journal of critical globalisation studies \"crisis\" (ipaper)

$: Journal of Critical Globalisation Studies \"Crisis\" (Ipaper)$

JOURNAL OF CRITICAL GLOBALISATION STUDIES

Journal of Critical Globalisation StudiesJournal of Critical Globalisation StudiesJournal of Critical Globalisation StudiesJournal of Critical Globalisation Studies , Issue 4 ‘Crisis’ (2011), Issue 4 ‘Crisis’ (2011), Issue 4 ‘Crisis’ (2011), Issue 4 ‘Crisis’ (2011) ISSN ISSN ISSN ISSN 2040204020402040----8498849884988498

EditorsEditorsEditorsEditors

Amin Samman (editor-in-chief for issue 4) Nathan Coombs Anthony Cooper Pepijn van Houwelingen Editorial advisory boardEditorial advisory boardEditorial advisory boardEditorial advisory board

Dibyesh Anand Michael Bacon David Bailey Sandra Halperin Christopher Perkins Chris Rumford Larbi Sadiki Stephan Stetter Nathan Widder

Journal affiliationsJournal affiliationsJournal affiliationsJournal affiliations

The Journal of Critical Globalisation Studies is supported by the Royal Holloway Faculty of History and Social Sciences fund for research activity 2009/10, in conjunction with the Politics and International Relations Departmental Research Committee. The journal is also supported by a fund from the New Political Communications Unit in the department. The journal is associated with the British International Studies Association working group ‘Global and Transnational Politics’.

© Journal of Critical Globalisation Studies, 2011

http://www.criticalglobalisation.com

Contents

The Idea of Crisis, editorial by Amin Samman 4

Articles: Crises of Economic IdeologyArticles: Crises of Economic IdeologyArticles: Crises of Economic IdeologyArticles: Crises of Economic Ideology International Political Economy and the Crisis of the 1970s: The Real

‘Transatlantic Divide’, by Julian Germann 10

Everyday Neoliberalism and the Subjectivity of Crisis: Post-Political Control in an Era of Financial Turmoil, by Nicholas Kiersey

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‘Grey in Grey’: Crisis, Critique and Change, by Benjamin Noys 45 Dialogue: Ideologies of Economic CrisisDialogue: Ideologies of Economic CrisisDialogue: Ideologies of Economic CrisisDialogue: Ideologies of Economic Crisis Value and Crisis: Bichler and Nitzan versus Marx, by Andrew Kliman 61

Kliman on Systemic Fear: A Rejoinder, by Shimshon Bichler and Jonathan Nitzan

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Marx, Systemic Fear and Capitalists’ Convictions: A Reply to Bichler and Nitzan, by Andrew Kliman

119

Commentary: Order and Change in North Africa and Commentary: Order and Change in North Africa and Commentary: Order and Change in North Africa and Commentary: Order and Change in North Africa and BeyondBeyondBeyondBeyond Egypt and the Failure of Realism, by Joe Hoover 127Political Semantics of the Arab Revolts/Uprisings/Riots/Insurrections/

Revolutions , by Nathan Coombs 138

ReviewsReviewsReviewsReviews Pathologies of Capital: David Harvey’s ‘The Enigma of Capital’, by Matthew

Morgan 147

Analogies of Crisis: Harold James’ ‘The Creation and Destruction of Value’, by Liam Stanley

150

Timing the Event: Antonio Calcagno’s ‘Badiou and Derrida: Politics, Events and Their Time’, by Hannah Proctor

152

Journal of Critical Globalisation Studies, Issue 4 (2011)

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The Idea of Crisis

Editorial for the special issue on ‘Crisis’

A spectre is haunting global politics – the spectre of crisis. Crisis not simply as an event, but also as a concept, and as the perceived need to come to terms with that concept. All across the academy, scholars of globalisation are vexed by the same, apparently simple question: Precisely what does it mean to speak of ‘crisis’? Is it to identify a critical moment of transformation, or to reveal our uncertainty about what such a moment might consist of? Is it to emphasise the objectivity of historical process, or instead to underline the deep subjective anchoring of both social order and change? Is it even to do with any and all of these things (then in which case, what are we to make of the very idea of crisis)? Looking back, these questions are nothing new, and for some time now they have figured within the human sciences as a series of diverse and contending perspectives on the nature of ‘crisis’. On the one hand, the concept has been consistently deployed to understand issues of order and change since at least the 18th century. Influential contributions run the gamut from Marx on the evolution of macro-social structures (see, for example, Marx, 1991, pt. 3; 1996); all the way through to Lacan on how the individual finds and maintains its place within these (see Lacan, 1977). Meanwhile, on the other hand, its sheer ubiquity and apparent polyvalence has served to render the concept an object of inquiry in its own right. Reinhart Koselleck, for example, has written at length on how the term’s meanings and referents have varied across time and space (see Koselleck, 1988; 2002). But now more than ever, this variation is on full display. Both during and after the Great Credit Crash of 2008 – and now also in the wake of the so-called ‘Arab Spring’ that began in early 2011 – media coverage has been awash with references to crisis. To confirm this, simply open up a newspaper or turn on the television; without doubt, you will be confronted by a seemingly endless parade of politicians and pundits invoking the idea. A crisis of confidence, a crisis of finance, a crisis of neo-liberalism, and a crisis of sovereign debt; a crisis of European integration, a crisis of North African dictatorship, a crisis of Western foreign policy, and a crisis of global capitalism; even a crisis of the global left. The list goes on. Unsurprisingly, though, few have had the nerve to ask what this variation might mean, opting instead to provide a drip feed of revisions and updates, which, in turn, have only served to amplify the overall sense of confusion. Within the academic literature, discussion has of course been somewhat clearer, but it remains no less varied in terms of the form and content of its abstractions. For

The Idea of Crisis, Samman

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example, in relation to the events of 2008, the idea of ‘crisis’ has been used to identify different periods in world history, and to account for specific pathways of institutional transformation; to describe the contradictions that underpin the failure of a political or economic system to function; and to understand the interpretive struggles triggered by the acknowledgement of such failures (see, for example, Block, 2011; Crotty, 2009; and Hay, 2011). When taken together, these theorisations do not simply repeat the already apparent polyvalence of ‘crisis’ as an idea; they reveal the centrality of this idea, in all its possible forms, to the contemporary global imaginary. Moreover, in the gaps and overlaps between the distinct ideas of crisis being deployed, we find an indication not only of an underlying historical confusion, but also of the contested and productive force of crisis theory within history. Indeed, with the return of crisis theory, the very historicity of the present has become the puzzle of our times. It is in this light that we encourage you to consider this special issue on crisis. The contributions contained within are as varied as you might expect, given the preceding discussion, but for the most part they are theoretical in orientation. And if “theory is a cluster of conclusions in search of premise”, as Norwood Russell Hanson (1958, p. 90) once put it, then it is in the aforementioned ‘puzzle of historicity’ that each of them finds their most basic premise. That is to say, all of the contributions more or less explicitly seek to situate the current conjuncture within an understanding of historical process. Hence, our hope is that the present volume might function as a kaleidoscopic survey of the possible relations between crisis and crisis theory. In practical terms, the contents of the issue are divided into three sections, where each section employs a different format in order to address a specific variation on the overarching theme. The first section, Crises of Economic Ideology, consists of three articles that adopt a meta-theoretical approach, providing an analysis of some of the problems implicit in popular understandings of economic order and change. Meanwhile, the next section, Ideologies of Economic Crisis, takes the form of an extended exchange between authors, bringing together two substantive and contemporary theories of capital and crisis. Finally, the third section, Order and Change in North Africa and Beyond, is comprised of two commentary pieces which seek to bridge these different levels of analysis, indicating some of the links between recent events, emergent readings of those events, and their theoretical or practico-ideological context. In this way, then, each section provides a slightly different point of entry into the theory-crisis nexus. We leave to the reader the question of precisely how these entry-points relate to one another. Some words, though, are in order on the relation between the arguments put forward in each of the three sections. On the crises of economic ideology. Theories of ideology abound in the social sciences, and within a great deal of these, political and economic theory is itself seen as


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central to the constitution of particular (read ‘ideological’) worldviews. This section concerns the rise and fall of specific theories as ideology, focusing in particular on those that speak to issues of economic order and change. Broadly speaking, all three articles seek to announce the recent or ongoing undoing of a particular theoretical approach. And yet by virtue of their respective problématiques, one’s conclusion ends up intersecting with another’s premise. In the first of these articles, Julian Germann argues that scholars of International Political Economy (IPE) must return to the crisis of the 1970s if they are to develop a better understanding of world order and change. By focusing their attention on a debate about the state of the discipline, he suggests, contemporary scholars of IPE have overlooked how the visions of cooperation and conflict that were developed during the 1970s have continued to dominate their field, despite countless theoretical and empirical challenges. In the context of another global crisis, then, the relevance of the discipline will hinge on its ability to break-free from this legacy. As he puts it: “Ultimately, what is required is not simply historical revision, but also the theoretical redefinition and political re-appropriation of IPE’s foundational puzzle” (pp. 17-18). Nicholas Kiersey’s article also speaks to debates within the field of IPE, but rather than focusing on the traditional realist and liberal perspectives, it addresses a growing literature on the social construction of global finance. While such work has usefully drawn our attention to the role of everyday norms and practices in sustaining particular forms of financial life, he suggests, the recent crisis has revealed its failure to relate these processes to the ongoing evolution of both capital and its mode of control. Drawing on Foucault’s discussion of neoliberalism, Kiersey traces the historical emergence of biopower in the West, linking this development to Hardt and Negri’s more recent writings on biopolitical production. In the former, Kiersey argues, postmodern capital finds its mode of control; but in the latter, it reveals its increasing reliance on ‘the common’ as a source of surplus value. In his own way, then, Kiersey too reaches for the crisis of the 1970s, which he casts not simply as a crisis of Fordism, but also as the birth of a new and profound tension between capital-as-labour and labour-as-life. Interestingly, in our third article, Benjamin Noys takes aim at precisely this kind of critique, emphasising its congruence with the ‘creative ideology’ of contemporary capitalism. According to Noys, if labour-as-life reveals the limits to capital, then it does so through an appeal to the productivity of life-as-labour. And within the context of a present mired in stasis, this appeal to an excessive or vital power provides precisely the kind of self-willed dynamism that is required to restart production and growth. Moreover, he suggests, even the inversion of this critique – i.e. an excessive anti-productivism – risks unintentionally providing the material needed for yet another round of accumulation. In other words, both are ideologies in crisis. But if this double-bind marks the “disarticulation of crisis, critique and change in present moment” (p. 54), then it also


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indicates a starting point for their future re-articulation. By conceiving of crisis as stasis, and by analysing all the compensatory visions of dynamism that accompany it, Noys contends, we might at least begin to forge a link between critique and change that befits the present. Hence, like both Germann and Kiersey, Noys alerts us to a crisis in economic theory, broadly construed. On the ideologies of economic crisis. If the aforementioned articles operate on a meta-theoretical level, providing more or less implicit analyses of what throws capital into crisis, then the discussion in this section addresses the question head on. Within the history of political economy, crisis theory of course has a long and complex lineage. However, after the neoclassical revolution – which effectively cast crisis as an exogenous shock to market dynamics – the undertaking was forced into the margins of the field, where it became the preserve of so-called ‘heterodox’ scholars (see, for example, Mattick, 1981; Toporowksi, 2005). In this section we stage an encounter between some contemporary theorists that draw from two different heterodox traditions: on the one hand, we have Jonathan Nitzan and Shimshon Bichler, who take inspiration from Thorstein Veblen; and on the other, we have Andrew Kliman, who works within a Marxian framework. Nitzan and Bichler (N&B) have recently proposed a new theory of ‘forward- looking’ capital (see Nitzan and Bichler, 2009), and our original intention was to publish their first attempt to understand the crisis through this lens (see Bichler and Nitzan, 2010) and then to have Kliman respond. Kliman did write a response, but it included an empirical critique that N&B took seriously enough to withdraw the publication of their original article. The remainder and bulk of Kliman’s response, however, concerned the critique of Marxian economics that N&B launched in their 2009 book, Capital as Power. Kliman’s response is published here in its entirety, and it is followed by a rejoinder from N&B, where they primarily address Kliman’s empirical critique of their unpublished article. Finally, in a third instalment, Kliman responds once more to N&B’s comments. Hence, the exchange published in this section includes three of four parts, and we would encourage interested readers to consult the unpublished article that formed the basis of the debate (Bichler and Nitzan, 2010). As only a cursory glance will confirm, the debate was a fractious one, revealing deep theoretical divisions even within the heterodox political economy camp. Interestingly, though, these divisions – which extend to cover their respective theories of crisis – can clearly be traced back to divergent views on scientific method and progress. For Kliman, the crisis of Marxian economics, which many locate in the ‘Cambridge controversies’ of the 1960s, is a crisis that never was; Marxian value theory remains free from proven logical inconsistencies, and any theory of capital and crisis that is premised upon this kind of inconsistency – such as N&B’s – goes wrong before it starts (see


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Kliman, 2007). That is to say, it begins by dismissing the potential validity of Marx’s labour theory of value. Meanwhile, for N&B, Kliman’s concern with logical consistency only serves to lumber any attempt to develop a new theory of capital with the task of definitively debunking old ones, which they see as an unnecessary hindrance to scientific advance. Without wishing to take sides, it would seem fair to point out that this encounter, which at times resembles a zero-sum game, provides a stark illustration of crisis theory as ideology. Each of the contributions is as coloured by the evolving politics of academia as one might ever see, and both sets of authors take fundamental issue with the other’s theoretical approach. If, however, it is possible that they are both right and there is indeed such a thing as a privileged path to scientific advance, then we at least hope that the discussion has generated more light than heat. We leave to the reader the task of judging this. On order and change in North Africa and beyond. In the wave of unrest that continues to sweep across North Africa and the Middle East, the notion of crisis has found yet another lease of life, and commentators of all stripes have begun to offer their reflections on exactly what these developments might mean. In this third section we offer two such commentaries that approach this question through existing theories of order and change. Joe Hoover, for example, reads events in Egypt through the prism of realism as both a theory and doctrine of International Relations, identifying the West’s fundamental failure to see the world through anything other than the nation-state’s eyes. Meanwhile, fellow co-editor Nathan Coombs asks whether these events warrant the use of the term ‘revolution’, providing an analysis of recent of left-wing commentary via Alain Badiou’s notion of the event. Both authors here have had the daunting challenge of chasing a moving target, but in routing this pursuit through different theories of order and change, they provide us with an additional window onto the idea of crisis today.

Finally, the issue closes with a selection of book reviews that revisit and complement some of the discussions initiated in the other sections. These are to be read, at least in editorial terms, as an attempt to extend the project of the issue as a whole, which, as we have indicated, seeks to highlight some of the connections and distensions that mark the double-return of crisis as theory and crisis as event. Of course, most of the contributions to the issue can be read as stand-alone pieces, but we invite you to read the collection as a deliberate experiment in the power of parallax; by shifting from one living idea of crisis to another, we hope, a mosaic-like image might emerge of that idea as an historical force. Amin Samman, on behalf of all the editors Birmingham, April 2011


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BibBibBibBibliographyliographyliographyliography Bichler, S. and Nitzan, J., 2010. Systemic Fear, Modern Finance and the Future of

Capitalism. Monograph: Jerusalem and Montreal (July), pp. 1-42. Available online at http://bnarchives.net/289/.

Block, F. 2011. Crisis and Renewal: The Outlines of a Twenty-First Century New Deal. Socio-Economic Review, 9(1): pp. 31-57.

Crotty, J., 2009. Structural Causes of the Global Financial Crisis: A Critical Assessment of the ‘New Financial Architecture’. Cambridge Journal of Economics, 33(4): pp. 563–580

Hanson, N. R., 1958. Patterns of Discovery. Cambridge: Cambridge University Press. Hay, C., 2011. Pathology Without Crisis? The Strange Demise of the Anglo-Liberal

Growth Model. Government and Opposition, 46(1): pp. 1–31. Kliman, A., 2007. Reclaiming Marx’s “Capital”: A Refutation of the Myth of

Inconsistency. Lanham, MD: Lexington Books. Koselleck, R., 1988. Critique and Crisis: Enlightenment and the Pathogenesis of Modern

Society. Oxford: Berg. —––—–. 2002. Some Questions Regarding the Conceptual History of ‘Crisis’. The

Practice of Conceptual History: Timing History, Spacing Concepts. Stanford, CA: Stanford University Press, 236-47.

Lacan, J., 1977. Écrits: A Selection. Trans. A. Sheridan. New York: W. W. Norton Marx, K., 1991. Capital: Vol. III. London: Penguin Classics. —––—–. 1996. The Eighteenth Brumaire of Louis Bonaparte. In T. Carver (ed. and

trans.) Marx: Later Political Writings. Cambridge: Cambridge University Press, pp. 31-127.

Mattick, P., 1981. Economic Crisis and Crisis Theory. London: Merlin Press. Nitzan, J., and Bichler, S., 2009. Capital as Power: A Study of Order and Creorder.

London and New York: Routledge. Toporowski, J., 2005. Theories of Financial Disturbance: An Examination of Critical

Theories of Finance from Adam Smith to the Present Day. Cheltenham: Edward Elgar.


10

International Political Economy and the Crisis of the 1970s: The Real

‘Transatlantic Divide’

Julian Germann

Recent years have seen a renewed interest in the intellectual history of International Political Economy (IPE). However, framed in terms of a growing divergence between an ‘American’ and a ‘British’ school, the debate has done little more than rehash well-known ontological, epistemological, and methodological differences between problem-solving and critical theory. This essay contends that situating the emergence of the field in the context of the crisis of the 1970s can do more to advance a critical review of the discipline. Conceived in a moment of crisis, IPE set out to address the fundamental question of how far global capitalism could be collectively managed. Looking back to the 1930s, however, IPE failed to explain how the crisis of the 1970s would lead to the acceleration, rather than disruption, of capitalist globalisation. I argue that the neglect of this foundational puzzle undermines the ability of IPE to offer an integrated analysis of international cooperation and conflict. In light of the current crisis, this essay concludes, there is a more significant ‘transatlantic divide’ to pursue than the obvious epistemic divisions between American and British IPE: namely, the strategic tensions between the United States and its European allies that emerged during the crisis years of the 1970s, and set the capitalist heartland on a path of deepening integration and multilaterally coordinated expansion.

IntroductionIntroductionIntroductionIntroduction The global financial meltdown of 2008 and ensuing world economic recession have exposed a debilitating division of labour in which the failure of ‘economics’ to anticipate the crisis is exacerbated by the difficulties of ‘political science’ to assess its social significance. Devised to bridge this disciplinary divide, the field of International Political Economy (IPE) would seem to be well placed for an intellectual renaissance. Four decades after its inception as an Anglo-American subfield of International Relations (IR) – and in light of the broad-based questioning of liberal market self-regulation, the return of the state as the principal crisis manager, and distributional struggles over the costs of

IPE and the Crisis of the 1970s, Germann

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the bailouts and burden of adjustment – an integrated analysis of the pursuit of ‘power and plenty’ would seem to be more pressing than ever.

Yet judging by the recent debate over the ‘state of the discipline’ that Benjamin Cohen’s intellectual history of the field has prompted, IPE is a far cry from realising this potential (Cohen, 2007; 2008; Phillips and Weaver, 2011). According to Cohen, what began forty years ago as an open-minded and inter-disciplinary exchange has fragmented into two separate camps: an ‘American school’ of IPE that privileges methodological individualism and quantitative methods; and a ‘British school’ that favours interpretive methods and holistic theorisations (for an overview of the various interpretations, see Weaver, 2011, p. 144). Whereas Cohen (2008, pp. 175-178) employed this categorisation in the hope of overcoming this schism and combining the forces of rigour and reflexivity, parsimony and pluralism, some of the rejoinders have struck a much sourer note. Obsession with formal modelling, some contend, has left ‘American’ IPE unable and unwilling to ask fundamentally political questions about structural power and social change (cf. Keohane, 2011, p. 39; Kirshner, 2011; McNamara, 2011). Meanwhile, others have argued that the penchant for abstract theorising and political posturing of ‘British’ IPE has come at the expense of empirically grounded and open-ended research (Underhill, 2011, p. 153; Blyth, 2011, p. 138; Cameron and Palan, 2009; Farrell and Finnemore, 2011, p. 64).

My concern here is less with the accuracy of these accusations than with the extent to which the debate itself is symptomatic of some of the major shortcomings of the field. I share the concerns of those who feel that the demarcation of two schools of IPE has effectively narrowed the terms of engagement to a rationalist and constructivist variety of institutionalism (van Apeldoorn, Bruff and Ryner, 2011, p. 216), and that critical IPE perspectives have been too readily dismissed or ignored (Cox, 2011; Murphy, 2011; Hveem, 2011). In this sense, the debate serves as a reminder that the history of IPE has also been one of academic gatekeeping and exclusion—a fact that the image of two schools drifting apart obscures rather than illuminates. A critical review of the discipline thus cannot be built upon the notion of a ‘transatlantic divergence’. While the focus of this essay is on the origins of what has been called ‘American’ IPE, the perspective is from the historical materialist margins of the field rather than from any ‘British’ school.

I also take seriously Cammack’s contention that, in failing to address the gap between the ambitions and actual contributions of the field, and in measuring success in terms of the leading journals and departments, the debate has exposed IPE to be a self-serving enterprise of staking out, defending and expanding intellectual territory (Cammack, 2007). This, of course, is the most devastating criticism of all; not only for mainstream but also for critical approaches. For if Cammack was indeed right to argue that the main concern of IPE has been the procurement of research funds and


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advancement of careers rather than the production of knowledge, any attempt to make room for a radical analysis of the global political economy would have been doomed from the start.

Above all, I share the uneasiness of those who have cautioned that the debate over the causes, consequences, value and validity of an alleged US/UK cleavage may detract from the substantive issues it ought to help us better understand (Phillips and Weaver, 2011, p. 1; Katzenstein, 2011, p. 105; Lake, 2011, p. 45; Weaver, 2011, p. 142; Helleiner, 2011, p. 178). There is a clear danger that what started out as a useful review of the intellectual lineage of IPE might turn into a self-indulgent scholastic introspective that no amount of personal anecdotes and ornate imagery can make palatable. With this in mind, the most important lesson to emerge from the debate is the need to turn to “the big, important, real world puzzles” (McNamara, 2011, p. 65) of the field. It is these that originally brought scholars of different theoretical persuasions together, that both narrowly positivist and overly theoretical approaches have lost sight of, and that the contemporary crisis of global capitalism is bound to bring back to the fore.

While the crisis has yet to translate into a corresponding epistemic rupture and genuine re-evaluation of the field, it has made a return to fundamentals all the more necessary. Amidst divergent national and global responses and conflicting interests over macroeconomic imbalances, currency realignments and the competitive reregulation of financial sectors, one of the foundational concerns of IPE has acquired a renewed sense of urgency: how far, and under what conditions, can the advanced capitalist countries manage global instabilities, negotiate political differences, and sustain a liberal international economic order?

This paper argues that in order to address this fundamental (if by no means the only) problématique, IPE needs to turn to its point of origin—the crisis years of the 1970s, which were characterised by considerable social and international contestation within and across the capitalist heartland, as well as serious concern among state managers and foreign policy intellectuals over the fate of the Cold War West. Conceived in a moment of crisis, even ‘American’ IPE could not help but ask ‘big’ questions about the nature and future of the liberal world economy of the post-war era. In the face of a global crisis of historic proportions, IPE would do well to revisit these intellectual responses, for the answers that the first generation of IPE scholars came up with have defined, and indeed restricted, the conceptual horizon of the field ever since. This essay argues that the neglect and misconception of the crisis of the 1970s—approached by many mainstream and critical scholars alike as a crisis of US hegemony—has impaired the ability of IPE to understand the dynamics of international cooperation and conflict in theoretical terms and in light of the current crisis.


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Capitalist Crisis and the Hegemonic CulCapitalist Crisis and the Hegemonic CulCapitalist Crisis and the Hegemonic CulCapitalist Crisis and the Hegemonic Cul----dededede----SacSacSacSac The link between the crisis of post-war capitalism and the (re-) constitution of IPE as an Anglo-American subfield of IR has escaped the debate over the state of the discipline (for some significant observations, see Kirshner, 2011, p. 203). Neither those who, like Cohen, wish to see IPE become the unified scholarly endeavour they believe it once was, nor those who, like Cammack, call to abandon any illusions of what IPE never could have been, have paid sufficient attention to this broader context. And yet the particular social and international circumstances under which IPE emerged, more so than the curiosity (or, to follow Cammack, careerism) of a handful of individuals, offer crucial insights into the development of the field. Rather than focusing on the alleged epistemic divisions of an American and British ‘school’, I argue there is a more pertinent and promising ‘transatlantic divide’ for critical IPE to pursue: the actual fault lines that emerged between the United States and its European allies during the crisis years of the 1970s, and that would resolve into the trans-nationally integrated, US-centred, neoliberal order that may be in fundamental crisis today.

Some four decades ago, scholars within the newly emerging field of IPE set out to explain what seemed to be a serious crisis of the Cold War West. The end of the golden age of post-war capitalism and dissolution of the ‘embedded’ liberal international order precipitated a significant degree of strategic confusion and discord among the advanced capitalist countries (cf. Gilpin, 2000, pp. 54, 62, 68ff.; Smith, 2004, p. 98; Gowan, 2003, p. 4; Panitch and Gindin, 2003, p. 17; van der Pijl, 2006, p. 138). The attendant discontinuities and instabilities also gave rise to a deep sense of intellectual uncertainty and outright pessimism about the future of the Atlantic order (cf. Kaiser, 1974; Hahn and Pfaltzgraff, 1979). And yet, contrary to the prevailing sentiments, and despite considerable and substantive disagreements among the allied powers, cooperation continued, differences were successfully negotiated, and Atlantic unity was maintained. Moreover, the neoliberal resolution of the crisis that ultimately prevailed would set the West on a path of deepening integration and, with the fall of the Soviet Union, multilaterally coordinated expansion that has continued until today.

The peculiar coincidence of cooperation and conflict that accompanied the crisis and transformation of the Cold War West constitutes a disciplinary puzzle that the newly emerging field of IPE set out to address but never managed to resolve. The principal reason for this failure is that the question of world order change was viewed principally, though not exclusively, through the prism of a ‘crisis of US hegemony’. The debacle of the Vietnam War, social unrest and labour militancy at home, the mounting challenge from the Third World and the rise of Western Europe and Japan as major


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economic competitors—all these events were read as a loss of American global power that coincided with a profound destabilisation of liberal multilateralism. In the face of the breakdown of Bretton Woods, the oil shock and economic recession of 1973/1974, as well as transatlantic dissension over how to respond to these challenges, the spectre of the 1930s had returned. Without the leadership of a preponderant state to underwrite a stable international order and smoothly operating world economy, many realist scholars concluded that a relapse into economic nationalism loomed on the horizon (cf. Krasner, 1976, p. 343; Gilpin, 1975, p. 72; 1981, p. 239; 1987, pp. 351, 394-408).

Confounded by the emergence of economic instabilities and political frictions that they could not otherwise explain (Krasner, 1983, pp. vii-viii; Grieco, 1988, pp. 486, 490-491; Nye, 1988, p. 236), many liberal institutionalists felt compelled to embrace the notion of a hegemonic crisis, even while they contended that institutions and regimes might be able to provide ‘post-hegemonic’ stability (cf. Ruggie, 1982, p. 384; Keohane, 1984).

Although the first paradigmatic debate of the newly constituted field of IPE was shaped decisively by a hard core of Harvard graduates (Germain, 2011, p. 88), the notion of a crisis of US hegemony was not confined to an ‘American’ school of IPE. Many critical scholars, too, had made the notion central to their analysis of world order change in the crisis years of the 1970s, and some of the most groundbreaking and lasting contributions to the field were framed in these terms (cf. Cox, 1981; Arrighi, 1982).

Guided by notions of hegemonic transition and American decline, however, the field was headed for an impasse (Cohen, 2008, pp. 76-77). The image of international relations as successive bids for hegemony led realist scholars to assume an automaticity of hegemonic decline and counter-hegemonic challenge (Gilpin, 1981; cf. Lake, 1984, p. 144). Framed as a general law of systemic cause and effect, political rivalry and economic closure appeared to be the logical consequence of US hegemonic decline. The predictions of a more rivalrous and fragmented world economy that followed from these theoretical postulates, however, turned out to be greatly exaggerated. The question that realists proved unable to account for is why, if US hegemony was supposedly in decline, the liberal international economic order had not disintegrated as it did in the 1930s (cf. Calleo, 1982, p. 3; Krasner, 1983, p. 358; Rosecrance, 1986, p. 57).

Yet the gap between claim and reality that opened up in the 1980s did nothing to strengthen the liberal-institutionalist case. For, as a growing number of scholars now began to argue that US hegemony had not declined after all (cf. Russet, 1985, p. 231; Strange, 1987, p. 571; Gill, 1990, p. 70), the debate turned out to have been fundamentally misguided. Liberal institutionalists may have eschewed the realist scenario of great power rivalry and economic nationalism, but they, too, had held the assumption that the socio-economic and geopolitical turbulences of the 1970s had been caused by a crisis of US hegemony. While they claimed to be better able to account for the lack of


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fragmentation of the world economy, they now could explain neither its crisis nor its subsequent transformation. Because their alternative vision was premised upon the continuity of the institutions and norms of ‘embedded liberalism’, liberal institutionalists were ill-equipped to explain what was most decisive about the period: the neoliberal restructuring, rather than preservation, of the post-war economic order, and the fundamental redefinition, rather than retention, of ‘social purpose’ this entailed (Ruggie, 1982; 2008, p. 4). Most importantly, with the erosion of US hegemony in question, liberal-institutionalist theories lacked the grounds for empirical verification. If US hegemonic decline had, at the very least, been exaggerated, there has—as Robert Keohane (2002, p. x) would acknowledge two decades later—never actually been a test of whether regimes and institutions can in fact facilitate non-hegemonic cooperation.

Hence where liberal IPE has failed to account for the very real instabilities and divergence of interests that became visible in this period, realist theories have struggled to explain the absence of any serious counter-hegemonic contestation and resurgence of economic nationalism. Realism has found it easier to accommodate the resilience of US hegemony. In light of its failed expectations, the argument that US hegemony had not (yet) declined seemed to offer an easy way out. The corollary of this admission, however, has been to deprive realist hegemonic stability theory of much of its empirical basis and analytical purchase. The clear-cut causal connection between US hegemonic decline and the destabilisation of the liberal international economic order during the crisis decade of the 1970s has given way to the fuzzy notion of a temporary weakening of US hegemony that reasons back from the absence of the expected effects and concludes that a renewal of US hegemony must have occurred.

Cohen’s more sympathetic review of hegemonic stability theory underestimates the degree to which both realist and liberal inflections have been devastated by the peculiarities of the seventies’ crisis. But what is far more striking, and even less appreciated, is that IPE scholarship refused to revisit the empirical evidence and revise its underlying assumptions. Instead of systematically reconsidering what had happened, scholars withdrew to the restatement of first principles. The problem-driven and substantive exchange that had opened up in the wake of the seventies’ crisis narrowed down to a game-theoretical exercise that ignored the international history and structural dynamics of cooperation and conflict that the field of IPE and its master concept of ‘hegemony’ had initially sought to explain. By the late 1980s, therefore, the original question of why the West had held together had effectively been rendered a ‘non-issue’ (Cohen, 2008, p. 68). And with the fall of the Soviet Union, a crisis whose consequences no one had yet understood was overshadowed by events that no one had foreseen. How can this apparent disinterest be explained? An answer to this question has


16

to include another dimension that conventional narratives of the history of the field have ignored. Born in a moment of capitalist crisis, the raison d’être of IPE was prescriptive as well as explanatory and predictive. Given the intimate relationship between the foreign policy establishment and academic circles in the United States (Cox, 2011, pp. 125-126; Germain, 2011, p. 88), ‘American’ IPE in particular needs to be understood not simply as a set of testable theories but as part of a political discourse that sought to influence decision makers and shape state responses in a volatile situation of international and class conflict.

The liberal notion of ‘complex interdependence’ (Keohane and Nye, 1977)—the multiplication of state and non-state actors and fractionation of military and economic power across issue areas—is a case in point. An ideological precept as much as ideal-typical approximation, the concept was meant not simply to describe an inevitable development towards a globally integrated political and economic order but to point to a desirable and contingent shift away from a territorially divided and potentially conflictual interstate system (Gill, 1990, pp. 23-25). Against the backdrop of inter-allied disputes over trade and monetary affairs, growing economic interdependence among the advanced industrialized countries was understood to heighten mutual sensitivities to economic and political disruptions (cf. Cooper, 1972). Interdependence, in short, was seen as a challenge to be met with new institutional responses; novel forms of organisation that not only sought to integrate the national and international decision-making processes of the advanced industrialized countries but also to insulate them from the mounting pressures of subordinate social forces both within the Northern capitalist core and in the Global South.

Much the same can be said about hegemonic stability theories during the crisis of the 1970s. At a minimum, some of their pessimistic conclusions should be read as political commentary on the unwillingness and inability of successive administrations from Nixon to Reagan to live up to the international responsibilities of the United States. But the prognosis of inevitable American decline and impending geopolitical disintegration should also be understood as a ‘self-falsifying hypothesis’. Designed less to predict than to prevent a post-hegemonic future, realist theories of hegemonic crisis, and their apocalyptic forecasts in particular, may well have been intended to galvanise the forces and mobilise the resources capable of sustaining US power under adverse circumstances. Cooperation and Conflict, Past and PresentCooperation and Conflict, Past and PresentCooperation and Conflict, Past and PresentCooperation and Conflict, Past and Present Premised upon the notion of a crisis of US hegemony and focusing on its likely consequences, the newly constituted field of IPE proved unable to account for the simultaneity of cooperation and conflict and the qualitative transformation, rather than


17

simply preservation, of the capitalist heartland during the crisis of the 1970s. While the positivist search of ‘American’ IPE for the general laws that govern the interactions of powerful states may be partly to blame for this failure, it is the ideological underpinnings of the field that explain its closure once the crisis of the 1970s had subsided.

Instructive as though it may be to lay bare the empirical and theoretical lacunae of IPE, does it not follow from this review that it is best to ‘bury IPE’ (Cammack, 2007, p. 18), rather than dig around further in its past? I would argue that critical scholars of IPE can ill afford to do that. The contemporary crisis has raised concerns about the future of international order that echo the situation of the 1970s. Then as now, the question is how far global capitalism can, in fact, be collectively managed. This is by no means the only legitimate question for IPE to ask. But it is one, I argue, that is theoretically and politically important not only for those who wish to facilitate capitalist cooperation, but also for those who wish to support anti-capitalist resistance.

Even if we were to jettison IPE, the questions it set out to address will remain (cf. Germain, 2011, p. 84). More important still, is that the answers on offer today continue to be based on unsubstantiated and untested assumptions that simply project the dynamics of the 1970s into the future. For even though scholars have turned their back on the crisis of the 1970s, the post hoc rationalisations of Western cohesion that have been devised in support of the grand theories of IPE have stayed with us. Theoretically inflated to lend support to either of the two contending grand theories, they have come to define how questions of international cooperation and conflict are approached today.

Realists have argued that the West held together because the confrontation between the US and the Soviet Union subordinated conflicts within the capitalist camp to the imperatives of collective defense and the primacy of American power. Liberal scholars, by contrast, have concluded that the advanced industrialized societies had become so closely intertwined and interdependent as to make ‘defection’ politically and economically unviable. Hence where realist scholarship sees the onset of a protracted process of geopolitical fragmentation of the world economy, temporarily halted by the threat of the Soviet Union (cf. Mearsheimer, 1990; Waltz, 1993; Gilpin, 2000, p. 160), liberal approaches see the release of the forces of globalisation and the permanent pacification of the relations between the advanced industrial democracies (cf. Keohane and Nye, 1977; Doyle, 1983, pp. 231, 233-235; Rosecrance, 1986, pp. 141-142).

Critical IPE has been caught between these two rival visions of world order: a realist scenario that has falsely predicted the return of interstate rivalries at every critical juncture of the last thirty years, and a liberal vista of globalisation that has been repeatedly caught out by geopolitical dynamics it cannot explain. Neither of these two perspectives, it is clear, will be particularly helpful in explaining what the current crisis has revealed to


18

be recurring conflicts of interests among the core countries of a world economy more closely coordinated and tightly integrated than ever before.

