One of the intriguing things about wading through some of the business and economics shelves of some CBD bookshops in (fruitless) search of some of the titles John Quiggin reviewed in the Fin Review on Friday (not online of course) was seeing tomes with titles such as “Bubbles last forever!”, “How to make enormous amounts of money from endless bubbles!”, “Greenspan is the greatest!”. I’m exaggerating, but not much. I suspect their shelf life is almost over, and they’re headed for the remainder bin soon. At any rate, I’ll have to cross my fingers and hope the AUD recovers soon so I can afford to buy something a tad more contemporary – and serious – from Amazon.
Since September, I’ve been wading through far more reading matter than I’d ever imagined possible on economics and finance. Much of it has been, by necessity, somewhat ephemeral. However, it’s good to see some commentators coming out with something of a longer view.
Immanuel Wallerstein’s conclusion won’t be any surprise to anyone who’s been following his work:
We can assert with confidence that the present system cannot survive. What we cannot predict is which new order will be chosen to replace it, because it will be the result of an infinity of individual pressures. But sooner or later, a new system will be installed. This will not be a capitalist system but it may be far worse (even more polarizing and hierarchical) or much better (relatively democratic and relatively egalitarian) than such a system. The choice of a new system is the major worldwide political struggle of our times.
As for our immediate short-run ad interim prospects, it is clear what is happening everywhere. We have been moving into a protectionist world (forget about so-called globalization). We have been moving into a much larger direct role of government in production. Even the United States and Great Britain are partially nationalizing the banks and the dying big industries. We are moving into populist government-led redistribution, which can take left-of-center social-democratic forms or far right authoritarian forms. And we are moving into acute social conflict within states, as everyone competes over the smaller pie. In the short-run, it is not, by and large, a pretty picture.
As I’ve previously commented, I’m not at all sure that he’s right that what we’re seeing is the final death throws of capitalism. But I do think he makes another very important point in his commentary:
The characteristics of a Kondratieff B-phase are well-known and match what the world-economy has been experiencing since the 1970s. Profit rates from productive activities go down, especially in those types of production that have been most profitable. Consequently, capitalists who wish to make really high levels of profit turn to the financial arena, engaging in what is basically speculation. Productive activities, in order not to become too unprofitable, tend to move from core zones to other parts of the world-system, trading lower transactions costs for lower personnel costs. This is why jobs have been disappearing from Detroit, Essen, and Nagoya and factories have been expanding in China, India, and Brazil.
As for the speculative bubbles, some people always make a lot of money in them. But speculative bubbles always burst, sooner or later. If one asks why this Kondratieff B-phase has lasted so long, it is because the powers that be – the U.S. Treasury and Federal Reserve Bank, the International Monetary Fund, and their collaborators in western Europe and Japan – have intervened in the market regularly and importantly – 1987 (stock market plunge), 1989 (savings-and-loan collapse), 1997 (East Asian financial fall), 1998 (Long Term Capital Management mismanagement), 2001-2002 (Enron) – to shore up the world-economy. They learned the lessons of previous Kondratieff B-phases, and the powers that be thought they could beat the system. But there are intrinsic limits to doing this. And we have now reached them, as Henry Paulson and Ben Bernanke are learning to their chagrin and probably amazement. This time, it will not be so easy, probably impossible, to avert the worst.
I think it’s incredibly important to underline the point made in the second paragraph of that extract. I feel like I’m sounding the same note over and over again when I’m arguing that what we’ve seen during the global financial crisis reveals the incapacity of ideology for understanding events. Dichotomies about states v. markets are nonsense. There are no “free markets”, except in the fervid imaginings of Hayek’s disciples. The bubbles which are now bursting simultaneously are to large degrees artefactual creations of state power – the self same mob – the Bernankes and the Paulsons of the world – who have now totally lost control of what’s occurring. It is just foolhardy to believe otherwise, and it also should signal that “state action” doesn’t necessarily equate to action in the public interest, another theme I believe has gone missing in action as folks on the left have rushed to claim some sort of revenge of socialism moment with strategies such as the TARP bailout.
It’s understandable that ideology continues to operate as a frame through which to view events which appear unprecedented and frightening, even when the events themselves show up its inability to provide understanding. In this context, LSE political economist Robert Wade’s analysis in the latest New Left Review is very instructive indeed:
Since the 1930s the non-communist world has experienced two shifts in international economic norms and rules substantial enough to be called ‘regime changes’. They were separated by an interval of roughly thirty years: the first regime, characterized by Keynesianism and governed by the international Bretton Woods arrangements, lasted from about 1945 to 1975; the second began after the breakdown of Bretton Woods, and prevailed until the First World debt crisis of 2007–08. This latter regime, known variously as neoliberalism, the Washington Consensus [1] or the globalization consensus, centred on the notion that all governments should liberalize, privatize, deregulate—prescriptions that have been so dominant at the level of global economic policy as to constitute, in John Stuart Mill’s phrase, ‘the deep slumber of a decided opinion’.
Neoliberal economics has powerful antibodies against evidence contrary to its way of seeing things. However, the current crisis may be severe enough to awaken economists from the ‘deep slumber of a decided opinion’, and render them more receptive to proof that the post-Cold War globalization consensus has strikingly weak empirical foundations.
[My emphasis.]
Wade’s article is well worth reading in full. Written on 7 October, it’s a relatively up to date analysis incorporating a historical view with a sound understanding of the current conjuncture. He’s less apocalyptic than Wallerstein, but I think well captures the actual significance of the global financial crisis as a turning point:
The shocks of the past year—another thirty years on from the last major shift—support the conjecture that we are witnessing a third regime change, propelled by a wholesale loss of confidence in the Anglo-American model of transactions-oriented capitalism and the neoliberal economics that legitimized it (and by the us’s loss of moral authority, now at rock bottom in much of the world). Governmental responses to the crisis further suggest that we have entered the second leg of Polanyi’s ‘double movement’, the recurrent pattern in capitalism whereby (to oversimplify) a regime of free markets and increasing commodification generates such suffering and displacement as to prompt attempts to impose closer regulation of markets and de-commodification (hence ‘embedded liberalism’). [3] The first leg of the current double movement was the long reign of neoliberalism and its globalization consensus. The second as yet has no name, and may turn out to be a period marked more by a lack of agreement than any new consensus.
Wade also emphasises something I wrote about in comments on a recent post:
The uk’s role in the crisis deserves emphasis, because contrary to conventional wisdom, the dynamics at its heart started there. The Thatcher government set out to attract financial business from New York by advertising London as a place where us firms could escape onerous domestic regulation. The government of Tony Blair and Chancellor Gordon Brown continued the strategy, leading Brown to boast that the uk had ‘not only light but limited regulation’. In response, political momentum grew in the us over the course of the 1990s to repeal the Depression-era Glass–Steagall act, which separated commercial from investment banking. Its repeal in 1999 produced a de facto financial liberalization, by facilitating an unrestrained growth of the unregulated shadow-banking system of hedge funds, private equity funds, mortgage brokers and the like. This shadow system then undertook financial operations which tied in the banks, and it was these that eventually brought the banks’ downfall.
Wade’s final suggestions about a reform of economic thought and global policy are also measured, stimulating and worth reading and discussing.
Good post Mark -
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Wallerstein’s assertions that the system that will come out of this rubble:
Is bullshit for more than one reason.
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This collapse of capitalism is no such thing. These sorts of crashes are a well-established feature of the system. The shock comes from a bubble that grew way too big before it burst – as usual. It’s exacerbated by the delusion that it would never end – as usual. The same phenomena you find every time, the utlization of fancy financial products and the widespread disconnection in everyone’s minds between actual values and profit potential.
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The same thing happened before the dotcom bubble burst. All these people going around pressing flesh and business cards talking it up big at lavish junkets about how rich everyone was gonna get. And any questions viz what does your company provide that people’d wanna pay money for was considered downright rude.
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Then it blew down.
