[Marxism] Patrick Bond responds to James Heartfield article on imperialism

[Louis Proyect <lnp3@xxxxxxxxx>]

(This showed up on LBO-Talk. Patrick takes James Heartfield far more 
seriously than I do and offers substantive answers to his attack on David 
Harvey, Michael Perelman et al. That being said, the usually affable 
Patrick refers to Heartfield's "bizarre political standpoint", which from 
him is tantamount to punching somebody in the nose.)

====

We've been working through this in SA on our e-debate list (let me know if
you're interested, anyone). There's too much contentious material here to do
justice to. Just a quick Sunday morning scroll through has left me irritated
at all the mistatements of marxian crisis theory. A few rebuttals:

----- Original Message -----

Zombie anti-imperialists vs the 'Empire'
by James Heartfield
...
JM: Behind the 'war for oil' legend is a coalescence of the old left's
theory of imperialism and the new cynics' predisposition to see all
government as corrupt.

PB: No, it's a coalescence of the left's concern that state actions
generally follow national economic interests, and that oil will run out,
hence the US strategy for decades to come is to have Iraq play vassal.

JM: Early in 2003, Guardian columnist George Monbiot gushed that 'in a
series of packed lectures in Oxford, Professor David Harvey, one of the
world's most distinguished geographers, has provided what may be the first
comprehensive explanation of the US government's determination to go to
war'. Monbiot was probably unaware that he was regurgitating a garbled
update of Lenin's analysis of imperialism from 1916: 'The underlying problem
the USA confronts is the one which periodically afflicts all successful
economies: the overaccumulation of capital.' (7) But while David Harvey's
doctrinal adherence to the results of Lenin's analysis was satisfied,

PB: Actually, Harvey rejects Lenin (and his interimperial rivalry theory) in
favour of Luxemburg (who has a broader theory of capitalism and
non-capitalism as the lynch-pin for imperialism).

JM: it is wrong to say that the USA is awash with capital, overflowing into
the less developed world. In fact, America is a net importer of capital,
dependent upon foreign purchases of US treasury bonds to recycle as consumer
credit (8).

PB: Harvey argues the world is awash with capital, and that uneven
development entails various kinds of switches in flows of capital. There is
no shortage of financial capital bubbling around organically within the US
(even if US T-bills are purchased by East Asians); witness the real estate
and mortgage bubbling going on.

§                       'Over-accumulation' - in relation to what?

JM: Theories of over-accumulation have been with us since Adam Smith first
anticipated that too many capitalists chasing the same profits would drive
profits down to nothing. The resonance of theories of a 'law of diminishing
returns' arose from the coincidence of growing investment and dwindling
profits - in 1813-1815, the 1870s, 1920s, and 1970s. The 'profit-squeeze'
was widely seen as a harbinger of economic doom (9).

PB: Actually, the profit squeeze is seen as the squeeze that tight labour
markets or class struggle puts on profits. The overaccumulation thesis -
that profits stem from excessively productive capital and underpaid labour
(unable to consume the massive output of the system) - is the opposite.

JM: In fact, investors did suffer diminishing returns on their investments
in the 1990s. But Wall Street investors were not even put off paying
fantastic prices for stock with negligible or no earnings. They accepted the
advice to ignore the traditional rule of thumb comparing the price of the
stock to the earnings (PE ratings) on the grounds that flotations like
Netscape's indicated a 'world-changing event' that created a 'new way of
financing companies' (10).

PB: Even without that rhetoric, the financialisation of the 1990s and
contemporary economy would have continued apace. It moves around, but there
are many non-productive circuits in which overaccumulated local and global
capital could be found in the main middle-income countries, including South
Africa.

JM: Diminishing returns did cause problems. Companies like Enron, Parmalat
and Shell forged their accounts to disguise poor earnings. But these
problems never caused the difficulties that the profit squeezes of the
1880s, 1920s or 1970s did.

PB: One could argue that the overall impact of overaccumulation is going to
be worse, because the scale of displacement - not resolution - of the
problem is so much more severe. Just as one example, all the debt ratios
(which indicate what Harvey terms the 'temporal fix') are far higher today
in most every country, especially the US, than the 1970s. I can send anyone
a slide show I do on this, if interested. The other manifestations of crisis
displacement - the search for relative and absolute surplus value, the
spatial fix through globalisation, amplified uneven development, worsening
'accumulation by dispossession' (including via superexploitation of women) -
all appear far more advanced, and I'd argue that all are the result of the
general overaccumulation crisis as witnessed by the persistently low rates
of profit in the 1970s-90s era.