One way out of this impasse is to return to the historical conjuncture that has prompted this conceptual bifurcation. Critical IPE ought to dispense with the sociological abstractions that see Western cohesion during the 1970s as the product of either globalisation or Cold War bipolarity, and develop an account that incorporates both the forces of cohesion and division into a single explanatory framework. Renewed attention to the crisis of the 1970s, however, can only be the first step. Ultimately, what is required is not simply historical revision, but also the theoretical redefinition and political re-appropriation of IPE’s foundational puzzle.

In essence, the first paradigmatic debate of IPE, as some of its American pioneers explicitly acknowledged (Keohane, 1984, pp. 42-44; Gilpin, 1987, p. 381), was but a sanitised version of the exchange between Lenin and Kautsky about the possibility of ultra-imperialist unity or inevitability of inter-imperialist rivalry. The political purpose, of course, would be a very different one. The first generation of IPE scholars took the theoretical concerns but not the practical orientation from Lenin and Kautsky. Recasting the debate over imperialist rivalry vs. unity in politically acceptable terms, their theorisations of the crisis of the 1970s were intended to stabilise, rather than challenge, internationalised forms of capitalist rule.

Yet by borrowing this problématique from a crisis past, the pioneers of IPE missed out on what was most decisive about the 1970s. Unlike the Great Depressions of the 1870s and 1930s, the crisis of the 1970s did not interrupt but instead accelerated capitalist globalisation. This peculiar outcome of a decade of social struggles and strategic tensions between the advanced capitalist countries is what sets the 1970s apart from previous crises of international capitalism.

As the socio-economic and geopolitical consequences of the current crisis are only beginning to emerge, critical scholars of IPE would do well to focus on the crisis of the 1970s rather than the spectre of the 1930s that has caught so much public and scholarly attention. Looking back at the 1970s from the vantage point of today, the question can no longer be Krasner’s (1983, p. 358) famous ‘why did things not fall apart?’ From the point of view of understanding and politically intervening in the crisis this time, critical scholars of IPE need to ask how economic recession and political friction—in the 1970s, and possibly today—could result in the strengthening of the collective institutions of capitalist cooperation and the deepening of capitalist discipline over society.


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Julian GermannJulian GermannJulian GermannJulian Germann is a PhD candidate in the Department of Political Science at York University, Toronto. His doctoral research examines the geopolitical origins of neoliberal globalisation in the 1970s.

Everyday Neoliberalism and the Subjectivity of Crisis, Kiersey

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Everyday Neoliberalism and the Subjectivity of Crisis: Post-Political

Control in an Era of Financial Turmoil

Nicholas J. Kiersey

As the financial crisis has progressed from its immediate origins in 2008 as a US-based credit crunch to a global economic emergency, Constructivist IPE scholarship has turned to social norms and expectations not only as variables explaining its origins, but also as factors constraining its resolution. In this article I suggest that while such work does usefully identify the role of 'everyday' values, and struggles, in shaping the game of contemporary financial life, it avoids discussing the fundamental role of capitalist practices of valorisation in sustaining this life. To make my case I invoke Foucault's discussion of neoliberal 'crisis subjectivity' and the closely attendant notion of human capital, suggesting a need to examine neoliberal technologies of the self. However, I expand on Foucault's arguments in this respect to show how his comments on neoliberalism posit not only a 'positive' ontology of subjectification but also make strong hints towards a theory of immanent social control through the market, akin to that outlined by Deleuze. In more recent formulations of the crisis, such as in Hardt and Negri's Commonwealth, this mode of control is posed as the only such mode adequate to a regime of capitalist valorisation that is itself premised on the productive potential of the common. This move allows Hardt and Negri, rightly, to associate today's crisis with a more profound, ontological crisis, grounded in the relative autonomy of labour from contemporary capitalist command.

IntroductionIntroductionIntroductionIntroduction With early signs emerging first in the US 'subprime' mortgage market as early as 2006, the shuttering in 2008 of such premium names in Wall Street investment banking as Bear Stearns and Lehman Brothers stand now as the harbingers of what many consider the greatest financial crisis since the Great Depression (Krugman, 2008). Exposing dramatically the weakness of an interdependent global economy leveraged increasingly


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by mortgage-backed securities and a host of other highly abstract financial products, 2008 saw spooked investors hurrying out of many of the funds offered by these banks. The resulting credit crunch had a massive knock-on effect not only in the housing markets of Cleveland and Detroit but also in Europe, where the tightening exposed vastly overleveraged loan sheets in a host of countries not typically associated with economic catastrophe, including Portugal, Ireland, Greece and Spain (the so-called PIGS). Despite a coordinated bailout strategy led by the EU and the IMF, these countries continue to face uphill battles sustaining the confidence of bond investors. While an initial bailout of the heavily indebted Greek economy early in 2010 seemed to assuage lenders’ concerns temporarily, risks of a sovereign debt crisis are once again being discussed (Bit, 2010). Ireland in particular is seen as a risky prospect, with the government having already nationalised one major commercial bank that had dramatically overstated its position, and guaranteed the deposits of two others, with significant uncertainty remaining as to whether mortgage holders will be able to continue to make payments under the government’s deflationary strategy (Kelly, 2010). While the jury is out as to whether these bailouts will work, it is clear that they have been rammed through with little regard for democratic debate and with severe conditionalities attached which will burden the citizens of Greece and Ireland with draconian austerity for years to come (Krugman, 2010; Byrne, 2010; See also BBC News, 2010).

One of the crucial take home stories to date of this 'Great Financial Crisis' is, of course, that of a maddening elite hypocrisy. Not only has neoliberalism's long-promised trickle-down growth failed to materialise but now vast swathes of the population of the Western world have been thrown into financial hardship. Several sovereign European nations stand on the precipice of receivership. And according to the Asian Development Bank, some $50 trillion in global asset values was written down in 2008 alone (Adam, 2009). That the costs of this disaster are being passed on to the masses is clear: political leaders of the major EU powers have continued to speak openly about the need for "ten years of austerity" and drastic cuts in public spending (Chapman, 2010). Meanwhile leading figures like Angela Merkel speak now with conviction of the duty of the "good European" to practice tough love, condemning a culture of profligacy on the periphery which she believes has now placed the euro itself "in danger” (The Local, 2010; EUbusiness, 2010).

In this sense, mainstream debate over the causes of the financial crisis has turned on a discourse of good citizenship, delineated in terms of economic responsibility, and moral courage. But what is remarkable about this discourse of responsibility is also what it has managed to forget. Much of the wayward behavior claimed to be at the heart of the crisis can actually be traced back to successive waves of neoliberal or "supply-side" deregulation, dating back to the 1970s (Surin, 2009, p. 70). These reforms, of course, attest to the premium neoliberals have placed upon privatising sources of wealth while


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extending social safety nets to elites who pursue risky investment strategies. In the same breath, these reforms have served as the permissive causes from which have flowed a long string of financial crises around the world. In the context of the current crisis, they also appear to be the root cause of everything from the predatory lending in the US to the risky speculative ventures that today have left such huge gluts in the Irish and Spanish property markets.

Yet, this hypocrisy acknowledged, what is far more fascinating is the relative ease with which elites have been able to palm off their lopsided solutions. So little has been demanded by way of accountability from the world's financial movers and shakers (for discussion, see Harvey, 2010). And even in Ireland, as the nation's sovereignty is subjected to the single greatest challenge since its founding, the recent election returned a centrist coalition, fully committed to the austerity regime and the enforcement of one of the most spectacularly unjust, and undemocratically decided, transfers of wealth from the taxpayers of an advanced Western nation to foreign bondholders (in this case, German, British, and French banks) in history (for discussion, see McWilliams, 2010; O'Toole, 2010). That the brutal reality of such facts can be so casually ignored suggests, at the very least, that 'ideas' play a significant role in shaping not only actors' expectations about the dynamics of markets but, also, the basic moral horizon of what social life is and what it is for. Constructivist scholars of IPE have focused significant attention on a range of areas where ‘everyday’ ideas about how markets function, and how they ought to function, appear to have influenced the development of the crisis, as well as the political responses to it (Seabrooke, 2010; Langley, 2010). As yet, however, little work has been done on the idea of crisis-generating behaviour itself as a metric of subjective behavior. Nor has much been said of the role attendant to this metric of contemporary techniques of capitalist valorization, which draw increasingly on capacities of subjectification in their basic functioning.

In this essay I examine recent social theorisation concerning the financial crisis, focusing on the tension between such ‘everyday’ Constructivist approaches and those more concerned with actually existing technologies of power. Focusing on contributions to a 2010 Special Issue of the journal of New Political Economy (Volume 15, Issue 1), I argue that Constructivist approaches do offer much that is interesting and important in terms of understanding how ‘theory-driven’ financial innovation drove the development of the esoteric products that actually collapsed in the meltdown (Wigan, 2010); how epistemic frames help select instruments for assessing performance in the market (Langley, 2010); and how everyday expectations shape welfare trade-offs (Seabrooke, 2010). However, even after a generous reading of these accounts, it is clear that their willingness to examine quotidian life only goes so far. For example, one has little sense from them of the power of neoliberal capitalism itself as a form of life; the place of crisis in


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its basic normative logic of subjectification; or the manner in which it actually goes about the business of producing value today. To remedy this I invoke Foucault's (2008) concept of neoliberal 'crisis subjectivity,' as well as the closely attendant notion of human capital, and argue that neoliberalism does in fact quite self-consciously see itself as a strategy of economic subjectification. Focusing especially on his discussion of neoliberal attitudes to the body in this respect, I suggest that Foucault intuitively understands neoliberalism as a regime of immanent social control through the market, akin to that outlined by Deleuze (1992). This understanding of social control is central to such theorisations of global order as Hardt and Negri's Empire (2000), with its focus on the decentred nature of today's capitalist 'command'. Yet it also plays out in the dimension of financialisation itself. To make this argument I invoke recent publications from Christian Marazzi (2010, 2008), as well as from Hardt and Negri (2009), whose work within the theoretical framework of Autonomist Marxism attests to a much deeper crisis facing capitalism as it struggles to sustain its regime of valorisation. Financial Crisis: Constructions and EFinancial Crisis: Constructions and EFinancial Crisis: Constructions and EFinancial Crisis: Constructions and Exclusionsxclusionsxclusionsxclusions One of the earliest Constructivist critiques of the current financial crisis came from a rather unlikely source. In his book The New Paradigm (2008), the world-famous financial speculator George Soros prefaced his analysis of the causes and dynamics of the crisis with a lengthy philosophical exposition of the importance of social norms and conventions in determining financial outcomes. Acknowledging the highly innovative and intrinsically risky nature of many of the financial products that failed during the crisis, Soros's basic argument was that principle fault for the crisis should, in fact, be lain squarely at the feet of modern economic theory and its misguided belief in itself as a 'science'. As economic exchange falls in the realm of social activity, he suggested, it is an object of inquiry that is necessarily resistant to study through scientific method. While the methods of natural science may be appropriate for studying the stuff of the natural world, such as nuclear physics, they can produce seriously misleading results when applied to realm of human affairs. Citing the influence on his thinking of Karl Popper, Soros (2008, p. viii) put forward the argument that the study of social life is confounded by the dilemma of what he calls "interference reflexivity". Basically, this dilemma suggests that, because they are also participants in the ongoing processes that they are trying to study, students of human affairs can never completely remove from their analyses preconceived understandings of how the world works.

For Soros, the global financial system 'bet the farm,' so to speak, on a set of non-reflexively developed assumptions about the nature of economic life. As such, for him, the crisis reflects the ultimately necessary "moment of truth" that confronts such assumptions when "reality can no longer sustain ... exaggerated expectations" (Soros, 2008, p. 66).


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Indeed, he notes, even at the moment when such expectations might be challenged in this way, 'corrected' behavior is not necessarily the result. As with the figurative lemmings over a cliff, beliefs can drive the market far past the moment of truth and into calamity. Thus Soros cites the infamous quip of former Citibank CEO Chuck Prince: "As long as the music is playing, you've got to get up and dance" (cited in ibid., p. 84). Albeit inadvertently, Prince was actually suggesting something quite correct about the socially embedded nature of economic life; while actors expect markets to tend towards equilibrium, history suggests that equilibrium is in fact an ever "moving target" (ibid., p. 72). In this sense markets are always to some extent wrong. The problem comes, however, when the brute force of this basic fact is supplanted by what he terms a 'super-bubble' in expectations. For where actual asset bubbles, such as in the case of property, can be driven by a 'local' misconception, such as the refrain that "the value of collateral is not affected by the willingness to lend" (ibid., p. 83), a super-bubble is driven by a much more foundational expectation – that is, the norm of ‘market fundamentalism’ where regulators and traders make the assumption that markets tend to automatically correct their excesses (ibid., p. 91).

In the introduction to a recent special issue of the journal New Political Economy, Soros's book is cited as an example of an early and somewhat premature approach to the crisis, and one that is too focused on the ‘surface relationships’ of financial market discourses. More specifically, the authors state, works such as Soros's are unilogical, ignoring key discursive contestations at the level of the everyday politics of contemporary finance. Thus, for example, we find no discussion of "the process through which credit expansion, the commodification of future welfare needs and the purposeful creation of bubble dynamics are all somewhat predictable outcomes of an increasingly financialized model of capitalism" (Brassett et al., 2010, p. 3). Nevertheless, in the essays that follow, many of the core theoretical conceits that Soros relies on are set to work to bring these 'missing,' micro-level nuances into relief. Wigan (2010, p. 110), for example, focuses on the idea of ‘theory-driven’ financial innovation to study how the esoteric products that actually collapsed in the meltdown were innovated and rendered commensurate with more traditional, ‘primitive’ investment vehicles, like government bonds. The point being to show how, in distinction to, say, a more Keynesian ‘animal spirits’-style analysis, where price bubbles are thought to be an ever-present reality in markets, the crisis was prefigured by a shift in the discursive locus where risk was framed from governments to the global banking industry itself. The Basel process of the 1980s, which ultimately facilitated this shift, switched the substantive object of regulation from the overall capitalisation of banks in terms of reserve requirements to their "capacity to navigate all future changes in all market prices" (ibid., p. 112) – and this being despite the fact that it was quite uncertain what could be said to count as an adequate capital reserve


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for the new, derivative-style financial products which banks were using as vehicles for their ‘originate-to-distribute’ model.

Wigan (ibid., p. 114, 118) suggests that the emergence of such products, and the fact that they were internally regulated by the industry, together with the fact that the purported guarantors of the transparent value were ratings agencies, themselves already with dubious records for accuracy, implies the need for a ‘productive lens’ capable of recognising the discursive ‘power of finance’, and its cadre of experts, in the governing of finance. In a similar vein, Langley (2010, p. 73) also looks at the 'normalising' power of finance but adopts a somewhat less 'macro' focus to examine instead the "calculative devices, models, formulas and so on which make possible pricing, exchange and circulation". If the market is the quintessential site of veridiction of government policy, as Foucault basically puts it in the Birth of Biopolitics, then Langley is interested in the epistemic devices and metrics that make this truth possible. His key question is how, in the context of the financial crisis, key firms and agencies performed liquidity and, in so doing, attested to the power of the "wider norms of Wall St. and the City" (Langley, 2010, p. 85). To make his argument, however, Langley turns to poststructural ideas, going deeper into epistemological territory than Wigan. Borrowing from De Goede (2005), for example, the 'power of finance' is expressed less in terms of the normative potential of the banking sector and more in terms of how these devices became instrumental in narrating "uncertainties and volatilities about future income streams as risks" (Langley, 2010, p. 75).

Classically, 'liquidity' denotes the existence of a 'deep' market with willing buyers and sellers who believe the assets they are trading are 'safe'. For Langley (ibid., p. 86), however, liquidity does not simply exist. Rather, the "imaginary of liquidity" constitutes an "ideal-type end point" for markets which must be crafted through discourse. Thus, as he cites De Goede, finance is a "discursive domain made possible through performative practices, which have to be articulated and rearticulated on a daily basis" (ibid., p. 75). Echoing Soros here, however, Langley (ibid., p. 75, 77) suggests that underneath the epistemologically confident and "seemingly scientific" discourse of liquidity, its utterances are bound constantly to meet "their others" in the shape of destabilizing activities like "gambling and speculation". Through various media representations during the 1990s, liquidity in global markets became reified and taken for granted. Thus it was not only that the Basel process allowed the banks to become the discursive adjudicators of their own capital requirements, as Wigan suggests, but also that key governmental agents like the Bank of England gave pronouncements suggesting that the new lending practices were actually beneficial in terms of systemic stability ibid., p. 78). Moreover, through their work in categorizing and 'structuring' the subprime loans into tranches of risk which could then be used to allocate portions of them into credible Structured Investment Vehicles (SIVs), the large investment banks were also key agents


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of the liquidity story. Langley's take home point from all this is that the system was performed as

'risk', not uncertainty. Within the margins of this subprime lending system, and at various levels of its process, a host of epistemic instruments were relied upon to give standardised and qualified accounts of the risk of subprime-related products. For example, the 'FICO' creditworthiness scores of the borrowers fed into the calculative metrics and standards of ratings agencies, who issued evaluations of the various 'sliced-and-diced' securities. Similarly, insurance firms underwrote the minimal capital requirements of the issuers with credit default swaps, which could themselves be enjoined and traded on by speculators. That such deep complexity and uncertainty could be passed off as 'risk' might appear to beggar belief. However, as Seabrook (2010, p. 53) notes, it is somewhat unfair to study these facets of the crisis without also recognizing the uniquely American "variety of residual capitalism," and the cultural premium it places on access to credit as a "welfare trade-off". Thus where Langley examines the epistemic instruments and performances that made subprime 'safe', Seabrooke (ibid., p. 52) turns to the "everyday politics of expectations" which both demanded a certain access to credit and, today, constrain the efforts of those trying to address systemic concerns.

For Seabrooke (ibid., p. 53), "financialization is set deep in the bones of US everyday politics." and many quite consciously defend aspects of it, including securitisation. Moreover, suggests Seabrooke, it is not for scholars, critical or otherwise, to determine the metric of what may be said to count as a legitimate way of facilitating credit in a society. Instead, the goal should be to explain the role of conventions and norms of social practice in shaping the horizon within which actors pursued strategies to secure their own wellbeing. While taking on vast quantities of debt might appear irrational today, there were intersubjective understandings at work which made these practices to some extent intentional and rational. One of the key background aspects of the crisis was the practice of redlining, where African American communities were passed over in terms of options to receive credit for their properties. Such practices, ongoing since before World War II, received some remedy with the Civil Rights Act of 1968, which created a sibling institution to Fannie Mae (the semi-state Federal National Mortgage Association), itself created in the Great Depression to help address credit needs in the wake of the US foreclosure crisis of the late 1930s. This new organisation, Ginnie Mae, was a public market-focused entity, intended explicitly to operationalise the idea that institutions could "actively redistribute access to credit" (ibid., p. 59). By the time of the Savings and Loan (S&L) crisis of the 1980s, however, the ‘community activist’ base that catalysed Ginne Mae clashed with industry interest groups, and 'experiments' were necessary in order to resolve it. This is the period that saw the emergence, for example, of the Association of Community Organizations for Reform Now (ACORN), which


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successfully developed a public campaign that linked strategies to resolve the S&L crisis to the affordable housing issue (ibid., p. 61).

Seabrooke goes on to link these developments to subsequent US securitization strategy in order to restore demand in the early 1990s, and through to the administration of George W. Bush. While the 'siblings' had always functioned by passing through mortgage-backed securities, under Bush they were seen as more under the rubric of a business than a public good and, Seabrooke suggests, may indeed have engaged in irresponsible lending practices. He concludes with a discussion of the continued role of expectations and norms as ‘path dependencies’ in relation to the Obama Administration's efforts to engage in financial reform (ibid., p. 64). As such, we are left with the impression that newer 'experiments' will unlikely reflect major changes from the status quo ante. Restarting securitisation has been defended by the Administration's public officials as a core pillar of the American approach to credit and, as Seabrooke reminds us, the US mentality towards welfare tradeoffs. For Seabrooke, this mentality reflects ‘deeply embedded desires’ of the US population more broadly (ibid., p. 52).

Insofar as they are emblematic of a Constructivist approach to the current financial crisis then, the commentaries discussed above usefully show how norms and conventions form deep constraints on processes, whether in terms of actual causes of the crisis or, indeed, efforts to resolve it. In some ways, the take home point of their critique is similar to that of Soros: a correct understanding of markets requires us to introduce greater reflexivity into our analysis of them. Reflexivity requires us to lower our expectations about what we can claim to know about human affairs. Making absolute predictions about future performance, for example, is impossible because any assumptions upon which such predictions might be based are necessarily incomplete, and tentative. However, Soros' approach is also revealed as rather superficial insofar as the Constructivists go much deeper into questions concerning the power of experts, epistemic devices, and social conventions concerning welfare tradeoffs. This notwithstanding, the commentaries noted above do seem to stop short of questioning the situatedness of the crisis in discourses and practices which yield the very capitalist structure that serves as its ostensible condition of possibility in the first place. In this sense, it is not at all clear what Constructivists mean when they refer to the 'power' of everyday norms and conventions of political economy, or how far 'down' this understanding of power might be applicable. In the next section, I suggest that one possible angle for progressing Constructivist IPE further into the realm of everyday politics would be the terrain of subjectivity. I start with a basic overview of Foucault's understanding of the concept of 'technologies of the self' before showing how this concept is central to his theory of contemporary governmentality. The imbrication of power with modern governmental knowledge was not intended simply to evoke the possibility a regime which would classify subjects as worthy of inclusion, or as requiring


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disciplinary management or exclusion, but was, rather, also about the technologies of the self that produced power's willing partners. MarkeMarkeMarkeMarket Autonomy, Market Confession: The Emergence of Crisis Subjectivityt Autonomy, Market Confession: The Emergence of Crisis Subjectivityt Autonomy, Market Confession: The Emergence of Crisis Subjectivityt Autonomy, Market Confession: The Emergence of Crisis Subjectivity As developed by Foucault, the term 'governmentality' refers not simply to the power of technocratic experts and institutions but also, in a more positive sense, to both “the way in which one conducts the conduct of men”, and to the creation of “an analytical grid" for assessing the efficacy of this conduct (Foucault, 2008, p. 186). Here, then, governmentality refers to the relationship between power and the conduct of the subject, both in terms of the body of knowledge that provides the criteria of the ideal subject, and in terms of the precise ways in which the actual subject is led to practice itself in satisfying these criteria. As a form of critique then, Foucault's theory of governmentality allows for an epistemologically indirect analysis of social institutions, focusing less on the analysis of an institution's form and more on the abstract "technology of power" which gives it its functional coherency (Foucault, 2007, p. 117). Such a technology can manifest itself in the operations of a host of institutions, including the state itself, that share a common genealogy in the efforts of a social formation to assess and manage certain problems.

Foucault (ibid., p. 185) finds the abstract model for this activation of the subject in the early Christian pastoral, which he suggests is "one of the decisive moments is the history of power in Western societies". Here we find a concern not so much with the problem of governing a territory but, rather, the problem of a "flock in its movement from one place to another," or "a multiplicity on the move" towards some sort of goal (ibid., p. 125). This is, in other words, an entirely positive form of power, or a power that seeks to function immanently. It is a power "with a purpose for those on whom it is exercised" (ibid., p. 129). Citing Paul Veyne, Foucault (ibid., p. 148) notes that the 'flock' metaphor is somewhat imprecisely linked to Christianity, but that nevertheless it is in the early Christian era that the practices of positive power develop. Compared to the Greeks and Romans, Christian institutions worked uniquely to develop an "art of conducting, directing, leading, guiding, taking in hand, and manipulating men ... an art with the function of taking charge of men collectively and individually throughout their life and at every moment of their existence" (ibid., p. 165). In this sense, what the pastorate bequeaths to modern government is the ability to instill in the subject a sense of a generalised "economy of faults and merits" (ibid., p. 183).

What Foucault emphasises here then is the innovative nature of this technology which produces obedience to an ideal of the soul. Previously in the West, he suggests, the Greeks had established an ideal that as a subject one should ‘take care of oneself’, in the sense of making oneself a project or an unfolding. In the Christian


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economy of faults and merits, however, the goal is the purification or renunciation of the self and its worldly temptations. In this sense, the Greek mandate for self-care is displaced by the task of self-knowledge relative to an ideal, and confession to an authority knowledgeable about this ideal. Foucault emphasises that this type of 'technology of the self' thus produces a very complete form of domination or subordination. As the individual now voluntarily turns to another, expert individual, for guidance on the proper way to live and think, there is a sense in which the everyday life of that person is now subject to evaluation relative to a set of conformist criteria. Thus the development of techniques of the self is significant for Foucault insofar as it suggests the advent of the first ever "individualizing society" (cited in Kelly, 2009, p. 95) And while the normative language of Christianity may have faded, its mode of governing lingers on; as Foucault (1978, p. 59) notes, "we have since become a singularly confessing society". Today, he suggests, in a host of institutions, from the prison to the hospital to the bedroom, it plays a role "in the most ordinary affairs of everyday life" (Foucault, 2007, p. 59).

How might such a reading of the techniques of governmentality help us to better appreciate the relationship that the Constructivists discussed above are trying to draw our attention to – namely, that between everyday life and the ongoing financial crisis? To answer this question we might wish to look at a further seminal aspect of the broader historical development of governmentality, and the role of the language of political economy therein. For where the Christian pastoral pursued the production of a divine asceticism in the subject, contemporary governmentality pursues the development of a subject of economic life. Developments in the sixteenth century appear to be very important for Foucault here, with major transformations both in the supplanting of the earlier feudal state by the more modern, territorially administrative variety, but also in the dispersion of confessional technologies through the Reformation and Counter Reformation. In this time, the art of governing is discussed in relation to a proliferating series of objects which commentators take as somehow naturally existing or present in the state of affairs. Instead of a select cadre of pastors, a new, expanded cadre of ‘police’ now appears. Here Foucault notes that the eighteenth century meaning of police is more appropriate, referring to government agents more generally. In distinction to Machiavelli's unique governing 'prince' figure, whose struggle with knowledge is carried out in the name of maintaining as a sovereign his link with his territorial dominion, these police are distributed across the whole of society, and operate on a diversity of levels in ensuring the proper arrangement of a dynamic field of exchange of certain things: "individuals, goods, and wealth" (ibid., p. 94). The task of this police is thus not to forge or reinforce a link to the territory but, rather, to practice “economic government” (ibid., p. 95).

As Foucault describes it then, the question of what governing is and what it is that is governed finds its modern origin in this abstract object of the economy. However,


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if the sixteenth century marks the emergence of the economy as an aspect of governance, by the eighteenth century it has more fully come to "designate a level of reality and a field of intervention for government" (ibid., p. 95). Thus Rousseau, for example, suggests that the principle goal of the state is to scrutinise and manage the population and its wealth. But it is important to recognise the intimacy of this managerial project. Much as in the Christian pastorate, we see scholars of government at this time drawing attention to the need for a certain pedagogy in the management of "men in their relationships with things like customs, habits, ways of acting and thinking" (ibid., p. 96). There are various elements in play then, each with their own essential nature and "suitable" ends, all of which must be respected if the state is to be governed successfully (ibid., p. 99). Foucault provides a variety of reasons why this new discourse does not properly arrive as a political force immediately in the sixteenth century. However, by the eighteenth century, he notes, it becomes clear that political economy is the “major form of knowledge” through which government knows and assesses the ethical performance of human life (ibid., p. 108).

Now, Foucault emphasises that the concept of the market was not a new one per se in the eighteenth century. But where previously it had thought to be a domain of activity that should be regulated in the name of sovereign ends, in the eighteenth century it starts to achieve a certain autonomy by becoming an indicator or metric of the success or performance of government. Man is here understood not as the container or vessel of a soul that must be directed towards heaven but, rather, as a creature of economic rationality, or an homo oeconomicus. As such, there is a certain congruence identified between the natural activities of man which, when taken as an aggregate phenomena at the level of the population, tends to produce a greater good. But this is only true if government leaves man alone to a certain extent. Thus, suggests Foucault, we find ourselves in the era of Classical Liberalism, where the success of a government is deemed in large part to be contingent on its ability to “cut out or contrive a free space of the market” for the expression of man’s utilitarian impulse (Foucault, 2008, p. 131).

The idea then is that there are now certain things which government ought not to do if it is to be successful. In this sense, says Foucault (ibid., p. 17), liberal political economy drives "a formidable wedge" between the powers of the state and the sphere of daily human life. This has a whole series of external and internal impacts on the orientation of state-governmental power. Externally, it appears to push to the side the more typical diplomatic-military Realism that dominated thought on the relations between states in Europe in the Mercantilist era. From the perspective of early liberalism, the mutual enrichment presupposed by a truly harmonious order was blocked by the tendency towards military balancing. Citing Kant and Adam Smith, Foucault notes the emergence of free-trade globalisation as a solution to the enmity of European states. Internally, however, it seems that the concept of the market works to bring pastoral


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techniques once again to bear upon the subject. This becomes true especially as the era of Classical Liberalism recedes and the ideal subject of a naturally existing homo oeconomicus becomes somewhat problematic. Indeed, the challenge for 'neoliberalism' is to develop a form of subjectivity that “accepts" itself as a homo oeconomicus (ibid., p. 269). For this reason, neoliberals take the study of economics itself as nothing less than the "analysis of the internal rationality, the strategic programming of the individuals' activity" (ibid., p. 223). In the twentieth century, the ‘Ordo-liberals’, for example, retained the liberal anxiety about state intervention in the economy. However, they rejected the laissez-faire naturalism of the classical liberals in favor of what they termed a Gesellschaftspolitik, a policy of socialisation, which should serve as “the condition of possibility for a market economy” (ibid., p. 160). Here the concept of a homo oeconomicus best left to his own devices thus becomes something more like a confessional ideal – one which must be incited or solicited by the institutions of government, through education, and one to which the meritous subject is subsequently expected to subscribe.

For the Ordo-liberals then, the fragility of the market is mitigated to some extent by this interventionist social policy. However, Foucault's analysis of the economic pastoral of modern Western governmentality also encompasses another, more contemporary framework which, like Ordo-liberalism, rejects the idea of a naturally existing homo oeconomicus but which nevertheless appears to eschew the idea of a government-led economic pedagogy in favor of a far more universal solution. This is the more American brand of neoliberalism, or Anarcho-liberalism, associated with Milton Freedman and the Chicago School. According to this strand of neoliberalism, the inculcation of the confessional ideal should happen exclusively through the instrument of the market. The market is a perfect instrument of governmentality insofar as, for the latter neoliberals at least, every facet of social life can be read as an ostensibly market-based interaction. Key to this market-based pedagogy is the rejection of the Ordo-liberal separation between the realms of social and economic activity. How are non-economic activities to be read as economic? The key move here is the theory of human capital, or the idea that all labour, including wage labour, can be understood as a voluntary investment or entrepreneurial activity carried out in the individual pursuit of some sort of surplus value, future return, or wage (ibid., p. 224). As a result, economic analysis can be applied to almost any form of social activity: marriage, parenting, discrimination, education, fertility, population growth, crime and punishment, addiction, and even insanity. That is, any activity which involves "substitutable choices" or the application of a "limited means to one end among others" (ibid., p. 222, 268).

Human capital is distinguished from other types of capital by the fact that it requires the human to be present if it is to be converted to surplus wealth. In this sense, the worker is fundamentally enjoined with his capacities as a kind of assemblage with a


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dynamic productive potential. He is thus a "machine-stream ensemble" or even a "capital-ability" (ibid., p. 225). This kind of labour is not merely a 'factor of production'. Rather, it has a qualitative and dynamic aspect, too. That is, in neoliberalism, the worker is in a very real sense "an active economic subject" not just at work but in everything he does (ibid., p. 223). What this means is that neoliberalism has effectively swapped out the traditional sovereign homo oeconomicus for a fully economic and adaptable entity. He is not a partner in a ‘process of exchange’ as traditionally conceived but a dynamic ‘entrepreneur of himself’, constantly balancing costs and benefits, and constantly careful of the future impact of choices even in seemingly non-economic spheres. The universality of this subject consists in the fact that he will then, out of the hope of some return, pursue his own transformation through enhancement of his basic physical capacities, mental skills, and his attitude through the market (ibid., p. 226, 229). Importantly, neoliberalism knows full well that such a pursuit might go too far and, to this extent, it is characterised by a "consciousness of crisis" (ibid., p. 68). However, Foucault is clear on this: neoliberalism recognises that the risk-seeking life of the ever more developed entrepreneur may generate costs. Such costs are something to be managed, to be sure, for governmentality understands all too well how, left unmanaged, the obsessions of entrepreneurial life, or the need to “live dangerously”, will create instability (ibid., p. 66). But to the extent that they are acknowledged, such problems have little to do with a passive subject. To the contrary, they are simply externalities which must, when necessary, be managed on the margins, through the market, as costs of “manufacturing freedom” (ibid., p. 65).

Unlike in previous modes of government then, here we see no need for much of a formal institutional framework for preparing the subject. The choice-focused nature of this subject makes him "eminently governable" through the 'technology of the self' that is the incentive structure of the market (ibid., p. 270). Government works through this ‘market milieu’ to create incentives and disincentives, shaping how entrepreneurs think and act towards others and themselves. In this sense, neoliberal governmentality seems to deploy the market as a kind of technology of the self. When government is seeking to instill the “rules of the game” it is not simply working in what previously was recognised as the field of economic activity but, rather, within a field populated by entrepreneurial capital-subject assemblages (ibid., p. 260). The ideal of the capital-subject assemblage of homo oeconomicus is obviously quite far removed from the Christian confessional ideal, discussed above. Under neoliberalism the ideal content of the subject is that, simply, of the subject and his preferences in the marketplace. To the extent that this subject is expected to follow rules then, he is asked simply to be an investor guided by his own, governable tastes. In this sense, while the neoliberal subject may appear to be a very fluid or postmodern subject, with no particular allegiances to the ethical ideals of more traditional subject modes, he nevertheless recognises his self-making project as one


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ultimately carried out in the pursuit of a form of capital. Now, importantly, Foucault does not seem to develop the broader social implications of this universal yet ontologically empty or contingent 'subject-as-capital’. However, by pointing to it as a salient feature of neoliberal ideology he appears to intuit, in a manner similar to Italian Autonomist Marxism, that neoliberalism makes a substantive difference within the history of governmentality precisely because it takes the subject not simply as something which must be produced but something which is in fact productive in a very broad sense. Linguistic Valorisation, Financial CrisisLinguistic Valorisation, Financial CrisisLinguistic Valorisation, Financial CrisisLinguistic Valorisation, Financial Crisis In the light of the above discussion on the emergence of the pastoral and, subsequently, the transferral of these techniques to the governmental state, the Constructivist stance on everyday life would appear to be quite superficial. Foucault believes that the basic tools of governmentality are found already in the Christian pastoral. For him, it is here that the technologies of the self which dominate the entire governmental history of the West are first developed. What neoliberalism seems to bring to this history is the use of the market itself as one such technology. Indeed, neoliberalism, as discussed, is acutely aware of the fragility of homo oeconomicus and the need to instill its desires and habits within the subject. In this sense the market seems to have a pedagogical function. Foucault does not explicitly refer to the market as a technology of the self, but to the extent that neoliberals themselves have commented on this, it would seem clear that they do believe that the market is a key pastoral agent (see, for example, Becker and Posner, 2008). What is of crucial importance, though, is the way that the subject responds to this governance: if it accepts the premise of the market, it will make decisions that result in the development of its own human capital in order to better survive and prosper; however, if it refuses to make such choices, it will experience some measure of discomfort, thereby allowing the market to correct the subject's choice calculus.

In this sense, the hegemony of neoliberal life appears to foreclose the possibility of any alternative mode of existence. Relying on the market as a tool of governmentality, the neoliberal regime would seem to evoke Deleuze's (1992) concept of the society of control. That is, as Hardt and Negri (2000, p. 23) frame it:

… that society (which develops at the far edge of modernity and opens toward the postmodern) in which the mechanisms of command become ever more “democratic,” ever more immanent to the social field, distributed throughout the brains and bodies of the citizens.