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As you say this crash comes after a protracted process whereby those acting within the bounds of what is called neoliberalism have propped up the market, when it stumbles, by government decree. This of course provides an out for what you call the disciples of Hayek who can and have maintained government failure the culprit.
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This is, as you say, a nonsense produced of the false dichotomy between the State and the Market. Nevertheless Wallerstein is talking out the wrong orifice here. What will follow is a wholsesale global reorganization of certain capitalist institutions. We will not be replacing capitalism with something else. We will simply proceed to the next level of institution creation much like the creation of central banks. This may produce some other system by evolution, not design.
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What are we going to replace it with? The long-standing alternative fell on its arse almost 20 years ago. And it’s widely reported to be no fun for anyone who isn’t a sociopath. People may point to the Scandanavian countries but their famed Social Democracy is another form of capitalism. Their deployment of social prerogatives over liberal ones likewise is selective. Sometimes they go the other way.
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As John Gray has said, and Wallerstein understands, the laissez-faire notion (which is both an unobtainable ideal and a slogan) is one that is peculiar to the English speaking world. The idea that globalization is out depends what you mean by that. I’d wager the US has set itself up for a stumble, likewise the UK. Their influence will probably recede. But India, China, S. Korea, Indonesia, the Russian Federation etc are all waiting in the wings. There’s resources to be dug up and pesky third-world pro-democracy dissidents in the way. Any reorganization of the global system will involve those who’s main priority is to keep the transnational flow of resources and markets going.
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They are organized and driven to the purpose. Those who dream of some hazy post-capitalist democracy haven’t written the first sentence of their manifesto. Far worse? Much better? Sorry the smart money ain’t on the forces of peace, love and mungabeans.
Check The Book Depository, Mark, as they usually cheaper than Amazon and send by free express airmail. I can usually get books quicker by mail from them than I can from the Sydney bookshops.
http://www.bookdepository.co.uk/WEBSITE/WWW/WEBPAGES/homepage.php
Thanks for the great post Mark.
A series of cheap shots, Mark. It would be Hayek’s dumber disciples that would be having those sorts of ‘imaginings’ – being familiar with The constitution of Liberty you know that he is far more nuanced than that. As a rule I tend to ignore most of the populist books in the finance shelves. Anything where the author puts his (and it is normally a ‘his’) qualification on the front cover can be ignored. Unfortuantely, the Australian market is too small to carry the good stuff, so amazon is your best bet.
Interesting post. I especially love how Wallerstein is so willing to predict definitive doom for the current system (doooooom!), and so utterly unwilling to make any claims about a future system – it could great, it could be crap, it’s coming as a result of an infinity of individual pressures. It’s ‘not so easy, probably impossible’ to avert this change. But that leaves a little wiggle room. In the end, is there anything falsifiable about Wallerstein’s position, anything at all?
Sans Blog @ 2 – thanks for that, will check it out.
Fmark and Peter, thanks.
Sinclair @ 4 – it may well be Hayek’s dumber disciples but they seem to have quite some degree of reach on the intertubes and in print!
Adrien, I think the crux of Wallerstein’s argument which is not one of his points that you address (and I agree with a lot of what you say – and I think Wade does a much better job than W on looking at globalisation as a double edged sword for the US) is the claim that there are no industries or sectors and/or productivity improvements on the horizon or immediately available to restart the “real economy”, or rather to provide an avenue for highly profitable returns on investment. That may be right, or right-ish. But I think:
(a) He’s still got what might in another guise be called a Eurocentric perspective – his world systems theory of core/semi-periphery/periphery – which I think has lost some of its explanatory value with the relative decline of the US (only some, mind you, and the tables in Wade are worth a look);
(b) There’s the more Schumpeterian view that the game can restart under different rules after sufficient destruction, creative or otherwise, of what Marxists would call fictitious capital, and also, needless to say, of capital that’s not so fictitious.
But he may have a point that some of the nostrums of the Washington Consensus – ie free trade – are for the chop. Wade also makes the point that there’s a real possibility that a new “financial regime” won’t emerge (which he doesn’t think is totally a bad thing). It is certainly the case that “the left” – whoever that actually may be – is certainly without an alternative set of precepts to replace those of neoliberalism, but then state actors seem dazed and confused too.
I think a lot depends on how deep and long the global recession turns out to be.
Mark wrote:
I’d doubt this for lots of reasons. Sure, there will be domestic political pressure in the US from the usual suspects (their over protected rural sector) but the US has far too many debts overseas to turn inwards now, unless you’re suggesting they will take the Russian solution and default on those debts. I’m not sure I would want to be walking the earth if they defaulted on the Chinese ones.
David, I think the protectionist pressure in the US has had a lot more to do in recent years with perceptions about jobs than with agriculture.
Mark,
Since most of the job creation in the US has been centred on Walmart and other service industry type occupations (like the housing industry), it’s going to be hard to whip up the kind of “my job went to Japan” stuff that worked in the 1980s. The jobs will go, but they’ll just evaporate. It’s hard to outsource a Walmart greeter. Most of those kinds of jobs are heavily dependent on international trade (which isn’t lost on the employees of Walmart, who are very aware of where their products come from).
“The characteristics of a Kondratieff B-phase are well-known”
Isn’t this crank economics? Kondratieff cycles seem to need all kinds of data massaging to even start being visible, let alone operate as a theoretical paradigm.
“render them more receptive to proof that the post-Cold War globalization consensus has strikingly weak empirical foundations.”
Yet another in a long line of people saying that one crisis (clearly attributable to both systemic market weaknesses and regulatory incompetence) makes a collapse, or a refutation of hundreds of years of evidence. I don’t understand this latching on to the credit crunch as some sort of definitive proof of the bankruptcy of the capitalist ideal. Well, maybe I do. Lacking an empirical basis for their beliefs, anything that seems remotely in their favour is seized upon as – finally! the evidence for what they knew all along.
“Governmental responses to the crisis further suggest that we have entered the second leg of Polanyi’s ‘double movement’”
I am only passingly familiar with this idea, but it seems to be yet more crank economics. Take this paraphrase as an example: “Robbed of the protective covering of cultural institutions, human beings would perish from the effects of social exposure; they would die as the victims of acute social dislocation through vice, perversion, crime and starvation. Nature would be reduced to its elements, neighbourhoods and landscapes defiled, rivers polluted, military safety jeopardized, the power to produce food and raw materials destroyed (Polanyi 1957:132).” I rest my case, for now.
“nostrums”
Sez you
David, the US still has quite a large (though increasingly non-unionised) manufacturing sector. Note that this sector has seen the majority of job losses over the last year, according to the latest US statistics:
http://www.bls.gov/news.release/empsit.nr0.htm
This is the reason why opposition to free trade was a huge feature of the primary campaign. Even Republicans have been proposing measures against “exporting jobs”.
There has also been substantial concern about the outsourcing of whitecollar service industry jobs.
In any case, it’s worth emphasising that the US will not in future – and in fact is not now – the centre of economic power in the world to anything like the same degree as it has been in the past. Wade’s comments towards the end of the article to which I linked on trade are worth reading.
Mark says: “One of the intriguing things about wading through some of the business and economics shelves of some CBD bookshops in (fruitless) search of some of the titles John Quiggin reviewed in the Fin Review on Friday (not online of course) was seeing tomes with titles such as “Bubbles last forever!”, “How to make enormous amounts of money from endless bubbles!”, “Greenspan is the greatest!”.”
Mark, I love it when you exaggerate. Makes for interesting reading and usually even more interesting discussion (and it is bloody funny)! In case anyone hasn’t noticed, IMHO, the blogosphere is EXTREMELY boring at the moment but Mark remains as one of the beacons of light that still makes the round trip worthwhile. And that is coming from someone who doesn’t often share a similar view as Mark.
And I’ll give ya the wrap for free.
David @ 10 – it’s absolutely right that free trade was a massive issue in the primaries. Obama was suspected of being somewhat better disposed to free trade agreements than Hillary and she made heaps of capital out of that. It was one of the foundations of her appeal to the blue collar vote.
In any case, the point about the Washington Consensus relates more to the free trade architecture at the global level – ie through the WTO etc – as I understand it.
