In 2014 the world finally spun off its axis into a suffocating vortex of incomprehension (just like the last half of Interstellar). Yet consolation was always available in the form of culture, which continued despite the progressing apocalypse. The next few posts will include some of this year's cultural consolers and a few of its challengers too - from Chekhov to Aphex Twin, the Oxford historian Selina Todd to the posthumous Vaclav Havel, Gang of Four to Gyorgy Lucacs, Nietzsche to the economist Thomas Piketty and many more.
Thomas
Piketty, a Parisian economist, was plucked from data-churning
obscurity last year in the wake of his book Capital in the
Twenty-First Century. It is not
difficult to see why: here Piketty combined a lifetime's devotion to
data analysis with generalising, sweeping insight. There is both
elegance and statistical weight to his much-cited formula that, where
the average annual rate of return to capital (in the form of profits,
dividends, interest, rents, and more) exceeds the level of growth in
an economy for a long time, a "force of divergence" will
concentrate wealth in fewer hands. Written in the form r>g
(where r
is the rate of return and g
is growth of output), Piketty thus has a formula which
demonstrates what is happening to wealth in especially, but not
exclusively, the advanced capitalist economies. Piketty explains the
divergence as a result of slowing growth, itself caused by dwindling
population growth. He explains that, in conditions where returns to
capital are high relative to growth rates, the owners of capital
"need save only a portion of their income from capital to see
that capital grow more quickly than the economy as a whole."
(25) Wealth for the very rich will therefore increase very quickly
while income to labour will stagnate with growth. Inherited wealth
will come to dominate wealth earned "meritocratically"
through hard work and achievement.
As I
recently explored in an article for New
Left Project,
this analysis has put fire in the bellies of reforming, though
ideologically quite "bourgeois", liberal economists like
Paul Krugman and Joseph Stiglitz. Together they are turning their
collective ire on inherited as opposed to earned wealth in a
perceived showdown between meritocracy and plutocracy. Piketty
himself, in his penchant for rationalism and the "cadastral
survey", has clear sympathies for the ideals of the bourgeois
republic. Good data, he claims, will save us all from the woes of bad
distribution.
His fatal flaw, however, is in the failure to deeply
contextualise the historical data which he so ably surveys: Where,
after all, did the great leaps forward of nineteenth and twentieth
century growth rates come from? What happens to the capital that the wealthy do invest - why is it not generating growth? Or why, in the advanced capitalist west
of the twentieth-first century, might growth be tailing off? As I
suggest - following Wolfgang Streeck in the New Left Review
- western capital may be
confronting insuperable barriers to its future expansion. Without the
high growth rates which funded the distributive losses to capital of
the era of democratic suffrage, can capitalism in the west continue
to afford democracy? Or, put in Marxist terms, with declining growth
rates since the 1960s, and with the developmental fruits of
increasingly competitive markets being captured by emerging economies
as opposed to the old western industrial juggernauts, capital in the
west must find a way of increasing its "rate of exploitation"
(s/v, the ratio of surplus value to variable capital) through
intensification of labour or it must find newly monopolisable commodities (hence the scramble to commodify, through patents
and branding and intellectual property, ideas as opposed to physical
goods as such).
Rates
of return - including interest, dividends, and other financial
wealth indicators - may, as Piketty argues, be stable; but profit
rates for US
manufacturing firms have experienced no steady increase since the
1960s (with the brief exception of the post-Plaza, post-recessionary
Clinton boom in the US). Uneven development of the global economy and
competition from rising regions have sapped the life out of the
"base" of a growing number of western economies (as argued
by Robert Brenner in his book The Economics of Global
Turbulence, the data from which
I rely on here). Though manufacturing is far from the
be-all-and-end-all of economic vitality, advanced western economies -
and the US in particular - have been forced to bear the brunt of
manufacturing decline. Since the 1970s the US in particular has
attempted to secure its hegemony, often by trying to maintain a
strong dollar; expand financial dominance; intensify domestic
consumption without increasing wages, and ultimately by disastrously
committing to the "asset price Keynesianism" that led to
the sub-prime mortgage crisis. In the face of the failure of all
projects undertaken so far, the advanced western economies must
invent yet another new means to assert their global dominance and to
coordinate hegemony.
Not, then, a generalised or
generic "crisis of capitalism" (one of the great
theoretical myths developed from the closed, abstract model of
capitalism used by Marx); rather a crisis of western led
capitalist development manifesting itself as a breakdown of US
hegemony.
The pattern of US
manufacturing decline will result in ever deeper financialisation of
the "real" economy and the further concentration of wealth
in the hands of the few. With western industry fundamentally
uncompetitive, yet with torrents of investment still pouring in from
exporting countries, the US in particular is forced to develop ever
deeper credit markets to fund consumption in the midst of declining
overall compensation to labour. "Neoliberalism" remains the
catch-all given to precisely the kind of project that seeks
to guarantee western power through financial hegemony; the only
problem is that - despite the hearts it has won among policy makers
and intellectual elites; despite the unprecedented string of
victories it has won against organised labour; despite its command
over global financial markets - it keeps failing to secure long-term
stability in the declining west. By the standards needed to
rejuvenate and secure western hegemony against growing international
competition, neoliberalism has not been radical enough. The harsh reality is that any rise in the federal funds rate - and a consequent increase in the real rate of interest - will curb domestic consumption. Not only this but such a move will increase US reliance on imports, increase the strength of the dollar in a glut of foreign investment, and ultimately further undermine US industrial competitiveness. Although the US economy grew by five per cent in the last quarter of 2014, even the Economist accepts this is the product largely of a drop in oil prices and "faint" signs of wage increases. A 1.2 per cent growth in median income last year does not bring any relief to families who suffered a loss of income of eight per cent between 2008 and 2011. This is hardly a convincing uptick in overall compensation to labour. No doubt, in such conditions, finance will fill the gaps that wages cannot. The model has not changed, even if the number of jobs is increasing.
The
overriding question for western elites is: can the west lead through
financial hegemony and low domestic growth alone or can it finally
unburden itself of the immense amounts of over capacity in its
economies and by what draconian, anti-democratic measures?
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