Hardt and Negri have tried to develop the notion of a society of control in combination with this tendency to invest in human capital as a means for investigating the


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transformation of political power in contemporary globalisation. Referring to this mode of globalisation as 'Empire', they note the preeminent role played in this transformation not just of neoliberal discourse, but also of a tendency towards labour practices made possible by communicative technologies and the deepening of the subject's capacities in capitalism for 'immaterial' labour. "Empire," they declare, "takes form when language and communication, or really immaterial labour and cooperation, become the dominant force" (ibid., p. 385). The advent of this type of global communicative capitalism for Hardt and Negri bespeaks what they refer to as the passage to 'real subsumption'. Whereas in the era of classical imperialism a nation-based European mode of capitalism expanded to enshroud the entire world, thereby also expanding the political forms of European modernity, ‘real subsumption’ suggests a shift away from the economic modernisation of the industrial era and towards socialisation, or a change in quality of labour itself, as labour reconcentrates around the production of information goods and physically intangible 'service' goods.

In considering the ways in which the ongoing financial crisis is driven by everyday phenomena, Hardt and Negri's identification of the linguistic and communicative nature of neoliberalism's hegemony would seem to be of seminal importance. In keeping with the broad ontological power of neoliberalism which Foucault hints at, Hardt and Negri frame Empire as a project of 'subsumption' of the creative potential of human capital. Under conditions of subsumption, every form of activity, from the household to the schoolyard to the family doctor's office to the university, is now accountable to metrics of behaviour determined by capitalist rationality. Yet certain ambiguities also become apparent here. For example, one of the key implications of the turn towards the human capital framework is that there is now, effectively, an indeterminacy in the location of wealth-producing labour. The line between labour and non-labour has been blurred. As Negri (1992, p. 85) observes, today "the factory spreads throughout the whole of society ... production is social and activities are productive". Skills of care and capacities of intuition that were once more or less irrelevant to industrial production are now referred to as indispensible forms of ‘human capital’ and are directly implicated not just in the production of value but in the reproduction of order tout court. Thus, as Jason Read (2001) has argued, Hardt and Negri are preoccupied with the basic political significance of these novel forms of labour insofar as they have a kind of ontological power. That is, by virtue of the way capitalism extracts surplus today – through the production of knowledge, desires and affects – the question of power is not simply a question of the production of subjectivity but, rather, a question of the real and intense ways in which the 'commanding heights' of the economy have become immanent through the hegemony of immaterial labour. It is 'control' then, but a control, as Read (2003, p. 18) puts it, premised upon "the production of subjectivity


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by subjectivity". Some may raise objections here about periodisation and the extent to which

subjectivity might not plausibly be said to have always been productive, and command always immanent. But this is to miss the point: where the Christian pastoral took the conveyance of souls into heaven as its goal, today's capitalism actively seeks out the deep capacities of human capital, especially the capacities of subjectivation, in order to generate surplus capital from them. Thus, in the abstract at least, while the productive capacities of today's postmodern labour can hardly be said to be new, their place in capitalist production today can be broadly understood to have focused them according to a certain logic, giving them a certain, historically new "modulating" influence over all manner of social interactions (Virno, 2002). In other words, the rise of forms of labour oriented around intellect, intuition, compassion, and communication suggest that these practices have acquired "a new political and moral dimension" (Luke, 2001, p. 124). We can speak, therefore, of the subjective conditions and effects of this sort of capitalism; basic capacities of the heart and mind have not simply been subsumed within capitalist production; we live in an era of capitalist 'biopolitics' where these capacities have achieved a new preeminence in the reproduction of social life.

In their more recent work, Commonwealth (2009), Hardt and Negri discuss the hegemony of these capacities of capitalist valorisation in relation to the ongoing difficulties governments are experiencing in reflating their economies in the wake of the global credit crunch. For them, the hegemonic figure of this era of crisis is the "biopolitical metropolis" (ibid., p. 154), which reveals how the ‘technical composition’ of capitalism's source of surplus value is today founded in what Hardt and Negri term 'the common'. That is, not just the common wealth of the natural world but, also, the "knowledges, languages, codes, information, affects" of today's increasingly complex and dynamic social world (ibid., p. viii). Importantly, such resources are neither passive nor scarce (ibid., p. 139). In this sense, and this is a vital point in the development of the argument in Commonwealth, it is quite erroneous to say today's capitalism functions on the basis of profit. Rather, because capital itself no longer maintains any significant role in the process of producing the surplus value it requires, capitalism today is premised upon the extraction of rent. In an actual city, the example is fairly obvious: real estate agents pitch the price of ‘high value’ properties on the strength of their proximity to 'cool' or 'chic' parts of town. Thus, there is necessarily a "common work" of the crowd going on externally to the property, giving it additional value (ibid., p. 155). The value of a certain good in a rent economy is therefore possible only through the appropriation of that value from the common. Hence the dilemma, and this is precisely the analysis that Hardt and Negri bring to the realm of global finance: should the district become unpopular, the source of value disappears.

Hardt and Negri do avoid the sort of claim that Soros teeters on, that finance is


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just a social construction and, literally, untrue. Instead, they pose the world's financial system as an "enormous engine of abstraction" and the "paradigmatic economic instrument" of biopolitical capitalism's exploitation (ibid., p. 157, 258). However, citing Marazzi, they suggest that there is still a very real, albeit mystified, "social wealth" underlying it all (ibid., p. 158). Drawing from the conceptual framework of Empire to offer a critique of the financial crisis, Marazzi (2008, p. 89) offers an antagonistic reading of the subsumption of household savings by investment, and its accompaniment by the 1990s "noninflationary growth" strategy. However, in contrast with Seabrooke, Marazzi suggests that the strategy of deregulation and deflation which catalysed this move was adopted by the US in the late 1970s as a response to the crisis of profitability of Fordism, the productive regime that Autonomist Marxism poses as coming prior to today's 'Post-Fordist' regime. Here manufacturing firms turned to financial speculation as an alternative to productive reinvestment of profits, and workers turned to debt as a way of making up for lost wages (Marazzi, 2010, p. 27). In this way, the emerging post-Fordism recruited the poor and middle class elements of the economy in the "becoming-rent" of profit (Vercellone, cited in ibid., p. 30). Marazzi (ibid., p. 31) posits this transformation of life savings as a massive redistribution of risk, a "kind of privatization of deficit spending à la Keynes," facilitated by a suite of new, securitised financial products possible only in a highly deregulated environment. The scale to which these operations reached, relative to the productive activity of the economy, is clearly indicated by the impact of subprime crisis in the US, both at home and on the global markets.

As Autonomist Marxists, neither Marazzi, nor Hardt and Negri, would likely disparage Seabrooke's argument about the importance of community activists in securing access to credit. Nevertheless, for Autonomists, contemporary capitalism has been innovated to a great degree in response to the struggles for social equality waged in the Fordist era. Thus, for Marazzi (ibid., p. 33), the subprime crisis attests to the cynicism of capitalism today as it stoops to invest "in the raw lives of people that cannot guarantee anything" in order to survive; failing in the production of real value, contemporary capitalism must make "raw life a source of profit". Yet this is not surprising, he notes, putting forward the thesis that "financialization is not an unproductive/parasitic deviation of growing quotas of surplus value and collective saving, but rather the form of capital accumulation symmetrical with the new processes of value production" (ibid., p. 36). Key here is the idea of externalising the task of value production through the mass recruitment of a class of ‘productive consumers’ who add value to the good through the sheer fact of its consumption. As an analogy, Marazzi offers the example of the involvement of the consumer in the production of a piece of IKEA furniture. The point is that none of the new speculative profit-making would be even possible without the value-making capacities of this kind of "unpaid labour" (ibid., pp. 38-39). Non-productive


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accumulation in capitalism takes place reflexively in this sense, through a kind of ‘crowd sourcing’, bringing in the informal labour and time of the worker in an unprecedented way. And all of this reveals the extent of just how far traditional productive labour has been bypassed as a determinant of productivity. The current financial crisis then is to some extent "the result of the long march of capital against the Fordist working class" (ibid., p. 40). Thus, whereas in the past the end of an economic cycle might have brought on a shift to ‘fictitious capital’ as real investment opportunities dried up, thereby potentially creating a speculative bubble, in the 'New Economy' the involvement of household or life savings has reframed finance, disastrously, as coterminous with the real economy (ibid., p. 26). The great impasse of the crisis today is that the government 'stimulus' strategies being set in place are oriented towards refloating precisely the status quo of this empty, ‘Ponzi’ model of an economy. ConclusionConclusionConclusionConclusion In the hope of deepening the critique of IPE's Constructivism then, this article has argued that contemporary developments in financialisation attest to the transformation of capitalism and the recruitment within its regime of governance of the power of subjectivity. As Foucault hints, contemporary governmentality works via the market to instill in the subject an understanding of himself as capital. To live and survive in a market-based society is thus to reproduce this understanding in the practice of one's daily life. From the perspective of the Autonomist Marxists, this form of labour that the subject performs on himself is, in the context of contemporary capitalism, an externalisation to the sphere of immaterial labour of the task of sustaining accumulation. This externalisation is no less present in the reflexively constituted markets of high finance. That financialisation today is premised on the conversion of savings and pensions is a sober testimony to the fragility of 'Late Capitalism' as a reflexive economy. Yet it is this self-same type of reflexivity that sustains popular investment in the conceit of postmodern labour as human capital. Financialisation thus appears to foreclose any understanding of the source of capitalist value as occurring anywhere other than in the brain and body of the individual. However, as we have seen, the extension of techniques of capital accumulation into the non-economic sphere, via the recruitment of such non-linear capacities as care and intuition, bespeaks the extent to which accumulation today is in fact heavily reliant on social production.

What the Constructivists perhaps miss then, most critically, is the extent to which norms and conventions are now, in a sense, quite beside the point. As Surin (2009) puts it, today is the era of the ‘low-information voter’. Ours is an era of ‘post-political’ politics to the extent that the political today has been turned into "the mere business of manipulating and dragooning voters according to the largely fictitious rhythms of


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election cycles" (ibid., p. 10). Politics itself has been marketised, resulting in the fact that politicians today are marketed, and about as hard to tell apart as "fizzy beverages" (ibid., p. 10). And political parties have become vote-harvesting enterprises, run more by consultants "primarily attuned to the desires of corporate interests" than by the politicians themselves (ibid., p. 11). Yet we must acknowledge even here the value-added of a positive ontology of social reproduction. If a debate emerges between Constructivism and this latter, Foucauldian strain of thinking then, it concerns just this: the extent to which capitalism today functions through an expropriation of the social or linguistic nature of production. Neoliberalism is not just an authoritative discourse, it is a way of life. Through its pedagogy of human capital, neoliberalism works in a decisive manner to corrode the link between the state and citizen, where the state has generally in the past been represented as a force for social progress through economic development. In the place of this ideal, Western political life emerges today in a decidedly postmodern form, where labour judges the merits of its activity according to the adaptive metrics and prescriptions of the market. As the above discussion indicates, Constructivism does recognise the technical rationality, and partiality, of government as a potential force of discipline or exclusion against those who might lack a voice. Yet by avoiding the deeply constitutive nature of contemporary capitalism, Constructivism fails to offer us any sense in which we might begin to challenge capitalism's cynical deployment of the power of subjectivity. BibliographyBibliographyBibliographyBibliography Adam, S., 2009. Global Financial Assets Lost $50 Trillion Last Year, ADB Says

Bloomberg, [internet], 9 March. Available at: http://www.bloomberg.com/apps/news?pid=newsarchiveandsid=aZ1kcJ7y3LDM [Accessed 30 November, 2010].

BBC News., 2010. Irish Republic announces record budget cuts. BBC News [internet], 4 November. Available at: http://www.bbc.co.uk/news/business-11693654?print=true [Accessed 4 November, 2010].

Becker, G. and Posner, R., 2008., The Erosion of Individual Responsibility. The Becker-Posner Blog [internet], 2009. Available at: http://www.becker-posner-blog.com/archives/2008/03/the_erosion_of.html [Accessed June 20, 2009].

Bit, K., 2010. Greenlight’s Einhorn Says Global Sovereign Debt Crisis Looms. Bloomberg [internet], 7 December. Available at: http://www.bloomberg.com/news/2010-12-07/greenlight-s-einhorn-says-global-sovereign-debt-crisis-looms.html [Accessed 10 December, 2010].


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Brassett, J. Rethel, L. and Watson, M., 2010. The Political Economy of the Subprime Crisis: The Economics, Politics and Ethics of Response. New Political Economy, 15(1): pp. 1-7.

Byrne, E., 2010. Global financial crisis undermining our democracy. Irish Times [internet], 11 May. Available at: http://www.irishtimes.com/newspaper/opinion/2010/0511/1224270130292_pf.html [Accessed 15 November, 2010].

Chapman, J., 2010. Osborne's austerity cuts will cost £10,000 a family as think tank warns it may STILL not be enough. MailOnline [internet], 21 October. Available: http://www.dailymail.co.uk/news/article-1322344/SPENDING-REVIEW-2010-Osbornes-austerity-cuts-cost-10k-family.html?printingPage=true [Accessed 1 December, 2010].

de Goede, M., 2005. Virtue, Fortune, and Faith: A Genealogy of Finance. Minneapolis, MN: University of Minnesota.

Deleuze, G., 1992. Postscript on the Societies of Control [internet]. Available at: http://www.n5m.org/n5m2/media/texts/deleuze.htm [Accessed October 18 2003].

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Foucault, M., 1978. The History of Sexuality, Vol. I: An Introduction, New York: Pantheon.

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[internet], 12 October. Available at: http://www.againstthegrain.org/program/354/id/411525/tues-10-12-10-david-harvey-capitalism-and-its-crises [Accessed 12 October, 2010].

Kelly, M., 2009. The Political Philosophy of Michel Foucault. New York: Routledge. —––—–. 2010. If you thought the bank bailout was bad, wait until the mortgage defaults

hit home. Irish Times [internet], 11 November, 2010. Available at: http://www.irishtimes.com/newspaper/opinion/2010/1108/1224282865400_pf.html.

Krugman, P., 2008. Desperately Seeking Seriousness. New York Times, October 26. —––—–. 2010. Eating the Irish. New York Times [internet], 25 November. Available:


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http://www.nytimes.com/2010/11/26/opinion/26krugman.html?_r=1andpagewanted=print [Accessed 25 November, 2010].

Langley, P., 2010. The Performance of Liquidity in the Subprime Mortgage Crisis. New Political Economy, 15(1): pp. 71-89.

Luke, T. W., 2001. Cyberspace as Meta-Nation: The Net Effects of Online E-publicanism. Alternatives, (26), pp. 113-142.

Marazzi, C., 2008. Capital and Language; From the New Economy to the War Economy. Los Angeles: Semiotext(e).

—––—–. 2010. The Violence of Financial Capital. In Fumagalli, A. and Mezzadra, S., (eds.) Crisis in the Global Economy: Financial Markets, Social Struggles, and New Political Scenarios. Los Angeles: Semiotext(e).

McWilliams, D., 2010. Bailout will sink Ireland before we can even swim. Irish Independent [internet], 1 December. Available at: http://www.independent.ie/opinion/columnists/david-mcwilliams/david-mcwilliams-bailout-will-sink-ireland-before-we-can-even-swim-2442878.html [Accessed 10 December, 2010].

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O'Toole, F. 2010. The people must act or we will remain irrelevant. Irish Times [internet], 23 November, 2010. Available at: http://www.irishtimes.com/newspaper/opinion/2010/1123/1224283932871_pf.html.

Read, J., 2001. The Hidden Abode of Biopolitical Production: Empire and the Ontology of Production. Rethinking Marxism, (13), pp. 24-30.

—––—–. The Micro-Politics of Capital. Albany: State University of New York Press. Seabrooke, L., 2010. What Do I Get? The Everyday Politics of Expectations and the

Subprime Crisis. New Political Economy, 15(1): pp. 51-70. Soros, G., 2008. The New Paradigm for Financial Markets: The Credit Crisis of 2008 and

What It Means. New York: PublicAffairs. Surin, K., 2009. Freedom Not Yet; Liberation and the Next World Order. Durham, Duke

University Press. The Local., 2010. Merkel says EU's future at stake in Greek crisis. The Local [internet], 5

May. Available at: http://www.thelocal.de/politics/20100505-26981.html [Accessed 30 June, 2010].

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Wigan, D., 2010. Credit Risk Transfer and Crunches: Global Finance Victorious or Vanquished? New Political Economy, 15(1): pp. 109-125.

Nicholas J. KierseyNicholas J. KierseyNicholas J. KierseyNicholas J. Kiersey is Assistant Professor of Political Science at Ohio University-Chillicothe. He has published research on ‘world state’ theory; scale and bio-politics in the War on Terror; and the European Union’s attitude to Turkish accession. His current research focuses on discourses of neoliberal capitalist subjectivity, and the ‘debate about empire’ in IR theory.

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‘Grey in Grey’: Crisis, Critique, Change

Benjamin Noys

This essay reflects on the global financial crisis of 2008 as a site from which to assess a number of theorisations of critique and change, based within a broadly-defined Marxism. While the recent crisis has given traction to Marxism as a form of critique, the articulation of that critique to actual change, and especially to the prospective agents of change, has been left hanging. Charting the work of Fredric Jameson, Hardt and Negri, and others, we find an emphasis on the powers of production and life as a point of excess to fuel anti-capitalist politics. However, these images of dynamism are now forced to confront capitalism in a state of inertia and deceleration, and in so doing, they reveal their dependence on replicating or displacing the supposed ‘productive forces’ of capitalism to their own projects. Models of ‘anti-production’, such as those derived from Georges Bataille, also tend to converge on models of vital powers, although cast in forms of consumption and excess. Criticising this convergence on a mythical vitalism, this essay suggests a deflationary critique of capitalism’s ‘productivism’, and explores the potential for an anti-vitalist analysis that might better grasp the ‘mythological displacement’ of experience that operates within the frame of capitalist social relations.

IntroductionIntroductionIntroductionIntroduction

When philosophy paints its grey in grey, a shape of life has grown old, and it cannot be rejuvenated, but only recognized, by the grey in grey of philosophy; the owl of Minerva begins its flight only with the onset of dusk.

Hegel, 1991 At the moment of crisis we stand in a glaciated landscape of frozen abstractions. Commodities no longer get up and dance, or stand on their heads, but become fixed in tableaux turned malign and uncanny – somewhere between the fictions of E. T. A. Hoffmann and Thomas Ligotti. The equation of ‘money = excrement’ of the Freudian unconscious is enacted in social reality by devaluation and foreclosure. Now the


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transfixing images of capitalist ‘dynamism’ peddled through the 80s and 90s, presaged in lucid fashion by William Gibson’s Neuromancer (1984), with its characterisation of ‘Night City’ as “a deranged experiment in social Darwinism, designed by a bored researcher who kept one thumb permanently on the fast-forward button” (Gibson, 1984, p. 14), become objects of capitalist Ostalgie. Instead, we have the inertial intensity of the Michael Bay blockbuster, figuring the stasis of pure commodification deliberately beyond sense (Shaviro, 2010), or images of apocalypse and collapse, which mimic and efface the true rotten core of capitalist crisis: the social abandonment of those superfluous to the need for valorisation, an ageing grey capitalism, and the spectre of an imminent slaughtering of capital values. Already, in 1998, Fredric Jameson had presciently noted “Stasis today, all over the world” (Jameson, 1998, p. 4); we now live this condition as actuality and are left in the position Adorno ascribes to Little Nell in Dickens’ Old Curiosity Shop: “Because she is not able to take hold of the object-world of the bourgeois sphere, the object-world seizes hold of her, and she is sacrificed” (Adorno, 1992, p. 177).

In the period of ongoing crisis, now becoming figured in the tropes and actualities of ‘austerity’, we witness the disarticulation of the classical coordination of crisis, critique, and change. Crisis certainly gives traction to critique, to the point that a bemused mainstream temporarily abandons its ingrained anathematisation of Marx and we ‘all’, from Nicolas Sarkozy to the Pope (at least according to media reports), become ‘readers’ of Capital. And yet the strategic elements that would articulate and link critique to change, and the agency necessary to make that change, appear to be lacking. In a very useful survey of recent Marxist approaches to the current crisis Benjamin Kunkel (2011, p. 14) notes that: “At the moment Marxism seems better prepared to interpret the world than to change it”. The traction of analysis appears to be aligned with an intractability of praxis; to complete Jameson’s sentence: “Stasis today, all over the world … certainly seems to have outstripped any place for human agency, and to have rendered the latter obsolete” (Jameson, 1998, p. 4) [My italics].

This intervention aims to assess and analyse the ways in which a number of contemporary theorists, identified with a broadly-conceived Marxism, have tried to address the problem of articulating critique and change. Beginning with Marx’s stress on the necessary link of critique to change, guaranteed by the encrypted possibilities of change secreted within capitalism, I trace how waning faith in this guarantee forces re-articulations of the project of change. Tracking through a series of interventions, which largely pre-date the current crisis, what we find is that the link of critique and change is re-posed on vital powers supposedly in excess of capitalism. These radicalised images of dynamism now confront a capitalism that appears to have rescinded its expansive circuit of accumulation, in Marx’s formulation M–C–M', and has stagnated into an inertia that leaves open the question of whether capitalism can re-start this drive through another round of therapeutic creative destruction. What concerns me is the extent to which these

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counter-formulations remain dependent on, or replicate, capitalism’s own self-conception of dynamism to found their critiques. The very act of displacing vital powers from their capture by capitalism risks, I will argue, reinforcing a capitalism that always operates through displacing vital powers.

I.I.I.I. For Marx, the link between critique and praxis is established on the ground of the conditions posed by capitalism itself. Without such a link between these conditions and transformative praxis Marxism would decline into the position of utopian socialism, which may be “full of the most valuable materials for the enlightenment of the working class”, but as it loses contact with reality descends into “systematic pedantry” (Marx and Engels, 2000, Ch. 3). To resist the fatal detachment of utopian socialism from the conditions for its realisation, communism must find itself encrypted in the present; as Marx (1973, p. 159) puts it in the Grundrisse:

if we did not find concealed in society as it is the material conditions of production and the corresponding relations of exchange prerequisite for a classless society, then all attempts to explode it would be quixotic.

This, however, does not require that we accept capitalism per se as a ‘positive’ development teleologically ‘leading’ to communism, contra the usual image of Marx. In fact, existent conditions are antagonistic and contradictory, and therefore history, Marx argues, advances by the “bad side” (Marx, 2009, p. 54). It is the very negativity and violence of capitalism, the fact that “capital comes dripping from head to foot, from every pore, with blood and dirt” (Marx, 2010, Ch. 31), that constitutes its paradoxical ‘advance’ and the necessity for its negation.

This is the discomforting dialectic visible in Marx, such as in his argument that the imposition of compulsory education in the factory is the germ of the “education of the future” – the combination of productive labour with instruction and gymnastics – which would lead to “fully developed human beings” (Marx, 2010, p. 313). In this case capital wants to draw children into the factory to extract labour from them, and this extraction is ‘improved’ through an educational process that results in ‘better workers’ and hence higher levels of production and, more importantly, profit. Rather than rejecting this situation out of hand as requiring replacement by some radically alternative ‘utopian’ education detached from production, Marx instead, controversially it’s true, argues that this form of education can be negated – that is, in the Hegelian sense, denied and also preserved – to ‘produce’ a communist education that would ‘enrich’ us through a new


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form of education detached from value-production. To use Brecht’s later formulation, we must found communism on the “bad new” rather than the “good old things” (Brecht in Benjamin, 2007, p. 99). What we can note is a general loss of faith in the scenario that the contradictions and antagonisms of the present will generate the “real movement which abolishes the present state of things” (Marx and Engels, 1845), which is to say communism. Here teleology appears suspended, and capitalism in crisis seems to portend the “common ruin of the contending classes” rather than “the revolutionary reconstitution of society at large” (Marx and Engels, 2000, Ch. 1). In this case the negativity of capital appears as non-dialectical, or auto-destructive. One of the most extreme responses to the situation where capital appears unable to generate its own ‘gravediggers’, and in fact appears suicidal, is that of contemporary primitivist or anti-civilisational currents. They argue that the rot did not set in with capitalism, but with the onset of agriculture in the Neolithic age, or even in the emergence of language itself (Zerzan, 1999). These versions of what Marx and Engels called ‘feudal socialism’ can only imagine an exit from the malignity of capitalism through civilisational collapse, treated with more or less schadenfreude and ressentiment. In this case the inability to imagine the contradictions and antagonisms of the present leading to any radical change leads to a chiliastic vision of necessary apocalypse to bring in the reign of ‘communism’. And yet this extreme example does indicate a more general problem. Can we continue to have faith in the ‘bad side’ if matters only continue to get worse and no dialectical reversal takes place? To return to more sober grounds, Adorno makes a classical statement of the procedure of starting with the ‘bad new’ when he argues that it is only when the commodity appears as fully ‘alien object’, as having outlived itself as commodity, that this loss of use-value figures the promise of a new free use, without regression, through exchange value. Rather than the appeal to a use-value supposedly immune to capitalism, Adorno argues that capitalism itself produces the possibility of communism through its own equalisation of objects qua commodities. The de-privileging of particular commodities, their detachment from ‘traditional’ personal forms of valorisation, presages a new order of ‘free’ commodities. In particular, for Adorno, this requires detachment from the belief in liberation lying on the side of the subject. When objects ‘grow hard’, salvation instead emerges as love for the object at the expense of the subject (see Vatter, 2008, pp. 52-4). It is “only a life that is perverted into thingly form” (Adorno in Vatter, 2008, p. 47), a life that mimics the object, that can traverse the commodity. If Little Nell is sacrificed to the object-world, for Adorno we must have faith that “the possibility of transition and dialectical rescue was inherent in this object-world” (1992, p. 177) [My italics]. Again, the difficulty lies in grasping the inherent nature of this dialectical rescue, and imagining who is to be the agent of this dialectical transition. To embrace the

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object has to be distinguished from a mere sacrifice of the subject to the object, as in the case of Little Nell. To take one of the key dimensions of the current crisis, we could say that the house or home ‘grows hard’ in the form of the unpayable mortgage – its ‘value’ becomes detached from its ‘use’, or its radical fluctuation of value prevents its use. Of course, if we follow Adorno, this realisation of exchangeability, the positing the house or home as ‘pure’ exchange value, could indicate an order where the house or home can be ‘loved’ as exchangeable, and the mortgage abandoned as ‘investment’ for another relation of living, in which housing is open to all. The problem is that, without intervention by subjects, the more likely result appears to be the simple loss of living space – eviction and foreclosure.

II.II.II.II. If the faith in the inherent possibilities of transition through the ‘bad new’ has waned, then new resources need to be found to re-start and link critique to change. Returning to Fredric Jameson’s prescient detection of the fundamental impasse and stasis imposed by financialisation on political praxis, he solves this problem by resorting to “Brecht’s Chinese dimension” (Jameson, 1998, p. 3); by supplementing the dialectic with an appeal to a metaphysics of change. In a lyrical sentence (which continues from the previous quotation) Jameson (1998, p. 4) argues:

This is why a Brechtian conception of activity must today go hand in hand with a revival of the older precapitalist sense of time itself, of the change or flowing of all things: for it is the movement of this great river of time or the Tao that will slowly carry us downstream again to the moment of praxis.

We cannot simply depend on contradictions and antagonisms of capitalism, on the ‘bad new’, or the inherent possibilities of the object-world but, instead must bolster and supplement this with a precapitalist metaphysics of time as flux, to free us from the stasis of the false image of perpetual revolution represented by capital. The difficulty is to imagine exactly how we can recover and then instantiate this sense of precapitalist time in capitalist conditions. Jameson’s solution is to suggest that despite his deliberate resort to archaism, this metaphysics of time as change will correspond to a future post-capitalist communism (Jameson, 1998, p. 12). Living in such a communist society would involve living the Tao as everyday reality, as the ideology or metaphysics commensurate with communism. The obvious problem, however, is that such a sense of time is required as the condition to carry us downstream to the praxis that would achieve that order. We are trapped in a temporal paradox or loop, whereby the


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sense of time needed to achieve the future can only come from the future. The result is curiously free-floating; a metaphysics that lacks any social grounding and becomes a mere placeholder for the necessary faith to shake the present. The way out of this aporia is by what Jameson (1998, p. 83) refers to as a “constructed contradiction”: we have to couple together the ‘Chinese’ or ‘peasant’ Brecht of the pre-capitalist sense of time, with the productivist Brecht who embraces the contemporary ‘bad new’. This requires that we link this metaphysical change to the potential vitality of capitalist production, a production always ‘fettered’ by the conditions of capitalist value-production. To use the imagery of Charles Olson’s poem ‘The Kingfishers’ (1949) – itself in part a response to the Chinese revolution and an answer to the claims of cultural sterility advanced in Eliot’s ‘The Wasteland’ (1922) – we have to suppose that “What does not change / is the will to change” (Olson, 1997, p. 5), and that this ‘will to change’ can only be founded “[o]n these rejectamenta” (Olson, 1997, p. 6), on the detritus of the capitalist present. In reply to the stasis of the capitalist present, with its image of hyper-production and new cybernetic frontiers that conceals a fundamental inertia, we have to find an image of ‘higher’ and more vital production; it is Brecht’s incipient ‘accelerationism’ (see Noys, 2010, pp.4-8), the recourse to radicalising the possibilities released by capitalism as the path to communism, that is required to free us from stasis and into the production, construction, and novelty of a plebeian postmodernity. Such a metaphysics has little of the serenity one might impute to the Tao Te Ching (1993), but may in fact be more faithful to the actuality of a text that places a certain adherence to the ‘flow’ of the Tao within a practice of statecraft and intervention. In Jameson’s terms the metaphysics of the Tao commits us to a ‘forcing’ (to borrow Badiou’s term) that can tease out the true experience of change from the false capitalist image of change: the truly new emerges from within the radicalised acceleration of the ‘bad new’. In Brecht, according to Jameson (1998, p. 17), we find “the sheerest celebration of change, change as always revolutionary, as the very inner truth of revolution itself”. Jameson’s dialectical flexibility, in which every thinker has his or her day – today Adorno’s pessimism (Jameson, 1990), tomorrow Brecht’s productivism – itself occupies a ‘flattened’ temporality of postmodernity. Of course, this, for Jameson, is its merit. The spatial dialectic of postmodernity operates on and in postmodernity (Jameson, 2009). The ‘turn’ of each thinker depends on their therapeutic grasp on a present moment, and their ability to shake us free from that moment. And yet the rapidity of shifts in attack and approach by Jameson might give pause about the grip of this dialectic on actuality. In the case of Jameson’s Brecht the difficulty, as Jameson recognises, is the congruence of the metaphysics of radical change with capitalist dynamism:

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Yet the celebration of change itself – whether in the form of the Tao or some other chronotope – may be open to all kinds of other doubts and suspicions, particularly in a society whose current economic rhythms perpetuate and thrive on permanent change: capital accumulation, investment and realization, the dissolution of stable firms and jobs into a flux of new and provisional entities, awash in structural unemployment, its cultural infrastructure committed to permanent revolution in fashion and to the imperative to generate new kinds of commodities, when not, in deeper crises, to invent or exploit wholly new production technologies. (Jameson, 1998, pp. 169-70)

The problem is devastatingly stated, but not adequately answered. While Jameson’s work of this period is highly prescient concerning the stasis and drift underpinning images of dynamism, which have become realised in the crisis of financialisation, his alternative is still posed in terms of a metaphysical dynamism that does not seem able to escape its congruence with the ‘permanent change’ inherent to the capitalist mode of production. What is left unspecified is exactly how we are to tease out ‘change as revolutionary’ from this capitalist ‘permanent change’. Instead, in the name of Brecht we are being called to return to the ‘heroic’ values of communism – of production, novelty, change, and the new – to allow ourselves to imagine a way out of the present deadlock. The difficulty is not that there may be possible utopian resources in Brecht; it is that this reference risks not only repeating capitalism, but also returning us to that twentieth-century communism of the ‘passion for the real’ and the installation of utopia anatomised by Badiou in The Century (2007) (in which Brecht is a central representative figure), without any real analysis of its failures. This ‘back to the future’ option appears as fatally temporally confused. Returning to an ancient metaphysics, that is supposed to correspond to a future communist society, we are at the same time recalled to images of dynamism associated with capitalism and a modernising ‘communism’, leaving us with a receding grasp on our own temporal moment.

III.III.III.III. This mood of ‘productivism’ as solution to stasis that Jameson caught in his characterisation of Brecht is much more widespread than his indications of a rapprochement between Brecht and Deleuze suggested (Jameson, 1998, p. 79). All around us there is a (theoretical) emphasis on novelty, production and the new as the core affirmative values that should perform our detachment or subtraction from the ‘limits of capital’. In the recent work of Hardt and Negri (2009) we find hymns to the


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‘productive’ powers of the multitude that lie ‘beyond measure’. Various other neo-Spinozist and neo-Nietzschean forms of ‘affirmationism’ can be identified in the current conjuncture, which also imply an outbidding of capitalist ‘dynamism’ by the dynamis of a vital or ontological ‘Life’. Miguel Vatter (2009) has noted the contemporary tendency to make the transition from ‘surplus value’, negatively correlated to the extraction of value from labour, to the concept of ‘surplus life’, as an affirmative statement of what exceeds capitalist value-extraction. In this model there is something ‘in’ life that always exceeds ‘capture’ by capitalism, an irrecuperable ‘resource’ of ‘expanded productivity’ that “can never be eclipsed or subordinated to any transcendent measure or power” (Hardt and Negri, 2009, p. 38; See also Anon, 2010). These critical conceptualisations are deliberately designed to be politically motivational by breaking the sense of powerlessness and inertia built-in to what had seemed a globally triumphal, and triumphalist, capitalism. Even in the face of capitalist crisis they can still maintain their appeal by their insistence on a power of production that capitalism no longer seems able to provide. As crisis rips away the capitalist integument of ‘productivity’, a true ontological or vital productivity is revealed. I want, however, to suggest caution over these claims. In the genuine desire to develop a radical break with the conditions of capitalism, the unfortunate irony is that such motivational benefits come at the high cost of replicating a bewitchment with production qua value, or with production supposedly exacerbated to the point of the transvaluation or destruction of all values. Also, the question of the political organisation and structuring of this supposed omnipresent ‘surplus’ is evaded, to be replaced by the myth of ‘Life’ as permanent excess. What such theorisations fail to grasp is the simultaneous appearance of labour-power as both a source of wealth and denuded experience of “absolute poverty” (Marx, 1973, p. 296). Instead this dialectic is deliberately broken, to valorise the one side of ‘labour’, now in excess of its own position as labouring subject, at the very time when capitalism enters, or more precisely reveals, its own decelerative phase (Balakrishnan, 2009). The seeming ‘failure’ of capitalism to develop the productive forces, made visible in the devalorising moment of crisis, leads not to a questioning of those forces, but to claims to reinscribe them under a new productive communism. Coupled at times to an unlikely Sinophilia, with ‘China’ as the (fantasmatic) site of true productivity, we are promised ‘communism’ as the re-starting and excess of capitalism, in which we return to the productive forces that have to be developed to their maximum so humankind can solve the problem of capitalism, to paraphrase one of Marx’s own most accelerationist texts – the 1859 Preface (Marx, 1999a).1 The “rose in the cross of the present” – to use Hegel’s (1991, p. 22) phrase referring to the moment of rationality within the actual – is, on this reading, the accelerative moment of re-starting production or creative destruction, even if this is now posed at the abstract ontological level of the productiveness of ‘Life’ itself.

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As I have noted, the difficulty is that this wager on a hyper- and excessive production, whether ontological or exceptional to ontology, recapitulates the very ‘creative ideology’ of contemporary capitalism – which posits labour as the constitutive ‘outside’, as the source of “fructifying vitality” (Marx, 1973, p. 298). For capitalist ideology this positing of labour as outside, as free of the usual despotisms of production, only serves to subject the worker more through their own self-subjection as ‘free’ creative worker. As Marx (1973, p. 308) remarks in the Grundrisse:

[t]hose who demonstrate that the productive force ascribed to capital is a displacement, a transposition of the productive force of labour, forget precisely that capital itself is essentially this displacement, this transposition, and that wage labour as such presupposes capital, so that, from its standpoint as well, capital is this transubstantiation; the necessary process of positing its own powers as alien to the worker.

Instead of analysing this congruence between capitalism and its supposed ‘opponents’, instead of recognising that “[t]he bourgeois have very good grounds for falsely ascribing supernatural creative power to labour” (Marx, 1999b, Ch. 1), today’s radicals all too often ascribe ever more ‘supernatural creative power to labour’. This is the difficulty of the valorisation of ‘surplus life’, which although often couched as anti-capitalist, insufficiently interrogates this congruence. The cure is more of the disease, and in a period of ‘creative destruction’ we might wonder whether such resorts to a metaphysics of change and production can truly overcome the stasis of the present, or merely, and typically, allow for communism or socialism as the panacea to regenerate capitalism itself.