@13 – cheers, Benji!
I’m only exaggerating a little, though! I also got a fair bit of amusement from Dymocks and Borders continuing to stock tons of biz books about how to make bucks from endless bubbles. I did nab the last copy of After the New Economy though, leaving the bubblemeisters to languish unsold on the shelves.
Just returning to Adrien’s comment @ 1, there’s an interesting article in Prospect on the defects in the efficient markets thesis, and also something of a Soros/Hutton suggestion about refocusing capitalism on productive investment and longer term horizons, which is another alternative hypothesis around to Wallerstein’s apocalypticism.
http://www.prospect-magazine.co.uk/article_details.php?id=10443
Kim/Mark,
I can see the “blue collar vote” of organised labour as being a base issue for the Democrats, but (like low taxes for Republicans), but have a good look at the areas where jobs are being created: Hospitality, tourism, retail etc. Low paying, poorly labour organised sectors largely dependent on international trade. Hillary might have got a few “attaboys” for her slightly less free trade outlook, but I would suggest for most Americans it’s either a non-issue or they depend on international trade for their new (crappy) jobs which is why Obama (wisely) demurred on the issue.
btw fatfingers is right about the Kondratieff stuff – it has a distinct whiff of crank about it.
I don’t see why that should be the case, David. They were actually named by Schumpeter, and they’re really just a way of capturing longer term movements in the business cycle. People may put differing interpretations on their causes and significance, but there’s no prima facie reason why there should be “a distinct whiff of crank about it”.
http://en.wikipedia.org/wiki/Kondratiev_wave
There’s an enormous cliometric literature in economic history on various types of cycles – including price waves, etc.
There are some obvious flaws in fatfingers’ argument – cherrypicking a quote from Polanyi (albeit while admitting his unfamiliarity with Polanyi’s argument) and then imputing an argument to Wade he didn’t make (no doubt as usual people feel free to comment on his points without reading the actual article). Wade wasn’t claiming that capitalism had been “refuted” or whatever, but rather arguing that the evidence base for the usual story about globalisation’s benefits is flawed.
Again, I’d submit, people are looking at all this according to what they expect people they perceive as ideological opponents to say rather than on what is actually said.
“but rather arguing that the evidence base for the usual story about globalisation’s benefits is flawed.”
I was clearly interpreting his criticisms as part of the reborn meme of “capitalism’s inherent contradictions” or whatever people want to use, not ascribing particular claims to him. This is obvious, thanks to my using “yet another in a long line…” as a lead-in.
“the evidence base for the usual story about globalisation’s benefits is flawed.”
This is precisely my point – the evidence base is not diminished in any real way by recent events in the financial world.
Let me illustrate this with an analogy. Graeme Bird has what he claims is evidence for an extinct Martian industrial civilisation. Even if you accepted that ‘evidence’ at face value, it has to be weighed against the predominance of evidence that there wasn’t any such civilisation. In other words, extraordinary claims need extraordinary evidence.
Anyone who pops up and declares that neoliberalism or the Washington consensus (or whatever quasi-derogatory misnomer is currently in fashion) is now shown to be flawed, mistaken, finished, refuted, damaged, unsustainable or gone too far (take your pick) due to the upheavals in credit markets, is using one data point to argue against a trend. That’s poor analysis, even for the social sciences.
“Again, I’d submit, people are looking at all this according to what they expect people they perceive as ideological opponents to say rather than on what is actually said.”
Something I’ve fought against my whole time in the blogosphere. And considering I responded directly to the quoted words, not exactly a legitimate argument if directed against me. If not, I apologise for being sensitive.
Mark@7: “….the crux of Wallerstein’s argument …is the claim that there are no industries or sectors and/or productivity improvements on the horizon or immediately available to restart the “real economy”, or rather to provide an avenue for highly profitable returns on investment.”
And there is is again – cognitive dissonance. The first world is not just in financial meltdown, global warming is promising catastrophic consequences for the entire planet if we don’t gear up for change.
In Australia, under the Howard hegemon, we watched while nascent solar and wind energy research programs and industries decamped overseas, thereby losing the edge on kick-starting the new productive industries that could help us adapt to emerging ecological demands that could compromise our very existence as a species.
Not once have I heard President-elect Obama mention, with any conviction, environmental pressures and the need to shift the american economy to renewable energy. Poor fellow, my planet.
I wish that was true.
But for Rudd’s silly piece a couple of years ago, there would be no Hayeking in the press at all.
Just for kicks – Murray Rothbard on Kondratieff: here
(Yeah, I know linking to lewrockwell.com stains the fingers, but there it is).
Summary: Kondratieff cooked the data and in general his theories get revived on a regular basis (the only real Kondratieff wave is the frequency with which his theories are cited). Warning: reading through the polemic is hard work, but it’s an interesting analysis nonetheless.
Wallerstein:
The bases for such statements do need to be interrogated.
Capitalism has grown and evolved in the West for several centuries. The capitalist system of credit creation has been fundamentally stable for that time. This is the sine qua non of capitalism.
I take it that Wallerstein is not asserting that this system “cannot survive”. Rather, he is talking about dependent aspects of that system — labour, property rights, institutions of the state, geopolitical — that have evolved around the central theme of credit creation.
But the question is to what extent can these be called capitalist systems rather than merely somewhat accidental and contingent features of a capitalist system that remained remarkably stable for centuries.
David, Wallerstein is a distinguished scholar and has been studying the 500 year plus history of capitalism for the best part of a lifetime. If he discerns a pattern that conforms to the shape of the Kondratieff cycles, I’m inclined to think he can see something that is actually there. His knowledge of real world affairs is immense and if you read his Commentaries regularly you wouldn’t lightly dismiss him. Have a look at his cv and see how you stack up.
He’s been talking about the Kondratieff cycles for yonks and if you want to dispute it you have to do him the courtesy of examining his arguments in detail.
That said, try this quote from Wallerstein:
Wallers would be the first to understand that in the future people may see different patterns in history which are more important to them in their context than his insights. He has been in the forefront in arguing that his World Systems Theory will reach its use-by date and we’ll need to go beyond it.
If you want to understand Wallerstein better you could do worse than have a read, not a skim, of this Festschrift. The article by William G Martin looks at an article Wallers did in 1998 on “The Rise and Future Demise of World-systems Analysis” which many would have found disconcerting at the time.
I was hoping Mark would post on Wallers’ commentary, but cringed in advance because looking at W’s world-system stuff always brings forth cheap shots from people who haven’t taken the trouble to come to terms with it.
W says the system is so far off balance that it can’t regain equilibrium in the same basic form. In the commentary he says he might be wrong several times before he makes a more definite call.
I have some queries about his analysis, but the overall problem is that because certain patterns have prevailed for 500 years it’s not written in stone that the patterns should continue now. Still his insights are based on so much knowledge that they deserve to be taken seriously.
Katz, I didn’t see your comment before posting.
As far as I can make out Wallerstein is saying that the generation of profits and capital accumulation is becoming difficult. He also sees the end in sight of cheap, compliant labour as well as the trick of externalising costs, eg. dumping crap in the environment.
As to capital accumulation and decent margins of profit, I always thought that ran counter to what I could see around me as funds for takeovers and expansion always seemed to be readily available. Yet this would seem to be the central problem of the credit crisis, and Wallerstein would have been one of the least surprised although Robert Brenner was also talking in apocalyptic terms as long ago as 2003.
The people who do have a bit of dosh to invest of course are the Chinese, the Japanese and the major oil producers of the Middle East. One problem is with the rise of new power centres will come new norms wrt to labour exploitation and the environment, which sends shudders up my spine.
But the question you raise as to how W would define the capitalist system and exactly what he thinks can’t survive is a good one, and I can’t answer it. My own knowledge comes from reading a number of his longer essays (usually about 7,500 words) about 5 years ago which are really popularisations of his thought. Mark has almost certainly read some of his heavier stuff and may be able to shed some light.
