Saturday, August 08, 2009

Finance capital!

Marxism has become awfully unfashionable in the last four decades, and not without good reason. Its utopian experiments have failed, and even in academia, where it was very strong (though hardly dominant) when I entered graduate school in 1971, it has been overtaken by more trendy ideologies involving gender and race. The experience of countries like the Soviet Union and China suggest that its visions simply do not reflect human nature, although the Chinese experiment has shown, to the surprise of many, how surprisingly it can evolve. Yet ironically, it has occurred to me over the last couple of months, one could argue that at no time have advanced countries seemed closer to confirming certain critical Marxist-Leninist hypotheses than right now.

Let us get one thing on the table first: Marxism would never have become so influential had not Marx come up with some world-historical insights of great importance. Marx understood both the significance of the bourgeois and capitalist revolutions--which were actually only just beginning in Germany when he began studying these questions--and some of the consequences that they were destined to have. The failure of regimes based upon his thinking should not blind us to the genius of some of his thought--for instance, with respect to the relations between the newly capitalist West and the rest of the world. Here, in one of his most striking passages, is how he and Engels described that iteration in the Communist Manifesto, written in 1848.

The bourgeoisie has through its exploitation of the world market given a cosmopolitan character to production and consumption in every country. To the great chagrin of Reactionists, it has drawn from under the feet of industry the national ground on which it stood. All old-established national industries have been destroyed or are daily being destroyed. They are dislodged by new industries, whose introduction becomes a life and death question for all civilised nations, by industries that no longer work up indigenous raw material, but raw material drawn from the remotest zones; industries whose products are consumed, not only at home, but in every quarter of the globe. In place of the old wants, satisfied by the production of the country, we find new wants, requiring for their satisfaction the products of distant lands and climes. In place of the old local and national seclusion and self-sufficiency, we have intercourse in every direction, universal inter-dependence of nations. And as in material, so also in intellectual production. The intellectual creations of individual nations become common property. National one-sidedness and narrow-mindedness become more and more impossible, and from the numerous national and local literatures, there arises a world literature.

The bourgeoisie, by the rapid improvement of all instruments of production, by the immensely facilitated means of communication, draws all, even the most barbarian, nations into civilisation. The cheap prices of commodities are the heavy artillery with which it batters down all Chinese walls, with which it forces the barbarians’ intensely obstinate hatred of foreigners to capitulate. It compels all nations, on pain of extinction, to adopt the bourgeois mode of production; it compels them to introduce what it calls civilisation into their midst, i.e., to become bourgeois themselves. In one word, it creates a world after its own image.

One must keep in mind that when this passage was published in 1848, the whole gigantic process it describes had barely begun. That is evidence both of the genius and the flaws in Marxist theory: while on the one hand Marx could see where certain only embryonic developments would lead, he also committed himself to a vision of a world transformed by further processes--the proletarian revolution--that had not yet even begun. Had he stuck to analyzing bourgeois capitalism and its consequences his work might have been more enduring. As it was it provided a foundation for various political movements, the most important of which was led by V. I. Lenin.

In 1917, at the height of the First World War, Lenin published Imperialism, the Highest Stage of Capitalism., many of whose ideas were borrowed from a bourgeois English critic of imperialism, J. A. Hobson. There were, as I recall, three major parts of Lenin's argument.

First, finance, rather than industry, had become, Lenin argued, the leading sector of capitalist economies. Secondly, having exhausted opportunities for investment at home, capital was forced to seek new markets for investment abroad, most notably in Asia and Africa. And thirdly, because finance capital controlled governments, the World War had broken out because of the efforts of the leading industrial powers to control larger shares of those critical new markets in poorer countries of the world.

Like Marx's passage about the worldwide impact of capitalism, these arguments had more than a grain of truth. Tragically, although the European nations, the United States and Japan did not need to control third world countries, the desire to do so was indeed large part of the reason for the outbreak (and the persistence) of the First World War. The Second World War grew out of German and Japanese attempts to find a different solution to the problem of resources and markets, by conquering autarkic empires. The capitalists, however, learned from their mistakes. For the last 60 years the industrialized world has accepted the political and military pre-eminence of the United States and the economically privileged status of the dollar, largely, I would argue, to avoid the kind of political and economic competition that had such disastrous consequences in the first half of the last century. Competition among capitalists did not become hopeless.