IV.IV.IV.IV. If ‘productivism’ is in congruence with the fantasy of capitalism, with its own mythology, is it possible to break with this structure, to re-imagine the ‘rose in the cross of the present’? Georges Bataille (1985, p. 14) writes, apocryphally as it turns out, of:

[t]he disconcerting gesture of the Marquis de Sade, locked up with madmen, who had the most beautiful roses brought to him only to pluck off their petals and toss them into a ditch filled with liquid manure – in these circumstances, doesn’t it have an overwhelming impact?

Writing in the late 1920 and 1930s, exactly across that ‘other crisis’ of 1929, Bataille articulated a vision of anti-production, of loss and excess, that articulated itself in an


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‘economy’ of the excremental, the perverse, and all elements that could not be coordinated with utility. Proposed in terms of ‘heterology’ (Bataille, 1985, pp. 137-160), this ‘cloacal’ critique targeted the stabilisations of value accumulation and labour through an avant-garde ‘base materialism’ (Bataille, 1985, pp. 45-52), which refused the materialist idealisation and stabilisation of ‘matter’ by exchanging it for an image of ‘matter’ as active, unstable and excessive (Bataille, 1985, p. 15). Obviously, and directly, borrowing heavily from Freud, while re-inscribing the concept of the unconscious under a general heterology, Bataille aimed at an active and excremental concept (or anti-concept) of ‘matter’ that would escape the usual conceptual prisons of a ‘materialism’ always structured by its opposition to ‘idealism’. Of course, as Jean-Joseph Goux (1990) would later note, Bataille’s economy of excess might have had traction on the asceticism of the Protestant ethic of accumulatory capitalism, but seems to come into strange congruence with a ‘postmodern’ capitalism of realised excess. One has only to read the life story of Don Simpson (Fleming, 1999), the producer of so-called ‘high concept’ films during the 1980s, to note how a transgressive and excessive world view (coupled to the self-discipline and self-punishment of the gym and plastic surgery) can conform to capitalism’s fantasmatic self-image as liberatory and excessive.2 This is, of course, before we turn to the more quotidian fact that those abandoned by capitalism, as ‘surplus humanity’, often live, literally, in shit (Davis, 2006, pp. 137-150). Instead of the excremental and perverse setting out some alternative space to capitalist modernity it becomes coded within it, as its inherent and licensed transgression (Žižek, 2004, p. 213), and hence reconnected to value production but at the level of ‘pure’ speculation and excess. Here, certainly, the so-called ‘sound investment’ can turn into excrement, but also excrement or waste can suddenly become a speculative resource. The impasse of Bataille’s critique is not only that it has been outpaced by a ‘cloacal’ capitalism, a capitalism that thrives on excess and waste, but, more damagingly, that it also appears to be mired in a similar productivism to that of accelerationism, only cast in the neo-primitivist or mythological register of excessive anti-production. This critique does not exhaust the scope of Bataille’s writing, which often problematises this recourse to myth, life, and production in profound ways (see Noys, 2000, pp. 117-124), but the tendency of his work to appeal to a ‘higher’ (solar) or ‘lower’ (excremental) production that always exceeds the ‘restrictions’ of capitalism can result in a kind of anti- or hyper-vitalism that hardly seems to shatter the ‘mirror of production’, as Baudrillard (1975) claimed. The dissolution of agency into evasive molecular flows of intractable ‘matter’ might seem to offer lines of flight from capitalist capture, but also it opens up new codings for speculation and investment (as Deleuze and Guattari (1983) insisted, deterritorialisation is always accompanied by reterritorialisation). While it promises the ‘rejuvenation’ of a life of excess, or an excess of life, outside of capitalism, the risk is that

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the excremental, the elements of ‘anti-production’, will become more manure to generate another round of accumulation through repeated ‘creative destruction’. The result is that although we have traced Bataille’s anti-productivism as an alternative path it actually tends to converge with a Brechtian productivism, which, as Badiou (2007, p. 45) notes, also regards the decline of capitalism as generating “a nourishing decomposition”. What is shared here is a particular conception of capitalism as ‘fetter’, or ‘decomposing’ order, which then tries to break this ‘constraint’ through excess production rather than the critique of production itself. Of course Bataille did offer material for a more direct critique of production, and it would be rash to claim his work is exhausted by its own residual productivism, or by recuperation through the capitalist cunning of reason. My argument is, however, that the contemporary use of such theoretical resources, whether ‘productivist’ or ‘anti-productivist’, requires a more thorough-going self-critique of the penetration of thinking by the ‘grammar’ of neoliberalism. Neoliberalism’s ‘State phobia’, its subjection of the ‘social’ to conditioning by the market, its anti-naturalism, and its multiplication of the ‘enterprise’, make it a form of ‘rationality’ organised through multiplicity and difference (see Foucault, 2008). As a result, often our supposedly critical concepts of exit from capitalism – freedom, difference, excess, the multiple, and flight – all-too often lead back in to capitalism. In particular, the notion of a ‘surplus life’ can find itself correlated with an excess inventiveness and capacity that always remains available as a resource awaiting transposition into the market. Again I would insist this is not to make neoliberal capitalism, or capitalism itself, some untranscendable horizon of our time, in a gesture of fatalism or recuperation. Instead, it is a matter of grasping the capillary forms and functions of neoliberalism, and capitalism, as they penetrate and shape potential modes of resistance.

V.V.V.V. We have arrived at the symmetry of an aporia: neither the radicalisation of the productive forces, nor the resort to anti-production seems able to grasp or escape the bewitchment of capitalism as a system of crisis and creative destruction. This reflects, however, the real problem of the disarticulation of crisis, critique, and change in the present moment. While crisis gives traction to critique, and would classically seem to promise the moment of change, the strategic elements that would re-articulate critique with agency are lacking. Instead of a tracing of the opaque stasis of the present, the almost horrifying fact that ‘things as they are’ remain as such, faith is retained in the old models of dynamism.

The vitalist models of the ‘passion for the real’ that Badiou identifies with the ‘short twentieth century’ have displayed remarkable persistence – as Badiou (2007, p. 14)


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notes: “in part, we still belong to this vital century”. In Badiou’s analysis the revolutionary passion for the real coordinated the “structured and living power” (Badiou, 2007, p. 14) of life with history by inscribing ‘Life’ as a point of rupture and revolution. In the contemporary context we find a new coordination of the power of life with history, which lies in the promise of this ‘living power’ as the means to overcome the stasis of capitalism in crisis through an imaginary ‘forcing’, or nostalgic return, to the “becoming of affirmation” (Badiou, 2007, p. 14). This is because in the moment of crisis we find the abandonment of living labour, and the treatment of labour as external or surplus to the requirements of capital’s self-valorisation (Endnotes, 2010). The result is that the stasis of capitalism in crisis appears as living proof, to use a deliberately ironic phrase, that capitalism is merely external and vampiric over the excessive power of life. Capitalism appearing as ‘dead labour’ personified results in the vitalist personification of living labour as an external ‘force’, as that living labour is abandoned. In this way crisis reinforces vitalism, as the mythological means to free us from the dead hand of capital, by encouraging a new belief in the ‘supernatural creative power’ of labour that capitalism no longer seems able or willing to harness.

This coordination can be disrupted if we reconsider Badiou’s inscription of vitalism as the operationalisation of ‘Life’ and ‘History’ as the means to overcome nihilism. In a critical review of Badiou’s The Century, Gopal Balakrishnan argues that this linkage of ‘Life’ and ‘History’ could be reformulated if we think

Life was the name for the compulsion of self-valorizing Value, and History the combined and uneven development of the vital or ‘productive forces’ that this compulsion set into motion. (Balakrishnan, 2010)

Unpacking this critique, we see the hymning of ‘Life’ is an attribution error, which ascribes to ‘Life’ the powers of Capital. At the same time the inscription of this vitalism in ‘History’ again involves a certain mistaken attribution of the functioning of ‘productive forces’ across the temporal and spatial axes of capital; one tendency was mistaken for the whole. This mistaking of vitality for valorisation and of history’s mandate for a particular configuration of productive forces led to the miring of the ‘will to change’ in capitalism’s ‘bad new’ of compulsive motion.

In the case of Badiou, we can note the distance he tries to take from this configuration, precisely by rejecting the validation that vitalism took from history (i.e. capitalism). Yet, while the stringency of Badiou’s alternative of ‘subtraction’ has much to recommend itself, precisely in its refusal of any myth of production and superior value of life, its own variant voluntarism fails to grasp what Balakrishnan (2010) calls “the erratic, violent universalization of capitalist civilization”. That is to say, Badiou’s own ‘political Marxism’, a Marxism that tends to insist on detachment from economic analysis and the

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‘purely’ political composition of a Marxism irreducible to the history of capitalism (see Badiou, 2009), itself remains subject to capitalism because it is not able to think capitalism. The result, according to Balakrishnan (2010), is that it is unable to “prepare us to explore the objective and subjective dimensions of an enigmatic present of stasis and impending catastrophe”. To grasp this ‘enigmatic present’ requires a rather different form of critique. Borrowing a characterisation of the films of Jia Zhangke by Zhang Xudong, I would propose that the task of contemporary critique can be defined as: “to capture a reality that is simultaneously slipping away from experience and coming back to haunt and overwhelm it at an abstract, mythological level” (Xudong, 2010, p. 78). Contrary to the inflationary founding of critique on myths of production, excess, and capital ‘L’ ‘Life’, or to mirror images of ‘Life’ qua viral apocalypse, rot, or undead exhaustion, both often justified on the grounds of supposedly motivational power, sometimes with surprising cynicism, we might better paint ‘grey on grey’ and analyse the production of experience as abstract and mythological, rather than feeding another round of mythological accumulation. In fact, these abstract myths are the result of the slipping away of experience, the very displacement of capitalist production, and destruction, to the ontological level of the subject, which then overwhelm the subject by being cast as potential sources of liberation. The ‘reality’ that is in fact slipping away from experience is the reality of the real abstraction of labour and its contradictory existence, as both “the living source of value” and “absolute poverty” (Marx, 1973, p. 296), which is stretched to breaking point in the current crisis. As we have seen the new vitalists valorise labour as the ‘living source’, without being able to simultaneously grasp its ‘absolute poverty’. In doing so the unity of the abstraction, which stands out starkly in and through the devalorisation of labour by the crisis, is occluded. Of course, the grasping of this loss of experience and its return at the level of the abstract and mythological should not be expected to solve the riddle of agency and praxis. At least, however, it refuses to conflate a mythological and inflationary fantasy of agency, which is only one side of the ‘moving contradiction’ of capitalism. Instead, by tracing the crisis as devalorisation, with all its compensatory fantasies, this analysis of the ‘grey in grey’ of abstraction offers us resources to better begin to strategically think forms and conditions of resistance against a devalorising and decelerating capitalism.


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NotesNotesNotesNotes 1. Such a position was essayed by Nick Land during the 1990s (see Land, 2010), and has

recently been re-stated by several of those presenting at the CCS event ‘Accelerationism’ (Goldsmiths, 14 September 2010).

2. To take just one index, Simpson’s autopsy reports and pharmaceutical records reveal that during the summer of 1995 he:

was on a regimen that included multiple daily injections of Toradol, for pain; Librium, to control his mood swings; Ativan, every six hours, for agitation; Valium, every six hours, for anxiety; Depakote, every six hours, to counter ‘acute mania’; Thorazine, every four hours, for anxiety; Cogentin, for agitation; Vistaril, every six hours, for anxiety; and lorazepam, every six hours, also for anxiety. He was also taking, in pill and tablet form, additional doses of Valium, plus the pain relievers Vicodin, diphenoxylate, diphenhydramine and Colanadone, plus the medications lithium carobonate, nystatin, Narcan, haloperidol, Promethazine, Benztropine, Unisom, Atarax, Compazine, Xanax, Desyrel, Tigan and phenobarbital. (Fleming, 1999, pp. 8-9).

BibliographyBibliographyBibliographyBibliography Adorno, T., 1992. On Dickens’ The Old Curiosity Shop. In R. Tiedemann., ed. 1992.

Notes to Literature vol. 2. Trans. Shierry Weber Nicholsen. New York: Columbia University Press.

Anon., 2010. Beyond Measure. Mute Magazine, [Online]. Available at http://www.metamute.org/en/content/beyond_measure [Accessed 18 November 2010].

Badiou, A., 2007. The Century. Trans. Alberto Toscano. Oxford: Polity. —––—–. 2009. Theory of the Subject [1982]. Trans. and intro. Bruno Bosteels.

London: Continuum. Balakrishnan, G., 2009. On the Stationary State. New Left Review, 59, pp.5-26. —––—–. 2010. The Historical Absolute. Lana Turner: A Journal of Poetry and Opinion, [Online]. Available at:

http://lanaturnerjournal.com/index.php?option=com_contentandview=articleandid=51:balakrishnanthehistoricalabsoluteandcatid=41:issue38andItemid=54 [Accessed November 10 2010].

Bataille, G., 1985. Visions of Excess. Ed. and Intro. A. Stoekl. Minneapolis: University of Minnesota Press.

Baudrillard, J., 1975. The Mirror of Production. St. Louis, MO: Telos Press.

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Benjamin, W., 2007. Conversations with Brecht. In Theodor Adorno et al., 2009. Aesthetics and Politics. London and New York: Verso.

Davis, M., 2006. Planet of Slums. London and New York: Verso. Deleuze, G. and Guattari, F., 1983. Anti-Oedipus [1972]. Trans. Robert Hurley, Mark

Seem and Helen R. Lane. Minneapolis: University of Minnesota Press. Endnotes, 2010. Misery and Debt. Endnotes #2, [Online]. Available at:

http://endnotes.org.uk/articles/1 [Accessed April 20 2011]. Fleming, C., 1998. High Concept: Don Simpson and the Hollywood Culture of Excess.

London: Bloomsbury. Foucault, M., 2008. The Birth of Biopolitics: Lectures at the Collège de France, 1978-79.

Trans. Graham Burchell. Basingstoke: Palgrave. Gibson, W., 1984. Neuromancer. London: Grafton. Goux, J-J., 1990. General Economics and Postmodern Capitalism. Yale French Studies,

78, pp.206-224. Hegel, G. W. F., 1991. Elements of The Philosophy of Right. Allen W. Wood., ed.

Cambridge: Cambridge University Press. Jameson, F., 1990. Late Marxism: Adorno, or, the persistence of the dialectic. London and

New York: Verso. —––—–. 1998. Brecht and Method. London and New York: Verso. —––—–. 2009. Valences of the Dialectic. London and New York: Verso. Kunkel, B., 2011. How Much Is Too Much? Review of The Enigma of Capital: And the

Crises of Capitalism by Harvey, D. and A Companion to Marx’s ‘Capital’ by Harvey, D. London Review of Books, vol. 33(3), pp. 9-14. [Online]. Available at: http://www.lrb.co.uk/v33/n03/benjamin-kunkel/how-much-is-too-much [Accessed 30 January 2011].

Land, N., 2010. Fanged Noumena: Collected Writings 1987-2007. Intro. R. Brassier and R. Mackay. Falmouth, UK: Urbanomic.

Lao-Tzu., 1993. Tao Te Ching. Intro. B. Watson. Trans. S. Addiss and S. Lombardo. Indianapolis and Cambridge: Hackett Publishing Company.

Marx, K., 1973. Grundrisse. Trans. Martin Nicolaus. London: Penguin. —––—–. 1999a. A Contribution to the Critique of Political Economy: Preface [1859]. Marxists Internet Archive. [Online]. Available at:

http://www.marxists.org/archive/marx/works/1859/critique-pol-economy/preface.htm [Accessed 16 November 2010].

—––—–. 1999b. Critique of the Gotha Programme [1875]. Marxists Internet Archive. [Online]. Available at:

http://www.marxists.org/archive/marx/works/1875/gotha/index.htm [Accessed 18 November 2010].


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—––—–. 2009. The Poverty of Philosophy. Marxists Internet Archive. [Online]. Available at: http://www.marxists.org/archive/marx/works/download/pdf/Poverty-Philosophy.pdf [Accessed 16 November 2010].

—––—–. 2010. Capital vol. 1. Marxists Internet Archive. [Online]. Available at http://www.marxists.org/archive/marx/works/download/pdf/Capital-Volume-I.pdf [Accessed 16 November 2010].

Marx, K. and Engels, F., 1845. The German Ideology. Marxists Internet Archive. [Online]. Available at: http://www.marxists.org/archive/marx/works/1845/german-ideology/index.htm [Accessed 16 November 2010].

—––—–. 2000. The Manifesto of the Communist Party [1848]. Marxists Internet Archive. [Online]. Available at: http://www.marxists.org/archive/marx/works/1848/communist-manifesto/index.htm [Accessed 16 November 2010].

Noys, B., 2000. Georges Bataille: A Critical Introduction. London: Pluto Books. —––—–. 2010. The Persistence of the Negative: A Critique of Contemporary

Continental Theory. Edinburgh: Edinburgh University Press. Olson, C., 1997. The Kingfishers. In R. Creeley. ed., Selected Poems. Berkeley, Los

Angeles, and London: University of California Press. Shaviro, S., 2010. Post-Cinematic Affect. Winchester, UK and Washington, USA: Zero

Books. Vatter, M., 2008. In Odradek’s World: Bare Life and Historical Materialism in Benjamin

and Agamben. Diacritics, 38(3), pp.45-70. —––—–. 2009. Biopolitics: From Surplus Value to Surplus Life. Theory and Event,

12(2). Project MUSE. [Online]. Available at: http://muse.jhu.edu/ [Accessed 29 November 2010].

Xudong, Z., 2010. Poetics of Vanishing: The Films of Jia Zhangke. New Left Review, 63, pp.71-88.

Zerzan, J., 1999. Elements of Refusal. California: C.A.L. Press. Žižek, S., 2004. Organs without Bodies: On Deleuze and Consequences. London:

Routledge. Benjamin NoysBenjamin NoysBenjamin NoysBenjamin Noys is Reader in English at the University of Chichester. He is the author of Georges Bataille: A Critical Introduction (Pluto 2000), The Culture of Death (Berg, 2005), and The Persistence of the Negative: A Critique of Contemporary Theory (Edinburgh University Press, 2010). He has published extensively on contemporary theory, cultural politics, literature and aesthetics.

Value and Crisis, Kliman

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Value and Crisis: Bichler and Nitzan versus Marx

Andrew Kliman

Editors’ Note: In this article, Andrew Kliman responds to Bichler and Nitzan’s recent paper on ‘Systemic Fear, Modern Finance and the Future of Capitalism’ (2010). He then goes on to raise a series of issues concerning the critique of Marxian value theory which these authors put forward in their book Capital as Power (Nitzan and Bichler, 2009). It is followed by a rejoinder from Bichler and Nitzan.

IntroductionIntroductionIntroductionIntroduction Shimshon Bichler and Jonathan Nitzan’s (B&N) ‘Systemic Fear, Modern Finance and the Future of Capitalism’ (Bichler and Nitzan, 2010) argues that ‘systemic fear’ – fear of the death of the capitalism – has gripped capitalists during the last decade, as it did during the Great Depression. Their evidence for this claim consists of the alleged fact that these two periods of crisis were the only periods since World War I in which equity (stock) prices and current profits were strongly correlated.1 Employing the same methods and data as B&N, Part I of this response shows that equity prices and current profits were also strongly correlated during the so-called golden age of capitalism! This should cause us to doubt B&N’s claim that systemic fear has prevailed in recent years. I then argue that flaws in their reasoning should also cause us to doubt their claim that capitalists are normally convinced that capitalism is eternal, as well as their claim that this conviction is crucial to its continued existence. But if the future of capitalism doesn’t hinge on the conviction that the system is eternal, it also doesn’t much matter whether capitalists have recently been gripped by systemic fear in B&N’s sense.

Good old regular fear, “the dread and apprehension that regularly puncture [capitalists’] habitual greed” (Bichler and Nitzan, 2010, p. 18), is another matter. There can be little doubt that good old regular fear was intense at the start of the last decade, and even more intense at the end.


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I believe that this good old regular fear was justified and that it remains so. The underlying long-run economic problems that led to the recent Great Recession, and to the weakness of the subsequent recovery, have not been resolved. Slow growth of employment relative to investment during the last six decades has led to a persistent fall in the rate of profit; the fall in the rate of profit has caused capital accumulation and economic growth to be sluggish for decades; and this sluggishness has led to mounting debt burdens (see Kliman, 2011). I doubt that the fall in the rate of profit can be reversed or that the debt problem can be solved without much more destruction of capital value –i.e. falling prices of real estate, securities, and means of production, as well as physical destruction – than has taken place to date. And if these problems remain unresolved, the economy will continue to be relatively stagnant and prone to crisis.

But it is difficult to discuss these ideas with B&N, or at all, because they and others like them contend that the theory on which the ideas are based, Marx’s value theory, is internally inconsistent and circular. An internally inconsistent theory cannot possibly be correct.2 All ideas resting upon such a foundation can thus be disqualified at the starting gate, without further ado. In order to clear the ground for a genuine discussion – one in which B&N’s approach to questions of crisis and the future of capitalism is compared with and contrasted to something rather than nothing – Part II of this paper responds to the main criticisms of Marx’s value theory contained in their recent book, Capital as Power (Nitzan and Bichler, 2009). In the course of that response, I will discuss inter alia how Marx’s value theory helps to illuminate the long-term difficulties that led to the Great Recession and its “new normal” aftermath. Part III concludes.

I.I.I.I. ‘Systemic Fear’ ‘Systemic Fear’ ‘Systemic Fear’ ‘Systemic Fear’ and Capitalists’ Convictions and Capitalists’ Convictions and Capitalists’ Convictions and Capitalists’ Convictions B&N (2010, p. 17) argue that “if we adhere to the scriptures of modern finance, we should expect to see no systematic association between equity prices and current profits.” And they claim that equity prices have indeed become decoupled from current profits since 1917, except during two brief and exceptional periods. “Figure 2 and Table 2 show two clear exceptions to the rule: the first occurred during the 1930s, the second during the 2000s. In both periods … equity prices moved together—and tightly so—with current earnings” (Bichler and Nitzan 2010, p. 17) [emphasis altered].

However, their Figure 2 actually shows four clear exceptions to the alleged rule. Equity prices also moved together with current earnings – and tightly so – from the early 1950s to the early 1960s, and from the early 1960s to the early 1970s (see my Figure 1). During the first of these additional “exceptional” periods, period 4 of my Table 1, the correlation between equity prices and current earnings was stronger than during the Great Depression (period 2). During the other “exceptional” period that B&N fail to


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bring to our attention, period 5, the correlation was lower, but still considerably stronger than during the 2000s (period 7).3 The percentage of the variation in one variable that is “explained” by, or attributable to, the variation in the other is the square of the correlation coefficient, r2. Thus, as Table 1 shows, only about two-fifths of the variation in share prices during period 7 is attributable to variations in current profits; the explained variation during period 4 is almost twice as great, while the explained variation during period 5 is more than 50% greater.4

Table 1 also shows that share prices have been strongly and positively correlated with current profits more than 40% of the time since 1917, and almost half the time since 1929. So the “exceptions” are not exceptional; the “rule” that share prices and current profits have become decoupled is no rule at all.

Figure 1. Figure 1. Figure 1. Figure 1. S&P 500: Price and Earnings per Share, 19S&P 500: Price and Earnings per Share, 19S&P 500: Price and Earnings per Share, 19S&P 500: Price and Earnings per Share, 1953535353––––1962 & 19621962 & 19621962 & 19621962 & 1962––––1973 (31973 (31973 (31973 (3----year moving averages of annual rates of change)year moving averages of annual rates of change)year moving averages of annual rates of change)year moving averages of annual rates of change)


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Table 1. Table 1. Table 1. Table 1. S&P 500: Pearson Correlation Coefficient between the Annual Rates of S&P 500: Pearson Correlation Coefficient between the Annual Rates of S&P 500: Pearson Correlation Coefficient between the Annual Rates of S&P 500: Pearson Correlation Coefficient between the Annual Rates of

Growth of Price and EarnGrowth of Price and EarnGrowth of Price and EarnGrowth of Price and Earnings per Share ings per Share ings per Share ings per Share (Monthly data expressed as 3-year moving averages)

Period Number of months Correlation

(r) Share-price variation

explained (r2)

1 Oct. 1917 – Dec. 1929 146 0.29 8%

2 Dec. 1929 – Feb. 1939 110 0.89 79%

3 Feb. 1939 – June 1953 172 –0.34 12%

4 June 1953 – Aug. 1962 110 0.90 81% 5 Aug. 1962 – Dec. 1973 136 0.80 65% 6 Dec. 1973 – Sept. 2000 321 –0.20 4% 7 Sept. 2000 – Mar. 2010 114 0.65 42%

Strongly positive-correlation periods: 2, 4, 5, and 7

42% of total months since Oct. 1917; 49% of total months since Dec. 1929

But B&N haven’t merely gotten their facts wrong. Because their facts are wrong, so is their paper’s key claim that we can infer that investors are gripped by “systemic fear” when the relationship between current profits and equity prices is strong and positive. They tell us that the two periods in which systemic fear prevailed were two periods of acute crisis, the Great Depression and the 2000s. If a strongly positive correlation between current profits and share prices were another exceptional feature of these periods of crisis, then the notion that we can infer the existence of systemic fear from the positive correlation might be plausible. But the 1930s and 2000s were not exceptional in that respect, as we have seen. And the other two strongly positive-correlation periods, which run from the early 1950s through the early 1970s, cannot plausibly be characterized as a time of systemic fear. On the contrary, that era was the so-called golden age of capitalism.5 So a strongly positive correlation between current profits and equity prices does not allow us to infer the existence of systemic fear.

But the correlation data are B&N’s only evidence that capitalists were gripped by systemic fear in the 1930s and 2000s. (The statements by the Financial Times, Alan Greenspan, Bernie Sucher, Gillian Tett, and Mervyn King quoted in their paper discuss a highly uncertain environment, economic crisis, and discredited economic theory and ideology, not fear of the death of capitalism.) So they have not given us a good reason to accept that claim.


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Nor do they give us a good reason to accept that the opposite of systemic fear –the conviction that capitalism is eternal – is the norm. Their ‘demonstration’ that capitalists are almost always guided by this conviction is fatally flawed. And since the same demonstration is the basis upon which B&N (2010, p. 3) claim that “[t]his … conviction is necessary for the existence of modern capitalism, at least in its present form,” they also fail to give us a good reason to accept this latter claim.

The most glaring flaw in their ‘demonstration’ comes at the end, when they write, “the fact that capitalists invest shows that they expect … that the value of their assets will grow, not contract – and that expectation means that, consciously or not, they also think that the ritual that valuates their assets will never end” (Bichler and Nitzan, 2010, pp. 3-4) [emphasis added]. The italicised clause is simply false. Just as some people buy lottery tickets even if they don’t expect to hit the jackpot, some people buy shares of stock even if they don’t expect their prices to rise. A large enough jackpot or a large enough potential capital gain more than makes up for a low probability of success. Hence, the fact that people invest does not mean that they normally expect capitalism to last forever.

Imagine, for instance, that you think that there’s only a 50-50 chance that capitalism will exist a year from now, and that you are considering buying shares of stock for $10,000 today. If capitalism doesn’t survive, you’ll lose the whole $10,000, so it would be better to spend the $10,000 now, not invest it. You believe that this outcome is as likely as not, but you also believe that if capitalism does survive, the shares will be worth $500,000 a year from now. If you are like most people, you’ll go ahead and invest. Secondly, dozens upon dozens of experiments conducted by Nobel laureate Vernon Smith and colleagues (e.g. Smith, Suchanek, and Williams, 1988; Porter and Smith, 2003) during the past quarter century have demonstrated conclusively that people frequently invest in assets even when know that “capitalism” (i.e., its experimental equivalent) will soon perish. Participants in the experiments are given some cash and some shares of an imaginary equity. They are told that the shares will pay dividends for a fixed length of time, such as fifteen periods, and that the experiment will then end, at which point the shares will be worthless. The current fundamental value of a share – the sum of the average per-period dividends throughout the remainder of the experiment – is announced at the start of each period.6 Participants can buy additional shares from other participants, sell their shares, or hold onto them and collect their dividends. At the end of the experiment, they get to keep their initial cash endowments, dividends, and any net capital gains they have obtained.

Now, B&N (2010, p. 3) claim to demonstrate that if capitalists believed that the system “would cease to exist at some future point,” then share prices “would have no-where to trend but down,” and capitalists would therefore be unwilling to buy additional


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shares. But even though participants in the experiments are absolutely certain that the system (i.e., the experiment) will soon cease to exist and that the asset’s fundamental value is continually falling, share prices typically rise throughout much or most of the experiment – big bubbles are formed – and the volume of investment in additional shares is typically heavy. This has been the routine outcome even when the participants in the experiments are over-the-counter stock dealers, businesspeople, or students at the California Institute of Technology or the Wharton School.

Research into why this ‘perverse’ behavior occurs is still ongoing, but the basic reason why people buy shares that eventually become worthless, and whose prices must therefore eventually fall, is obvious. People think that they may well make a substantial profit in the meantime, by reselling the shares at prices higher than those they paid.

Finally, even if the rest of B&N’s ‘demonstration’ were sound, it would not prove that capitalists are normally guided by the conviction that capitalism is eternal. At least it wouldn’t prove this if we use the word “conviction” in the normal way. B&N are undoubtedly aware that it would not, since they write that “consciously or not, [capitalists] also think that the ritual that valuates their assets will never end” [emphasis added]. I doubt that “unconscious conviction” is a coherent concept, but even if it is, B&N’s appeal to it turns what started out as a provocative and straightforward claim into a piece of unfalsifiable Freudian speculation.7

II. Nitzan and Bichler’s Critique of MarxII. Nitzan and Bichler’s Critique of MarxII. Nitzan and Bichler’s Critique of MarxII. Nitzan and Bichler’s Critique of Marx Marx’s supposed logical errors are a major theme of Nitzan and Bichler’s (N&B’s) recent book.8 They put forward what they call an “alternative” to both “mainstream and Marxist political economy” (p. xxv), and their main justification for doing so is technical and logical: Marx’s value theory and mainstream economics are riddled with “circularities and contradictions” (p. 144). And since these theories are logically unsound, N&B argue, their alternative is not merely something they prefer; it and its further development are needed, objectively (p. 144). Because N&B focus on the logical issues at stake, my commentary shall do so as well, though I shall also discuss how Marx’s value theory can help us understand the long-term problems that resulted in the Great Recession.

This part of the paper begins with a discussion of how N&B critique Marx for alleged methodological sins that they themselves commit. I then consider their critique of Marx’s theory that real-world prices and profit are determined by the production of value and surplus-value. I will respond to their allegation––or, rather, their repetition of a hoary allegation––that Marx’s theory of the value-price relationship is internally inconsistent. I will also respond to their critique of the temporal single-system interpretation (TSSI) of Marx’s value theory, an interpretation that refutes this and other allegations that the theory is inconsistent.9 Finally, I discuss their criticisms of Marx’s distinction between


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productive and unproductive labour, his concept of abstract labour, and the manner in which he “reduced” complex (skilled) labour to simple (unskilled) labour. A. StoneA. StoneA. StoneA. Stone----ThrowingThrowingThrowingThrowing N&B complain that “Marx nowhere explains why the additional value-creating capacity of skilled labour should bear any particular relationship to the labour cost of acquiring the skill. The fact that an engineer trains 10 per cent longer does not mean she will create 10 per cent more value; it could also be 1 per cent, 20 per cent or any other number” (p. 142). Yet when they come to their own theory, they tell us that if one company’s market capitalization is a thousand times as great as the average capitalization, its owners are a thousand times as powerful as the owners of an average company (p. 313). Why 1000 times as powerful, and not 100 times or 2000 times or any other number?

They wish this problem away by defining power in terms of market capitalization: a market cap that is 1000 times as great as the average doesn’t give the owners 1000 times as much power; it simply is 1000 times as much power. This identification of capital and power––capital as power––is certainly not correct in a literal sense. As N&B (p. 312) cheerfully admit, it is a “figurative identity.” This means that Capital as Power is a work of fiction, or what they call a “scientific story” (p. 313).10 Although they throw stones at Marx for quantifying the unquantifiable, they themselves live in a glass house. In other words, if we were to assume for the sake of argument that all of their many technical objections to Marx’s value theory are valid, he would then be guilty of exactly what N&B are guilty of – measuring what cannot be measured, creating a “figurative identity” between things that are not identical, and using these fictional measures and identities to tell a “scientific story.” So what entitles them to criticize (what they take to be) his method, given that it is their method as well? Their apparent answer to this question is that

… we have seen what happened to liberal and Marxist analyses when they tried to imitate th[e] rigour [of natural science]. They pretended that there is a strict quantitative correspondence between prices, production and accumulation on the one hand and utility and labour values on the other, and then fell flat on their faces when they tried to demonstrate this correspondence. (p. 313)

Now, N&B themselves pretend that there is a strict quantitative correspondence between power and market capitalization. In that respect, then, there is no difference between their method and the method that Marx allegedly employed. Thus the only difference is that


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they refrain from trying to demonstrate their pretend correspondence; they simply assert it as a “figurative identity.” But a glass house is no more shatterproof when one admits that it is made of glass than when one tries to demonstrate that it is made of brick. So N&B are still not entitled to throw stones. B. Marx’s Alleged InconsistencyB. Marx’s Alleged InconsistencyB. Marx’s Alleged InconsistencyB. Marx’s Alleged Inconsistency N&B’s allegation that Marx’s value theory is internally inconsistent focuses mainly on his account of the relationship between commodities’ values and their average prices (price of production). Marx claimed to show that the “law of value” on which Capital is based holds true at the level of the economy as a whole, even though the prices that individual companies and industries receive for their products deviate from the products’ actual values.11 He argued that these price-value deviations merely cause value and surplus-value (profit) to be distributed differently; they do not alter the economy-wide aggregate value of output, aggregate surplus-value, or the economy-wide rate of profit. As N&B (pp. 99-100) recognize,

These aggregate equalities are crucial. … [T]he rate of profit in price terms is equal to the rate of profit in value terms. It is through this determination of the rate of profit that the value system anchors the price system. … Marx claimed his theory to be superior to the bourgeois alternatives, partly because it did something they couldn’t: it objectively derived the rate of profit from the material conditions of the labour process.

But they claim that Marx has been proven wrong. “Bortkiewicz … demonstrated that Marx’s solution of pulling and redistributing is logically inconsistent” and that “it could be fixed only by making the rate of profit independent of the value system” (p. 99-100). Yet N&B’s discussion of Marx’s alleged inconsistency is itself internally inconsistent. A few pages later, when discussing the TSSI, they implicitly shift to an agnostic position on the internal inconsistency question. In their discussion of the temporal aspect of the TSSI, they write, “There is really no way to decide which of these two methods [temporal valuation or simultaneous valuation] is ‘valid’. … there is no objective yardstick … to tell us which method to use” (p. 107). And when they discuss the single-system aspect of the TSSI, they write, “Proponents of the TSSI argue that this is what Marx had in mind. And maybe they are right” (p. 109). But if one aspect of the TSSI is not invalid, and its only other aspect is possibly what Marx had in mind, then the TSSI is possibly a correct exegetical interpretation of Marx’s theory.12 And since this possibly correct interpretation eliminates the apparent internal inconsistencies in his theory, a fact that N&B accept,13 it follows that the charge of inconsistency is possibly false. So while


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they wish to convict Marx of inconsistency, their own arguments imply that he is possibly not guilty. Price vs. Money, Value vs. Labour-time N&B’s critiques of Marx and the TSSI are marred by a great many inaccuracies, most of which seem to stem from their apparent belief that Marx measured commodities’ values exclusively in terms of labour-time, and not also in terms of money. For instance, they refer to “the issue of ‘transforming the resulting labour values into money prices,” and they assert that, “according to Marx, the value of a commodity denotes the abstract labour time necessary for its production” (p. 89, p. 96, emphases added). This belief is entirely unwarranted. It is true that, in recent decades, many ‘Marxian economists’ have measured prices exclusively in money terms but values exclusively in labour-time terms – perhaps as a way of justifying their dual-system interpretations and revisions of Marx’s theory –but Marx himself did not do so. In chapter 1 of Capital, vol. 1, he analyzed the “money form” of value, and he noted at the start of chapter 3 that “Money as a measure of value is the necessary form of appearance of the measure of value that is immanent in commodities, namely labour-time” (Marx 1990a, p. 188). And Capital is chock-full of examples in which values are measured in money terms. Here are a few, from chapters 7, 8, and 9:

… the sum of the values of the commodities thrown into the process [of yarn production] amounts to 27 shillings. The value of the yarn is 30 shillings. Therefore the value of the product is one-ninth greater than the value advanced to produce it; 27 shillings have turned into 30 shillings; a surplus-value of 3 shillings has been precipitated. However useful a given … means of production may be, even if it cost £150 or, say, 500 hours of labour, it cannot under any circumstances add more than £150 to the value of the product. [During] six hours of labour he [the worker] has added a value of three shillings. This value is the excess of the total value of the product over the portion of its value contributed by the means of production. [T]he value of this commodity is (£410 constant [capital] + £90 variable [capital]) + £90 surplus[-value]. The original capital has now changed from … £500 to £590. The difference is s, or a surplus-value of £90. [Marx 1990a, p.