Ok, fatfingers, but you could do Wade the courtesy of reading his specific arguments. I don’t see how such an interpretation is valid. He makes a claim that the evidence base for the usual stories about globalisation is largely wrong. He sustains that. I’ve quoted him selectively to make a point, but you’re attacking him on a point where it would be more appropriate to let him speak for himself.
And what Brian said about Wallerstein, although I’m not sure I agree with his assessment of the current conjuncture. I’ve already pointed out – pace David – that he is using Krondatieff cycles in the sense which Schumpeter gave to them, as do others who employ them. Thus it doesn’t really matter what Rothbard said about Krondatieff if others have taken an idea he had, and changed and refined it in the process of putting it to use.
I’d also point out that Wallerstein and Wade are coming from very different perspectives, which seems to be missed in some of these comments.
Brian wrote:
It’s hard to take seriously because it offers no mechanism that powers the waves, and is therefore impossible to either prove or disprove. I thought Mark was trying his best to distance himself from ideological explanations of current financial events, yet here he is embracing one that happens to fit the “left” critique of capitalism.
Embarrassingly, Rothbard *does* offer up a mechanism that can be proved or disproved (that inflationary credit bubbles are caused by government backed wars), which is just as feasible as the Kondratieff stuff but, importantly, offers a mechanism which can be refuted.
I don’t think anybody would dispute that there exists a business cycle, but trying to back fit it into some kind of over-arching 54 year wave based on less then 10 points of data is poor science, let alone the complete fantasy of using it for prediction. You might as well examine the entrails of a chicken.
No, David, that’s to misunderstand what I’m trying to do. I’ve noted areas of agreement and disagreement, and if I may say so, I don’t think that the point about the Krondatieff cycles is at all central to what I’m trying to convey – it’s something you seem to have decided is a key point, but that’s your decision not reflective of what I think the main point is. But I’d recommend you read Schumpeter on the topic, if you’re interested. Unfortunately, his work is in books not online articles.
Brian, he doesn’t define the capitalist system as Marx did, at any rate. Basically, you’re right, it’s about the presence of factors and techniques of production and exchange which allow continual accumulation of capital. I think it would take us too far off track, though, if I were to expand at length, and I’d need to go and do some rereading, for which the time is presently lacking.
Mark wrote:
It’s a house of cards Mark. If Wallerstein and Wade are basing their arguments on some underlying (yet unexplainable) long wave theory of capitalism, their conclusions should be considered suspect. The rest is little more than an appeal to authority which is *always* suspect.
David, I’ve made the point that Wade is writing from a different perspective than Wallerstein, and rather than making assumptions about what he is saying, it would be more useful for you to read his article! I don’t think it’s an “appeal to authority” to refer to Schumpeter’s work, even if it’s not available online. However you don’t seem to be reading what is available online and what I’ve linked to so I have a strong feeling we’re going round in circles now, so that’s probably a sign that this interchange isn’t particularly productive!
What makes you think I didn’t read Wades article? He waffles on, makes one insight:
Then makes the huge mistake of signaling the failure of three merchant banks in the US as some kind of watershed that will break that pattern. What he fails to indicate is that at least one of those banks drifted in and out of independence over the last century anyway as their fortunes waxed and waned. Lehman’s was owned by American Express for 25 years for example.
Trying to tie it into unverifiable theories about “double movements” make it all sound plausible, but in reality it’s a big long opinion piece, not a serious bit of analysis.
(oh, and I wasn’t referring to the Schumpeter reference as an “appeal to authority”, it’s the Wallerstein one).
Is it productive to discuss these criticisms? Probably not to you. However, I think it’s important to highlight what is essentially a bunch of techno-babble about long waves and double movements that simply aren’t mainstream economics, because whatever merit the rest of the arguments might have is simply overshadowed by the voodoo underneath.
And therein lies the difficulty – that’s why we’re talking past each other. I don’t accept your appeal to authority about “mainstream economics” and the underlying assumption that anything else is “voodoo”. I’ve also noted your prior claims that nothing particularly out of the ordinary is occurring at the moment economically. We’re arguing from very different premises, which is why this interchange is a waste of time.
It would seem to me that a “double movement” as conceptualised by Wade is less an economic concept than a political concept.
The “decommodification” embodied in Wade’s description of a particular historical moment occurs when the government make concessions to immiserated and angry losers from the last round of commodification.
Thus Wade accords governing classes during any given evolution of the capitalist system a degree of wriggle-room and pragmatic appreciation of the nature of the threats that they face. Indeed, this flexibility and robustness of capitalism was the argument of Eduard Bernstein and several other progenitors of social democracy in Europe at the end of the 19th century.
It would appear to me that we are all Bernsteinians now.
Certainly, there are passing phases of commodification and decommodification. Yet, across the developed world, despite “free market” rhetoric or lip-service to marxism/leninism, the tensions between commodification and a social market have tended to make societies work more similarly as opposed to more differently over time.
New Soviet Man is only slightly more anachronistic than homo economicus.
Wallerstein appears to ignore or deny the possibility that a captialist system can survive by accommodating itself to the social, decommodified market.
And just as a postcript -
Obviously, that’s not all that either Wade is discussing or that is going on. If you think it is the only significant thing about what’s occurring, well make that case, but don’t distort others’ arguments. It’s clear to a lot of people that something of much greater importance is occurring, and many of the hypotheses of “mainstream economics” – such as the efficient markets thesis and the “great moderation” of business cycles – have crumpled under the evidence. That’s a point made by many – and most recently in terms of links from me – by John Quiggin in this post:
http://crookedtimber.org/2008/10/26/what-does-it-all-mean/
If you think what is happening is just some normal blip, and there’s an easy path back to some sort of putative equilibrium, than I think you need to state that.
I think that a large part of the problem is that assumptions which are essentially ideological are masked by a fetishisation of models which have proved to be useless on the junk in, junk out principle. But over and above that, I don’t concede that there is no place for interpretative thinking as opposed to nomothetic “normal science” in discussions of political economy. There isn’t much econometrics in Smith or Ricardo obviously!
If it’s being asserted that anything above and beyond tracing business cycles is some how epistemologically invalid, I can’t see the reasoning behind that. A more open minded and thus properly scientific attitude would be to try out various approaches to see which has the best fit. As I’ve been emphasising, I don’t think it has to be what Krondatieff himself wrote, but the refusal to come to grips with thought such as that of Schumpeter and Wallerstein doesn’t constitute any sort of knock down argument – not in the slightest.
Anyway, I’ll leave it there, because I don’t think that a debate between me and you is the best direction for this thread, and because I don’t think you’re prepared to concede that there’s any epistemological validity to a perspective you don’t subscribe to, which makes such a debate – if it were to be at all fruitful – impossible anyway.
Katz @ 34 – that’s right – Polanyi’s concepts which Wade is adapting are from the point of view of political economy.
Mark wrote:
Not a “blip”, a normal falling off the cliff you see after every bubble. Doesn’t matter whether it’s tulip bulbs, south sea company shares, car manufacturing, dotcom nonsense or house flipping. You have to remember that the claims of “biggest EVAH” are moderated by the simple fact that the economy is the biggest ever.
I blame too much focus on hard science Mark – I’ll admit to a large degree of skepticism when it comes to the more dismal end of the dismal sciences given their inability to predict anything except in hindsight. Economics included, btw.
Fair enough, David, and thanks for stating your position. I think what we’re seeing now transcends the usual bursting of a bubble for a number of reasons – a succession and multiplication of bubbles to a large degree stimulated by the US Fed and Treasury all bursting at the same time, the freezing up of credit markets (which is not usual) and the distinctly new geopolitical context in which all this is occurring – where the “contagion” is both more widely spread and far less visible, etc. The level of complexity in the system is much higher than it’s been in the past – and the degree of interconnectedness. That’s off the top of my head!
I’m not sure I’ve got a huge amount of time for predictive models in this context, either, but hindsight – in the sense of understanding how we actually got to this point – is more valuable than some might suggest. It’s also worth looking at a range of perspectives. Incidentally, I would disagree that the Popperian verificationist paradigm is the only yardstick for understanding the validity of social science work, or indeed an unproblematic one. But perhaps that’s a topic for another post another time.
