In close-ups now, you can see it in every face,
despite the roped rain light pouring down the bus-windows—
it's the strain of gravity itself, of life hours cut off and offered
to the voice that says "Give me this day your
life, that is LABOR, and I'll give you back
one day, then another. For mine are the terms."
—from 'The Mill-Race' by Anne Winters
We have been trained into an almost-Pavlovian aversion to Marx and Engels here in the U.S. Nonetheless they bear a re-reading, especially at this critical juncture in economic history. I should preface my interest in this key area of Marxist thought however with the opinion that practicable Marxism, generally, has shared with the Malthusian orientation an overall deficiency in imagination. Undoubtedly, whole new realms of exploitable human endeavor lie ahead (e.g. alternative energy, stem cell research, nano-technology, etc.) As there is much for capitalism to sink its teeth into, present-day excesses should not be over-interpreted (unless of course economic crisis dissembles into ruinous wars or comparable catastrophes, posing threats to the very fabric of civilization. In this case, all bets would be off.) Full-blown socialism or Marxism is anything but a foregone conclusion. Furthermore Marx, the thinker, has been ill-served by the various programmatic dalliances —Marxist-Leninism, Maoism and the like— that invoke his name more than his complex vision. We would be foolish to discard Marx and Engels out-of-hand as they offer crucial insights deserving of our close attention.
That said, in recent months I have become convinced we are in the grips of classic Marxist overproduction on an unprecedented global scale. Overproduction is the phenomenon caused by capitalism's need to engage in perpetual labor-cost reductions in order to remain competitive. The effects of this downward spiral are ultimately self-destructive as they eliminate the worker's ability to purchase the fruits of his own labor. A society where the vast majority of citizens lack the wherewithal to consume much beyond a subsistence level becomes a plutocracy in a hurry. Who but the working class can furnish the mass consumption essential for capitalism?
Overproduction is the central crisis inherent in capitalism. That is, capitalism effectively destroys its own markets in an orgy of cost reductions, all in an effort to remain 'competitive'. However at some point one must ask, competitive for whom? Production stacks up for lack of able buyers (or, stated another way, demand plunges as the ranks of subsistence-level workers grow.) Witness for instance the acres of brand-new automobiles languishing at U.S. ports right now. Even after accounting for the dislocative —and temporary— effects of the current business cycle, these are the fruits of overproduction.
In America wages have been stagnant for thirty years. However due to the timely arrival of an exogenous labor pool, primarily the Chinese, two crucial functions were fulfilled. One, production could be off-shored and then imported back at reduced costs, providing cheap consumer goods to American workers. And two, the profits from selling that production in the U.S. could be re-invested in the U.S., particularly in the latter's credit markets. (To repatriate the profits would have caused appreciation in the producer-nation's currency, thus making Chinese production less competitive than, say, Indian production.) The producer nations were, in true Marxist fashion, chasing the rather dubious honor of lowest-cost producer. This race to the bottom in mad pursuit of foreign market-share represents a beggar-thy-neighbor variant whose end result is poverty-for-the-many. In effect third-world production became, from the standpoint of its domestic consumer markets, prima facie overproduction, as the fruits of production exited the producer-nation on the fastest boat to the West. Frankly, it wouldn't be a stretch to call this phenomenon mercantilism redux; neo-colonialism effectively 'out-sourcing' the costly colonialist infrastructure to an in-country ruling elite. For the vast preponderance of the world, what really has changed?
As the developing nations took their place as 'factory-states' with little in the way of domestic consumer markets (and vague promises of prosperity looming in their futures), the capitalist food-chain became segmented across nations in dangerously unstable —and on a long-term basis, politically untenable— ways. This is also why the producer nations are suffering more than the consumer nations at the moment. In an economic slowdown, a nation of factories essentially falls off a cliff; whereas a nation of consumers can reduce or curtail its consumption and, in the short-term at least, muddle through.
The Chinese and others thus served as 'greater fools' for America's various prosperity bubbles, plowing their stateside profits into Fannie Mae and Freddie Mac agency paper and U.S. government debt with duteous abandon. This surfeit of cheap credit (the un-repatriated proceeds resulting from America's consumption of foreign goods) afforded regular Americans access to homes and other durable goods that exceeded their wage-based ability to pay. Whoever said economics was fair? The more America consumed, the more 'captured' funds lay at its disposal to be borrowed. In this way, America managed to make a business of consumption. Then we whiled away the non-productive hours flipping houses back and forth amongst ourselves.
In his recent essay "Breaking Free from Dollar Hegemony", Chinese economist Henry C. K. Liu implicitly captures the weird artificiality of the overproduction phenomenon in its current internationalist form:
"World trade is now a game in which the US produces fiat dollars of uncertain exchange value and zero intrinsic value, and the rest of the world produces goods and services that fiat dollars can buy at "market prices" quoted in dollars. Such market prices are no longer based on mark-ups over production costs set by socio-economic conditions in the producing countries. They are kept artificially low to compensate for the effect of overcapacity in the global economy created by a combination of overinvestment and weak demand due to low wages in every economy."
The overproduction dynamic in the US was masked, and heroically postponed, by cheap credit from foreign credit-providers. Easy credit cushioned stagnant wages. Americans felt they were richer than they were. This allowed American senior management and Wall Street to extract more money from U.S. corporations than was the historical norm, and to keep wages flat without precipitating riots in the streets. Wall Street made huge profits on both sides of the conveyor, originating the debt stateside and then aggregating it for sale to unwitting foreigners.