At the same time, capital, and production, have been flowing steadily to the Third World for a long time now, chasing cheap labor, just as Marx and Lenin had predicted. Again some cooperative relationships have emerged: China wisely (in my opinion) takes the dollars it accumulates by producing for our needs and invests them in American securities. But this process has actually brought about something that Marx predicted for industrial economies: the gradual impoverishment of the proletariat. In the middle of the last century, shaken by Fascism and Communism, the western nations wisely promoted trade unions and a variety of benefits for ordinary people. Now, especially here in the United States, unions and the good jobs they protected have been in headlong retreat for more than thirty years. Indeed, the whole drama of our current political crisis, as I have already argued here, revolves around the issue of whether the Obama Administration will actually be able to give the American working class a better life, or whether enough of them will be moved by anger and resentments to return the Republican Party to power.

But the last and most troubling aspect of Marxist Leninism at the moment has to do with finance capital. Our economy remains a mess. The President made a serious mistake yesterday, in my opinion, to suggest that the economic news in any way suggested that we were emerging from the recession. Jobs are still down and unemployed Americans are still on the rise. The only reason the unemployment rate dropped last month was that the total of those employed and seeking work fell, as more people dropped out of the labor force. I plan to investigate this situation more thoroughly this week; suffice it to say for the moment that things are not, as yet, improving.

Yet despite this, Wall Street has been in the midst of an extraordinary rally for months, and is threatening the 10,000 barrier again. Finance capital--as embodied in the big banks, also showing renewed profits, and Wall Street--suddenly seems to me to be more or less completely disconnected from the actual productive sectors of the economy, and from the life of ordinary Americans. This is a staggering and obviously very important development. The stock market began as a place where business firms could raise money they would repay in profits, but it now seems to be something very different, a speculative futures market which will go up as long as there is money to fuel it. And that money, of which there has been more than enough for the last six months or so, is not coming from any increase in economic activity. I am afraid, in fact, that it is coming from the enormous infusions of cash the Federal Reserve Board is putting into securities markets, and I read one article from the Wall Street Journal some time ago that suggested it was coming from the stimulus. The apparent lack of much connection between the fortunes of our financial giants and the American people strikes me as worthy of more investigation. It is not reassuring.

Marxism and Leninism are not the answer to our current woes--but I do not think we know what the answer is. I am not sure anyone really understands our economy as it has evolved, or how to make it benefit the mass of Americans. I am sure we can make some progress, but only by admitting what we do not know.


Roy said...

Mr. Kaiser,
Another stunning read. I had the privilege of stumbling across your blog while investigating the anti-Obama that was falsely attributed to this blog. I am very happy that the myth was debunked and that I found this outlet for thought.
I believe that you are right on in your assessment of what is wrong with the economy and the disconnect between the "market" and the average American. I believe that part of the problem here is that the primacy of the "market' is reinforced by the American middle and upper classes move to embody that the market is really a measure of how well the economy is doing. It is no longer a measure of this at all as far as the vast majority of Americans are concerned but we have all been conned into thinking in very simplistic terms that "market" up = good and "market" down = bad. If 50,000 auto workers are laid off and the Dow rises in response, how can that be good for the economy as a whole and the average American in particular?
Thanks again for the writing and keep up the good work. Also, please feel free to check out a blog that some friends of mine and I started just a few months ago at

simon.andrews said...

Wonderful reading with many great insights...loved it.
One point worth a mention. After World War 2 America was the only industrial country left standing. We lent money globally to our defeated enemies and we supplied all the infrastructure to rebuild their country. The American unions asked for top wages and with so much money rolling in to the USA the bosses and politicians gave it to them and in return they got a peaceful work-place. For 30 years 1945 to 1975 America lived in a dream world. With Globalization reality has set in..those days will not come back. The solution eludes me.

Antiquated Tory said...