Well, not exactly Popperian, he’s useless IMHO as a philosopher of science, because his central tenet (that it isn’t science when it can’t be refuted) isn’t complete. For me, it isn’t science if it can’t be used to make useful predictions i.e. Newtonian physics is refutable (and has been refuted), but it’s still science in that for a given frame of reference and precision it can make useful predictions.
Now, in this case the use of sociology or political economy as a tool for analysing what happened is useful only as an intellectual exercise. Too much of economics (and sociology as a whole) is dominated by polemic, which is great for “I told you so”, but fundamentally useless in formulating solutions.
That’s why “muddle through” will dominate sociological bleatings in this case and for the foreseeable future. You guys need your Einstein and the accompanying technological breakthrough to make him possible.
Oh, and this thread is useless with some levity.
Apparently, it’s an Obama related conspiracy. Soros and Buffet are making us their biatches.
Grace@20: Indeed.
Nature is the other major fictitious commodity created by capital whose thorough exploitation is creating a threat to the existence of life as we have known it. The subsequent ecological crisis and breakdown is going to make the current global capitalist financial instability and dysfunction a mere foretaste of a far greater and much more thorough systemic destruction and mass human suffering to come.
In the absence of new forms of democratic global co-operation the inter-imperialist economic and military wars we can look forward to will, like their predecessors, destroy capital in the massive way that seems to be the historic pre-condition for its continued growth. Except, this time, the whole eco-system, natural and human constructed, will be knocked off its balance in a way that will be irreversible and catastrophic for the forseeable future and the entire planet.
Mark – …the claim that there are no industries or sectors and/or productivity improvements on the horizon or immediately available to restart the “real economy”, or rather to provide an avenue for highly profitable returns on investment.
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Biotechnology?
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It was forecast back in the early 90s (on the crest of the dot/com boom) that biotech would be the second wave of this new industrial revolution. It does however take time for technological innovation to reach the market. (I remember one of those late 70s IT types – now in China – telling me at a conference that it takes 7 years for an IT product to travel from drawing board to the shops). Granted biotech doesn’t seem to be taking the world by storm just yet and when it does there’ll be hot talk in the public arena.
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I think a lot depends on how deep and long the global recession turns out to be.
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Exactly.
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That said the election of Obama will probably precipitate a new boom in ecological sustainable modes of energy. Even The Daily Rupert now see which way the wind is blowing. But you’ll remember Marx asserting that the bourgeoisie usually picks itself out of depression by going to war. He wasn’t entirely wrong there. Gulp!
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But he may have a point that some of the nostrums of the Washington Consensus – ie free trade – are for the chop. Wade also makes the point that there’s a real possibility that a new “financial regime” won’t emerge (which he doesn’t think is totally a bad thing).
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I agree with the first, disagree with the second. The United States has taken a tumble courtesy of its lack of thrift and foolhardy chauvinism. From this point it seems to me that globalization will no longer be commensurate with US interests – necessarily. The United States is still one of the biggest fish in the water tho’. On the second I think we might see a closing down of the global economy and the withdrawal into regionalism but the momentum’s clearly in place for the continuation of a global financial system. It’s just that it’ll have to be regulated.
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If the Peace Movement weren’t so insistently ignorant they’d realize this is a step to global governance.
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It is certainly the case that “the left” – whoever that actually may be…
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Good question. Who are the Left?
Grace – Not once have I heard President-elect Obama mention, with any conviction, environmental pressures and the need to shift the american economy to renewable energy. Poor fellow, my planet.
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You need to get out more. One of his most detailed policies concerns:
He plans to effect a change in what he calls the energy economy. He evokes quite a well-versed approach to sustainability and, unlike so many American blockheads, realizes that the US is slipping behind in science and technology and suggests action to redress this.
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His plans might be the wrong ones but it’s incorrect to say that he has none or hasn’t thought about it.
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Fatfingers – Anyone who pops up and declares that neoliberalism or the Washington consensus (or whatever quasi-derogatory misnomer is currently in fashion) is now shown to be flawed, mistaken, finished, refuted, damaged, unsustainable or gone too far (take your pick) due to the upheavals in credit markets, is using one data point to argue against a trend. That’s poor analysis, even for the social sciences.
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A cursory look at the Murdoch press might give you pause there. Contrary to the protestations of those labeled there is such a thing as neo-liberalism. I commented extensively on what this means and doesn’t mean elsewhere. But Murdoch’s success largely rests on his ability to spot the soon to be dominant trends and go with them. Even the man himself has called for an increase in regulation. And his apparatchnik lackies are singing the ‘too-much’greed’ song; a regime change is being called for. How far this departs from so-called neo-liberal practices remains to be seen.
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Still this translates into policy impetus. But more than that the increasingly global orchestration of governments conspiring to rescue the economy will lead to more extensive international rules. This is inevitable. The State was originally created to protect the market place from chaos. Originally it consisted of a wall and a standing military to repel raiders. As economic zones increase the need to establish law upon them becomes necessary.
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Rather than being the end of capitalism as some persons might suggest this is simply business as usual. After the coming round of regulation’s had its effect it will become cumbersome and they’ll cut the short leash and the same mess’ll happen all over again. Probably in China this time.
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Funny how Marxists don’t understand Marx. Remember people the bourgeoisie swallows up the world before the rise of the Global Proletariat. The bourgeoisie haven’t finished eating and the working class still think it means something to barrack for Arsenal.
Mark quotes Wallerstein:
Sorry, Mark, but it seems to me that really is just quackery, just as David Rubie says.
I read it as equivalent to something like “Freud’s biorhythms are well-known and match…” well whatever.
They’re hypotheses from a hundred years ago that just don’t stand up to evidence.
I’ll just repeat the point I made earlier, SJ, that Wallerstein is not taking his cues from Krondatieff himself but from Schumpeter.
Since this time last night I have read Robert Wade’s article and reread an article I did myself in 2004 for Webdiary entitled “Another World is Inevitable: the big picture of Immanuel Wallerstein.” I’d link to it but the buggers have let it go down the drain with the bathwater. Evidence that it did once exist, giving a short extract and Margo K’s introduction is here.
SG and David Rubie, feel free to sneer and use derogatory language. It’s unpleasant, but I guess it represents your view. When I first encountered Wallerstein talking about Kondratieff cycles my reaction was that it was a bit loopy. But the first I had read of him was an article in the AFR Friday Review section entitled “The End of Pax Americana” followed by a number of other pieces, so I knew I was dealing with an uncommonly learned and insightful gentleman who wouldn’t be engaging in crack pottery. So I noted it and tucked it away hoping that I’d learn more about what he meant.
It’s not an appeal to authority, I’m simply asking for a bit of respect. I’m quite sure that Wallerstein recognised a pattern that he considered appropriate to call a Kondratieff cycle. Whether it conforms exactly with what Kondratieff thought, or anyone else who happens along is secondary and incidental.
I’d have to expend quite a few words to explain what I think he means, and I’m not sure it’s worthwhile. Wallerstein did say that the end of the cycle would be marked by a debt crisis in the United States. We have that, but it’s too early to say whether the cycle is at an end.
FWIW four years ago I ended up thinking that there might be another cycle or three before the world system was kaputt, certainly before the end of capitalism. Now I think that Wallerstein didn’t perhaps appreciate the magnitude of the looming environmental crisis from climate change, the pressure on resources and the elimination of species and other negative impacts on the planet. Some time in the next 20-30 years, certainly within 50, all that is going to whack us in the face.
Yet I see some form of capitalism enduring throughout. But with more constraints.
BTW Commsec, the online trading arm of the Commonwealth Bank is offering a capital guaranteed investment in the ASX200 over the next 5 and a half years. That’s confidence for you!
Brian wrote:
Not sneering, just cynicism.
That statement I wholeheartedly agree with.
