.
The two books that complement each other are a welcome addition to the literature of the present crisis that set out the case for a new radicalism and a vision of the alternatives. But one thing has been made clear by the crisis: there can never be unfettered capitalism, “red in tooth and claw”. Call it what you like, capitalism has to be regulated if it has to survive.