JM: Without any challenge from organised labour, declining profit rates are
a problem that can be contained. Everyone understood that the climb in
stockmarket prices was speculative, meaning that money was to be made, not
from dividends, but by selling the stock on as it appreciated (11). Where
previous generations were scandalised by falling profit-to-capital ratios,
in the 1990s these were welcomed for what they were: a stockmarket boom.

PB: Heartfield doesn't understand that a 'speculative boom' is a reflection
of deep-seated crisis tendencies let loose in the stock market. That's Marx
101.

JM: The touchstone for radical theories of over-accumulation would seem to
be Marx's celebrated account of the 'tendency of the rate of profit to fall'
(12). In Capital: A Critique of Political Economy, Vol. III, Marx shows how
increased accumulation can give rise to diminished profits. His underlying
assumption is that all societies create a surplus over and above the
producers' means of subsistence. Under capitalism, this surplus takes the
specific economic form of profits on invested capital. But, explains Marx,
as an ever-greater proportion of investment is in capital that does not
yield surplus value, such as machinery and raw materials (which he calls
constant capital), and relatively less in labour (which he calls variable
capital), which does yield surplus value. 'Over-accumulation' for Marx,
then, is the over-accumulation of constant capital, relative to the
profit-creating variable capital.

PB: And in turn, the overproduction of commodities beyond the capacities of
the market to realise profits.

JM: The importance of Marx's theory should not be made into a dogma. Marx
was seeking to uncover those trends in the economy that indicated the
historically limited, or transient, character of capitalism. Crises
suggested that the market system was not synonymous with human civilisation,
but might need to be overcome in favour of a more intelligent mode of social
organisation. On the other hand, it was never Marx's aim to suggest there
was an automatic tendency for capitalism to break down, independent of the
deliberate actions of people (13).

PB: Of course class struggle was the central theme in his work, but there is
a vibrant literature on Marx's breakdown theory - especially a 1929 book by
Heinryk Grossmann (which Heartfield's group promoted very heavily just over
a decade ago).

JM: The assumptions that frame Marx's theory of over-accumulation, though,
are less pertinent to today's economy. Capital accumulation in the 1990s
boom years has typically been extensive investment, or 'job-rich growth':
the creation of new points of production, the assimilation of ever-greater
numbers of workers, 'the rapid growth of employment taking place without the
benefit of a parallel increase in the plant and equipment at the disposal of
each worker' (14).

PB: Resort to this sort of language - so reminiscent of French regulationism
('extensive investment') - means Heartfield is merely operating at the

JM: In fact, both the European and American workforces grew - the EU
workforce by 15million and America's by 27million - between 1986 and 2001.
In East Asia, and especially China, millions more have been drawn into the
factories. That implies an expansion of capitalist production,

PB: Sure, but it also implies the search for absolute surplus value, given
the sweatshop character of those operations. It implies a worsening of
uneven and combined development, which is also a classic symptom of
overaccumulation crisis.

JM: but not necessarily an increase in the ratio of investment in means of
production relative to labour. There is evidence that the ratio between
constant capital and variable moved in the other direction, as a more
labour-intensive service sector expanded (15).

PB: But JM knows the problem isn't in the economy as a whole, it's in the
'value-creation' sector, namely sites where surplus value is extracted in
commodity production. So much of the service sector - especially financial
markets - is not about value creation, but about value *realisation*, e.g.
transporting goods further to markets, or the marketing of commodities, or
the maintenance of the commodity. It may be true that the production of some
new dematerialised commodities - images on the page or on a DVD - is more
prevalent than in Marx's time, this basic problem - distinguishing between
value-producing and nonvalue-producing labour - remains a central feature of
crisis theory, which Heartfield should acknowledge here.

JM: Whatever the real movement of profits, they are not, in this instance, a
consequence of the declining ratio of workers to means of production. While
raging against 'over-accumulation', today's critics have failed to notice
that the real problem is the shortfall of investment in new technologies,
the perpetuation of drudgery and the squandering of labour in unproductive
toil.

PB: The 'shortfall of investment' - because most evidence is of declining
fixed capital investment ratios during the past three decades - itself
reflects overinvestment and glutted markets, and that condition hits even
sectors like ICT, e.g. from the late 1990s, once these overaccumulate very
rapidly (witness the optic fibre gluts all over N.America).

JM: In any event, most of the radical critics of imperialism only pay lip
service to Marx's theory of over-accumulation. Their Marxism is what Ulrich
Beck might call a 'zombie Marxism', whose categories wander the night,
though life has long since drained from them. They like the way that it
sounds - full of crashes and 'death-knells' - but each give different
explanations for the long-awaited reversal of capitalist fortunes.

PB: There's a healthy, robust debate underway (e.g. on the Brenner 1998 NLR
article), but 'lip service'? That's an insulting way to read this
literature.