Alas America's reduced demand for foreign goods as a result of the current recession puts a stake through the heart of this rather one-sided conveyor. Export nations have fewer proceeds to invest in U.S. credit markets. Reduced access to cheap foreign credit prevents the American worker from augmenting his stagnant wages (and turbo-charging his standard of living) on the backs of foreign creditors. An abundance of foreign credit forestalled our rendezvous with near-subsistence. Suddenly a generation of false prosperity is being taken away, and we stand poised to sample the bitter fruits of our stagnancy. Reconciling with our 'unadorned' place in the world will not be easy, nor will it come, one suspects, without social unrest.
For one thing, re-investing in the American industrial base (after a long period of under-investment) includes the grim reality of competing with the world's established low-cost producers. America's standard of living must fall, probably precipitously, as it 'gets to the back of the production line' in many markets where it once held superiority. Perhaps the good news for the world is that ultimately there will be a meeting in the middle; though in a process of this type, there's more fun to be had on the rising end of the equilibrating see-saw.
The accusations of profligacy lodged against the American worker (which seem to emanate suspiciously from Wall Street) ignore one key fact. The American worker merely furnished the crucial demand-side of a Wall Street debt factory. Moreover they were allotted the role of consumer by necessity and design as there was an abundance of lower-cost workers in Asia and the capitalists required a low-paid, debt-subsidized consumer class to complete their less-than-virtuous circle. By far the instigator, and chief beneficiary, of the game was Wall Street with its 'segmentation' and 'securitization' (cynics might call it the divide-and-conquer) of the debt markets.
The current vogue of blaming workers for their 'financial irresponsibility' ignores the orchestrated roguery conducted above their heads. Just as greed at the top of America's corporations crowded out wages at the bottom, Wall Street's pursuit of ever-higher debt levels in the U.S. served to perpetuate their greed overseas. Together, these forces precipitated a historic theft on workers of all nations. Exploitation of even less fortunate Chinese workers served to conceal the predations on American workers. The aftermath is an American worker who is both underpaid and over-leveraged. Third-world workers by contrast are 'merely' underpaid. Here again Marx intuited correctly the essentially internationalist complexion of the working class. Exploitation is impervious to national boundary. Capitalism is an international project.
One thing is certain. The Chinese and others will not reprise the role of fool. These nations are now earnestly developing their own domestic markets. With the looming departure of cheap foreign money, a generational, paradigm-sifting reindustrialization is required to restart meaningful economic activity in the US. This is hardly music to the ears of a nation that got away for decades with bursts of stimulative credit expansion during business cycle contractions. Politicians are similarly accustomed to delivering largesse between two-year election cycles. However after years of accrued malinvestment, nothing meaningful will happen overnight. Expectation-setting in America will need to develop its long game. More than a few politicians will be sacrificed to America's ingrained culture of impatience. When President Obama talks (as he does repeatedly) about 'resuming the flow of credit to get the economy rolling again', he is talking the traditional short game. This is not encouraging.
We return to the seemingly insoluble paradox of blunt-force capitalism: Elevate the exploited masses and your competitiveness gets shot to hell. Exploit them further and your competitive zeal destroys the very demand it seeks to address. In the final analysis excess or over-production is a euphemism for too-low wages. Only increased wages over a large swathe of the population can sop up the excess production and create the necessary supply-demand equilibriums.
As Henry Ford intuited with his revolutionary $5-a-day program, the only workable capitalism is one that builds markets and automobiles. The third-world needs a champion of Ford's stature and market power to establish a universal wage-floor. Otherwise with the subsistence wage acting as both scourge and grail, perpetual crisis seems assured. Categorical repudiations are often tempting, but rarely fruitful. Capitalism is flawed. So, to my knowledge, is everything else. The practical question becomes, are its flaws 'more fatal' than those of other systems? No easy answer there, comrades.
Norman Ball is a Virginia-based writer and musician. His work has appeared in Rattle, Prairie Home Companion, Epicenter, Main Street Rag and others.
Comments (closed)
Alex Nodopaka
2009-05-06 08:36:42
Clear synopsis! The easy idealistic answer is: extensive humanist education eduction education & a guarantee for a full belly every day.
Luis Rivas
2009-05-09 10:17:41
Great article. Words echoing my own sentiment on the global economic (and political) situation, but yours are more articulate.
"Exploitation is impervious to national boundary. Capitalism is an international project."
Absolutely.
I just finished watching a 2006 Power of Community documentary on how Cuba survived their Peak Oil Crisis. It lays out a clear and optimistic game plan for the rest of the world.
norman ball
2009-05-14 09:07:37
Thank Alex and Luis,
I try to take pains at separating Karl Marx' cogent thought from the baggage and miscues of programmatic Marxism. Engels too.
Even confirmed capitalists ignore them at their peril. I have been reading a lot about Peak Oil lately, and will check that Cuban video out.
I would urge you to take a look at Matthew Simmons' peak oil PDF presentations for an authoritative up-to-the-minute account:
http://www.simmonsco-intl.com/research.aspx?Type=msspeeches
take care
norm
Sabitha
2009-07-16 13:35:10
Good analysis, Norm. The trick is to find that balance between undercutting wages and creating conditions for demand. This really is a classic case of over-production we are seeing. You have not mentioned the environmental unsustainabilty of this mode of production. That we have been eating ourseleves out of home and earth! A concerted effort towards sustainable and environmetally responsible welfare economies is possibly the only thing that can get us out of the morass. Pragmatic socialism may not be the place to look at (State take-overs did not/do not work), but certainly social welfare and reduction in disparities in wealth that leaves everyone something to spend on things other than essentials such as healthcare and education. Irresponsible capitalism's days are (hopefully) over.