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301, p. 314, p. 316, p. 320]

Because they are apparently unfamiliar with the fact that Marx measured value in terms of money as well as labour-time, N&B think that labour-time values need to be “transformed” or “converted” into money prices.14 They thus seriously misunderstand the issue that Marx addressed in his account of the transformation of values into prices of production, and Bortkiewicz’s critique of that account, and the single-system aspect of the TSSI. They tell us that the “transformation problem” controversy is about Marx having supposedly mixed and matched variables measured in terms of labour time and variables measured in terms of money:

According to Bortkiewicz, the inconsistency occurs because Marx’s transformation is incomplete. It converts surplus value counted in labour time into profits counted in [money] prices, but it does not do the same for constant and variable capital. The resulting price system therefore is half-baked––partly [money] price denominated, partly [labour-time] value denominated. (p. 99)

This is simply not the case. The controversy pertains exclusively to alleged quantitative discrepancies between values and prices, and between surplus-value and profit. It has nothing to do with the units in which the variables are measured. (At least it had nothing to do with units of measurement before poorly informed commentators on the controversy got their hands on it a few decades ago). In other words, the controversy deals with the following kind of question: If the value of output and surplus-value in the economy as a whole are $120 trillion and $15 trillion, must the price of output and profit also be $120 trillion and $15 trillion, or can they be, say, $105 trillion and $25 trillion? It has nothing to do with whether a total price of $105 trillion is equal or unequal to a total value of 1.2 trillion labour-hours; the very question is meaningless.

Bortkiewicz understood perfectly well that Marx measured value in terms of money:

the theory of the equality of total value and total price—a theorem to which Marx and the Marxists attach so great an importance—is generally wrong. …This situation is in no way altered by the fact that Marx thought of values and prices in terms of money. (Bortkiewicz, 1952, pp. 10–11) [emphasis added]


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Bortkiewicz’s ‘Proof’ Thus, when he claimed to prove that Marx’s account of the transformation was internally inconsistent, Bortkiewicz did not allege that Marx mixed and matched labour-time and money variables. He argued that Marx’s account led to spurious quantitative discrepancies between, for instance, the amount of G (gold) spent to purchase machines and the amount of G charged by the producers of replacement machines. And he claimed to prove that this discrepancy implied a spurious “break[...] down” of the economy (Bortkiewicz, 1952, pp. 8–10), because the amount of G spent to purchase machines may well fall far short of what is needed to replace used-up machines. But this ‘proof’ has itself been disproved (see, e.g., Kliman, 2007, ch. 8). The crux of the refutation is the recognition of a very simple fact: the amount of gold (or accounting money, etc.) received by the producers of replacement machines and the amount of gold spent on the original machines can and generally do differ, because the original machines are bought before the replacement machines are sold. Consequently, the difference between these two amounts does not mean that the amount of gold received by the producers of the replacement machines differs from the amount of gold spent on replacement machines, and it therefore does not imply any spurious breakdown of the economy. Notice that just as the “proof” does not involve any issue of units of measurement, neither does the refutation. More than two decades have passed since the refutation of Bortkiewicz’s “proof” was first published, and it has yet to be disproved itself. Laibman (2004, p.10), the only critic of Marx to have addressed it in print, has acknowledged that the refutation demonstrates that “Reproduction equilibrium exists between periods.” In other words, Marx’s account does not imply a spurious breakdown of the economy. N&B (p. 99 and p. 99 n12) endorse Bortkiewicz’s proof, but fail to explain why. They do not demonstrate that the refutation contains any error. They do not even acknowledge its existence, even though they certainly should be aware of it, since they cite three works (Kliman and McGlone, 1999; Kliman, 2004; Kliman, 2007) in which the refutation prominently appears.

Their silence on this matter is quite important, since what is at stake is the logical validity of Marx’s theory that the “price” rate of profit of the real world is equal to and determined by the “value” rate of profit, i.e., the ratio of the amount of surplus-value pumped out of the workforce to the sum of value invested. Having supposedly proved that Marx’s account was internally inconsistent, Bortkiewicz (1984) went on to produce a “correction” that fails to preserve this crucial aggregate equality. Yet if his proof is false, there is nothing to correct. Marx’s theory of how the real-world rate of profit is


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determined cannot properly be rejected by appealing to Bortkiewicz’s results. But that is what N&B do. Single-System Valuation Their apparent failure to understand that Marx measured values in terms of both labour-time and money also causes them to misunderstand the single-system aspect of the TSSI, and to allege that Marx’s value theory becomes a “tautology” and a “dogma” when it is understood as a single-system theory (p. 109).15 Once values and prices are no longer conceived as being determined in two separate systems, they argue, there is “nothing to transform in the first place”:

The conventional Marxist approach argues that labour values are the cause of prices. This causal link is meaningful because the definitions of the two magnitudes are different. Prices are counted in money, whereas values are counted in labour time. … The setup of the TSSI is completely different. Here, there is no point in asking whether or not prices are equal to values, simply because values are defined by market prices. … Labour is still held responsible, by definition, for the creation of all value in the aggregate. But it is no longer necessary for any of the underlying computations. … And since value is made proportionate to both price and labour time, it follows that prices are proportionate to labour time and that the labour theory of value is true before we even begin. … [The result] is not a scientific theory in the sense of cause X (value) explaining consequence Y (price). (pp. 108–109) [emphases in original]

These objections are based on N&B’s mistaken belief that Marx measured values exclusively in labour-time terms and their consequent mistaken belief he tried to explain how labour-time magnitudes are transformed into monetary ones in his account of the transformation of values into prices of production. If these beliefs were correct, then the fact that the TSSI understands both the values and the prices of Marx’s transformation account as monetary magnitudes would indeed imply what N&B think it implies, namely that the TSSI construes the values as well as the prices as price magnitudes rather than as value magnitudes. Hence, there would be “nothing to transform in the first place,” and “the labour theory of value [would be] true before we even begin.” It would also be an


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empty tautology and a dogma. But since N&B’s beliefs are not correct, none of these conclusions follow from the fact that values and prices are both measured in terms of money.

First of all, when the total value and total price of output are both understood as monetary sums, there still remains a “point in asking whether or not prices are equal to values” because it is conceivable that they differ quantitatively. For instance, if the capitalist class were able to create profit, in the aggregate, by selling commodities for more than they are actually worth – i.e., if monopolies and other firms that reap extra profit in this way were able to do so without reducing other firms’ profits to the same degree – then total price (the aggregate monetary value received) would exceed total value (the aggregate monetary value produced). But Marx demonstrated in chapter 5 of Capital, volume 1 that extra value cannot originate in this way in the economy as a whole, and his account of the transformation of values into prices of production in chapter 9 of volume 3 is based on the same principle. Indeed, the overriding purpose of that account is to show that the existence of quantitative price-value deviations in individual industries does not contradict the notion that total price and profit are determined by and equal (quantitatively) to total value and surplus-value.

And contrary to what N&B claim, “cause X (value) explain[s] consequence Y (price)” is affirmed by the TSSI as well. In the first paragraph of the passage I quoted at the start of this section, they seem to suggest that causal links are meaningful only when the cause and the effect are measured in different units. This is simply not the case. The $10 million in retirement taxes that a government collects is the “cause” (source) of the $10 million in benefits that retirees receive, because the collection precedes the receipt and the prior collection of $10 million fully accounts for the receipt of $10 million. The fact that the tax revenue collected is measured in dollars rather than in labour-hours does not make the causal connection meaningless. By the same token, in Marx’s theory and in the temporal single-system interpretation of that theory, the production of value and surplus-value precedes the receipt of value and profit by means of sale, and the prior production of value and surplus-value fully accounts for the amounts of sales revenue and profit received.

B&N’s claim that “Labour … is no longer necessary for any of the underlying [TSSI] computations” is also incorrect. As Table 2 illustrates, labour is a crucial determinant.16 The total price of output is $100 because the total value of output is $100, and the total value of output is $100 because workers’ labour added $60 of new value (and $40 of existing value was preserved and transferred to the products during production). And workers’ labour added $60 of new value because, only because, value-creating workers performed 60 minutes of work and each minute of their work created $1 of new value. The example simply stipulates the amount of new value that was created by


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a minute of work, but this magnitude is in fact determined by actual data, prior to the start of production, and it can be estimated using available national account data (though N&B will surely say that the estimates are just as “meaningless” as official inflation estimates, which they also dismiss (p. 135). In sum, causation proceeds from left to right, following the arrow of time, so the total price of output, and thus total profit and the average real-world rate of profit, are determined by, but not determinants of, the other variables.17

Table 2Table 2Table 2Table 2

Pre-production During production Post-production

Branch

Value transferred from used-up means

of production (a)

Value added by living labour (b)

Total value of output (a + b)

Total price

of output

$30 20 labour-minutes �

$20 $50 $65

1

2 $10

40 labour-minutes � $40

$50 $35

Total

$40

60 labour-minutes � $60

$100 $100

Temporal Valuation I turn now to N&B’s discussion of the other aspect of the TSSI, temporal valuation. As I noted above (see note 12), their discussion of whether it is the right “method to use” and their agnostic position on this matter are not germane to the issue of the logical consistency of Marx’s theory. When the theory is construed as temporal (and single-system), it is consistent. If temporal valuation is not the right method to use, then the theory is consistent but wrong, which has no bearing on whether the TSSI is a correct exegetical interpretation. However, N&B seem to suggest that it might not be a correct interpretation for a different reason. “According to Michael Perelman (1990), Marx himself left the issue open. He used antecedent (past) labour at the micro level of the firm and coexisting (current) labour at the macro level of capitalism as a whole” (p. 107). But Perelman’s argument supports the TSSI, because the production of commodities and their values takes place at the “micro level.” As he noted, “Marx held to the notion that the production of an individual commodity should be framed in the context of antecedent labour, as a


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succession of isolated labour processes... Co-existing labour is more appropriate for a discussion of ‘the production process in its continuous motion and in the entirety of its conditions, and not merely as an isolated action or a limited part of it’” (Perelman, 1990, p. 68). [Emphasis added; the interior quote is from Marx]. Although N&B say that temporal valuation is not invalid, they also write that:

the TSSI allows each barrel of oil to have its own value – depending on its particular temporal position in the production process. This difference allows the TSSI to appear more theoretically ‘robust’ than its conventional alternative – but that appearance is misleading. Obviously, if the same commodity can have multiple values, the likelihood of the valuation system as a whole being logically inconsistent is much reduced. (2009, p. 107)

It is very hard to make sense of this statement. Isn’t logical consistency a crucial part of what makes a theory or interpretation robust? Doesn’t the fact that the TSSI eliminates the apparent inconsistencies in Marx’s theory therefore make it a more robust exegetical interpretation? N&B make it seem as though logical inconsistency is a good thing.

Perhaps they meant to argue that it is easier to achieve consistency when one relaxes the restrictions imposed on a problem. That is certainly true, but robustness and difficulty are two different things. Kepler’s theory of planetary motion is more robust than Copernicus’ because it is more consistent with the facts, and it is more consistent with the facts because he relaxed the restrictions imposed on the problem – he did not try to force planets to move in circles. Or perhaps N&B meant to argue that although Marx’s theory is internally consistent when it is understood as a temporal theory, it becomes less robust in some other respect. But if this is what they meant, it is hardly an argument, since they fail to identify any other respect in which it becomes less robust. Monopoly Prices and Limits to Monopoly Power N&B argue that “the labour theory of value requires perfect competition” and that the “existence of … power institutions and processes” such as monopolies, oligopolies, and government intervention “makes labour values … practically useless for the study of actual prices and accumulation” (p. 91). For this and other reasons, “the development of capitalism [has] undermined [his] logic” (p. 84).

But Marx’s value theory simply does not require perfect competition. He devoted two hundred pages of Capital to an analysis of land rent and agricultural prices that include rent as a component. As Marx (1991, p. 897) noted, “agricultural products are always sold at a monopoly price.” This is because a condition that is needed for


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perfect competition to exist is absent in this case; the scarcity of arable land makes it difficult for new suppliers of land to enter the market.

So the emergence of monopolies and oligopolies as a dominant presence throughout the economy has not undermined Marx’s logic. His analysis of monopoly price predates this new phenomenon, and monopoly prices (as well as market prices that differ from average prices and other prices besides perfectly-competitive ones) can be understood in a manner consistent with his value theory. N&B seem to think that prices can be “set ‘arbitrarily’ without any necessary link to production prices” if perfect competition does not exist (p. 91). Marx was either aware of or anticipated this objection, and he responded to it, once again, by making use of his demonstration that capitalists cannot create additional profit at the level of the economy as a whole by selling commodities for more than they are actually worth:

[If] a monopoly price becomes possible …, this does not mean that the limits fixed by commodity value are abolished. A monopoly price for certain products simply transfers a portion of the profit made by other commodity producers to the commodities with the monopoly price. … [it] leaves unaffected the limit of surplus-value itself. (Marx 1991, p. 1001) [emphasis added]

The prices of individual products depend and have always depended on a great many factors, not only the amount of labour needed to reproduce them. But this does not imply that their values are “practically useless for the study of actual prices.” I do not see how struggles over intellectual property rights can be fruitfully understood without appealing to the principle that commodities’ values are determined by the amount of labour needed to reproduce them. This principle certainly does not account for the current prices of things like software, but it does account for software owners’ fierce struggle to protect their monopoly rights. If the law permitted software to be reproduced freely, its price would plummet to almost nothing, because almost no labour is needed to reproduce it and thus the cost of reproducing it is negligible.18

For another example, one of the most significant economic phenomena of our time is the dramatic fall in computer prices. The average price of ‘computers and peripheral equipment’ declined by 99.99% during the 50 years between 1959 and 2009.19 Can there be any doubt that this decline is due predominantly to a massive increase in productivity, i.e., a massive reduction in the amount of labour needed to reproduce a unit of computing power?


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Falling Rates of Profit and Accumulation Underlying the Great Recession Computers are an extreme example, but not an isolated one. A decade ago, the orthodox Marxist who headed the Federal Reserve noted that

[F]aster productivity growth keeps a lid on unit costs and prices. Firms hesitate to raise prices for fear that their competitors will be able, with lower costs from new investments, to wrest market share from them.

Indeed, the increased availability of labour-displacing equipment and software, at declining prices and improving delivery times, is arguably at the root of the loss of business pricing power in recent years. (Greenspan, 2000)

The “loss of business pricing power” due to “labour-displacing equipment and software” is the crux of Marx’s law of the tendential fall in the rate of profit. This law, a crucial pillar of his theory of economic crisis, is a direct consequence of his value theory, particularly its key propositions that a commodity’s value is determined by the amount of labour needed to reproduce it and that aggregate price and profit are equal to aggregate value and surplus-value.

At least in the case of the U.S. (I have not studied other countries), the law of the tendential fall in the rate of profit possesses remarkable explanatory power, and it is tremendously significant for an understanding of the long-run conditions that set the stage for the Great Recession. The chain of causation runs as follows: (1) As I will show presently, the law accounts for almost all of the fall in the rate of profit of U.S. corporations during the six decades preceding the latest crisis, and (2) the fall in the rate of profit fully accounts for the sharp fall in corporations’ rate of accumulation since the late 1970s. (3) The fall in the rate of accumulation is in turn the principal cause of the chronic slowdown in economic growth. (4) The slowdown in growth, the falling rate of profit, and governmental policies intended to ameliorate the effects of, and perhaps reverse, the declines in growth and profitability have led to ever-rising debt burdens.20 And (5) the massive burden of unpaid debt seems to be a crucial determinant of the length, severity, and persistent effects of the Great Recession.21


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Figure 2. Figure 2. Figure 2. Figure 2. The Rate of Profit and the Rate of Accumulation OneThe Rate of Profit and the Rate of Accumulation OneThe Rate of Profit and the Rate of Accumulation OneThe Rate of Profit and the Rate of Accumulation One----Year Later, U.S. Year Later, U.S. Year Later, U.S. Year Later, U.S. CorporationsCorporationsCorporationsCorporations

I cannot document all of these claims here, but points (3) through (5) are not very controversial. As for points (1) and (2), let us first look at the relationship between corporations’ rate of profit and their rate of accumulation of fixed assets.22 Figure 2 shows that the relationship has been a remarkably tight one for four decades. And since movements in the rate of profit precede movements in the rate of accumulation by one or more years, the fall in the former fully explains the fall in the latter.

Figure 3. Nominal and Adjusted Rates of Profit, U.S. CorporationsFigure 3. Nominal and Adjusted Rates of Profit, U.S. CorporationsFigure 3. Nominal and Adjusted Rates of Profit, U.S. CorporationsFigure 3. Nominal and Adjusted Rates of Profit, U.S. Corporations


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But why did the rate of profit fall? Well, one factor that can cause it to change is a change in income distribution between profits and compensation of employees. Another is a change in the relationship between the money and labour-time measures of value. For example, when money prices rise in relationship to the amount of labour that is needed to reproduce commodities, this will raise the nominal (money) rate of profit. To ascertain the impact of these factors, I computed an adjusted rate of profit that holds them constant, thereby eliminating them as sources of variation in the rate of profit. As Figure 3 shows, they had very little effect on its trend in the long run. (Increases in money prices relative to labour-time values boosted the level of the nominal rate of profit substantially, but they had almost no effect on its long-run trend). Between 1947 and 2007, the nominal rate of profit fell by 11.0 percentage points while the adjusted rate fell by 12.3 points.

Thus, in order to understand why the rate of profit, the rate of accumulation, and the rate of economic growth fell, we have to understand why the adjusted rate of profit fell. To understand the mathematical reason why it fell, note that the average age of the people in a room has to fall whenever a new person enters the room whose age is less than the average age. In the same way, the overall rate of profit has to fall whenever the rate of profit on new investments is less than the overall rate. (The rate of profit on new investments is the extra profit that results from an extra dollar invested.) Now, as Figure 4 shows, the adjusted rate of profit on new investments was indeed consistently less than the overall adjusted rate of profit. So the overall rate had to fall.

Figure 4. Adjusted Rates of Profit, Overall and on New Investments, U.S. Figure 4. Adjusted Rates of Profit, Overall and on New Investments, U.S. Figure 4. Adjusted Rates of Profit, Overall and on New Investments, U.S. Figure 4. Adjusted Rates of Profit, Overall and on New Investments, U.S. CorporationsCorporationsCorporationsCorporations


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The economic reason why the adjusted rate of profit fell has to do with the fact that the adjusted rate on new investments, toward which it tends, is an extremely close proxy for the ratio of (a) the growth rate of employment to (b) the share of profit that is accumulated, i.e., spent on productive investments (see Kliman, 2011, pp. 132–34 for the derivation of this result). Thus, the overall adjusted rate of profit fell because the ratio of (a) to (b) was consistently below the current overall adjusted rate. In other words, the adjusted rate of profit, and thus the nominal rate of profit, experienced a persistent fall because, throughout the entire six decades, employment increased too slowly in relationship to the accumulation of capital to allow the existing rate of profit to be maintained. This is exactly how Marx’s law explains the tendency of the rate of profit to fall (Marx, 1991, ch. 15).

Additional Criticisms N&B make several other criticisms of Marx in their discussion of his theory of the relationship between values and prices. First, while Marx claimed to demonstrate, at the start of Capital, that the sole property that commodities have in common is that they are products of labour in the abstract, N&B endorse Eugen von Böhm-Bawerk’s famous counterargument that Marx arbitrarily ignored some other possible common properties – utility, scarcity, and the commodities’ existence as appropriated things. But Böhm-Bawerk’s criticism is based on a misunderstanding of the object under investigation. At this point in Capital, Marx’s aim was to identify a common property, not to identify the factors that enable things to exchange as commodities. “It is quite true that the things could not exchange as commodities unless they were scarce, owned, and useful. But none of these is a property of the things themselves; all are relations between the things and people. (Although the usefulness of things is dependent on their physical properties, usefulness itself is not such a property)” (Kliman, 2000, p. 105). Second, N&B argue that it is not possible to “explain the trajectory of financial markets with Marxist tools” (p. 92). It is true, and Marx stressed at length, that there is no law of value underlying variations in interest rates. And for this and other reasons, there is only a tenuous relationship between commodities’ values and the prices of debt instruments. But if the tools that Marx employed count as “Marxist tools,” there is indeed a Marxist tool to explain interest-rate variations: the theory (which is not uniquely his) that they are determined by changes in the relationship between the supply of and the demand for loanable funds (see, e.g., Marx, 1991, p. 488). And the law of value can help explain equity-market phenomena such as the relationship between equity prices and companies’ profits. As I discussed above, Marx’s theory largely accounts for variations in U.S. corporations’ rate of profit, and between 1946 and 2008, the correlation between the (before- and after-tax) rates of profit and S&P 500 corporations’ earnings-to-price ratio


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of the following year was a far-from-negligible 0.595 (see Kliman, 2011, pp. 102–03). And Potts (2009, 2011) has employed Marx’s concept of ‘surplus capital’ in order to argue that asset bubbles form partly because investment in financial instruments may tend to increase when a fall in the rate of profit depresses productive investment.

In any case, I do not see that the relative absence of ‘Marxist tools’ to explain financial phenomena is due to any inherent defect in his theories. If there are few such tools today, it is because Marx died before he could develop them – he noted in Capital that thorough analyses of credit markets and competition in the world market were “outside the scope of this work … they belong to a possible continuation” (Marx, 1991, p. 205) – and because mainstream “Marxian economists,” who are staunch opponents of his work, have not wanted to develop them.

Third, N&B claim that Paul Samuelson ‘demonstrated’ that the transformation of values into prices of production is ‘pointless.’ Prices of production can be deduced directly from “real” data – physical input and outputs and real wages – “without any intermediate resort to labour values” (p. 100). But Samuelson demonstrated no such thing about Marx’s transformation of values into prices of production. He showed that values are not needed in order to deduce the ‘prices of production’ of the simultaneous dual-system revisions (‘corrections’) of Marx. The “redundancy” of value is purely a consequence of simultaneous valuation. If prices and values are determined temporally, physical data are not the only proximate determinants of relative prices or values (see Kliman, 2007, ch. 5, esp. pp. 79–81). Finally, N&B argue that Michio Morishima and Ian Steedman demonstrated that “there is nothing inherent in joint production to guarantee” that commodities’ values are positive rather than negative, a result that is “potentially devastating for the labour theory of value” (p. 101). But if wool and mutton are only produced jointly, neither of them has a value on its own. The value of a commodity is determined by the amount of labour needed to reproduce it, and in this case we cannot say how much labour is needed to reproduce either wool or mutton on its own. The very notion is meaningless. What has a value is the joint product. Kliman and McGlone (1999, pp. 45-48) provide a temporal single-system account of the determination of joint products’ values and prices. Their values cannot be negative, and all of Marx’s aggregate value-price equalities are preserved. C. C. C. C. LabourLabourLabourLabour Productive and Unproductive Labour A whole chapter of Capital as Power is devoted to a critique of “the Marxist” distinction between productive and unproductive labour. But almost all of it is a critique of various


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post-Marx Marxists’ writings on the topic. N&B have extremely little to say about Marx’s own distinction between productive and unproductive labour – which is quite surprising, given that hundreds of pages of his economic writings are devoted to it. Marx is of course not responsible for what post-Marx Marxists have said, and I have no desire to take responsibility either. My response will therefore be limited to a discussion of the few things N&B say that have a bearing on Marx’s own distinction between productive and unproductive labour. Their only critique of Marx’s distinction is the critical remark they make about his statement that an act of labour is productive only if it is “directly consumed in the course of production for the valorization of capital” (p. 120; from Marx, 1990b, p. 1038) [emphasis omitted]. On their interpretation, this means that the act of labour must be “tied to capital through the wage contract.” And the problem with Marx’s statement, they write, is that “even if we accept that capitalist control is a prerequisite for the creation of value, it is not clear why the only gauge for such control is the wage contract” (p. 120).

But “tied to capital through the wage contract” – which is not even an adequate rendering of “directly exchanged with capital,” another condition that must be satisfied in order for labour to be productive – has little, if anything, to do with “directly consumed in the course of production for the valorization of capital.” Marx uses the phrase “directly consumed in the course of production” to distinguish between (a) human activity that is part of a particular act of production and (b) human activity that – no matter how much it facilitates that act of production and no matter how necessary it may be for that act of production to take place – is not part of it. Activity (a) is productive if it also valorizes capital, i.e., creates surplus-value, while activity (b) is necessarily unproductive.

To understand this more clearly, consider the objection of Pellegrino Rossi to Adam Smith’s distinction between productive and unproductive labour. Smith held that the labour of a magistrate is unproductive. Rossi argued against this that the magistrate’s labour is indirectly productive. Other acts of production are almost impossible without it. His labour therefore “contributes to [other acts of production], if not by direct and material co-operation, at least by an indirect action which cannot be left out of account” (quoted in Marx, 1989, p. 190). Marx did not dispute the fact that it contributes in this manner, but he nonetheless rejected Rossi’s attempt to efface the distinction between productive and unproductive labour: “It is precisely this labour which participates indirectly in production (and it forms only a part of unproductive labour) that we call unproductive labour. Otherwise we would have to say that since the magistrate is absolutely unable to live without the peasant, therefore the peasant is an indirect producer of justice. And so on. Utter nonsense!” (Marx, 1989, p. 190).

The following example will help to illustrate why the distinction between direct and indirect participation in production is crucial. Every workday, workers in some company directly create $1000 of surplus-value. The manager puts the $1000 in a box in


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his office. But every day, one worker breaks into the office, takes the $1000, and pockets it. So the company hires a guard to prevent her from doing so. Because it has to pay the guard $100, the profit it keeps for itself is $900, which is less than the total surplus-value, but much more than the $0 profit it wound up with when the thefts were occurring. So the guard indirectly contributes to the company’s profit; indeed, if the company is to wind up with any profit at all, his labour is absolutely necessary. But the $1000 exists whether or not he shows up to work, so he does not directly create the surplus-value. To the contrary, the $100 he receives deprives the company of one-tenth of it. The reason why I have belaboured the distinction between direct production and indirect participation in production is that N&B are either unfamiliar with it or, for some reason they do not explain, choose not to respect it. They repeatedly try to efface the distinction between productive and unproductive labour on the grounds that some activity that has been classified as unproductive contributes indirectly to the production of surplus-value. For instance, they try to complicate the issue by noting that, although financial intermediation is often classified as unproductive activity, it “help[s] guide reproduction” (p. 112). Employees of insurance companies do work that “serve[s] to provide stability for production” (p. 113). And don’t “government taxation, expenditures and subsidies, the legal code and the organized use of violence” “affect exchange values and surplus-values?” (p. 119). Yes; but they don’t directly create them. The point of these efforts to complicate matters is to argue, first, that the distinction between productive and unproductive labour is irredeemably fuzzy. And second, since Marx’s value theory cannot do without the distinction, it is likewise irredeemably fuzzy and must be abandoned.23 But it is N&B who are making them fuzzy, by ignoring the clear distinction between the direct creation of surplus-value and indirect contributions to its creation. Abstract and Concrete Labour, Simple and Complex Labour The term abstract labour refers to homogeneous labour, labour as such, in contrast to the variety of heterogenous concrete labours (waiting tables, truck-driving, etc.). In Marx’s theory, abstract labour creates value, wealth in the abstract, while concrete labour produces use-values, useful material products and effects. But, N&B charge, “No one, from Marx onward, has been able to measure the unit of abstract labour,” so “Marxists do not even know what abstract labour looks like” (p. 143, p. 107). Consequently, the theory that the amount of abstract labour needed to reproduce commodities determines their values and aggregate prices is rubbish.

Actually, it was quite clear to Marx what abstract labour “looks like,” because it is real work. And because it is real work, it is “measured in terms of time”:


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The work is not done twice over, once to produce a suitable product, a use-value, to transform the means of production into products, and a second time to generate value and surplus-value, to valorize value. ... All that is contributed is the labour of spinning, and so on, and through this contribution more yarn is continually produced. This real work creates value only if it is performed at a normally defined rate of intensity ... and if this real work of given intensity and of given quantity as measured in terms of time actually materializes as a product. (Marx, 1990b, pp. 991–992)

So Marx resolved the problem that N&B pose by noting that “the work is not done twice over.” Their claim that “Marxist political economy lack[s] a basic unit” (p. 7) is simply incorrect.

But N&B, who are evidently unaware of the manner in which Marx actually specified the unit of abstract labour, write that “Marx resolves this problem, almost in passing, by resorting to another distinction – one that he makes between skilled labour and unskilled, or simple, labour” (p. 139). (An hour of skilled (or complex) labour counts as a multiple of an hour of unskilled labour; if it counts as double, it creates twice as much value.) N&B say that this latter way of specifying the unit of abstract labour is “difficult to accept” because “[t]he very parity between abstract and unskilled labour seems to contradict Marx’s most basic assumption. For Marx, skilled and unskilled labour are two types of concrete labour whose characteristics belong to the qualitative realm of use value” (p. 139).

But Marx did not specify the unit of abstract labour in this way, and it cannot properly be specified in this way. That is because, contrary to what N&B assert, skilled and unskilled labour are both abstract labour. Hence, the unit of abstract labour must already be identified before an hour of skilled labour can be counted as a multiple of unskilled labour.

When we refer to simple and complex labour, we do not refer to simple weaving-labour or complex tailoring-labour, and so on, but to simple and complex labour-as-such. The commensuration of labours that produce different use-values is already presupposed. …

Complex labour can be compared to, and thus reduced to a multiple of, simple labour, only because they lack any qualitative difference, i.e., only because both are abstract labour. As Marx [1990a, pp. 140–41] noted, ‘the magnitudes of different things only become comparable in quantitative terms when they have been reduced to the same unit’.


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… When … we consider doctoring-labour and janitoring-labour as labours of different kinds, it is meaningless to ask whether one is more skilled or complex than the other. Like can only be compared with like.

To compare the relative complexity of these two labours, their qualitative differences must thus be set aside. (McGlone and Kliman 2004, pp. 138–39)

The upshot of all this is that, even if it were impossible to reduce complex labour to a multiple of simple labour, Marxist political economy would still not lack a basic unit, because the basic unit—a unit of real work, measured in terms of time—is specified independently of and prior to the reduction of complex labour to simple labour.

Not surprisingly, N&B doubt whether complex labour can be reduced to a multiple of simple labour:

Now, skilled labour supposedly creates more value than unskilled labour, and the question is how much more? … Marx answered the question from the output side, by pointing to the greater ‘physical productivity’ of skilled labour. His solution, though, is both circular and incomplete. It is circular insofar as physical productivity can be compared across different commodities only by resorting to prices and wages. (p. 142)

I simply do not know what they are referring to here, and they provide no citation. Marx’s actual answer was completely different:

All labour of a higher, or more complicated, character than average labour is expenditure of labour-power of a more costly kind, labour-power whose production has cost more time and labour than unskilled or simple labour-power, and which therefore has a higher value. This power being of a higher value, it expresses itself in labour of a higher sort, and therefore becomes objectified, during an equal amount of time, in proportionately higher values. (Marx, 1990a, p. 305)

Thus, if the cost of reproducing the ability to do engineering work, when divided by the average number of hours an engineer works during his life, is $40, while the hourly cost of reproducing the ability to perform simple tasks is $10, then $40 and $10 are the hourly values of these two different kinds of labour-power, and the amount of value created during an hour of engineering work is likewise four times the amount of value created


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during an hour spent performing simple tasks. If, for instance, an hour of simple labour creates $20 of new value, then an hour of engineering work creates $80 of new value. Notice that nothing in this answer appeals to the wages of the engineer or the regular worker.

The answer does appeal implicitly to prices, such as tuition at engineering schools, since the tuition forms part of the cost of reproducing the ability to do engineering work. But the answer is not circular because, in Marx’s theory and in the temporal single-system interpretation of the theory, causation follows the arrow of time. The price paid for the output, the product or service that the engineer provides, is determined by, but not a determinant of, the amount of value an hour of his work creates.

But why does an hour of his work create four times as much value as an hour of simple labour? Why not twice as much, or 50% more, or any other number? As I discussed earlier in this paper, N&B claim that “Marx nowhere explains why the additional value-creating capacity of skilled labour should bear any particular relationship to the labour cost of acquiring the skill” (p. 142). And this is why they regard his answer as incomplete. But he does explain why, in the final sentence of the passage I just quoted.

It can be explained in another way as well: self-interested behavior by companies and workers will induce changes in the cost of reproducing engineering labour-power that tend to bring about the proportionality to which Marx referred. Assume that an hour of the engineer’s work creates only 50% more value than an hour of simple labour, i.e., $30. Firms would not hire engineers unless they could pay them less than $30 an hour. But if they did so, engineers wouldn’t recoup the cost of going to engineering school, since $30 is much less than the $40 needed to reproduce engineering labour-power. So the supply of engineers would quickly evaporate.24 If that doesn’t occur, we can infer that an hour of engineering work creates more than 50% additional value. But what if an hour of engineering work creates, say, 3.5 times as much value as an hour of simple labour, $70? Well, if we assume that people who perform simple labour are paid the value of their labour-power, $10, then, unless engineers’ hourly pay is $35 an hour or less, firms still get a bigger bang for the buck by hiring people to do simple labour. The ratio of the value created by simple labour to the hourly wage of a simple labourer is $20/$10 = 2, while the ratio of the value created by an hour of engineering work to the hourly pay of an engineer is less than 2 if they are paid more than $35 an hour. What would tend to happen, then, is that the demand for engineers would decline, and thus the supply of engineering students would decline. More costly engineering schools would shut down. Since those that continued to operate would be cheaper, the cost of reproducing engineering labour-power would fall. It if fell from $40 to $35, the result would be that the cost of reproducing engineering labour-power would be 3.5 times the cost of reproducing simple labour-power, $10, and the amount of new value created by an hour of engineering labour, $70, would be 3.5 times the amount of new value created


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by an hour of simple labour. Marx’s proportionality would hold true exactly. Of course, the real world does not function in such a neat and frictionless

manner, but it seems likely that Marx’s proportionality is a serviceable approximation to what occurs in the world of appearances, and the best one available. It is certainly not the arbitrary stipulation that N&B suggest it is. III. ConclusionIII. ConclusionIII. ConclusionIII. Conclusion This paper has shown that Bichler and Nitzan have not provided us with good reasons to accept that belief in capitalism’s eternality is crucial to its continued existence, or that capitalists do normally believe that the system is eternal, or that they have come to fear its demise. The paper has also sketched out an alternative approach to questions of economic crisis and the future of capitalism rooted in Marx’s value theory, in the course of defending that theory against their charges that it is logically unsound and that the development of capitalism since Marx’s death has undermined his logic. By showing that none of Bichler and Nitzan’s charges holds water, it has eliminated their main justifications for their claim that their “capital as power” theory is needed as an alternative to Marx’s theory.

Charges that his value theory is logically unsound serve to disqualify it at the starting gate, depriving it of the opportunity to demonstrate its explanatory power empirically. In contrast, my response to Bichler and Nitzan’s work, while quite critical, has not tried to disqualify their theory at the starting gate, on a priori logical grounds, irrespective of empirical evidence. They are entitled to their theory. Marx is also entitled to his. NotesNotesNotesNotes

1 They interpret a strong influence of current profits on share prices as evidence that

investors are acting on the basis of the current situation, having abandoned their supposedly normal “conviction” that the shares will yield returns ad infinitum because capitalism is eternal.

2 An internally inconsistent theory may happen by accident to hit upon correct conclusions, but the arguments it provides in support of these conclusions are always invalid.

3 The correlation was negative between February 1961 and May 1964. If we count this as a distinct period and shorten periods 4 and 5 accordingly, the correlations during these periods increase to 0.92 and 0.82.