David, my worry about your cynicism, if you like to call it that, is that you are shutting yourself off from a perspective that is genuinely different from the usual same old. Wallerstein almost more than anyone sees the relationship between economic and political power on a world basis and how this plays out in the relationship between nation states, international organisations, poorer people and poorer countries in various stages of development. He understands capitalism as an essentially heirarchical and exploitative system that has a tendency to commodify everything and because of his historical understanding can see patterns that play out over the centuries.
The guy is interested in everything, although it has been said that he has a bit of a blind spot on cultural matters. No-one’s perfect. His overall understanding of how things fit together make his bi-monthly commentaries on world affairs quite penetrating. He seems to go directly to what is significant and important and as I think Mark said he’s more often right than wrong.
His recent comments on Georgia and Bolivia are good examples. They can be read without understanding his world systems stuff, but take on added meaning if you do have some understanding of that perspective.
So I’m saying you’d do yourself a favour if you gave him the benefit of the doubt until you understood where he was coming from.
Brian wrote:
I appreciate that you like him Brian, but it’s all a little too close to demagoguery for me given what I see as pretty shaky underpinnings. It’s sort of a comfort food I suppose which relies a lot on playing on confirmation bias. There are lots of opinions out there, and they’re all about as equally valid (what’s that old saying?).
I guess the real problem for somebody like me is that before I want to listen to an opinion, I’d like to confirm the facts which are used as supporting evidence beforehand. In this case, there’s a real hurdle. I would have thought that at this point in history, anybody who claims to have any kind of over-arching theory of how the world works is inevitably going to be either a conspiracy theorist or wrong.
The more things change……..
The budget should be balanced,
the Treasury should be refilled,
public debt should be reduced,
the arrogance of officialdom should be tempered and controlled,
and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance.
Cicero – 55 BC
Mark Says:
As I understand it, Schumpeter believed that a combination of Kondratieff (50-60 year) cycles, superposed by shorter cycles of about 20 years, 10 years and 5 years had explanatory value.
It doesn’t. It’s just a half-assed version of a Fourier series curve fitting exercise.
Schumpeter’s wave model has no predictive or explanatory value. Sure, Schumpeter’s work is of historical interest, and it does still have some influence in the present, but that part of it never, ever, made any sense.
So when I see the words “Kondratieff cycle”, I have exactly the same reaction that I would to someone who included “biorhythm” in his argument: this guy’s a quack. He doesn’t understand his subject at all, and he probably should have his own entry on snopes.com.
Define your terms. What is meant by this – specifically?
The criticism from SJ and David Rubie seems to come down to:
(a) Neoclassical economics explains everything – there is no place for any interpretive social science;
(b) Nothing is happening now that’s noteworthy.
Pure ideology. Nothing more.
You’re wrong here, Kim.
You know what the words “predict” and “explain” mean.
I can’t speak for David Rubie, but I would never, ever, say anything even vaguely resembling “Neoclassical economics explains everything”, nor anything else that you’re whingeing about.
What I’m confused about, SJ, is whether you think the concept of “business cycle” has explanatory value. The argument appears to be that longer cycles and price waves don’t exist? Or they do exist, but they have no explanatory value. What can that mean?
In addition, Schumpeter’s contribution to the debate about innovation and the creation of value is pretty much tied up with the argument about cycles. The first bit is certainly still influential.
What I’m trying to tease out is the reasoning underlying what you and David Rubie are saying. It doesn’t seem to be specified. On one hand, Wallerstein is being critiqued for apparently not explaining his premises, but on the other it’s ok to say “that part of it never, ever, made any sense” or “this guy’s a quack”.
That’s not an argument. It’s an ideological dismissal. That’s my point.
Note that I’m not taking any particular position on the validity of Wallerstein’s work.
Kim, for any set of data that exhibits some kind of cyclical pattern, no matter how complex, you can always describe it as a superposition (this just means addition) of simpler cyclical patterns. That comes from Fourier. It’s no surprise, therefore, that Schumpeter can find cycles that fit the data he looked at.
But it’s just a curve-fitting exercise. If I have n data points, I can always find an equation with n terms that fits my data data exactly.
Kim, you should also understand that nothing I’ve said here should be understood as an attack on you, Mark, Brian or anyone else. The math is just the math.
Sure, SJ, thanks. But I think where we’re all disagreeing is on the epistemological issue of mathematical vs. interpretive analysis! No reason not to be friends because of it though!
I do think this broad brush stuff has some value.
Robert Brenner wrote an an article on what he called “the persistent stagnation” of the US and world economies from 1973-1993 and it’s ostensible revival after 1993 and a book “The Boom and the Bubble” about the same stuff. But apparently he thought the measures taken to boost the economy after 1993 may have actually made matters worse, which could be why he was later talking about it heading for a precipice. I believe he also made reference to a similar phase in the 19th century when the British hegemony within the world system was coming to an end.
If he didn’t Giovanni Arrighi certainly did in his 67 page critique and rewriting of Brenner’s thesis. Arrighi’s main criticism of Brenner is that his analysis is purely financial, whereas Arrighi believes that if you want to understand what’s going on with the economy long term you need to see it in it’s political and social context.
This puts him on the same page as Wallerstein. This is not surprising. He’s currently Professor of Sociology at Johns Hopkins but spent a fair he spent time as Prof of Sociology at the State University at Binghamptom and the Fernand Braudel Center. Of course that’s the place where a certain Immanuel Wallerstein was not just Professor of Sociology but Distinguished Professor of Sociology from 1976-1999. If you look through his CV he must have conned a lot of people. There are not many people who have an academic journal devoted to his central idea.
Arrighi and Wallerstein even wrote some books and articles together.
I know that can be dismissed as an appeal to authority (actually it can’t be easily dismissed) but I’m saying to David in particular that he has demonstrated no warrant of knowledge himself to dismiss Wallerstein’s work as demagoguery. Especially since he hasn’t yet engaged with it as far as I can see.
Arrighi mentions three periods going back to the end-of-hegemony Dutch period each having similar features, as well as differences. One common feature was the tendency to financialisation and financial speculation. The two earlier ones ended in tears. Arrighi, writing in 2003, said there was a fair chance that this one would also.
I might say a bit more about that tomorrow night, but for the present please note that Arrighi says these long cycles of upturns and downturns have individually been studied to death. Arrighi and Wallerstein as I understand them are not interested in stringing numbers together and seeing numerical patterns. Rather they are looking to see whether there are patterns in the events that yield insights into what is going on and the possibilities of what might happen next.
It seems to me that Wallerstein’s notion that the whole 500 year game of capitalism is up is a judgement call. His bottom line is that we are entering, rather, that we are in an age of transition, where small actions can have large effects. In this lies great freedom as well as danger.
I’m going to bed.
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Surely, patterns can be found in the life cycles of these economic systems. Wallerstein is interested in the life-span of successive hegemonies, beginning with the Dutch.
But the most practical question is whether knowledge of these cycles can be mobilised to disrupt these cycles. In other words, can effective action be taken to perpetuate an hegemony?
If these cycles can be disrupted by the actions of powerful and intelligent conservatives, then it cannot be argued that these cycles represent the inevitable and ineluctable life-spans of hegemonies.
A parallel is worth notice. De Tocqueville wrote about the collapse of the Ancien Regime in France. During the 19th century, governming elites in European monarchies attempted to adapt de Tocqueville’s “lessons from history” to save their own absolutist systems. For example, de Tocqueville blamed the irresponsibility of the French aristocracy for triggering the events that resulted in their demise. European aristocrats were determined to hold the line against the rise of their “third estate”. Yet the very oppression of the lower orders that de Tocqueville lamented as being missing in France sent the rest of Europe along another course to systemic collapse. So it may be said that there was an inevitability about the collapse of European absolutisms.
But can the same be said about economic hegemonies?
SJ wrote:
I really dig the idea that somebody clever like Schumpeter can accidentally re-invent fourier analysis without really understanding exactly what he’d done. i.e. the idea was insightful (my god, it’s full of curves!) but the interpretation was wrong. I wonder whether he would have realised it if he’d studied physics.