Dr Kaiser,
Will you forgive me for reproducing something from the conclusion of The Perspective of the World: Civilization and Capitalism 15th-18th centuries, which bears upon the relationship between US government policies and corporate capitalism, and in fact between the state and capitalism in general.
The worst error of all is to suppose that capitalism is simply an 'economic system,' whereas in fact it lives off the social order, standing almost on a footing with the state, whether as adversary or accomplice; it is and always has been a massive force, filling the horizon...
A businessman might reply that at present politics is the most important, that the power of the state is such that neither banking nor industrial capital stand a chance compared to it. And there are certainly serious commentators who have written of the all-powerful state, crushing everything in its path, stifling initiative in the private sector, sapping the beneficial freedom of the 'innovator.' The state, they say, is a mastodon that must be driven back into its cave. But it is of course possible to read the opposite -- that capital and economic power are entrenched everywhere, crushing the freedom of the individual. We should not let ourselves be deceived: the truth is of course that both state and capital -- a certain kind of capital at any rate, the monopolies and big corporations -- coexist very comfortably, today as in the past; capital does not seem to be doing so badly. It has, as it always did, burdened the state with the least remunerative and most expensive tasks: providing the infrastructure of roads and communications, the army, the massive costs of education and research. Capital also lets the state take charge of public health and bear most of the costs of social security. Above all, it shamelessly benefits from all the exemptions, incentives, and generous subsidies granted by the state, which acts as a machine collecting the flow of incoming money and redistributing it, spending more than it receives and therefore obliged to borrow. Capital is never very far away from this providential source of bounty. "Contrary to the myth of the private sector as the source of initiative whose dynamism is stifled by government action, late [or as some people would say, mature] capitalism has found,in the range of activities peculiar to the state, the means of ensuring the survival of the entire system." This reflection comes from a review by the Italian economist Federico Caffe of two books generally in agreement with this position, by C. Offe on contemporary Germany, and James O'Connor on the United States in 1977. Lastly, it is thanks to its friendly relations, indeed symbiosis, with the state -- the dispenser of fiscal incentives (to stimulate the great god Investment), of lucrative contracts, of measures which make it easier to reach foreign markets -- that 'monopoly capitalism', which J. O'Connor contrasts with the 'competitive sector', prospers. Consequently, O'Connor argues, 'the growth of the state sector [including the welfare state] is indispensable for the expansion of private industry and in particular the monopolist industries'. Although 'economic power and political power are formally separate, there is a close network of informal relations between them.' I will not quarrel with that, but collusion between the state and capital is nothing new. It dates back to the beginning of the modern period and is so regular that every time a state falters -- whether the state of Castile in 1557 or the French monarchy in 1558 -- capitalism visibly misses a beat too.

Ian Curran said... reading your question...did you author the email that's been going around. Some say no...but the writing style of the email as well as the detail seems to fit much of what I've studied on your site. But it's impossible to be sure. I figure there must be a reason that letter or email has been attributed to you though, so maybe it's true. I mean, it's everywhere, so who really did write it, if not you, do you know who? Here's one link:
Has anyone in the media contacted you to speak on television...mainly Fox News, I would hope, and especially Glenn Beck. I think as far as media on the radio or TV goes he's the only one who cares to seriously investigate and tell us who all these crazies are.
Well...if you could articulate all that you know on a show like his (I know that could take years, but it would be worth it!) then Americans might just wake the hell up! I hope we can correspond sometime soon. And now that I've found your site, I hope you can give me your permission to spread the word to all who follow mine...I feel you're a tremendous source of knowledge that not only will influence my own beliefs but encourage me further that I'm on the right track and always have been even though I couldn't possibly pull from the same advanced pool of experience that you have. Either way...thank you.
Ian Curran - Tampa, FL

Antiquated Tory said...

In one matter I could not agree more with Mr Curran--I would pay good money to see Dr Kaiser on Glen Beck's show. It would be the perfect platform to address all those people who have found the aforementioned email to resonate deeply with their understanding of the world. Though The Colbert Report might be even better. Or Glen Beck and Dr Kaiser together on The Colbert Report.

Anonymous said...

I am glad that I found this blog, while investigating the anti_Obama email which is going around. I e-mailed you after reading it because I was so upset, but now I am having second thoughts because it appears that you did not write that e-mail. And after reading your blog which I found very interesting I can see that the e-mail is a fraud. I apologize to you for my harsh words that I sent to you in my email. Elizabeth

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Carol Fryday - Pittsburgh, PA said...