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4 I computed a correlation of 0.65 for period 7, while B&N report a correlation of 0.64.

My other results match theirs, so this slight discrepancy may be due to a recent revision of the data set.

5 Since I, like B&N, computed the correlations between 3-year average values, periods 4 and 5 use data from August 1950 through December 1973, which is almost exactly coextensive with the golden age as defined by Skidelsky (2010, p. 24) – the period “from 1951 to 1973.”

6 In some experiments, shares pay a fixed dividend. In others, participants are told what the possible dividends are and the probabilities that each will be paid.

7 As William James (1890, p. 163, emphasis omitted) noted, “the distinction … between the unconscious and the conscious being of the mental state … is the sovereign means for believing what one likes in psychology and of turning what might become a science into a tumbling ground for whimsies.”

8 When I cite page numbers below, but no authors or dates, I am referring to this book. 9 The TSSI differs from the standard (simultaneous dual-system) interpretation, which

creates the inconsistencies that are attributed to Marx, in two simple respects. First, it holds that Marx understood values and prices to be determined temporally, which means that the values and prices of inputs can differ from the values and prices of outputs. Second, it holds that he understood value and price magnitudes to be determined interdependently. For instance, the sum of capital value invested depends on the prices of the means of production that are purchased, while the total price of output depends on the amount of new value created by living labour. See Kliman (2007) for further discussion.

10 They thus veer dangerously close to the postmodernism that they excoriate elsewhere (see, e.g., p. 2 n1).

11 In Marx’s theory, a commodity’s value is determined exclusively by the average amount of labour needed to reproduce it.

12 Since the TSSI does not try to show that Marx’s theory is true, it is actually irrelevant whether temporal valuation is the right “method to use.” The only relevant issues are whether he himself employed temporal valuation and whether his theory becomes internally consistent when it is interpreted as a temporal (and single-system) theory.

13 They write that TSSI authors’ “purpose is to show that [Marx’s] framework is logically consistent and fully in agreement with his analytical claims. But in the process of achieving this purpose, they seem to have shifted into reverse” (p. 109, emphasis added).

14 In a certain sense, this is so; they are “converted” by means of the quotidian procedure, which Marx analyzed in chapter 1 of Capital, of expressing how much a product of


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labour is worth in terms of ounces of gold, dollars, etc., instead of in terms of labour-hours. But N&B are referring to a distinct, analytical operation.

15 They and I agree that it is “logically inconsistent and plagued by insoluble problems” (p. 106) if it is not understood as a single-system theory.

16 The value of each branch’s output is the sum of the value transferred from used-up means of production and the new value added by living labour. Because the example is too simple to illustrate the determination of the value transferred from used-up means of production, the relationship between the labour-time and money measures of value added, or output prices, I selected the magnitudes of these variables (and the amounts of value-creating living labour that are performed) arbitrarily. Thus the output prices could be prices of production, competitive market prices, monopoly prices, etc. The values and prices of output are in real rather than nominal terms—i.e., they are adjusted for any changes in the relationship between labour-time and money magnitudes that take place during the period—though Marx’s aggregate equalities hold true under the TSSI for nominal value and price variables as well. For further discussion of the temporal single-system interpretation of Marx’s account of the transformation of value into prices of production, see chs. 8 and 9 of Kliman 2007, esp. pp. 164–66. For further discussion of how the relationship between the labour-time and money measures of value is determined, see esp. pp. 185–89 of that work.

17 I am referring here to the real magnitudes of these variables (see note 16 above). Their nominal levels are determined in a more complex manner.

18 Potts (2007) explains that research and development expenditures do not augment commodities’ values, and he argues that this is why capitalists seek patents.

19 My source is National Income and Product Accounts table 1.5.4, line 32, available from the U.S. Bureau of Economic Analysis at bea.gov/national/nipaweb/Index.asp.

20 For example, the ratio of U.S. Treasury debt to GDP increased by 71% between 1970 and 2007, but it would have declined by 19% if corporate income taxes had not fallen as a share of GDP. These taxes fell as a share of GDP partly because the rate of profit fell––there was relatively less corporate income to tax––and partly because the government shifted much of the effect of falling profitability from corporations to the public at large by lowering corporate income tax rates. For further discussion of this issue, see Kliman 2011, pp. 55–57.

21 “These broader problems of debt and deleveraging arguably explain why the successful stabilization of the financial industry has done no more than pull the economy back from the brink, without producing a strong recovery. The economy is hamstrung—still crippled by a debt overhang” (Krugman and Wells, 2010).


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22 Accumulation of fixed assets means investment in equipment and software, and

spending to construct factories, office buildings, and other “structures.” The numerator of the rate of profit shown in Figure 2 is corporations’ net output (net value added) minus compensation (wages, salaries, and benefits) of employees. The numerator of the rate of accumulation is corporations’ net investment in fixed assets. The denominator of both rates is the net stock of fixed assets. All variables are valued at historical cost, and all data used to compute these variables and the derivative variables shown in Figures 3 and 4 come from the U.S. government. For further discussion of my data sources and computations, see Kliman 2011, chs. 5 and 7.

23 See, e.g., their remarks about the distinction between capitalist production and other forms of social reproduction on p. 121.

24 I am assuming here that the government does not subsidize their education. All else being equal, the subsidy is a wasted expenditure from the vantage point of a government interested in augmenting value, since engineering work doesn’t “pay for itself” (i.e., create more value than the engineers receive once the subsidy is factored in).

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—––—–. 2011. Marx and the Crisis, Capital & Class [forthcoming]. Skidelsky, R., 2010. Keynes: The Return of the Master. London: Allen Lane. Smith, V. L., Suchanek, G. L and Williams, A. W., 1988. Bubbles, Crashes, and

Endogenous Expectations in Experimental Spot Asset Markets, Econometrica, 56(5): 1119–1151.


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Andrew KlimanAndrew KlimanAndrew KlimanAndrew Kliman is a Professor of Economics at Pace University in New York. He is the author of Reclaiming Marx’s “Capital”: A Refutation of the Myth of Inconsistency, and a forthcoming book on the underlying causes of the Great Recession. He has published in the Cambridge Journal of Economics, Capital and Class, Historical Materialism, and in other journals and edited collections. Many of his writings on the crisis and recession, value theory, and other topics are available at http://akliman.squarespace.com.

Kliman on Systemic Fear, Bichler and Nitzan

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Kliman on Systemic Fear: A Rejoinder

Shimshon Bichler and Jonathan Nitzan

Editors’ Note: Andrew Kliman’s paper in this issue, ‘Value and Crisis: Bichler and Nitzan versus Marx’, consists of two sections. The first section deals with Bichler and Nitzan’s recent paper on ‘Systemic Fear, Modern Finance and the Future of Capitalism’ (2010). The second section takes issue with their earlier critique of Marx’s labour theory of value (Nitzan and Bichler, 2009a), and offers an explanation of the global economic crisis. In the following rejoinder, Bichler and Nitzan address the points raised in the first of these sections.

IntroductionIntroductionIntroductionIntroduction The first part of Kliman’s paper isn’t exactly a critique. The author doesn’t engage our argument, and he shows no concern for the broader theoretical and historical context in which this argument is made. Instead, he looks for inconsistencies, discrepancies and incompatibilities – faults that in his view pull the rug out from under our entire analysis and make such engagement unnecessary to begin with. The gist of his complaint can be summarised as follows: 1. Bichler and Nitzan, he argues, draw conclusions that their own data refute. In their

2010 article they claim that, in capitalism, systemic fear is revealed solely by the breakdown of capitalisation (with stock prices being positively and tightly correlated with current earnings). They then argue that such a breakdown occurred only during the 1930s and 2000s, and use this observation to infer that capitalists have been gripped by systemic fear during these periods. However, according to the evidence that they themselves marshal, a positive and tight correlation also existed from the early 1950s to the early 1970s. And since the latter period wasn’t one of crisis – in fact, it is commonly seen as the ‘golden age’ of capitalism – the notion that price-earnings correlations are indicative of systemic fear breaks down.


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2. Bichler and Nitzan erroneously assume that capitalism requires capitalists to believe

that the system will continue forever. The error here is both logical and empirical. Simple probability theory suggests that, for a high enough reward, most people will invest even when they believe that the capitalist system is very likely to collapse. And laboratory experiments, including those reported by Nobel laureates, show that people will continue to buy stocks that they know will become worthless by the end of the experiment. In other words, capitalists act like capitalists regardless of what they think about the future of capitalism.

3. The very notion of systemic fear is entirely subjective and therefore useless for a

scientific inquiry. Bichler and Nitzan pretend to show that capital is a historical subject capable of bringing capitalism down, but their alleged demonstration relies on incoherent terminology and unfalsifiable Freudian speculations. Instead, they should go back to the ‘good old fear’ that capitalists feel when struck by a real crisis of real profit (as Marx already and perfectly explains in Das Kapital).

The SleepwalkersThe SleepwalkersThe SleepwalkersThe Sleepwalkers Kliman’s first point is correct, and we are grateful to him for having pointed it out to us. The positive correlation between share prices and current earnings indeed is not unique to the 1930s and 2000s. As he indicates, a similar correlation exists from the early 1950s to the early 1970s – a correlation that we overlooked and failed to mention in our paper. However, as this rejoinder shall show, the oversight is hardly critical. It can be easily corrected in a manner consistent with both our systemic-fear hypothesis and our broader notion of the capitalist mode of power.

To begin with, Kliman’s personal anxieties notwithstanding, inconsistency need not be lethal. Note that we are dealing here not with a heteronomous dogma, but with the autonomous, living process of an ever-changing science.1 And scientific discovery, unlike religious reiteration of eternal truths, is littered with oversights and errors. They are the bread and butter of the creative process, the serendipitous leeway that gives scientists the ability to tease order out of chaos. For academics concerned with the health of their career, errors are a recipe for disaster – a risk best avoided by limiting oneself to ‘adoptions’, ‘interpretations’ and ‘critiques’. But for creative scientists, making errors – and negating them – is the only path to breakthroughs.

The Pythagoreans erred in their belief that every magnitude can be expressed as a rational number. This erroneous conviction, though, helped launch the remarkable triangle of democracy-science-philosophy, and the eventual refutation of that conviction created a much larger mathematics that incorporated irrational as well as rational


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numbers. And the list continues. Kepler’s astronomical research was bogged down for a decade by his supposition that celestial orbits were circular rather than elliptical, but that mistake sharpened his inquiry and hardly invalidated his broader thesis. Delambre and Méchain’s mission to measure the standard meter was full of baffling inaccuracies, but those inaccuracies helped trigger the mathematical development of statistical estimates. Einstein’s belief in a stationary universe didn’t sit well with his relativity theory, creating an inconsistency that he solved by inventing a ‘cosmological constant’; later on, when he accepted that the universe was expanding, the inconsistency disappeared and the constant became unnecessary (erroneous?); and nowadays, talk of an accelerating universe may end up giving the constant yet another lease on life. The works of Gardiner Means on administered prices and on the separation of corporate control from ownership, although subject to intense empirical criticism, remain two of the most fruitful starting points in twentieth-century economics.2 Andrew Wiles’ proof of Fermat’s Last Theorem took seven years to produce, only to be found fatally flawed. But two years later, the error was corrected, the proof was accepted, and mathematics benefitted from novel hypotheses and new areas of inquiry that Wiles’ torturous journey helped open up. Yutaka Taniyama, one of the greatest sleepwalkers of modern mathematics, was described by his collabourator Guro Shimura as sloppy to the point of laziness: “He was gifted with the special capability of making many mistakes, mostly in the right direction. I envied him for this and tried in vain to imitate him, but found it quite difficult to make good mistakes” (quoted in Singh, 1997, p. 174). This willingness to go astray enabled Taniyama to come up with a most fantastic conjecture on the symmetry between modular forms and elliptical equations, a conjecture that opened up multiple new mathematical horizons well before it was finally proven.3

We, too, sleepwalked. Our concern was systemic fear and systemic crisis, not ‘business as usual’. We wanted to understand what happens not when capitalists are sure of their rule, but when they lose their confidence. We wanted to know how they act not when capitalism seems certain, but when it is put into question. And so we overlooked what in retrospect seems obvious. The Broad Context: The Capitalist Mode of Power, Capitalisation and the Stock The Broad Context: The Capitalist Mode of Power, Capitalisation and the Stock The Broad Context: The Capitalist Mode of Power, Capitalisation and the Stock The Broad Context: The Capitalist Mode of Power, Capitalisation and the Stock MarketMarketMarketMarket Kliman clings to a technical oversight, presenting it as a ‘make-or-break’ error for our broader argument. But by ignoring the argument itself and the overall framework in which it is developed, he ends up with a misleading caricature.

So let us reiterate the broad picture, if only in outline, and in the process try to clarify our argument and put things right. Our focus on the twin notion of systemic fear


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and systemic crisis didn’t come out of the blue. It emerged as part of a new approach to capitalism – an approach that offers an alternative to both neoclassical and Marxian political economies, and that we have articulated in many articles and books, including our recent Capital as Power (Nitzan and Bichler, 2009a). In 2008, we began to write a paper series on the ‘Contours of Crisis’; a series that we hope to continue and eventually develop into a book (Bichler and Nitzan, 2008, 2009; Nitzan and Bichler, 2009b). The article ‘Systemic Fear, Modern Finance and the Future of Capitalism‘ (Bichler and Nitzan, 2010) is an expanded version of the third installment in that series. The series introduces and develops the notions of systemic crisis and systemic fear – but it does so in steps, gradually rearticulating and refining the terms as the story continues to unfold.

Mainstream and Marxist political economies see capitalism as a mode of production and/or consumption. Consequently, they both adhere to a double separation – one between politics and economics; and another between the so-called real and nominal spheres of the economy itself.4 In this framework, the nominal sphere of money, credit and finance is merely a mirror – accurate for the neoclassicals, distortive for the Marxists – of the underlying ‘economic reality’. From this viewpoint, the only true crises are ‘real’ ones: crises of employment, production and consumption; crises of real profitability; crises of real accumulation, crisis of real investment, etc. These crises can be trigged by many causes, including government intervention, natural disaster, war, and, of course, finance. But whatever their origins, they become meaningful only insofar as they materialise in the underlying ‘reality’ of the economy.

Our framework is very different. Capitalism is not a mode of production and consumption, but a mode of power. To understand it, we start not from the narrow ‘material’ sphere of economics, but from the broad architecture of social power. And even when we deal with so-called economic processes, we focus not on productivity and well-being, but on the power to control productivity and well-being. In this framework, capital is not a technological/productive entity that is merely ‘reflected’ in finance. It is not machines, structures and work in progess, but a pure quantitative code of power. And that code is financial and only financial.

The central and by now all-pervasive algorithm of the capitalist mode of power is capitalisation: the discounting to present value of risk-adjusted expected future income. This is the ritual that constantly creorders – or creates the order – of capitalism’s power institutions and process. Over the past century, capitalisation has expanded to encompass numerous aspects of social life – from the mindset and genetic code of individuals, to social organisations and institutions, and even the ecological future of humanity. But the most distilled and perfected form of capitalisation remains the stock market. This is the chief symbolic barometer of the capitalist outlook; it is the mechanism through which capitalists increasingly organise their world of strategic sabotage and differential accumulation; and it is the main yardstick with which they gauge their success and failure.


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Major Bear MarketsMajor Bear MarketsMajor Bear MarketsMajor Bear Markets Systemic crisis is one that threatens the very future of capitalism. The first necessary feature of such a crisis is the existence of a major bear market. That was the starting point of our paper series. In ‘Contours of Crisis: Plus ça change, plus c'est pareil?’ (Bichler and Nitzan, 2008), we explained what we mean by such crises, identified their occurrence in the United States, characterised their main features, and speculated about their relationship to broad societal transformations.

Since there is no agreed-upon definition for a bear market – let alone a ‘major’ one – we devised our own:

A major bear market denotes a multi-year period during which: (1) the 10-year centred moving average of stock prices, expressed in constant dollars, trends downward; and (2) each successive sub-peak of the underlying price series, expressed in constant dollars, is lower than the previous one.5

The reason for expressing stock prices in ‘constant dollars’ is that the capitalist outlook is always differential. Modern capitalists do not seek simply to increase their dollar assets, but to increase them faster than the assets of others. Now, one of the most basic benchmarks for such comparisons is the standard basket of consumer goods and services. If the price of equities rises faster than the price of that basket, equity price inflation ends up being higher than overall Consumer Price Index (CPI) inflation; the so-called ‘constant dollar’ price of equities increases; and equity owners end up doing better than the average basket owner.6 (Of course, beating CPI inflation is merely the first step in a long sequence, whose ultimate achievement is beating the increase of every existing basket, but these further steps need not concern us here.)

According to the above definition, over the past two centuries, the United States has experienced six major bear markets. These periods are marked by the grey areas in Figure 1 and are listed in Table 1, along with the cumulative declines in stock prices.


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Figure 1

U.S. Stock Prices in Constant DollarsU.S. Stock Prices in Constant DollarsU.S. Stock Prices in Constant DollarsU.S. Stock Prices in Constant Dollars

NOTE: Grey areas indicate major bear markets, as defined in the text and in Table 1. The U.S. stock price index splices the following four sub-series: a combination of bank, insurance and railroad stock series weighed by Global Financial Data (1820-1870); the Cowles/Standard and Poor’s Composite (1871-1925); the 90-stock Composite (1926-1956); and the S&P 500 (1957-present). The constant dollar series is computed by dividing the stock price index by the Consumer Price Index. The last data point is for 2010. Data are rebased with 1929=100.0

SOURCE: Global Financial Data (series codes: _SPXD for stock prices; CPUSA for consumer prices); Standard and Poor’s through Global Insight (series codes: [email protected] and SP500.D7 for stock prices); IMF through Global Insight (series code: L64@C111 for consumer prices).


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Table 1

Major U.S. Bear Markets*Major U.S. Bear Markets*Major U.S. Bear Markets*Major U.S. Bear Markets*

(constant(constant(constant(constant----dollar calculations)dollar calculations)dollar calculations)dollar calculations)

NOTE: The most recent sub-trough of the current major bear market occurred in 2008. It is not yet clear whether this sub-trough marks the end of this bear market.

* A major bear market is defined as a multiyear period during which: (1) the 10-year centred moving average of stock prices, expressed in constant dollars, trends downward; and (2) each successive sub-peak of the underlying price series, expressed in constant dollars, is lower than the previous one.

** The peak occurs one year prior to the onset of a major bear market.

Clearly, the 1950s and 1960s did not fulfill this first criterion of a systemic crisis: there was no bear market, let alone a major one. Although much of the emphasis during that period, epitomised in the triumphalist books of John Kenneth Galbraith (1958; 1967), was on the rising welfare-warfare state, the self-financing ability of the leading industrial corporations and the alleged demise of finance, the stock market actually boomed – and at growth rates that would make today’s neoliberals envious. Capitalism was not in crisis, and capitalists certainly had no reason to fear for its future. That is obvious enough. Major Bear Markets and Societal TransformationsMajor Bear Markets and Societal TransformationsMajor Bear Markets and Societal TransformationsMajor Bear Markets and Societal Transformations Now, ‘Plus ça change, plus c'est pareil?’ wasn’t merely technical (Bichler and Nitzan, 2008). It further argued that the long-term ups and downs of the stock market, no matter how stylised and patterned, are not self-generating. They don’t just happen on their own.

PERIODPERIODPERIODPERIOD DECLINE FROM PEAKDECLINE FROM PEAKDECLINE FROM PEAKDECLINE FROM PEAK

TO TROUGH TO TROUGH TO TROUGH TO TROUGH (%)(%)(%)(%) ********

1835–1842 –50%

1851–1857 –62%

1906–1920 –70%

1929–1948 –56%

1969–1981 –55%

2000–2010 –50%


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Each of them has a reason, and that reason is deeply social and historically unique. Note that, during the twentieth century, every oscillation from a major bear market to a bull market was accompanied by a systemic societal transformation:

� The crisis of 1906–1920 marked the closing of the American Frontier, the shift from

robber-baron capitalism to large-scale business enterprise, and the beginning of synchronised finance.

� The crisis of 1929–1948 signaled the end of ‘unregulated’ capitalism, and the

emergence of large governments and the welfare-warfare state. � The crisis of 1969–1981 marked the closing of the Keynesian era, the resumption of

worldwide capital flows and the onset of neoliberal globalisation.

Moreover, the article pointed out that none of these transformations were ‘in the cards’. Most observers in the 1900s didn’t expect managerial capitalism to take hold; few in the 1920s anticipated the welfare-warfare state; and not too many in the 1960s predicted neoliberal regulation. All three transformations involved a complex set of conflicts; their trajectories were fuzzy, and their outcomes were all but impossible to anticipate.

In other words, underneath the seemingly oscillating long-term patterns of the market lies an open-ended and inherently unpredictable creordering of the entire political economy. Although past bear markets have always given way to long bull runs, these transitions were never automatic. Each and every one of them reflected a profound transformation of the underlying societal structure. This quantitative-qualitative correspondence, we noted, still holds. In order for the current crisis to end and a new long-term upswing to begin, the social structure must be transformed, and the key aspect of that transformation is the creordering of capitalist power.

The Capitalist Mode of Power: Approaching the Glass CeilingThe Capitalist Mode of Power: Approaching the Glass CeilingThe Capitalist Mode of Power: Approaching the Glass CeilingThe Capitalist Mode of Power: Approaching the Glass Ceiling While systemic crisis is always accompanied by a major bear market transformation, the reverse is not necessarily true: a major bear market does not have to be associated with systemic crisis. Systemic crises are ones that threaten the very future of capitalism, and these threats arise only when capitalist power approaches a glass ceiling and it becomes difficult if not impossible for capitalist power to increase under existing circumstances. These conditions are fairly rare, and they need not exist – and usually do not exist – in every major bear market.

How do we know that capitalist power is approaching its glass ceiling? The answer begins with the nature of capitalist power. Private ownership is created,


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augmented and protected through organised exclusion, and organised exclusion is always a matter of power: it requires strategic sabotage and the threat and occasional use of force. Now, capitalism is historically unique in that everything that can be owned can be priced. And since ownership is based on power, relative prices quantify the relative power of owners: the greater the relative magnitude of the owned assets, the greater the power of their owner. In this sense, capitalism is deeply differential, and that differentiality is not static, but dynamic. Caught in a never-ending power struggle, capitalists are compelled to think of accumulation not absolutely, but relatively. They seek not to meet the average, but to beat it; not to keep their distributive share, but to raise it; not to run with the herd, but to butt ahead of it.

As we indicated in ‘Systemic Fear’, though, power is deeply dialectical. As an institution of power, private ownership is inherently conflictual: it requires organised exclusion, strategic sabotage and the differential exercise of force. And since capitalists are conditioned to accumulate differentially, their quest for further redistribution forces them to exclude more, inflict greater sabotage and increase the dose of force. But there is a built-in limit: no single capitalist or group of capitalists can ever own more than what there is to own. So from a certain point onward, further forceful redistribution is bound to run into mounting resistance; it gradually grows more difficult to achieve; and, eventually, it reaches its own envelope and becomes impossible to sustain.

This is the glass ceiling, the elusive yet imposing point of hubris to which we alluded in ‘Systemic Fear’. It is the societal point where the rulers, having reached their maximum power, seem completely confident in the obedience of the ruled. And it is the point from which their power and confidence has no where to go but down.

Have U.S. capitalists reached this point of hubris? In the second part of ‘Systemic Fear’, we noted that much of the postwar increase in stock prices was accounted for by the self-reinforcing convergence of redistributional power processes. During that period, there was a rise in the gross profit and interest share of capitalists in national income; a drop in effective corporate tax rates; a decline of profit volatility that reduced risk perceptions; and, since the early 1980s, a fall in the rate of interest that boosted corporate profit relative to interest payments and lowered the discount rate. Now, since these processes are self-exhaustive, the question is: at what point do they become impossible to maintain, and how far is the U.S. political economy from reaching that point?

One quick way to address this question is to examine the size distribution of income. This measure is far from ideal. Limited to income size, it says nothing explicit about the distribution between capitalists and non-capitalists (although it is reasonable to assume that much of the top income is earned by capitalists); it ignores the differential processes of accumulation that affect the distribution of income and assets within capital;


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and it tell us little about the non-income power underpinnings of capitalisation.7 But the size distributional measure has one major advantage: thanks to the painstaking work of a few researchers, its data are available for an extended period, from 1917 to 2008.

Such data are presented in Figure 2. The thin line shows the per cent share of ‘market income’, inclusive of capital gains, accounted for by the top 10% of the U.S. population. The thick line expresses the 5-year moving average of the underlying series.

Figure 2

Income Share of the Top 10% of the U.S. PopulationIncome Share of the Top 10% of the U.S. PopulationIncome Share of the Top 10% of the U.S. PopulationIncome Share of the Top 10% of the U.S. Population

NOTE: Income is defined as ‘market income’, including capital gains; it excludes government transfers. Grey areas indicate periods during which the 5-year moving average of the data series exceeded 45%. The last data point is for 2008;

SOURCE: Piketty, Thomas, and Saez. 2004. Income Inequality in the United States,

1913-2002. Monograph, pp. 1-92. Updated until 2008 at

http://www.econ.berkeley.edu/~saez/TabFig2008.xls; data sheet: data-Figure1

(retrieved on February 7, 2011).

The numbers draw a striking U-pattern, with its twin peaks marked by the 1930s on the left and the 2000s on the right. In both periods, the income share of the top 10% of the


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population averaged over 45% and at some point approached 50%. And both periods are unique. In between, from the early 1940s to the early 1980s, the numbers are far lower, averaging less than 35% and hardly changing from year to year.

Of course, historical patterns per se do not reveal their own glass ceiling (which is why economists can never specify the maximum amount of profit, or the highest possible growth rate). But although there is no way to know for sure, it seems to us, however impressionistically, that 45% is fairly close to the glass ceiling for this measure. The bull market of the 1980s and 1990s was associated with a rise of more than 40% in the top’s income share (from 33% to 47%, and to nearly 50% more recently), along with significant reductions in interest rates, effective corporate tax rates and profit volatility. And since the latter reductions would be difficult to replicate, a similar bull run from here onward would require the top income share to rise to more than 70%. Such an increase is highly improbable – that is, unless the U.S. turns into a dictatorship of the kind described in Jack London’s Iron Heel (1907) or Vladimir Sorokin’s Day of the Oprichnik (2011). And given that in the 1930s the top income share peaked at around current levels, it is not far fetched to take 45% as the Zeno-like cutoff point beyond which the ruling class enters hubris territory: confident in its enormous power, but aware that this power is difficult to increase much further.8

So now we have two criteria for systemic crisis: (1) a major bear market; and (2) extreme income and asset inequality, indicative of peak capitalist power and an inability to increase that power significantly. It is at this point, when these two conditions of systemic crisis are fulfilled, that systemic fear – fear for the very future of capitalism – becomes possible. And according to the available data, these two conditions have coincided only twice since the First World War: during the the late 1920s and 1930s, and again during the 2000s. The Dominant Dogma and ForwardThe Dominant Dogma and ForwardThe Dominant Dogma and ForwardThe Dominant Dogma and Forward----Looking CapitalisationLooking CapitalisationLooking CapitalisationLooking Capitalisation Now, note that these two conditions imply a potential for systemic fear. To know whether capitalists have actually been struck by such fear, we need a third condition. And that third condition is the breakdown of forward-looking capitalisation.

In our ‘Systemic Fear’, we argued that, under the normal circumstances of ‘business as usual’, capitalists are conditioned by their dominant dogma to follow the ritual of capitalisation; that, in following this ritual, they express their belief that their system is eternal; and that this belief in turn implies that they are confident in their rule and in the obedience of the ruled (we deal with Kliman’s objection to this point later in the article).

However, in times of systemic crisis – i.e., when capitalism is mired in a major


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bear market, and when extreme inequalities, having pushed capital toward its envelope, make further increases in power difficult if not impossible to achieve – there arises the prospect of systemic fear. If that fear takes hold, with capitalists no longer certain of the future of their system, their ability to look forward is seriously impaired. And when looking into the future becomes impossible, the ritual of forward-looking finance breaks down.

One indication of such a breakdown, we argued in our paper, is a tight, positive correlation between the rates of change of stock prices and current earnings. When capitalists adhere to the capitalisation ritual, they price stocks based on the earnings trend all the way to the deep future (from the ‘standpoint of eternity’, as finance guru Benjamin Graham put it). But when capitalists are struck by systemic fear, the ritual breaks down, by definition. With the future of capitalism deeply uncertain, the long-term earnings trend becomes undefined, and undefined earnings cannot be incorporated into the capitalisation formula. So capitalists have to look for an alternative. They need something they are sure of and which is visible here and now. And that something, we argued, is current earnings.

Now note the causal direction here: systemic fear creates a tight positive correlation between the growth rates of equity prices and current earnings. But the reverse isn’t necessarily true: in and of itself, a positive correlation between the growth rates of equity prices and current earnings does not necessarily mean that capitalists have been struck by systemic fear.

This point wasn’t properly articulated in our paper, so it is important to clarify it. To reiterate, according to the forward-looking capitalisation formula, equity prices discount the long-term earnings trend. Current earnings do not appear in the capitalisation formula, so in principle they should have no direct impact on share prices.9 However, current earnings can still have an indirect, apparent effect. During certain periods, one or more of the capitalisation components can become correlated with current earnings, and if that happens, we may end up with a spurious correlation. For instance, changes in current earnings could be – and sometimes are – correlated negatively with changes in the rate of interest. And since the rate of interest features in capitalisation, the result could be a spurious correlation between the growth rates of current earnings and stock prices. Indeed, there is nothing to prevent such a spurious correlation from cropping up during periods of systemic fear; and if it does crop up, the impact of current earnings on equity prices may become more difficult to disentangle.10

For this reason, the correlation between the growth rates of stock prices and current earnings becomes meaningful only in times of systemic crisis. It is only then, when capitalism is pulled down by a major bear market and capitalists are approaching their hubris-point of peak power, that such a correlation could be taken as indicative of systemic fear.


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Figure 3 shows the levels and rates of change of equity prices and earnings per share (with rates of change expressed as 3-year moving averages). The grey areas indicate periods of high positive correlation between the rate-of-growth series at the bottom of the figures (including the period pointed out by Kliman). The correlation coefficients for the different periods are listed in Table 2.

Figure 3

S&P 500: Price and Earnings per Share, 1871S&P 500: Price and Earnings per Share, 1871S&P 500: Price and Earnings per Share, 1871S&P 500: Price and Earnings per Share, 1871----2011201120112011

NOTE: Earnings per share denote net profits per share earned in the previous twelve months. Monthly earnings are interpolated from annual data before 1926 and from quarterly data after 1926. Stock price data are monthly averages of daily closing prices. Both series are expressed in $U.S. and rebased with September 1929=100. The last data


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points are June 2010 for earnings per share and January 2011 for price; SOURCE: Robert Shiller, http://www.econ.yale.edu/~shiller/data/ie_data.xls.

Table 2

S&P 500: Pearson Correlation Coefficient Between theS&P 500: Pearson Correlation Coefficient Between theS&P 500: Pearson Correlation Coefficient Between theS&P 500: Pearson Correlation Coefficient Between the

Annual Rates of Growth of Price and Earnings per ShareAnnual Rates of Growth of Price and Earnings per ShareAnnual Rates of Growth of Price and Earnings per ShareAnnual Rates of Growth of Price and Earnings per Share

(Monthly data expressed as 3-year moving averages)

SOURCE: Figure 3.

The data show four periods of high positive correlation: the period leading up to 1917; the 1930s; the early 1950s to the early 1970s; and, finally, the 2000s. But based on our earlier discussion, only two of these periods can be associated with systemic fear. This association is summarised in the timeline of Table 3, which provides data on our three criteria for systemic fear. The table covers the period from the 1820s to the present, although the data coverage is uneven and allows conclusions to be drawn only from 1917 onwards.

PPPPERIODERIODERIODERIOD CCCCORRELATION ORRELATION ORRELATION ORRELATION CCCCOEFFICIOEFFICIOEFFICIOEFFICIENTENTENTENT

Jan 1873 – Oct 1917 + 0.72

Oct 1917 – Mar 2010 + 0.35

Oct 1917 – Dec 1929 + 0.29

Dec 1929 – Feb 1939 + 0.89

Feb 1939 – Jun 1953 – 0.34

Jun 1953 – Aug 1962 + 0.90

Aug 1962 – Dec 1973 + 0.80

Dec 1973 – Sep 2000 – 0.20

Sub

perio

ds

Sep 2000 – Mar 2010 + 0.65


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Table 3

Criteria for Systemic Crises in the United StatesCriteria for Systemic Crises in the United StatesCriteria for Systemic Crises in the United StatesCriteria for Systemic Crises in the United States

NOTE: Grey areas denote periods of (1) major bear markets; (2) peaks of capitalist power as indicated by extreme income inequality; and (3) periods of a high positive correlation between the growth rates of share prices and earnings per share. The dashed lines delineate the two periods that fulfil all three criteria: 1929–1939 and 2000–2010.

SOURCE: Figures 1, 2 and 3.

� The first criterion is a major bear market, based on the long-term trend and pattern

of the stock market expressed in ‘constant dollars’. Based on these considerations, the United States has experienced six major bear markets since the 1820s.

� The second criterion is peak capitalist power, based on extreme income inequality.

This condition has been fulfilled twice since 1917: from 1927 to 1940 and from 2000 to 2008 (with the stock market having recovered since 2008, it is not far


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fetched to assume that income inequality continues to hover at peak levels). Combining these two conditions, we can conclude that only two of the four major bear markets since the beginning of the twentieth century have contained a systemic crisis: the periods from 1929 to 1940 and the period from 2000 to 2010.

� The criterion for systemic fear is systemic crisis during which the rates of change of

stock prices and current earnings are tightly and positively correlated. Such positive correlation existed during four periods since the 1890s. But only two of these periods were ones of systemic crisis: 1929-1939 and 2000-2010.11

In sum: Kliman found an oversight in our paper on ‘Systemic Fear’ and celebrated it as if it pulled the rug out from under our entire argument. But that oversight, although inconvenient and regrettable, hardly dents our broader argument. Capitalism remains the first mode of power to offer a quantitative indicator for systemic fear. This indicator involves the convergence of three conditions that we have discussed at great length in our work: a major bear market, a glass ceiling of peak capitalist power, and the breakdown of the dominant dogma of forwarding-looking finance. And these conditions have coincided only in the two periods indicated in ‘Systemic Fear’ – the 1930s and the 2000s. Toward Behavioural Marxism?Toward Behavioural Marxism?Toward Behavioural Marxism?Toward Behavioural Marxism? But Kliman claims that the problem is not only empirical; it’s also theoretical. Think of a situation, he says, in which ‘you’ (the investor?) believe that capitalism is about to collapse, but you are not entirely sure (the probability of collapse is less than 100 per cent). Next, assume that someone comes along and invites you to make a small investment that will yield an extremely high rate of return. If capitalism collapses, you lose your investment (no pain, no gain); but if it doesn’t, you become fabulously rich (fulfilling your mission on earth). Now, between you and me (wink), wouldn’t you grab this golden opportunity and invest? And given that you would go ahead and invest (assuming you are like most people – i.e. most capitalists), isn’t your decision a clear proof that the future of capitalism is irrelevant for capitalists (like you)?

And if the logic of greed isn’t enough, there are the scientific experiments. According to Kliman, these experiments repeatedly show that ‘people’ (capitalists?) continue to invest in stocks, almost to the very end. They invest when earnings go up; they invest when earnings come down; in fact, they invest even when they know, with certainty, that earnings will converge to zero and that the equities they buy will become worthless at a definite point in time. And since these experiments show that the investment behaviour of people (capitalists?) is more or less independent of the future of their system (i.e., the end of the experiment), the very notion of ‘systemic fear’ – at least in


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the way that Bichler and Nitzan describe it – is irrelevant and in fact meaningless. These are very interesting claims, particularly when coming from a

fundamentalist Marxist.12 Marxism correctly rejects the neoclassical dogma. The neoclassical tenets –

egocentrism, the emphasis on individual rationality, the belief that the market is natural, the sanctification of private property and the rejection of societal planning, to name but a few – are not natural laws, but the mere objectification of the capitalist creed. According to Marxist epistemology, the autonomous, utility-maximising individual is an oxymoron; an impossibility that can be concocted only by the misguided ideological servants of capital. From the viewpoint of Marxists, human beings are not stand-alone entities, but creatures of their society. They have a certain freedom to think and act, but in the final analysis, their thoughts and actions are bound by the class relations and the forces of production of their own historical epoch.