JM: The most common explanation for the crisis is an overproduction of
goods, relative to the available market, rather than an over-accumulation of
constant capital relative to variable capital. 'In the current crisis of
over-accumulation and overproduction, in which the markets are saturated,
low levels of income.make it impossible for the poor to access these
commodities', argues David Masondo of the South African Communist Party.
David Harvey also conflates the two, writing of the 'general problem of
excess capacity (over-accumulation)'. Robert Brenner, author of The Boom and
the Bubble, agrees: 'The overcapacity that was already showing itself very
clearly in 1998, 1999 and 2000 has become blatantly obvious, as bubble
years' over-investment, exacerbated by the reversal of the wealth effect,
has hit the economy with ever-greater force.' Brenner finds plenty of
evidence for his thesis, such as the utilisation of just 2.5 per cent of
existing telecommunications networks, 25 per cent surplus in world auto
production, and massive increase in retail floor space. But this
interpretation represents the perspective of the individual businessman, for
whom selling goods is always a source of existential angst, rather than the
socialist critique of capitalist production as a whole.

PB: JM fails to realise that the critics use such data as empirical evidence
of surface-level conditions, while also making a theoretically-grounded
case.

JM: With businesses investing less in developing new products, they
concentrate instead on marketing the same old stuff (16). But despite the
relative constraint on wages in the 1990s, the growth in numbers working has
kept shop tills ringing.

PB: Nothing here about the massive rise in consumer credit required? Quite
an oversight.

JM: Brenner in particular has difficulty with the evidence of economic
buoyancy in the USA from 1993 onwards, adopting awkward euphemisms like
'up-tick', 'equity price aggrandizement' and 'amplification of the growth of
personal consumption'.

PB: Brenner actually titled his book 'Boom and Bubble' to show that the boom
got out of control. JM should also consult the data on profitability from
Dumenil and Levy (Cepremap website), which strip out the interest-related
(rentier) profits from US non-financial corps and demonstrate that profit
rates have remained very low throughout the last three decades.

JM: Not surprisingly, he makes great play of the collapse in stockmarket
prices around 2000-01, pointing out that these were equal to the aggregate
profits these companies reported between 1995 and 2000. 'As one economist
pithily put it', he writes, 'what it means is that with the benefit of
hindsight, the late 90s never happened' (17).

PB: No doubt Brenner wishes that the 1990s had never happened, since the
economic optimism in that decade seems to make a nonsense of his thesis. The
reductio ad absurdum of Brenner's argument comes when he describes an
'ongoing international economic stagnation, rooted in overcapacity and
over-production' - in other words, decline, rooted in growth.

JM: No, growth would be the capacity to maintain the 1950s-60s ('Golden
Age') investment levels forever. Because of overinvestment problems that
emerged from the early 1970s (or late 1960s) onwards, the 'growth' that
capitalism has generated has been less 'sustainable' (capable of reproducing
itself) given how quickly new markets fall victim to overproduction
problems. The overcapacity in the system as a whole is occasionally
lessened, during recessions or the shutdown of geographically-specific sites
of industry, and the rise of the credit bubble allows some of the
commodities to be mopped up in an unsustainable consumption boom, to be
sure. But moving these problems around across space or through time (credit
allows you to buy today - on hopes of realising more surplus value in the
future) is no substitute for a genuine resolution of the crisis conditions,
and for a renewal of accumulation. The last time such conditions were in
place were the 1930s-40s, when the crisis required a Great Depression and
World War to wipe out the economic deadwood that had overaccumulated.

JM: Though the old left was providing the intellectual ballast, the real
meaning of the 'war for oil' slogan was rather different from the
Marx-inspired analysis of over-mature capitalism. Behind the terminology lay
the more moralistic preoccupations of the contemporary radical
intelligentsia with personal greed on the part of the West. According to
Christian Aid, 'the global economy's addiction to oil - its drug of choice -
has done more than anything else to skew the world's priorities' (18). The
war in Iraq was taken as a sign that the West was over-dependent on cars and
fossil fuels. The real target of the criticism was not a social system that
stood in the way of economic development, but of economic development
itself, and of the greater personal consumption it gave rise to.