Renaissance man is overdue for a comeback I say.
An interesting question, Katz. Arrighi writing in 2003, I think just as Bush was about to launch the assault on Iran, suggested that the intractable problem was the “increase in US foreign indebtedness that has no precedent in world history”. That was before Bush increased the problem to a very significant degree. Debt is not the only issue, I think he and others and certainly Wallerstein have pointed out the invention of financial instruments that have no fundamental relationship to the the productive economy as producing short term wealth but longer term grief.
Wade also emphasises debt. Today I heard that the US GDP is two-thirds based on consumption, much of which has been fueled by private debt taken out against the family home, which in the US is falling in value.
Debts incurred in the Vietnam war were a big part of why the American economic hegemony peaked around 1970, which Wallerstein has long pointed out and which has caused him considerable grief, but it seems blindingly obvious now.
Another part of that significant turn of events was the rise in competitiveness of the Japanese and German economies, which the US was keen to restore and boost after 1945 to provide new markets and to make the world safe against communism. The success of this program contained the seeds of its difficulties. Much of what Wallerstein talks about then is the story of how US capitalists manouvred to maintain the profitability to which they had become accustomed and how US policy sought to aid them but to do so in a way that preserved the US geoplitical position.
With respect to debt, Arrighi suggests that the old way of doing things would have been for the empire to extract a tribute. But the essence of the capitalist world system is that it depends on core financial provinces which don’t depend on or correspond exactly with geographic political power. So we have a different deal from the Roman Empire. But how power is articulated between the centre and the periphery and how this relates to nation states and their role in creating the framework and order for capital to continue on its dynamic and exploitative way is where the World System stuff gets complex and really interesting.
In my 2004 post I said the following:
Arrighi said in 2003 that there was no new hegemonic power waiting in the wings. What he’d say now, I’m not sure, but I think that is still correct. China or Chindia are not ready for that role yet. Also I think even more that China realises that they are not ready for that role and that they would hurt themselves if they pulled out the rug.
The future for the US is to see itself as one amongst others. Wallerstein has been consistently urging this for years. It may involve giving up much of their foreign deployment of armed forces and internally developing an economy that depends less on the military-industrial complex.
At the time of GW1 the US was able to get others to pay for their intervention. Those days are gone. After old Europe’s difficulties in following the US into GW11 Perry Anderson in an article ‘Force and Consent’ in the New Left Review believed back in 2003 that the American hegemony over Europe would be quickly re-established after the rebellion over the Iraq war. Move forward to 2008 and Nicolas Sarkozy concludes a deal with the Russians over Georgia where, as Wallerstein points out the US has nothing to offer, indeed their presence at the table would have been counterproductive.In his commentary on Bolivia Wallerstein points out how the South Americans are increasingly choosing themselves what they do. This was unthinkable a decade ago.
So while pax Americana is coming to an end there is no ready replacement. This is going to increasingly cause us grief as population pressures and changing climates, as Huggybunny said the other day, re-order life on the planet.
Wallerstein has constrained expectations of an Obama victory:
Elsewhere Wallerstein explains, I think better than most why the the Left disappoints when it achieves power and how antisystemic movements work. In fact he sees, generally, electing left of centre parties as a way of ensuring that things don’t get worse, or at least don’t go bad so quickly. Still if we are in age of transition the possibility for effective action is greater.
Arrighi said that unlike the Dutch and the British the US still has greater capabilities to “convert its declining hegemony into exploitative domination”. That was before they demonstrated the limitations of their power in Iraq. But he’s still probably right I think in suggesting:
Here Obama shows promise and McCain would be an unmitigated disaster.
This is a myth.
A cursory glance at US trade statistics indicates that US trade was only marginally in the red in the late 1960s. Moreover, the US government debt, expressed as a percentage of GNP was at an historic low in the mid 1960s and had risen only marginally by the late 1960s.
It is true that the Senate threatened to pass legislation in early 1968 to ban $US and gold convertability. This triggered a run on US gold reserves, which induced LBJ to authorise cessation of dollar/gold swaps. This amounted to a credit crisis somewhat analogous to our present credit crisis.
At this moment, some European bankers flew to Washington DC to warn the Johnson administration to raise taxes and/or to cease spending. The big-ticket items at that time were the Great Society programs and the Vietnam War. Contemporaneously Clark Clifford’s “Wise Men” advised Johnson to de-escalate the War on the interests of the US economy. Agonised, Johnson accepted this advice.
Certainly the trigger for US withdrawal from Vietnam was economic. But ironically, it was panic rather than structural weakness that drove the decision. It is true that in politics perception is everything. But there was little in the US national accounts of 1968 that gave credence to this sense of panic.
Bush’s problem was the opposite. He remained blythely oblivious of the dire condition of the US financial system and the poor economic conditon of the US until extremely late in the present crisis. At that point Bush panicked, adopting a national-socialist solution that betrayed his own oft-stated assertion that he was “a market guy”.
Katz, that’s interesting. But as you say in politics perception is everything.
I’ll try to have a look today to see whether what you say changes anything in what Arrighi, Wallerstein and Brennan were saying. I suspect it doesn’t. Myths constitute a kind of reality of their own.
Thanks Brian.
I believe my observations tend to undermine the Wallersteinian thesis that these cyclical lifespans of hegemonies are somehow ineluctable.
In short, the psychological and perceptual usually trump the structural.
Which was the point I was trying to make in #60 above.
This does not deny the importance of the structural. Indeed GWB is a case in point of a leader who ignored structural limits and drove the US hegemon into the ground.
Mostly, however, leaders are smart enough to recognise that there is a looming problem, as LBJ did in 1968, and pulled the pin, if perhaps a bit too precipitately, out of a sense of panic.
Thanks for the links Brian: apart from the content, the guy writes uncommonly and refreshingly clear.
The link to the article from the New Left review is interesting if for nothing other than it’s explanation of how modern identity politics emerged – specifically that after Maoism died with the old bastard warlord who conned and killed so many had shuffled off his mortal coil and while flailing around for “meaning” the vacuum in leftist thinking was filled by the intellectual remainders and odds and ends of the 70′s.
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And the garbage about Krondatieff is beyond parody – are you serious ? Hey , I’ve got a great investment for you all – it uses Elliot wave theory and Fibonaci sequences to measure how deluded people are becoming in the significance of their economic and financial anaylsis.
Glad to be of help, danny. Yes, his writing is a model of clarity. Pity he latched onto that “Krondatieff” term. I think it’s a bit like Lovelock’s “Gaia”. That was strictly a metaphor but has caused no end of grief and misunderstanding. Yet when you see what he meant spelled out in plain English it amounts to the bleeding obvious. Or it does now, perhaps not 30 years ago.
Murph any decent share charting package has an Elliott Wave plotting facility along with Gann angles and Fibonacci fan lines. I prefer the Stochastic oscillator, the MACD histogram and the Relative Strength Index. I don’t understand the others (although I do understand the basic concept of Fibonacci numbers and used to follow a chartist who mentioned them when relevant) but I don’t throw off at others who do.
When you can contest Wallerstein from a similar knowledge base I’ll be all ears.
Katz, thanks for your contribution. I think the short answer is that debt, real or perceived, was only part of the story and we are talking about the end of the upswing, which is different to how downswings play out. Hopefully more tomorrow night.
Brian,
Have you seen ‘The Great Wave: Price Revolutions and the Rhythm of History’ by David Hackett Fischer?
http://www.amazon.com/Great-Wave-Revolutions-Rhythm-History/dp/019505377X
It sounds similar to what Wallerstein is on about with Krondatieff cycles (but I’m not familiar enough with W’s work to be sure).
Fischer’s book is a great read, and I find these global history theorists to be very stimulating, but at the same time one must always keep in mind just how limited and unreliable the data is which they are using.
In one economic history subject I took, the lecturer observed how we don’t have a precise figure for the level of ‘negative growth’ (contraction) in GDP in Australia during the Great Depression. It is normally stated for each year as a range of likely values.
If we can’t be certain about economic data from only 80 years ago, we have to be very careful making theories about cycles going back hundreds of years.