Adhering to this epistemology, though, has proven easier said than done. Although critical of the liberals, Marxists have by and large failed to develop their own accounting system, their own unique data and their own dedicated research methods. And so, gradually, pressed by academic necessity and tempted by the available alternative, they have gravitated toward the ever-expanding databases and increasingly sophisticated methods of their class enemy, the bourgeoisie.

During the 1950s and 1960s, Marxists started to use the capitalist national accounts and measurements of the ‘capital stocks’. But there was a hefty price to pay: the derivation of these quantities relies on the very assumptions that Marxists correctly reject. ‘Real GDP’, for instance, is aggregated based on the supposition that the statistician knows equilibrium prices, and that these equilibrium prices reflect the relative utilities of the produced goods and services. Similarly with the ‘capital stock’: its magnitude, which many Marxists cite without a second thought, is taken to measure the util-generating capacity of the underlying machines and structures. And so, paradoxically, when Marxists routinely employ such measures to denote economic growth rates or the pace of capital accumulation, they end up endorsing the conceptual tools with which the ruling capitalist class manages society, as well as the individualistic-hedonic-equilibrium ideology that this ruling class imposes.13

And that is just for starters. In subsequent decades, many Marxists began using bourgeois econometrics, and in so doing abandoned the last vestige of dialectics. They developed closed models with mathematical propositions and proofs, and in so doing made their arguments increasingly ahistorical. They succumbed to the elegance of game theory, and in so doing accepted the rational-atomistic starting point of conventional economics. And now we learn from Kliman that it is perfectly fine for a Marxist to invoke the findings of experimental economics and behavioural finance.


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Now, as noted, our own work starts from finance. This choice has nothing do with convenience or fashion. We start from finance because finance is the heart and brain of the modern capitalist mode of power. The capitalisation ritual of finance is the algorithm with which capitalists creorder their society, and the relative magnitudes that emerge from that ritual map the ever-changing terrain of capitalised power. Deciphering modern finance is the initial step for any understanding of how modern capitalist power is organised, imposed and altered.

Kliman, though, adheres to a different approach. For him the only real capital is one created by production denominated in socially necessary abstract labour time (or its ‘real’ price equivalent). The rest – i.e., finance – is a speculative operation in the sphere of exchange that sometimes matches and sometimes mismatches the movement of actual capital. And whatever has to do with speculations, bubbles and other mismatches or distortions can be safely delegated to the neoclassical experiments of Nobel laureates and the psychological analysis of behavioural finance.

But then, if this is the micro-Marxism Kliman has to offer, it is a strange one indeed: a representative experiment of representative gamblers, sans quotes, who serve to represent the universal human bourse, with no classes, no struggle, no dialectics, for ever and ever. Note that the participants in Kliman’s experiments are not capitalists, but ‘people’ (in America everyone has an equal opportunity to buy up Microsoft or sleep under the bridge). These people are examined not in a real, power-based society, but in a laboratory ‘game’ for which they are hired or volunteer (since, at the moment, the experiment is still too complicated for rats). There is no ruling class, no power belt and no underlying population of workers, unemployed and the redundant. There is only a collection of Marshallian ‘representatives’. These ideal types play their game not in order to control their society and shape their world, but simply to make a buck (the universal drive of all people at all times, even if the buck happens to be hypothetical). And most importantly, the questions they face have no bearing on their own future, let alone on the future of their society. Once the experiment is over (and capitalism ends) they can go home and forget all about it.

The ultimate purpose of these experiments is to discover, once and for all, the eternal human ‘nature’ of the universal investor – and in the process to annul the very heart of Marxism. According to Alan Greenspan, this human nature can be conventional, or perverse. What matters, he explains, is “not whether human response is rational or irrational, only that it is observable and systematic” (Greenspan, 2008). And perhaps Kliman feels that Marxists have much to learn from these natural-state-of-things models that the capitalist rulers impose on themselves and on their subjects. What remains unclear, though, is how any of this relates to the long-term outlook of the capitalist ruling class. To use simulated stock market experiments to tell us about the systemic confidence and fear of present-day capitalists is like using a chess game to understand the mindset of


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the French nobility during the French Revolution, or a board game of Monopoly to understand the anxiety of capitalists during the 1930s.

In our paper, we claimed that capitalist belief in the permanence of capitalisation is a prerequisite for investment. This is a foundational claim. It deals not with this or that profit flow, with this or that asset, or with this or that capitalist. Instead, it refers to the basic institution of the capitalist mode of power: the institution that makes finance in general and capitalist calculations in particular possible to begin with, the institution that pervades everything capitalists do, the institution that holds their power structure together. The validity of our claim is tied to the centrality of this institution, and that is why we expressed our claim hypothetically, as a thought experiment. This is also why we brought different historical examples of systemic collapse – from the fall of the last Babylonian emperor Belshazzar, to the French Revolution, to the collapse of the Soviet Union – instances during which a latent but deep crisis suddenly gave way to disintegration. The crises themselves had different causes; but what made them culminate in collapse, we argued, was that the rulers were struck by systemic fear: they lost their confidence in their own dogma and their ability to rule. And such losses – as well as their consequences – are difficult if not impossible to predict.

“[T]he future comes disguised”, says Coetzee; “if it came naked, we would be petrified by what we saw” (1990, p. 163). To ask what will happen to capitalism if capitalists become convinced that capitalisation is about to end is like asking what will happen to the ecosystem if earth surface temperature rises by 25 per cent. No laboratory, even one run by a Nobel laureate, can replicate this process.

Finally, Kliman invokes the ‘S’-word: Bicher and Nitzan, he says, have turned capital into a ‘Subject’, capable of triggering its own demise, and they have voiced this claim using tongue-twisting concepts and irrefutable Freudian conjectures. We prefer to remain silent on the second allegation. The interested reader can judge for herself by reading our articles and books. But we have to plead guilty to the first accusation. Capital is certainly a subject, and with a capital ‘S’ to boot. In fact, if we are to remain true to Marx, we should add that, save for rare revolutionary situations, capital is the only social subject, the entity that subjugates all else – capitalists as well as workers – to its will and rage. Marxists Contra MarxMarxists Contra MarxMarxists Contra MarxMarxists Contra Marx Kliman seems to have been deeply offended by our position ‘versus Marx’, as he puts it, so a few closing comments about this subject may be in order.

We have the greatest admiration for Marx as a revolutionary scientist, and we have learned a great deal from his path-breaking work on the capitalist system. But like Marx (and unlike many Marxists), our real interest is not in Marx, it is in capitalism.


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Marx tried to trace the intricacies of human history, to map its progressive breakthroughs, and to understand its regressive setbacks. He focused on the critical aspects of the capitalist regime, searching for weak points in the fortified walls that protected the capitalist rulers. He tried to anticipate the development of capitalism, to identify the inner contradictions that would pave the way for a revolution.

But Marx’s work mirrored his own epoch. And as capitalism continued to develop and mutate, his theories, research and conclusions have become less and less congruent with the ever-changing reality. As a result, radicals have come to face two mutually exclusive options. In the words of Cornelius Castoriadis, they have had to decide whether to remain revolutionaries or ‘Marxists’. To choose the former meant to take from Marx what seemed true, insightful and useful – and to let go of the rest. To choose the latter meant to sanctify all of Marx’s writings and then constantly ‘reinterpret’ them to fit the shifting reality.

Some radicals chose the former path, but many more took the latter. After Marx’s death, there emerged numerous congregations and sects, each with its own theological interpretation. Until the 1960s and 1970s, the fault lines were largely geopolitical. The main debate was between Moscow and Beijing, with subsidiary interpretations emerging later on in lesser communist capitals, such Belgrade, Havana and Pyongyang.

The unravelling of Stalinism and Maoism and the winding down of the Cold War shifted the centre of gravity to the universities of Europe and North America. But that shift hasn’t liberated the Marxists from Marx. Instead of an open-ended scientific debate on the changing nature of capitalism, there developed a closed theological debate about the eternal nature of Marx’s writings (what did Marx really mean?). There are exceptions – some of which are ingenious – but for many Marxists the key questions have become those of how to appropriate the prophet’s writing; and of what might be done to fortify the faith.

The consequence is a minute division of labour, not unlike the neoclassical one, between different groups of Marxists and post-Marxists, each of which specialises in protecting a different section of the Great Marxist Wall. There are experts on the ‘young Marx’, on ‘Marxist philosophy’ and on ‘Marxist dialectics’. Some deal with the ‘Marxist theory of the state’, while others focus on ‘cultural Marxism’. There are pundits for ‘analytical Marxism’, ‘Marxism and game theory’, and ‘Marxist anthropology’. There are even those who claim to do ‘political Marxism’ (suggesting that Marxism can also be a-political). Within ‘Marxian economics’ proper, there are those who do ‘crisis’, others who do ‘regulation and the social structures of accumulation’, and still others who do ‘investment and profit rates’. There is even a specialisation in ‘fictitious capital’ and its various distortions. The list goes on. Of course, not all of these specialists are defensive of the dogma, but many are.


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At the analytical heart of these specialised endeavours stand the experts on Marx’s labour theory of value and surplus value. Most Marxists are unfamiliar with the intricacies of this theory, and most ‘productive labourers’, however defined, would probably find its language impossible to understand – that is, assuming they even tried. But this theory is the foundation stone of Marx’s science.14 It is the key to understanding capitalist exploitation, capitalist development, and, eventually, capitalism’s own demise. It has to be defended, if only in appearance.

This is the forte of Andrew Kliman. His own section in the Great Marxist Wall is the theory’s internal ‘consistency’. This section has been somewhat weakened since Bortkiewicz, but not to worry. A new and improved reading of the theory – the Temporal Single System Interpretation, or TSSI – has recently been applied to the weak points, and apparently it works wonders.15

For defenders such as Kliman, the key thing is to save Marx from deviant interpretations. Our 2009 Capital as Power contains a systematic critique of liberal and Marxist theories of capital and the elementary particles of utils and abstract labour on which these theories rest; it develops an alternative approach to capital based on power; it offers an analytical, historical and empirical exposition of a new theory of differential accumulation; and it provides a new history of the capitalist mode of power. In short, it is an important book to ignore – and, indeed, so far no Marxist has reviewed it. Even Kliman, who broke the wall of silence, is careful to ignore the gist of our framework, theory and findings: his main concern is to defend his own defence of Marx’s value theory – a defence that our book deals with only briefly.

Sadly, the zeal to defend Marx has caused many of the defenders to lose their grip on reality. The period since 2000 has seen capitalism rocked by major turbulence, and the free-market dogma has been challenged openly from within and without. Liberal economics – including its macro and micro variants, its Keynesian and Monetarist inflections, its expectations and game theories – seems to have lost its intellectual compass, and there have been open calls on Nobel laureates to return their Sveriges Riksbank Prizes. This has been the historical opportunity Marxists have been waiting for since the 1930s, and they seem to have missed it. Instead of developing new theories and new research programmes, they were busy defending Marx and ridiculing or simply ignoring radicals who tried to transcend him. And when the time finally came, they were caught off guard. Marxists today talk of speculative-fictitious bubbles and the tendency of the rate of profit to fall, of a too-weak or a too-strong state, of capitalist irrationality, greed and corruption. But deep down inside, many of them know that these reiterations belong to the world of yesterday. They offer no serious challenge, let alone an alternative, to the current capitalist mode of power.


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NotesNotesNotesNotes

1 The difference between heteronomy and autonomy is articulated in the social and

philosophical writings of Cornelius Castoriadis – see, for example, his Philosophy, Politics, Autonomy (1991).

2 Means’ claim that there were in fact two types of prices – administered prices as well as market prices – was brilliantly defended against charges of empirical error levelled by Chicago School Nobel laureate George Stigler, but eventually swept under the carpet by the economics profession. By contrast, his empirical data on the separation of corporate control from ownership were shown to be faulty by the relatively unknown Marxist Maurice Zeitlin, yet continue to inform mainstream business studies (see Berle and Means, 1932; Means, 1935, 1972; Stigler and Kindahl, 1970, 1973; and Zeitlin, 1974).

3 One of the first, and still unparalleled, histories of cosmology is Arthur Koestler’s The Sleepwalkers (1959), a story that is nicely complemented by Simon Singh’s more recent Big Bang (2004). On the measurement of the standard meter, see Alder’s The Measure of All Things (2002). The development of mathematics is told in Singh’s Fermat’s Last Theorem (1997).

4 These dualities are introduced in Part I of Capital as Power (Nitzan and Bichler, 2009), and are further developed in the rest of the book.

5 This definition is more precise than the one in Bichler and Nitzan (2008). In the original article, we referred to a downtrend in stock prices. Here we operationalise this downtrend as a falling 10-year centred moving average.

6 The measurement of ‘constant dollars’ involves significant theoretical and philosophical quandaries that economists are yet to solve. Our concern here, though, is not the logical underpinnings of the measurement, but the mindset of capitalists. And since capitalists take constant-dollar measures for granted, these difficulties need not distract us (for more on these issues, see Nitzan, 1992: Chs. 5 and 7).

7 On the differential ratio of net profit to wages, see Bichler and Nitzan’s ‘Elementary Particles of the Capitalist Mode of Power’ (2006: Figure 5). On capital’s share of national income, aggregate concentration and differential accumulation, see Nitzan and Bichler’s Capital as Power (2009a: Figure 13.1, p. 274; Figure 14.1, p. 318; and Figure 14.2, p. 320).

8 Elsewhere in our work we examined the differential process by which capitalist power breaks through its geographic-societal ‘envelopes’ – from the industry, to the sector, to the national setting, and, finally, to the global arena (e.g. see Nitzan, 2001; Nitzan and Bichler, 2009a, Ch. 15). In this process, the power of capitalists that are based in one region or country could expand by creating, altering and taking over capitalist power in


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other regions and countries. U.S.-based capitalists have done so after the 1930s by raising the profit share of their foreign subsidiaries from 5 per cent to over 30 per cent of the total. But since this redistribution too is self-limiting, a repeat of that process nowadays seems less than likely.

9 Current earnings feature in capitalisation only insofar as they alter the long-term earnings trend. In the case of corporate equities, this impact usually is negligible and can be ignored.

10 For example, during much of the period from the early 1950s to the early 1970s, the rates of change of equity prices and the rate of interest were negatively correlated (with interest rates measured by the tax-free yield on AAA municipal bonds). This negative association means that, during that period, the observed correlation between the rates of change of equity prices and current profits identified by Kliman may have been spurious. The same cannot be said about the 2000s, since the rates-of-change correlation between equity prices and the rate of interest during that period was positive. The case of the 1930s is more ambiguous. There was a negative correlation between the rates of change of prices and the rate of interest, but the variations of the rate of interest were very small relative to the variations in current earnings, suggesting that their impact on prices was probably far smaller than the impact of current earnings.

11 Although it is probably too early to tell, the 2010 data in Figure 3 suggest that the correlation between the rates of change of stock prices and current earnings is no longer positive. A continuation of this situation would mean that capitalists no longer suffer from systemic fear.

12 For the difference between neo-Marxists and fundamentalist Marxists, see for example Sherman (1985).

13 For more on the individualistic-hedonic-equilibrium assumptions of ‘real’ economic measurements, see Nitzan (1989) and Nitzan and Bichler (2009a: Chs. 5 and 8).

14 Marx claimed his theory to be superior to the bourgeois alternatives, partly because it did something they couldn’t: it objectively derived the rate of profit from the material conditions of the labour process. Prices of production, writes Marx, “are conditioned on the existence of an average rate of profit’, which itself ‘must be deduced out of the values of commodities … Without such a deduction, an average rate of profit (and consequently a price of production of commodities), remains a vague and senseless conception” (Marx, 1909, Vol. 3, pp. 185-86, emphasis added). This same point is reiterated by Engels: ‘These two great discoveries, the materialistic conception of history and the revelation of the secret of capitalist production through surplus value, we owe to Marx. With these discoveries socialism became a science. The next thing


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was to work out all its details and relations’ (Engels, 1966, Section I, emphases added). 15 According to Kliman and McGlone (1999, pp. 33-34), the TSSI “vindicates the

internal consistency of Marx’s most challenged theoretical results without relinquishing his theory’s quantitative determinacy or absorbing it into the theories of his critics”, and “is able to make sense out of crucial aspects of [Marx’s] value theory that the standard interpretation (and others) have always found to be incoherent” (p. 55). See also Kliman (2004; 2007).

BibliographyBibliographyBibliographyBibliography Alder, K., 2002. The Measure of All Things: The Seven-Year Odyssey and Hidden Error

that Transformed the World. New York: Free Press. Berle, A. A. and Means, G. C., 1932. [1967]. The Modern Corporation and Private

Property. Revised ed. New York: Harcourt, Brace and World. Bichler, S. and Nitzan, J., 2006. Elementary Particles of the Capitalist Mode of Power.

Paper read at Rethinking Marxism, October 26-28, at University of Amherst, Mass.

—––—–. 2008. Contours of Crisis: Plus ça change, plus c'est pareil? Dollars and Sense, December 29.

—––—–. 2009. Contours of Crisis II: Fiction and Reality. Dollars and Sense, April 28. —––—–. 2010. Systemic Fear, Modern Finance and the Future of Capitalism.

Monograph: Jerusalem and Montréal (July), pp. 1-42. Available online at http://bnarchives.yorku.ca/289/.

Castoriadis, C., 1991. Philosophy, Politics, Autonomy: Essays in Political Philosophy. New York and Oxford: Oxford University Press.

Coetzee, J. M., 1990. Age of Iron. 1st American ed. New York: Random House. Engels, F., 1966. Herr Eugen Dühring's Revolution in Science (Anti-Dühring). Trans. by

E. Burns; Ed. by C. P. Dutt. New York: International Publishers. Galbraith, J. K., 1958. The Affluent Society. Boston: Houghton Mifflin. —––—–. 1967. The New Industrial State. Boston: Houghton Mifflin. Greenspan, A., 2008. We Will Never Have a Perfect Model of Risk. Financial Times,

March 17. Kliman, A., 2004. Marx versus the '20th-Century Marxists': A Reply to Laibman. In

Freeman, A., Kliman, A. and Wells, J. (eds.) The New Value Controversy and the Foundations of Economics. Cheltenham, UK and Northampton, Massachusetts: Edward Elgar, pp. 19-35.

—––—–. 2007. Reclaiming Marx’s “Capital”: A Refutation of the Myth of Inconsistency. Lanham, MD: Lexington Books.


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Kliman, A. and T. McGlone., 1999. A Temporal Single-System Interpretation of Marx's Value Theory. Review of Political Economy , 11 (1): pp. 33-59.

Koestler, A., 1959. [1964]. The Sleepwalkers. A History of Man's Changing Vision of the Universe. Intro. by H. Butterfield. M.A., London: Hutchinson of London.

London, J., 1907. [1957]. The Iron Heel. New York: Hill and Wang. Marx, K., 1909. Capital. A Critique of Political Economy. 3 Vols. Chicago: Charles H.

Kerr and Company. Means, G. C., 1935. Price Inflexibility and Requirements of a Stabilizing Monetary Policy.

Journal of the American Statistical Association, 30 (190): pp. 401-413. —––—–. 1972. The Administered-Price Thesis Reconfirmed. The American Economic

Review, 62 (3): pp. 292-306. Nitzan, J., 1989. Price and Quantity Measurements: Theoretical Biases in Empirical

Procedures. Working Paper 14/1989, Department of Economics, McGill University, Montréal, pp. 1-24.

—––—–. 1992. Inflation as Restructuring. A Theoretical and Empirical Account of the U.S. Experience. Unpublished PhD Dissertation, Department of Economics, McGill University, Montréal.

—––—–. 2001. Regimes of Differential Accumulation: Mergers, Stagflation and the Logic of Globalization. Review of International Political Economy, 8 (2): pp. 226-274.

Nitzan, J. and Bichler, S., 2009a. Capital as Power: A Study of Order and Creorder. New York and London: Routledge.

—––—–. 2009b. Contours of Crisis III: Systemic Fear and Forward-Looking Finance. Dollars and Sense, June 12.

Singh, S., 1997. Fermat's Last Theorem. The Story of a Riddle that Confounded the World's Greatest Minds for 358 Years. London: Fourth Estate.

—––—–. 2004. Big Bang: The Most Important Scientific Discovery of All Time and Why You Need to Know About it. London and New York: Fourth Estate.

Sherman, H. J., 1985. Monopoly Capital vs. the Fundamentalists. In Resnick, S. and Wolff, R. (eds.) Rethinking Marxism: Struggles in Marxist Theory. Essays for Harry Magdoff and Paul Sweezy. Brooklyn, NY: Autonomedia, pp. 359-377.

Sorokin, V., 2011. Day of the Oprichnik. Trans. by J. Gambrell. New York: Farrar Straus and Giroux.

Stigler, G. J. and Kindahl, J. K., 1970. The Behavior of Industrial Prices. New York: National Bureau of Economic Research; distributed by Columbia University Press.

—––—–. 1973. Industrial Prices, as Administered by Dr. Means. The American Economic Review, 63 (4): pp. 717-721.


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Zeitlin, M., 1974. Corporate Ownership and Control: The Large Corporation and the Capitalist Class. American Journal of Sociology, 79 (5): pp. 1073-1119.

Shimshon BichlerShimshon BichlerShimshon BichlerShimshon Bichler and Jonathan NitzanJonathan NitzanJonathan NitzanJonathan Nitzan teach political economy at colleges and universities in Israel and at York University in Toronto, respectively. Most of their publications are freely available from The Bichler and Nitzan Archives (www.bnarchives.net).

Marx, Systemic Fear, and Capitalists’ Convictions, Kliman

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Marx, Systemic Fear, and Capitalists’ Convictions: A Reply to Bichler and

Nitzan

Andrew Kliman

Editors’ Note: In this final installment to the dialogue section, Kliman responds to some of the points raised by Bichler and Nitzan in their rejoinder.

Bichler and Nitzan Contra MarxBichler and Nitzan Contra MarxBichler and Nitzan Contra MarxBichler and Nitzan Contra Marx In Capital as Power, Shimshon Bichler and Jonathan Nitzan (B&N) argued at great length that Marx’s value theory is logically invalid and that the subsequent development of capitalism has undermined his logic. My paper (Kliman, 2011) demonstrated, painstakingly and point by point, that none of their specific charges hold water. Their rejoinder (Bichler and Nitzan, 2011) does not refute, or even try to refute, any of these demonstrations. They have proved unable to defend the charges they leveled against Marx’s value theory.

This failure has two main consequences. First, Marx is entitled to his theory. If B&N had actually shown that it is logically invalid, Marx’s theory would have been disqualified at the starting gate. A genuine demonstration of logical inconsistency is a demonstration that a theory in its existing state cannot explain things correctly. Thus, if B&N had been able to make any of their allegations of inconsistency stick, it would be pointless to turn to Marx’s value theory in its existing state as a source of possible explanations of how capitalism functions and malfunctions. But since B&N have proved unable to defend their allegations of inconsistency, Marx’s theory has not been disqualified. Let me stress again that “[n]one of this implies that Marx’s theoretical conclusions are necessarily correct. It does imply, however, that empirical investigation is needed in order to determine whether they are correct or not. There is no justification for disqualifying his theories a priori, on logical grounds” (Kliman, 2007, p. xiii).


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The other main consequence of B&N’s inability to defend their allegations is that their ‘capital as power’ theory cannot properly be presented as a logically valid corrective to Marx. The gist of B&N’s framework is that their own theory and its further development are needed, objectively, in order to correct Marx’s errors and provide a logically sound basis for the useful aspects of his work:

Is there a way out of [Marx’s] circularities and contradictions? In our view, the answer is yes––but not within the existing framework of political economy. …

What we need …is not a revision, but a radical change. We need to develop a new political economy based on new methods, new categories and new units. Our own notion of capital as power offers such a beginning. (Nitzan and Bichler, 2009, p. 144) [emphases altered]

Since B&N’s charges of circularity and contradiction have proven to be indefensible, this claim is untenable. There is no objective need for their theory. It is simply a theory that differs from Marx’s, not one that transcends his by overcoming its logical errors. B&N are just as entitled to their theory as Marx is entitled to his, but they are not entitled to legitimate the existence of their theory by delegitimating the existence of his.

In other words, if academic discourse were regulated by scientific considerations rather than by power relations, B&N’s theory would now have to stand on its own, uncoupled from the supposed need to correct Marx that they have invoked in order to justify its existence. And it would have to stand alongside Marx’s theory, not on its grave. To assess the relative merits of their theory and his, we would look at their relative success in explaining how capitalism functions and malfunctions, at the relative breadth of the phenomena each can potentially explain, and at the relative importance of those phenomena. For instance, in the wake of the financial crisis and Great Recession, we would consider whether it is more important to explain this breakdown in the reproduction of the system or whether it is more important to speculate about a breakdown in capitalists’ supposed ‘unconscious conviction’ that capitalism is eternal. And if we decided that the former subject is more important, we would consider the extent to which each theory is able to explain why the financial crisis was able to trigger such a deep slump and continuing malaise. This is clearly not the kind of “open-ended scientific debate” that B&N wish to have (2011, p. 112). They simply ignore my paper’s discussion of how Marx’s value theory helps to illuminate the long-term difficulties that led to the Great Recession and its ‘new normal’ aftermath. They also ignore my discussions of how his theory helps to explain struggles over intellectual property, the massive fall in computer prices, and what Alan Greenspan called the ‘loss of business pricing power’. Their rejoinder shows that


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they are unwilling to engage with Marx’s theory as an alternative, living theory, or to assess the relative explanatory power, scope, and importance of his theory and theirs.1 Having failed to disqualify his theory on logical grounds, they try to disqualify it by letting loose a torrent of stomach-turning invective against those who seek to understand and develop it. Although B&N are unable to defend their allegations that Marx’s value theory is logically invalid, they have not retracted the allegations or acknowledged that Marx is entitled to his theory. I find this extremely disturbing. For generations, Marx’s critics, including Marxists as well as non-Marxists, have excluded his value theory from the academy and ‘respectable’ intellectual discourse, and the myth that the theory is logically inconsistent is the principal pretext used to justify this suppression. By failing to retract their allegations and acknowledge that Marx is entitled to his theory, B&N’s rejoinder perpetuates the myth of inconsistency and legitimates the suppression of Marx’s theory. They should rectify this failure promptly. The manner in which B&N choose to relate to Marx’s work is not a minor or tangential issue. Their critique of Marx is a major element of Capital as Power, their allegations of logical error are the centerpiece of that critique, and they justify their ‘capital as power’ theory on the grounds that it is needed in order to correct Marx’s circularities and contradictions. To be sure, they attempt in their rejoinder to separate this ‘critique’ from the ‘gist’ of their work, complaining that “Kliman … is careful to ignore the gist of our framework, theory and findings: his main concern is to defend his own defence of Marx’s value theory” (ibid., p. 1113). In their book, however, B&N themselves emphasized that such a separation is untenable: “On the face of it, [the structure of this book] may seem to separate neatly our ‘critique’ of existing theories in the first three parts of the book from the ‘gist’ of our story in the last two. But … [s]ubstantively, there is no split in the book. The early parts of the book are crucial to the dialectical development of our argument” (Nitzan and Bichler, 2009, p. 10). Systemic FearSystemic FearSystemic FearSystemic Fear In their rejoinder, B&N claim that my paper criticized their concept of systemic fear for being “entirely subjective and therefore useless for a scientific inquiry” as well as “irrelevant and … meaningless” (p. 104). But I said nothing like this. I have nothing against subjective concepts.2 After all, as Marx recognized, the concept of value is subjective (see Kliman, 2007, p. 141, p. 151 n1). And I regard systemic fear as a perfectly meaningful and potentially relevant concept. What my paper criticized is something that B&N now acknowledge: they provided no valid “evidence that capitalists were gripped by systemic fear in the 1930s and 2000s” (p. 64) [emphasis added].


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Their rejoinder also fails to provide any such evidence. One problem is that the bulk of the rejoinder consists merely of what Fay (2011) has called “a long-winded effort to patch together some revised semblance of a hypothesis.” [emphasis added] This is an astute observation. Fay recognizes that the data analyzed in the rejoinder do not count as evidence that systemic fear prevailed in the 1930s and 2000s. Nor do they count as evidence that B&N’s ‘three criteria for systemic fear’ are in fact the (only) three conditions that must be present in order for systemic fear to prevail. Since these data were used to construct the revised systemic-fear hypothesis—B&N searched for three conditions that were all present during the 1930s and 2000s, but not during any other period—the same data cannot also function as evidence that supports the revised hypothesis. If this last point is not obvious, note that failure to accept it would allow me to:

(a) hypothesize that systemic fear prevailed between 1953 and 1973 and during that period alone;

(b) discover that the 1953–1973 period was the only one in which all of the following conditions held true:

(i) stock prices and current profits were strongly and positively correlated;

(ii) capitalism was in its so-called golden age; (iii) Brazil won the World Cup 60% of the time;

(c) declare that these conditions are the three criteria for systemic fear; and (d) confirm my hypothesis by discovering that the 1953–1973 period was the only

one in which the three criteria for systemic fear were present.

Another reason why the rejoinder fails to provide any evidence for B&N’s systemic-fear hypothesis is that, once again, they have drawn a conclusion that their own data seem to refute. In a footnote, they write, “during much of the period from the early 1950s to the early 1970s, the rates of change of equity prices and the rate of interest were negatively correlated [which] means that, during that period, the observed correlation between the rates of change of equity prices and current profits identified by Kliman may have been spurious” (p. 115, fn. 10). There are two things wrong with this statement. First, a negative correlation between equity prices and interest rates is the norm, and it cannot by itself produce a spurious correlation between equity prices and current profits. What can produce such a spurious correlation is a negative correlation between current profits and interest rates (together with a negative price-interest rate correlation).3 Second, the annual percentage changes in current profits and interest rates were not negatively correlated during the period in question. The correlation coefficient was +0.41 during the June 1953–August 1962 period and +0.10 during the August 1962–December 1973


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period.4 To test for spurious correlation in an additional and more robust manner, I ran ordinary-least-squares regressions of the annual percentage change in equity prices on the annual percentage changes in current profits and the interest rate. This procedure yields a measure of the correlation between current profits and equity prices that controls for, and thereby eliminates the influence of, changes in the interest rate. In order to exclude the ‘structural break’ of 1962–1963, the observations run from June 1953 through February 1962 and from April 1963 through December 1973. In both periods, the regression coefficients on current profits are positive and statistically significant at the 5% level,5 which means that these tests fail to confirm B&N’s conjecture that the positive correlations between current profits and equity prices are spurious. The above evidence suggests that that a positive and genuine (non-spurious) relationship between equity prices and current profits existed during capitalism’s ‘golden age.’ The existence of a similar relationship in the 1930s and 2000s therefore does not count as evidence that capitalists were gripped by systemic fear during these periods of crisis. Capitalists’ ConvictionsCapitalists’ ConvictionsCapitalists’ ConvictionsCapitalists’ Convictions Bichler and Nitzan’s (2010, p. 3) ‘Systemic Fear’ paper claimed that capitalists’ “conviction that the capitalization process itself will continue to rule and organize humanity, forever … is necessary for the existence of modern capitalism, at least in its present form, and the easiest way to demonstrate that necessity is to assume it away.” [emphasis added] I provided three distinct arguments as to why their alleged demonstration is fatally flawed. If even one of my arguments is correct, B&N’s demonstration fails, and their rejoinder fails to provide counter-arguments against two of my arguments.

My paper argued that “even if the rest of B&N’s ‘demonstration’ were sound, it would not prove that capitalists are normally guided by the conviction that capitalism is eternal. At least it wouldn’t prove this if we use the word ‘conviction’ in the normal way”—that is, without engaging in “unfalsifiable Freudian speculation” about capitalists’ “unconscious convictions” (p. 66). B&N’s rejoinder offers no response to this argument. At one point, they do write something about “tongue-twisting concepts and irrefutable Freudian conjectures” (p. 111), but in connection with the notion of capital as a historical Subject, not in connection with their alleged demonstration. In any case, their response to my point about ‘unfalsifiable Freudian speculation’ is a non-response: ‘We prefer to remain silent.’ So their demonstration fails. Secondly, in order for their demonstration to succeed, it must be true that “the


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fact that capitalists invest shows that they expect … that the value of their assets will grow” (Bichler and Nitzan, 2010, p. 3). My paper argued that this claim is false, because “some people buy shares of stock even if they don’t expect their prices to rise. A large enough … potential capital gain more than makes up for a low probability of success” (p. 65). In the opening paragraph of the ‘Towards Behavioural Marxism?’ section of their rejoinder, B&N restate my argument in a very inaccurate way, perhaps in order to ridicule it, but they offer no response to it. So their demonstration fails.6 B&N do respond to my remaining argument, but their responses are non-sequiturs. In order for their demonstration to succeed, it must be true that (a) if equities will be worthless at some point in the future, their current prices can only fall, not rise; and (b) if capitalists’ believed that equities will be worthless at some point in the future, they would not invest in them now. My paper argued that stock market experiments call both claims into question: “even though participants in the experiments are absolutely certain that the system (i.e., the experiment) will soon cease to exist and that the asset’s fundamental value is continually falling, share prices typically rise throughout much or most of the experiment … and the volume of investment in additional shares is typically heavy” (p. 66). B&N respond that “simulated stock market experiments [do not] tell us about the systemic confidence and fear of present-day capitalists” (p. 110). Of course not, but they do offer evidence which suggests that (a) and (b) might not be true.

B&N also respond that no laboratory experiment can simulate “what will happen to capitalism if capitalists become convinced that capitalisation is about to end” (p. 111) [emphasis added]. Of course not, but the experimental results do suggest that capitalists might invest in equities now even if they think that all equities will be worthless at some point in the future. It makes perfect sense to invest in equities now if that future point is far enough away (e.g., after the death of one’s great-great-grandchildren) and decent returns can be obtained in the meantime. So B&N’s demonstration fails. Notes Notes Notes Notes

1 It is no accident that B&N’s writings on the crisis have offered little, if any, explanation

of the underlying conditions that set the stage for the deep slump and continuing malaise. Having rejected the distinction between real and nominal variables (Nitzan and Bichler, 2009, pp. 30–33 and passim), they cannot distinguish real changes in profit, investment, and economic activity from changes that merely reflect variations in prices. Thus, they can only meaningfully analyse differences among firms’ rates of accumulation, not variations over time in the aggregate rate itself (Nitzan and Bichler, 2009, chap. 14). And so they discuss the crisis by offering us speculations about capitalists’ ‘unconscious convictions’.


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2 Unfalsifiable claims, such as the claim that capitalists are normally convinced that their

system is eternal—“consciously or not” (Bichler and Nitzan, 2010, p. 4)—are a wholly different matter.

3 Imagine that there is no causal connection between current profits and equity prices, while current profits happen to be negatively correlated with interest rates. If interest rates rise (fall), equity prices will tend to fall (rise) as a result. Since current profits happen to be negatively correlated with interest rates, by assumption, they too will fall (rise) as interest rates rise (fall). Since equity prices and current profits both fall (rise), they are positively correlated. But since there is no causal connection between them, by assumption, the correlation is spurious.

4 My interest rate variable is the constant-maturity rate on 10-year U.S. Treasury notes (GS10).

5 The coefficients are +0.52 and +0.26, the associated t-values are 4.08 and 2.30, and the degrees of freedom are 101 and 125.

6 Their version of my argument also seriously misrepresents its purpose. In their version, the purpose was to provide “a clear proof that the future of capitalism is irrelevant for capitalists.” The actual purpose was to show that “the fact that people invest does not mean that they normally expect capitalism to last forever.” Since the alleged demonstration is theirs, not mine, the burden of proof is on them, not me.

BibliographyBibliographyBibliographyBibliography Bichler, S. and Nitzan, J., 2010. Systemic Fear, Modern Finance and the Future of

Capitalism. Monograph: Jerusalem and Montreal (July), pp. 1-42. Available online at http://bnarchives.net/289/.

—––—–. 2011. Kliman on Systemic Fear: A Rejoinder. Journal of Critical Globalisation Studies, Issue 4: pp. 93-118.

Fay, P., 2011. Comment on ‘ ‘ ‘ ‘Reflections on Crisis, Fear and Behavioural Marxism’. lbo-talk Internet list, Feb. 24. Available at http://mailrepository.com/lbo-talk.lbo-talk.org/msg/3444451/.

Kliman, A., 2007. Reclaiming Marx’s “Capital”: A Refutation of the Myth of Inconsistency. Lanham, MD: Lexington Books.