PB: Sure, that's part of the problem. The 'old left's' crisis theory never
adequately dealt with the social degradations of mass capitalist culture
('personal consumption') and especially of the ecological damage associated
with rampant capitalism, including excessive global warming and the looming
exhaustion of fossil fuels (especially petroleum). Harvey's thesis about
accumulation by dispossession, added to his geopolitics, fills some of those
gaps nicely. Since later, JM completely misreads the primitive accumulation
debate, and since there are so many other awful bits in his article, I'll
just leave it at that for now... Ooops, some endnotes to this last section
remain:

(7) Too much of a good thing, George Monbiot, 18 February 2003

(8) Ann Pettifor of the New Economics Foundation objected that George
Monbiot 'is wrong to say that the US is awash with capital, striding the
Earth in search of markets in which to invest surplus savings', but is
actually a net importer of capital. An empire living on credit, Ann
Pettifor, Guardian, 20 February 2003

PB: The critique is of the system as a whole, which does indeed create vast
excess 'savings' that take the form of financial market surpluses. Just
consider how much of this is being invested in the real estate bubble - The
Economist last year estimated that of a $70 trillion global property
valuation, about 2/5ths is overvaluation - and you get a sense of the scale
of the problem. Uneven development means the problem is worse in some
places, and sure the US draws in $2 bn each day from the rest of the world
(mainly East Asia), but that does not contradict the 'awash with capital'
problem.

(9) 'The Origin Of The Law Of Diminishing Returns', Edwin Cannan, 1813-15,
Economic Journal, vol 2, 1892. Marx quotes Ricardo: 'The natural tendency of
profits then is to fall.the very low rate of profits will have arrested all
accumulation'. Marx adds: 'This, as Ricardo sees it, is the bourgeois
"Twilight of the Gods" - the Day of Judgement'. (Theories of Surplus Value,
vol 2, 1969, p544.) Comparing profits in the 1960s with those in the 1970s,
William Rees Mogg wondered whether 'maybe Marx was right in saying there
will be a historic decline in the rate of return on capital'. (Diaries, Tony
Benn, 1996, p370)

(10) As Morgan Stanley analyst Mary Meeker told John Cassidy, quoted in his
dot.con: The Greatest Story Ever Sold, 2002

(11) Everyone, that is except Robert Brenner, who worried that the 'glitch
of course, was to be found in the ever-increasing chasm between expected
profits, on the one hand, and actual profits, on the other, which manifested
itself in the stock market bubble' (The Boom and the Bubble, Robert Brenner,
2003, p247). Hype about 'future profits' was really for the brochures, not
to be taken seriously.

PB: Easy to say, after the dot.com bubble-burst fact. Lots of New Economy
boosters believed it and persuaded investors to gamble on that basis.

(12) So for example, the South African Communist Party's 1999 document 'The
current global economic crisis', uses Marx's terminology: 'The present
crisis is, in fact, a global capitalist crisis, rooted in a classical crisis
of overaccumulation and declining profitability.' Patrick Bond says the
document borrows from Robert Brenner's New Left Review article (May-June
1998) which was the basis of his book The Boom and the Bubble - see Green
Left Weekly, 5 May 1999

PB: To be precise, it was an October 1998 document. It would repay JM's
effort to read the document, because, tragically, it's a case of using
marxian crisis theory (talk left) to justify the most milquetoast of global
and local reformism.

(13) 'For some of his disciples the "law of value" . seems to assure the
breakdown of capitalism', chided Paul Mattick, adding: 'Marx's critique of
political economy became the ideology of the inevitability of socialism.'
('Value Theory and Capital Accumulation', Science and Society, Winter 1959,
Vol XXIII, No 1, p 33)

PB: It shouldn't have to take this form, obviously. Since Mattick was a
Grossmann disciple, I suspect (though haven't read the article) that he had
a more nuanced take on this than we're getting in the one-liner.

(14) The Boom and the Bubble, Robert Brenner, 2003, p79

(15) 50 Years of Figures, Eurostat, Bureau of Labour Statistics, 2003

(16) 'The Pitfalls of the Long Transition to Socialism', The African
Communist, First Quarter 2002, p101; The New Imperialism, David Harvey, p70;
The Boom and the Bubble, Robert Brenner, 2003, p254; 'Too much of
everything', R Miller, et al, Business Week, 9 April 2001; 'Branding over
the cracks', James Heartfield, Critique 35, May 2004. According to the
British Department of Trade and Industry, productivity deteriorated as 'the
economy has generated an additional 1.5 million jobs at a quicker rate than
it has increased investment', UK Competitiveness Indicators, HMSO, 2001, p75

PB: JM's use of one 2001 indicator as countervailing evidence is
unsatisfying.

(17) The Boom and the Bubble, Robert Brenner, 2003, p295. The quote is
Robert Barbera, chief economist at Hoenig and Co, talking to Steve Liesman
of the Arkansas Democratic Gazette, 19 August 2001. Remember that the asset
prices were overvalued, so the losses do not bear upon the underlying
profits.

PB: I'm not sure there's time today to do more with this, or that it's a
healthy use of time anyhow, given JM's bizarre political standpoint and
trajectory. Maybe someone else wants to take up the baton.


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