By the way, Fischer’s book was reviewed by the Journal of World-Systems Research, and got a reasonably positive review, although with a number of criticisms concerning “theoretical flaws”.
http://jwsr.ucr.edu/archive/vol4/v4n2r5.php
Perhaps … but downswings are by definition contingent upon the end of upswings.
Katz – Certainly the trigger for US withdrawal from Vietnam was economic. But ironically, it was panic rather than structural weakness that drove the decision.
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Was it? Nixon, like Gorbachev in Afghanistan, attempted to win the war by upping the destruction. He tried this on for years. Various arguments about Vietnam (viz: we coulda won the war) tend to be contradicted by this sort of imagery. Not conclusive of course.
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How does oil feature in this? Remember the second phase of the war was tainted by OPEC. And talkin’ of oil.
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Bush’s problem was the opposite. He remained blythely oblivious of the dire condition of the US financial system and the poor economic conditon of the US until extremely late in the present crisis. At that point Bush panicked, adopting a national-socialist solution that betrayed his own oft-stated assertion that he was “a market guy”.
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Bush is an agent of his own class. His mission was to bust taxes for the rich. These old monied American aristos like busts. The prices come down and they pick up bargains.
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Bush’s ignorance of foreign policy led to him swallowing the PNAC agenda whole. The lax response to terrorist buzzes from the intelligence apparatus, the slickly handled and rather inept crime investigation process following 9/11 in addition to PNAC’s stated aims of invading Iraq as a step to establishing imperial hegemony and their speculation that some kind of terrorist attack on American soil would be required to give ‘em the ‘go’ lead me to believe that in some way the US govt set the whole thing up.
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What’s happened since is that any US government will be required to maintain a military presence in at least parts of the country so long as the US depends on oil. The exploration contracts have come to Bush’s interests cheap and many of his ideological-theological fellow travelers have been enriched at taxpayer’s expense thru the granting of disgracefully corrupt contracts.
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We think he’s been a disaster but his good ol’ boy mates reckon he’s just grouse.
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Praise Jesus – I’m rich!
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Good to see someone is thinking clearly. It could never happen here tho. Our monied are more arriviste than aristo, and have absolutely no class.
It reminds me of what happened in parliament immediately before Costello et al got
serioushysterical and first released the dogs of campaign smear in deadly earnest, ie the attempt to tar Rudd with the Brian Burke brush.Kevin Rudd had started nailing the Libs, and Howard in particular, for secret nuclear power company deals with Ron Walker, Hugh Morgan, and Robert De Crespigny on the 27/2. Two sitting days later Costello segues from it being OK to deal with the likes of these model citizens but
Touched a nerve, what?
Kim
Just out of interest, how much have you actually studied of your obviously new talking points of “neoclassical economics,” “epistemological,” and “mathematics”? Because to be blunt it seems pretty clear you have no idea what you are talking about. I cannot believe you have been anywhere near Fourier Series. But if you have studied these things please correct me.
“Murph any decent share charting package has an Elliott Wave plotting facility along with Gann angles and Fibonacci fan lines. I prefer the Stochastic oscillator, the MACD histogram and the Relative Strength Index. I don’t understand the others (although I do understand the basic concept of Fibonacci numbers and used to follow a chartist who mentioned them when relevant) but I don’t throw off at others who do.
When you can contest Wallerstein from a similar knowledge base I’ll be all ears.”
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Herein lies the problem – the idea that a “decent” share charting package needs to have Elliot wave theory charts at all is ludicrous – you might refer to it to try and determine where the chartists are misadvising their clients to put money but all research to date has shown that index tracking is rarely beaten .Wave theory , grand cycles , mysterious ( but natural ) number sequences occurring through nature are dressed up as in jargon decorated with some maths and sold to the unwitting.
All the assumptions behind these grand “we answer all questions” unifying theories are shaky and about as much use as using Nostrodamus as your advisor and economics guide.
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That an eminent sociologist who also appears to be a life long marxist relies on crackpot theories from the very edge of investing strategies to flesh out his go at a grand unifying theory of economics and life just leaves my confounded that that is the best line of argument he comes up with.
Why the self inflicted trauma of having to demand that everything fits into an overall system anyway?
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As Paulus wrote these therories can be stimulating but have limitations. Rather than things all falling in heap as Wallerstein might suggest and the marxists leading us to the bright shiny future the article by Mr Wade is full of simple and concrete advances – regional and local development, regional trade agreements rather than large multilateral ones and reinforced banking regulations.
Not a cycle or magic number or tea leaf in sight.
Ernald Says:
Settle down, Ernald.
This is an inter-disciplinary debate involving sociology/history/economics/mathematics, and what’s obvious to someone on one side is not necessarily obvious to someone on the other side. All Kim was doing was to force me explain what I thought was obvious to me. Kim hasn’t refuted me, and I haven’t refuted her.
Katz, eventually I’ll try to come back to your question, because it takes us back to the topic of the post.
Paulus, I’m not well read in economics. It seems that Fischer is focussing on wave-like movements in prices, which is very much narrower than what Wallerstein is on about. It’s interesting but probably won’t throw much light on the issue at hand.
Murph, if you are talking about share selection systems costing thousands of dollars with visions of making masses of money, I wouldn’t touch them with a barge pole. I’m talking about software that costs a few hundred dollars where you have to learn how to find and follow shares yourself. I’ve been to seminars on share trading, have read a few books, followed some successful traders and even done a bit myself. I’m not active now.
We were told that 1 in 50 who try share trading are successful. By being successful IMO you should be making consistently year after year a net 30% or it’s not worth the exercise. If your money management is good it’s actually not very risky.
There are two relevant points out of this. The first is that in my experience successful traders use a combination of techniques, and have a written strategy which they follow with great discipline and no emotion. There are different styles, using markedly different techniques. I’ve not met any who use Elliott waves, but I wouldn’t denigrate them as rubbish before I’d investigated them.
The second is that Wallerstein was talking about three different cycles, one of which he termed Krondatieff. Cyclical rhythms, according to a guy called Walter L Goldfrank, are one of six “basic orienting concepts” in Wallerstein’s scheme of things.
Your caricature of Wallerstein is RS even as a caricature, because caricatures are meant to bear some relation to their subject.
I’m far from an expert on Wallerstein’s thought and don’t have a settled position on it at all. Currently I’m rereading Goldfrank’s article which I’d picked out as particularly relevant four years ago. After that I’ll say some more.
Nixon wasn’t looking for victory, he was looking for “peace with honor”, or if you like, a diplomatic victory rather than a military victory.
In the starkest terms, Nixon was never interested in re-escalating the ground war in Vietnam back to or beyond the levels of pre-Tet 1968. His constant military theme was “Vietnamization”, in other words, the withdrawal of US troops.
In short, Nixon added his own flavour to the themes developed by LBJ in his concession speech in March 1968. And as I have suggested, LBJ’s themes were inspired by economic considerations.
Danny – It could never happen here tho. Our monied are more arriviste than aristo, and have absolutely no class.
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It happens everywhere. The notion that Aristocrats have class is more often bullshit than otherwise. There are exceptions.
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Katz – Nixon wasn’t looking for victory, he was looking for “peace with honor”, or if you like, a diplomatic victory rather than a military victory.
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Please don’t confuse election slogans with actual policy especially where Nixon’s concerned.
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The peace deal that the Yanks ended up with in the ’70s, such as it was, was almost identical to that being negotiated in ’68. It was scrapped under the influence of Kissinger for political reasons. Nixon then came to power and proceeded to bomb all fuck out of Vuietname, Laos and Cambodia in a an effort to “ceeveeliz’em leedle yella bustuds” (to paraphrase ee cummings). It didn’t work.
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Peace with honour was just something Nixon told the electorate who were growing tired of the war. Fact is, he, like his predecessors was disinclined to be the first US president who lost a war. Kissinger was likewise disinclined to allow the ‘irresponsibility’ of the US citizenry to interfere with his plans to indulge his Machiavellian antics.