On August 14th, I received the Obama/Hitler essay you purportedly wrote and after researching it, sent out a correction to the email chain containg a snapshot of your blog and citing Despite debunking the essay, I received the same email from the same sender ten days later! I wrote the sender again, asking him why he thinks it's OK to knowingly send out a fraudent email that uses the name of a respected scholar of history to lend it credibility, but I got no response.

I am, of course, completely frustrated by this (so I can only imagine your frustration).

Is it, I wonder, legal for someone to send out their essay using your name--and your credentials? Isn't it slander to do so? Though you probably don't have the time and energy, I really wish you would enlist the help of some of MIT's computer staff and students to track down the originator of the piece. And that you would then sue them. I fear that if we don't put a stop to this sort of misinformation on the web (which is unfortunately usurping the power of the press), our democracy is doomed.

David Kaiser said...

Ms. Friday,

You are under a misconception. I am not at MIT, but at the Naval War College. (That's another David Kaiser at MIT.) To answer your question, if I could identify the person who started the misattribution I suppose there might be a case there, but I'm afraid only the National Security Agency could do that! Meanwhile a lot of people like yourself have found me.


Jim Baxter said...

Each individual human being possesses a unique, highly
developed, and sensitive perception of variety. Thus
aware, man is endowed with a natural capability for enact-
ing internal mental and external physical selectivity.
Quantitative and qualitative choice-making thus lends
itself as the superior basis of an active intelligence.

Human is earth's Choicemaker. His title describes
his definitive and typifying characteristic. Recall
that his other features are but vehicles of experi-
ence intent on the development of perceptive
awareness and the following acts of decision and
choice. Note that the products of man cannot define
him for they are the fruit of the discerning choice-
making process and include the cognition of self,
the utility of experience, the development of value-
measuring systems and language, and the accultur-
ation of civilization.

The arts and the sciences of man, as with his habits,
customs, and traditions, are the creative harvest of
his perceptive and selective powers. Creativity, the
creative process, is a choice-making process. His
articles, constructs, and commodities, however
marvelous to behold, deserve neither awe nor idol-
atry, for man, not his contrivance, is earth's own
highest expression of the creative process.

Human is earth's Choicemaker. The sublime and
significant act of choosing is, itself, the Archimedean
fulcrum upon which man levers and redirects the
forces of cause and effect to an elected level of qual-
ity and diversity. Further, it orients him toward a
natural environmental opportunity, freedom, and
bestows earth's title, The Choicemaker, on his
singular and plural brow.

Human is earth's Choicemaker. Psalm 25:12 He is by
nature and nature's God a creature of Choice - and of
Criteria. Psalm 119:30,173 His unique and definitive
characteristic is, and of Right ought to be, the natural
foundation of his environments, institutions, and re-
spectful relations to his fellow-man. Thus, he is orien-
ted to a Freedom whose roots are in the Order of the
universe. selah

Anonymous said...

I think we may disagree on a few issues here.

First I don’t think the relationship between finance and the real economy has been given anywhere near the level of attention it deserves. Many on the left show little interest in financial questions.
I think the problem goes well beyond the micro-economic level of loan regulation. Indeed it goes beyond macro-economics and into the realm of political economy. You can also find information about Currency rates.

College Term Papers said...

A great article indeed and a very detailed, realistic and superb analysis, of this issue, very nice write up, Thanks.

Gerald said...

Just ran across this topic. New jewels abound here.
I loved the "Most Ironically..." part; also glad to see someone in the universe, in a response, took a look at Braudel once upon a time.

The Wall Street Markets have not for a long time been closely associated with the domestic American economy. That, after all, has been one aspect of the problems such a unin faces now.

Sweezy and Baran wrote a book, a long time ago, Monopoly Capital; dated now, but what a wonderful title.

I am really something of a different kind of animal, but some of Marx's expositions, as you intimate, have not been improved on.

All the Best,

Gerald said...

If you google Monopoly Capital, wikipedia has a ref to "The Sales Effort and Monopoly Capital", very good '09 article, for those having an interest in such things.

Perhaps becoming kind of passe by the moment now; but....Hitler's techniques were ostensibly drawn from Madison Avenue too.

all the best,