—––—–. 2011. Value and Crisis: Bichler and Nitzan versus Marx, Journal of Critical Globalisation Studies, Issue 4: pp. 61-92.

Nitzan, J., and Bichler, S., 2009. Capital as Power: A Study of Order and Creorder. London and New York: Routledge.


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Andrew KlimanAndrew KlimanAndrew KlimanAndrew Kliman is a Professor of Economics at Pace University in New York. He is the author of Reclaiming Marx’s “Capital”: A Refutation of the Myth of Inconsistency. He has published extensively on crisis and recession, value theory and other topics. Much of his work is available at http://akliman.squarespace.com.

Egypt and the Failure of Realism, Hoover

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Egypt and the Failure of Realism

Joe Hoover

Recent upheavals in Tunisia, Egypt, Yemen and Libya have caught many by surprise as the order of things has proven protean in a way that official experts and conventional wisdom were largely blind to – reality, it seems, can be unruly. As revolution unfolded in Egypt there were many pleas for restraint, worries that political instability would spread, and among Western leaders a profound wariness of change that they feared would compromise their strategic interests. There was, in a word, an invocation of ‘realism’, intended to quell the earnestness of fast moving and profound change. The failure of realism as a response to recent events in Egypt is revealed through the policies invoked by state representatives, commentators and academics, which confirmed the given reality of world politics but proved wanting ethically and heuristically, as those willing to support the brutal rule of Hosni Mubarak and unable to comprehend the power of the protesters proved to be on the wrong side of history. These banal appeals to realism, however, do lead to a broader insight, revealing that such appeals in world politics are actually calls to preserve what I term ‘the reality of dominance’, which invokes the inevitability of the existing order of things to discount the reality of resistance to that order – which calls for transformation over preservation.

In early February, before Mubarak’s ouster, the Egyptian revolution was in doubt. It was still only a fragile possibility.1 The protestors and Mubarak’s goons waited it out in Tahrir Square while the army stood watch. The success of the revolution would be determined by whose will was most resilient. Would the threat of increasing violence discourage the protestors and give Mubarak the space he needed to solidify his power till next year and thus avoid the changes the Egyptian people were demanding? Or would the protestors’ resolve hold, making clear to Mubarak that he could no longer hope to rule Egypt? As protestors faced violence, exhaustion and deprivation the prospect of compromise must have seemed more desirable as the hardships mounted. The time was ripe for expressions of support from key leaders, which could buttress the resolve of the protestors and pressure the Mubarak regime. It was much easier for Mubarak to play for time from the presidential palace than for protesters in the streets, yet far too many of the men and women able to make a difference did not use their voices to share in


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democracy’s street-choir – instead their voices echoed in the halls of disreputable power. The Obama administration has the greatest culpability in this, as they not only had the capability to undermine Mubarak, but their failure to do so revealed the hypocrisy of US support for democracy and human rights in the region. The events in Egypt demonstrated that President Barak Obama has mastered the dark art of evasive support, leaving no doubt that he fully supported Egyptian democracy, as long as it did not change too much, too fast, and, most importantly, as long as US strategic interests were not compromised.

The administration’s restraint is also driven by the fact that, for the United States, dealing with an Egypt without Mr. Mubarak would be difficult at best, and downright scary at worst. For 30 years, his government has been a pillar of American foreign policy in a volatile region. (Sanger & Cooper, 2011)

Predictably, Vice President Joe Biden made the point with less tact, but perhaps more truth, when he expressed his insensibility to the crimes of Mubarak against his own people:

Asked if he would characterize Mubarak as a dictator Biden responded: “Mubarak has been an ally of ours in a number of things. And he’s been very responsible on, relative to geopolitical interest in the region, the Middle East peace efforts; the actions Egypt has taken relative to normalizing relationship with – with Israel. … I would not refer to him as a dictator.” (Murphy, 2011)

Clearly regional stability is the key rhetorical trope, which justified turning a blind eye to the brutality of Mubarak’s regime and the lack of democracy in Egypt. Perhaps no issue is more important in defining what “regional stability” means for the US than the issue of Israeli security. Binyamin Netanyahu clearly exerted pressure on the US, trying to limit the support they gave to democratic reforms in Egypt.

The prime minister, Binyamin Netanyahu, reportedly ordered his cabinet to refrain from commenting publicly on the unfolding drama, saying only that the treaty must be maintained. But as Haaretz reported today, the government is seeking to convince the US and EU to curb their criticism of Hosni Mubarak to preserve stability in the region, even as Washington and its allies signal their wish for an “orderly transition” which the incumbent almost certainly cannot ignore. (Black, 2011)

Despite the homilies on human rights and democratic freedom delivered by Mr Obama


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to the Egyptians (Wilson and Warrick, 2011), it was a predictable set of concerns that set the agenda for the US response to the revolution taking place in Cairo and throughout Egypt – the imperative was to maintain order, control those changes that proved inevitable and ensure that the political and economic interests of dominant states were preserved. The representative for the US State Department, PJ Crowley, who was interviewed by Al Jazeera (US urges reform in Egypt, 2011), performed a practiced dance to the theme of restraint, gradual reform and false equivalencies – as if protesters and the agents of Mubarak’s “coercive apparatus” could be compared2 – as he made clear that the suffering of the Egyptian people and their desire for democracy would not undermine US support for the Mubarak regime.

We respect what Egypt contributes to the region. It is a stabilising force; it has made its own peace with Israel and is pursuing normal relations with Israel. We think that’s important; we think that’s a model that the region should adopt broadly speaking. At the same time, we recognise that Egypt, Tunisia, other countries, do need to reform, they do need to respond to the needs of their people and we encourage that reform and we are contributing across the region to that reform. (US urges reform in Egypt, 2011)

This routine, we can assume, was an exercise in managing expectations and making US interests clear – democratic revolution should not be allowed to upset regional stability, nor should the suffering of the protestors be allowed to cloud “our” judgment on what really matters – or, more bluntly, if democratic dreams threatened the interests of the US, then so much the worse for those beautiful revolutionary dreams.

As Tony Blair joined the discussion he not only underlined Biden’s scepticism regarding whether Mubarak was a dictator, claiming he was ‘immensely courageous and a force for good’ (McGreal, 2011), but he also clearly articulated the managerial worldview of a man who has learned to think of himself as a member of a privileged group of clear-eyed realists whose responsibility it is to control all the things of world politics.

Blair argued that the region has unique problems that make political change different from the democratic revolutions in Eastern Europe. He said the principal issue was the presence of Islamist parties that he fears will use democracy to gain power and then undermine the freedoms people seek... Blair said he did not doubt that change was coming to Egypt. “People want a different system of government. They’re going to get it. The question is what emerges from that. In particular I think the key challenge for us is how do we help partner this process of change and help manage it in such a way that what comes out of it


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is open minded, fair, democratic government.” (McGreal, 2011)

Not only does this response implicitly trade in the notion that Arab countries will not be able to handle democracy without Western tutelage, it also trades in a degraded notion of realism, in which serious men act as if their apologia for imperial arrogance is sagacious wisdom gleaned from long experience. The Egyptian protestors will be allowed their democracy, but their democracy will be managed and defined by the powerful, so as not to disturb the order of things or run afoul of the realities of world politics.

Yet this statist and status quo line is actually divorced from reality, or at least the reality of the protesters battling their corrupt leaders in the streets of Cairo, Alexandria and cities throughout Egypt – it reflects the reality of dominance. Realism, as Western leaders express it, is little more than an attempt to limit the happenings of world politics to their own constrained vision, a myopic self-interest that fails to take the measure of the cruelty it justifies or realise its own analytical failings. There is an obvious danger contained in the argument I have made thus far – it is all too easy to equate the political calculations of state representatives with a realist theory of International Relations. A committed realist may well respond by suggesting that the problem highlighted by the US response to the Egyptian revolution is not realism in foreign policy but the shoddy analysis and muddled thinking of these all too human leaders of women and men. And I need not speculate about this potential realist, as Stephen Walt (2011) has already made the argument for getting rid of Mubarak. Making the case that a consistent realist policy, focused on the strategic self-interest of involved states, should have led the US and Israel to support a democratic Egypt and the ouster of Mr Mubarak – all the while, of course focusing on how such a transition benefits dominant states and must be properly managed to ensure the stability of the international system – Walt says:

Other things being equal, states are better off if they don’t have to worry about their allies’ internal stability, and if an allied government enjoys considerable support among its population. An ally that is internally divided, whose government is corrupt or illegitimate, or that is disliked by lots of other countries is ipso facto less valuable than one whose population is unified, whose government is legitimate, and that enjoys lots of international support. For this reason, even a staunch realist would prefer allies that were neither internally fragile nor international pariahs, while recognizing that sometimes you have to work with what you have.

While there is an admirable consistency and clarity to this argument, it serves to highlight the failure of realism as a theoretical framing. It is not a problem of analysis but a problem


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of understanding. Whether we are looking to Walt’s sober instrumentalism, or the more mundane realism that the Obama administration embraced while the outcome of rebellion in Egypt was still in doubt, the appeal is only to the reality of dominance, which preserves stability and order ahead of and, if necessary, at the cost of the pains and dreams of the protestors – ignoring the reality of resistance. Despite its pretensions, realism, as an orientation and a theory, does not grant special access to some indisputable or unchanging reality, rather it invokes reality for political ends.

My criticism does not apply only to those writers who self-identify as realists, but to a brand of statist thinking that justifies the narrowness of its analysis, the instrumentalisation of moral concerns, and its principled elevation of order above all other values in the name of the undeniable realities of international politics.3 The fundamental claim shared by those who privilege state interests and the preservation of order is that international politics demands such qualities of us. Historically, this realist position has been contrasted with putatively utopian views (whether internationalist, idealist, socialist, or cosmopolitan) that cannot see the world of international politics for what it is, which fail to see that focusing on state interest and perpetual conflict is not immoral but the only sober response to the imperatives of the world – and because of that the moral policy demanded of states (Cozette, 2008). What goes unchallenged is exactly which reality realists are better able to grasp. The too-often-unspoken truth is that they embrace the reality of powerful actors, of those seeking to dominate, control, exploit and to render social reality into the means for their various ends. Realism, as the dominant theory in International Relations, requires a denial of this power-fetishism; its historical role as counsel to imperial ambition (Long and Schmidt, 2005) is transformed into an account of the necessary (and at times tragic) responsiveness states must have to the constraints of political reality (Mearsheimer, 2001). This act of elision is most clearly seen in realists’ adoption of Niccolò Machiavelli as a patron saint, as the 15th century author is wrenched from the complex context in which he wrote his ironic and complex counsel for the new Prince of renaissance Florence (Strauss, 1978, pp. 54-84), in order to provide insight into the timeless nature of conflict in international politics (Fischer, 1996, pp. 248-279). Without considering the revolutionary account of the virtuous political community articulated by Machiavelli (Berlin, 1997), which celebrated a vigorous republicanism that denied the universal Christian morality of his time and necessitated a space outside of political community that was not constrained by ethical imperatives (Walker, 1993), the realist tradition in International Relations has appropriated this antagonistic and hierarchical vision as a scientific theory. No account of the inherent struggle for power in international politics is more influential (or ungrounded) than that of Hans Morgenthau, who simply asserted a


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psychological drive to justify the inescapable reality of dominance:

The tendency to dominate, in particular, is an element of all human associations, from the family through fraternal and professional associations and local political organizations, to the state. On the family level, the typical conflict between the mother-in-law and her child’s spouse is in its essence a struggle for power, the defense of an established power position against the attempt to establish a new one. As such it foreshadows the conflict on the international scene between the policies of the status quo and the policies of imperialism. (Morgenthau, 1985, p. 39)

While the reason that states face this imperative to dominate and struggle has become more sophisticated, whether explained psychologically or structurally (Waltz, 1979; Molloy, 2006), it remains a view from a very particular viewpoint, from the perspective of established and conservative power – as it gives its (sometimes ambiguous) blessing to the given reality of dominance – no matter how fervently this politics of preservation is denied.

In politics, the belief that certain facts are unalterable or certain trends irresistible commonly reflects a lack of desire or lack of interest to change or resist them. The impossibility of being a consistent and thorough-going realist is one of the most certain and most curious lessons of political science. Consistent realism excludes four things which appear to be essential ingredients of all effective political thinking: a finite goal, an emotional appeal, a right of moral judgment and a ground for action. (Carr, 1964, p. 89)

Despite the fact that Carr is consistently upheld as a paradigmatic realist (Wilson, 2000), his critique gets to the nub of the matter. When realists claim that utopians refuse to engage with the reality of the world they are themselves tilting at windmills. No one is anti-real; the problem with statist realism is that it takes a particular world as the world that is and, without acknowledging the fact, gives that world its blessing, judging the world of dominance to be a world we should accept.4

At its base the utopian impulse is a belief in the necessity of a new reality, not a dreamy idealism that cannot countenance the relations and structures of power that define international politics. This belief in the necessity of a new reality requires identification with a reality other than that of dominance in two ways. First, to endeavour to change the world is to believe that reality can be changed, that the order of things is protean – it is a social ontology that is incompatible with realism’s focus on merely cyclical change and the persistence of basic drives and structures. This is what the


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standard realist critique rejects in utopian thinking, but utopianism also begins from a different reality. The utopian impulse draws its inspiration from dissatisfaction with the reality of dominance, judging it to be wanting. This leads to the identification of a reality of resistance, which looks to conditions of deprivation, uncertainty, and danger to justify opposition and coordinated efforts for social change. This critical and active approach to world politics is not, however, detached from the world, is not blind to reality – at least not necessarily – it is opposed to the reality of dominance, judges the conditions of the world to be wanting, and rejects the counsel of powerful actors to have patience, to manage transitions and not upset the order of things too much. The calls for Egyptian protesters or for those expressing solidarity to be realistic were not calls to be prudential, accurate and thorough, but to respect the boundaries of the reality of dominance, to avoid knocking out the walls or pulling up the flooring in the house that power built. Robert Fisk (2011) is no less realistic in his analysis of the US response to Egypt, he just has the good sense to know that the situation in Egypt is disgraceful and the chance to help those women and men who bravely faced down the batons, knives and shields of state-agents should have been embraced because it would help to create a better reality. Commenting on Obama’s handling of the situation he says:

Had he rallied to the kind of democracy he preached here in Cairo six months after his investiture, had he called for the departure of this third-rate dictator a few days ago, the crowds would have been carrying US as well as Egyptian flags, and Washington would have done the impossible: it would have transformed the now familiar hatred of America (Afghanistan, Iraq, the “war on terror”, etc) into the more benign relationship which the US enjoyed in the balmy 1920s and 1930s and, indeed, despite its support for the creation of Israel, into the warmth that existed between Arab and American into the 1960s. But no. All this was squandered in just seven days of weakness and cowardice in Washington – a gutlessness so at odds with the courage of the millions of Egyptians who tried to do what we in the West always demanded of them: to turn their dust-bowl dictatorships into democracies. They supported democracy. We supported “stability”, “moderation”, “restraint”, “firm” leadership (Saddam Hussein-lite) soft “reform” and obedient Muslims. This failure of moral leadership in the West – under the false fear of “Islamisation” – may prove to be one of the greatest tragedies of the modern Middle East. (Fisk, 2011)

Realists have no exclusive claim to the analysis of power, no special providence over


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prudence, and the statist claim to represent reality is never its own justification. Until we study world politics from the perspective of those dominated at least as much as from the perspective of those who dominate, our study will remain a course book for statist and imperial management. The rebellion in Egypt was an opportunity for the Obama administration to help bring about a momentous change in the dynamics of world politics – not for a political victory, but to make a contribution to the transformation of a problematic reality into a better one. Does anything justify his failure to act? I don’t think so. What explains this failure? I would suggest, at least in part, that it stems from the difficulty of escaping the reality of dominance – to see beyond the framing that prioritises state interests, stability and order as bulwarks against the constant threat of international anarchy, and which sanctified indifference to the suffering and aspirations of the Egyptian protestors among US and other western political elites.

The hypocrisy of western liberals is breathtaking: they publicly supported democracy, and now, when the people revolt against the tyrants on behalf of secular freedom and justice, not on behalf of religion, they are all deeply concerned. Why concern, why not joy that freedom is given a chance? Today, more than ever, Mao Zedong’s old motto is pertinent: “There is great chaos under heaven – the situation is excellent.” (Žižek, 2011)

The Egyptian people were able to face down Mubarak’s apparatus of violence and make a start on putting an end to “corruption, injustice, poverty, and unemployment” through their effort to bring about a better reality with more equality and democracy – to support the state or the cause of order over those vulnerable bodies and brave people, even if it is with reticence, is not realism, but moral incompetence. NotesNotesNotesNotes

1 For a useful timeline of recent events in the North Africa and the Middle East see Blight

& Pulham (2011). 2 Crowley repeatedly calls for restraint on both sides, despite the obvious fact that it was

Mubarak’s various forces – army, police and hired thugs – that were carrying out the most serious violence. Further demonstrating the administration’s unwillingness to condemn Mubarak, Crowley indicates that the US state department’s key concern was the blocking of Facebook and Twitter, rather than security services firing into the crowds with rubber-coated bullets and the illegal imprisonment of protestors – and of course completely missing the economic hardship and deprivation that were central to instigating the protests.


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3 In International Relations, those who identify as realists are more accurately described

as state-centric, pessimistic, convinced of the necessity of separating political analysis from morality and primarily concerned with conflict. The particular aspect of realism I am critical of here is actually shared by most mainstream figures in International Relations who focus on the reality experienced by political and other social elites; this would include contemporary liberal-institutionalism, classical and neo-realism and the English School, particularly those identified as “pluralists”.

4 The acceptance of the reality of dominance is, however, complex – as often as not

reflecting resignation rather than an embrace of hegemonic or imperial ambition. Morgenthau, in particular, has been singled out in recent years as a realist with a critical streak that who sought to preserve an ethical element to International Relations scholarship – see Williams (2004).

BibliographyBibliographyBibliographyBibliography Berlin, I., 1997. The Originality of Machiavelli. In Berlin, I., 1997. Against the Current:

Essays in the History of Ideas. Hardy, H. ed. London: Pimlico Publishing. Black, I., 2011. Egypt protests: Israel fears unrest may threaten peace treaty. The

Guardian Online, [internet] 31 January. Available at: http://www.guardian.co.uk/world/2011/jan/31/israel-egypt-mubarak-peace-treaty-fears [Accessed 7 April 2011].

Blight, G. & Pulham, S., 2011. Arab Spring: an interactive timeline of Middle East protests. The Guardian Online, [internet] 5 April. Available at: http://www.guardian.co.uk/world/interactive/2011/mar/22/middle-east-protest-interactive-timeline?INTCMP=SRCH [Accessed 7 April 2011].

Cozette, M., 2008. What Lies Ahead: Classical Realism on the Future of International Relations. International Studies Review, 10(4), pp. 667-679.

Fischer, M., 1996. Machiavelli’s Theory of Foreign Politics.” In Frankel, B., 1996. Roots of Realism. London: Frank Cass Publishers.

Fisk, R., 2011. Secular and devout. Rich and poor. They marched together with one goal. The Independent Online, [internet] 2 February. Available at: http://www.independent.co.uk/opinion/commentators/fisk/robert-fisk-secular-and-devout-rich-and-poor-they-marched-together-with-one-goal-2201504.html [Accessed 7 April 2011].

Long, D. & Schmidt, B., 2005. Imperialism and Internationalism in the Discipline of International Relations. Albany, NY: State University of New York Press.

McGreal, C., 2011. Tony Blair: Mubarak is ‘immensely courageous and a force for good’.


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The Guardian Online, [internet] 2 February. Available at: http://www.guardian.co.uk/world/2011/feb/02/tony-blair-mubarak-courageous-force-for-good-egypt?CMP=twt_fd [Accessed 7 April 2011].

Mearsheimer, J., 2001. The Tragedy of Great Power Politics. New York, NY and London: W.W. Norton & Company.

Molloy, S., 2006. The Hidden History of Realism. A Genealogy of Power Politics. Basingstoke: Palgrave Macmillan.

Morgenthau, H., 1985. Politics Among Nations. The Struggle for Power and Peace. New York, NY: Alfred A. Knopf.

Murphy, D., 20111. Joe Biden says Egypt’s Mubarak no dictator, he shouldn’t step down... The Christian Science Monitor Online, [internet] 27 January. Available at: http://www.csmonitor.com/World/Backchannels/2011/0127/Joe-Biden-says-Egypt-s-Mubarak-no-dictator-he-shouldn-t-step-down [Accessed 7 April 2011].

Sanger, D. and Cooper, H., 2011. Obama Presses for Change but Not a New Face at the Top. New York Times Online, [internet] 29 January. Available at: http://www.nytimes.com/2011/01/30/world/middleeast/30diplo.html?_r=2&ref=global-home [Accessed 7 April 2011].

Strauss, L., 1978. Thoughts on Machiavelli. Chicago, IL: University of Chicago Press. US urges reform in Egypt, 2011. Al Jazeera English [online video] 26 January. Available

at: http://www.youtube.com/watch?v=pmEcQMwprIo [Accessed 7 April 2011].

Walker, R., 1993. Inside/Outside: International Relations as Political Theory. Cambridge: Cambridge University Press.

Walt, S., 2011. A realist policy for Egypt. Foreign Policy, [online] 31 January 2011. Available at: http://walt.foreignpolicy.com/posts/2011/01/31/a_realist_policy_for_egypt [Accessed 7 April 2011].

Waltz, K., 1979. Theory of International Politics. Boston, MA: McGraw-Hill Companies. Williams, M., 2004. Why Ideas Matter in International Relations: Hans Morgenthau,

Classical Realism, and the Moral Construction of Power Politics. International Organization, 58(4), pp. 633-665.

Wilson, P., 2000. E.H. Carr: the revolutionist’s realist. The Global Site [online]. Available at: http://www.theglobalsite.ac.uk/press/012wilson.htm [Accessed 7 April 2011].

Wilson, S. & Warrick, J., 2011. As Arabs protest, U.S. speaks up. The Washington Post Online, [internet] 27 January. Available at: http://www.washingtonpost.com/wp-dyn/content/article/2011/01/26/AR2011012608075.html [Accessed 7


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April 2011]. Žižek, S., 2011. Why fear the Arab revolutionary spirit? The Guardian Online, [internet]

1 February. Available at: http://www.guardian.co.uk/commentisfree/2011/feb/01/egypt-tunisia-revolt [Accessed 7 April 2011].

Joe HooverJoe HooverJoe HooverJoe Hoover is a Fellow in the International Relations Department at the LSE. He is PhD candidate at the LSE and his doctoral work focuses on the role of human rights in world politics, developing a pluralist account of human rights that draws on theories of agonistic democracy and pragmatist ethics. His current research interests include the use of human rights by social movements, the politics of international criminal law and the nature of ethical judgment in world politics. His work has been published in Human Rights Review, Millennium: Journal of International Studies and International Affairs; he has also published an edited volume (co-edited with Meera Sabaratnam and Laust Schouenborg), Interrogating Democracy in World Politics (Routledge, 2011). He blogs at http://thedisorderofthings.wordpress.com/.


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Political Semantics of the Arab Revolts/Uprisings/Riots/ Insurrections/Revolutions

Nathan Coombs

Ever since the outbreak of the Arab revolts/uprisings/riots/ insurrections/revolutions, the question of which of these terms best describe recent events in Tunisia, Egypt, Libya, and now Bahrain, Yemen, and Syria, has formed the fulcrum for a deeper political rift reflecting the unconsolidated ideological nature of early 21st century politics. At stake in whether we consider, say, the popularly forced ousting of President Mubarak in Egypt as a revolution is an interconnected set of strategic, ideological and conceptual questions. Of all the aforementioned terms the deployment of ‘revolution’ to describe these changes sharpens these questions to the point of separating erstwhile allies, bringing to the surface deep disagreements that cannot be suppressed in the actuality of practice. For example, even whilst not hesitating to affirm unconditional support for the Tunisian events, French philosopher Alain Badiou’s (2011) description of them as “riots” provoked his former student, Mehdi Belhaj Kacem, to launch the following tirade against the intellectual figures he sees as the arch-provocateurs of the Western “extreme-left”:

It’s obvious that Badiou and Žižek … know absolutely nothing about the situation, although, in Badiou’s case, it’s truly spectacular: almost like Sarkozy he manages to talk about the Tunisian revolution as if it were no more than some ‘riots’. (Kacem, 2011)

In a further deepening of the divide it transpires that it is not just Badiou’s ignorance that is condemned by Kacem; rather, it is Badiou’s fidelity to the Marxist-Leninist heritage of the 20th century, which sought to transcend the formal-freedoms of liberty under capitalism to realise communism. So Kacem also adds:

I’d been wondering for years if it wasn’t necessary quite simply to forget nearly all of twentieth-century politics. That is, to forget the failure of Leninism and its deep causes.

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With the insistence on the term ‘revolution’, and in attaching it to Tunisia 2011, comes a concomitant demand for the erasure of the 20th century’s revolutionary sequence. The meaning of revolution today therefore becomes a potentially explosive question.

But why exactly is the term ‘revolution’ so politically-charged in comparison to others such as ‘revolt’, ‘uprising’, ‘riot’ or ‘insurrection’? Let us propose that it is because of all the above terms, ‘revolution’ is the one that implies the deepest content. It does not simply describe mass political actions, crowds on the street, or governments falling. Instead, it announces an affirmation of the systematic overhaul of existing socio-economic conditions, within which the popular mobilisation plays an essential role even while it remains insufficient to represent the overhaul itself (this, at least, is the French revolutionary and Marxist conception—and even non-Marxist revolutionaries would like to maintain its potency of implication). Thus, the question moves. Once the innocuous language of ‘revolts/uprisings/riots/insurrections’ is delineated from the more affective term ‘revolution’, the ideological divide between the two vocabularies becomes an expression of the hermeneutic claim over ‘revolution’, which is necessarily bound up with the continuities and ruptures of the 20th century’s revolutionary and anti-revolutionary sequences.

The aim of this theoretical commentary is to unpack the subjective core of this matter by way of an extrapolation on the thought of Alain Badiou, whose philosophy of the event would seem ideally placed to provide theoretical rigour here. We proceed in three parts. The first of these underlines the inadequacy of the sociological literature on this topic, pointing out how it has occluded the role of political subjectivity in attaching content to the term ‘revolution’. The second part then goes on to formalise the subjective splits that pertain to the word ‘revolution’, making use of what Lacan and Badiou call ‘mathemes’. Finally, the third part uses this discussion to draw some conclusions with regard to recent events in the Middle East and North Africa Sociological (unSociological (unSociological (unSociological (un----) grounding) grounding) grounding) grounding What is revolution? Such a simple question, but one that unleashes an array of entangled theoretical considerations. On the one hand, it is not adequate to seek to determine the nature of this nomination solely through its invariant characteristics like masses on the streets, governments falling, or new leaders rising to power. All these are ultimately too ambiguous to serve as anything more than the loosest schematic, which then falls apart with the entrance of active subjectivity. For a Marxist, if the bourgeoisie remain in power, this negates any procedural semblance of a revolution. For a liberal democrat, the survival of cliques from the old nomenclature deflates the democratic revolution. Whichever way it


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is examined, on closer inspection there is no single set of characteristics that will serve to unite all around a common content. On the other hand, neither is it satisfying to sophistically divide up revolution to fit individual preferences and leave the matter there—a ‘you have your revolution, and I’ll have mine’ approach. What is rather needed is an investigation into the conditions of possibility for nominating a political event as a revolution.

To do this we firstly have to differentiate our concept of revolution from the academic typologies produced by the likes of Samuel Huntington and Theka Skocpol (see Goldstone, 2001 for a broad comparative overview of all these conventional sociological approaches). Revolution, I insist, cannot be defined in a manner consistent with these forms of social science. The notion is contradictory; we would have to accept the idea of a static social world that can be measured, tested and made amenable to prediction and forecasting. Hence, our first Badiouian axiom regarding revolutions is that the complete social overhaul indicated by the word cannot be fully predicted: a revolution relies on the introduction of novelty that reconfigures the sense of what is possible. Following Badiou’s conception of an event, despite all the associations we might have with revolution—say in the case of the French Revolution: the storming of the Bastille, the Terror, and so forth—these terms cannot define ‘revolution’ in its entirety, for if they were to occur again (with no new element added) they would not compose revolution, but just repetition (or a sanitised historical recreation). Social science discourse has a blind spot for precisely this necessary change in content. And this is where Badiou’s idea of the event comes into its own. Instead of presenting the idea of the event as an abstraction, he conceives it as a subtraction, and likewise for the subjective process of affirming an event. The essential difference can be put as follows: the revolution conceived of by social science is one based on the accumulation of knowledge of the phenomenon filed under the signifier ‘revolution’, whereas for Badiou the event—in an ambiguous mathematico-epistemological register—is the occurrence of the void: the empty set of inconsistency asserting itself as a momentary, vanishing, partitive excess over belonging (see Badiou, 2006, meditations 16-20, pp. 173-211). Or, dropping the quasi set-theoretic language, the difference is that Badiou’s event occurs and recedes as quickly as it happens, leaving only an indelible mark on those subjects given the choice to affirm it and see through its consequences to the end. It disrupts the regime of knowledge with an irreducible novelty.

But at the same time, if we want to follow Badiou, contra sociology, all the way down this line of thought, we need to insist on keeping event and revolution as separate terms, despite the similar way in which they are conceived. Significant in this regard is the fact that Alain Badiou (2005) and former comrade, Sylvain Lazarus (2007), consider ‘revolution’ an exhausted term in the context of the contemporary political impasse. Yet since Badiou has marked a number of revolutions as key examples of events (the French Revolution, the Chinese Cultural revolution, etc.), this has led to a conflation of


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‘revolution’ with ‘event’ in some readings of his philosophy. Most seriously, this confusion resulted in Toula Nicolapoulos and George Vassilacopolous (2006) charging Badiou with infidelity to the retreat of the political event; by which they mean Badiou romanticises the event in bad faith, knowing full well the implications of the end of the global, revolutionary movement in the late 1970s. To untangle this claim one needs to be attentive to the fact that as tempting as it might be to draw a one-to-one correspondence between the term ‘revolution’ and ‘event’–even if what is and is not a revolution is defined according to criteria in line with Badiou’s idea of the event – they still do not match precisely. It is worth clarifying this relationship in more depth, taking Badiou beyond Badiou. The meaning of ‘revolution’ split in twoThe meaning of ‘revolution’ split in twoThe meaning of ‘revolution’ split in twoThe meaning of ‘revolution’ split in two Let us first mark the most crucial difference: namely, that the term ‘event’ operates as an idea, whereas a revolution, on the other hand, consists of a concrete set of factual occurrences. To take an archetypal example, in the case of the Russian revolution, the rupture arguably spans from February 1917 to the end of the Civil War in 1921. One should not consider this period itself as a single event, though, even if we could consider it as one revolution. Different subjectivities have always named events at different sites in this single revolutionary sequence:

• The February revolution: which all can affirm, except the extreme reactive figure of the recalcitrant monarchist;

• The Bolshevik October seizure of power: the political Fall, according to liberals;

• The dissolution of the Soviets: for left-communists, the Bolshevik’s first counter revolutionary action; or

• The extinguishing of the Kronstadt rebellion in 1921: for anarchists, further demonstrating the necessity of resistance to the idea of the dictatorship of the proletariat and transitional socialism.

The splits issuing from the events within the Revolution led to the event’s promulgation through the loyalties of sects to the possibilities of the ruptures within the revolution. Since there had never been a successful communist revolution in history before (excluding the short lived Paris Commune), there was no textbook to follow, no obviously right or wrong answers even for those strictly adhering to the Marxist orthodoxy of the time. The full force of the undecideable made its presence felt.

In rendering the possibility for splits like these into formal language, we have to go beyond Badiou to make the distinction that a revolution has to be both a revolution (a term of itself, much the same as how Badiou constructs the matheme of the event), and


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also must contain at least one event thought separately from the revolution itself. This leads to an extremely simple matheme for revolution, (1), which for simplicity’s sake is presented as a formalisation of a revolution containing a single event for the subjects who affirm an event within in:

(1) Rx’ = {Rx, ex}

(2) ex = {x ∈ X, ex} (Badiou, 2006, p. 204) (3) Rx = { (∑ Ry, Rz …), X }

Matheme (1) indicates that R (revolution thought as a loosely determined ahistorical invariant—the masses on the street bringing down government, for example), given a determinate site Rx is coupled with an event ex, leading to a revolution necessarily containing novelty Rx’— i.e. a revolution has to be both a revolution and contain an event; the axiom for those who subjectivate themselves to the 20th century’s sequence. Rx’ is irreducible to what is known of revolutions past. This novelty is contained in Badiou’s matheme of the event (2), where an event is both a term of itself and contains and evental site X. Finally, the third matheme (3) determines Rx as a revolution only insofar as it presents an iteration of other revolutions, the sequence that gives sense to its terms. So the Russian revolution would be determined insofar as it repeats certain traits of earlier revolutions (∑ Ry, Rz …), which in turn repeat historical revolutions preceding them.

For those who never subjectivated themselves to the Marxist revolutionary sequence of the 20th century, revolution (3) contains only the evental site X, and the term ‘revolution’ Rx simply describes this historical repetition of the accumulated traits observed in past revolutions (∑ Ry, Rz …). Consequently, in this conception of revolution we have no novelty, created by ex and to be affirmed by a subject leading to Rx’. Whereas revolution for subjects within the event horizon of the 20th century’s revolutionary sequence (1) is denoted as Rx’ to emphasise the necessary novelty introduced through the event, for non-subjects (social scientists of revolution, say) Rx denotes that revolution only need couple knowledge of past revolutions with a specific site. Or to render into plain English: for a non-subject, a specific revolution Rx is solely the sum of what is known of revolutions past framing the contemporary evental site X. This expresses particularly well non-subjects’ inability to perceive anything more than contingent spatial and temporal variants in each revolution, and also the social science methodology, which conceives revolution by cumulatively adding the features of each past revolution to just modify the definition, controlling it within the encyclopaedic regime of knowledge. It gives no indication of what classes a revolution as a revolution other than it bearing similarities to past revolutions, resulting in an ever-wider array of definitions by which ‘revolutions’ may fit the criteria of equivalence as time goes on.

Theda Skocpol faced this problem in the late 1970s, when she was forced to


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invent new categories to divide the term (political vs. social revolutions) in order to police its growing ubiquity and indeterminacy. It was her subject position as expressed through social science discourse that necessitated splitting the set as it grew ever larger. But still, by trying to contain revolution within this framework, the proliferation Skocpol sought to curtail continued unabated as “researchers sought to apply the structural theory of revolution to an increasingly diverse set of cases,” with the result that: “Two recent surveys of revolution… list literally hundreds of events as “revolutionary” in character.” (Goldstone, 2001, p.142) And adding an ideological twist to boot: “whereas the “great revolutions” had all led fairly directly to populist dictatorship and civil wars, a number of the more recent revolutions—including that of the Philippines, the revolutionary struggle in South Africa, and several of the anticommunist revolutions of the Soviet Union and Eastern Europe—seemed to offer a new model in which the revolutionary collapse of the old regime was coupled with a relatively non-violent transition to democracy” (ibid., p. 141).

What does this formal theorisation of ‘revolution’ reveal? It demonstrates that if revolution is perceived to have reached an end, we need to take that not literally to mean that there are no longer any revolutions, as in the phenomena of an act of a revolutionary uprising, or the toppling of a government. It is rather that once revolutions no longer take place within the sequence of Marxism, or in the context of any new sequence, the term collapses to its non-subjective definien. As Lazarus (2007, pp. 262-263) concludes: “Revolution… belongs as a category to the historicism that is fuelled by both defunct socialism and parliamentarianism,” because, “historicism keeps a place for the word ‘revolution’ ... in post-socialist parliamentarianism following the fall of the Berlin Wall.”

We are now in a position to understand the relation of ‘Marxism’ to ‘revolution’ and to ‘event’. If Marxism was the sequence which created an event horizon dividing subjects and non-subjects across the 20th century, it is only from a position subjectively inside that event horizon that we can talk of a ‘last revolution’—as Badiou, a Maoist, considers the Chinese Cultural Revolution. Only as part of that sequence does his theory of the event make any sense. Take away revolution, and all your are left with is the idea of the event in its subtracted purity: Rx’ = {Rx, ex} Thus we have to repudiate Nicolapoulos and Vassilacopolous’ charge of Badiou’s infidelity to the retreat of the revolutionary event; on the contrary, on the event horizon of the Marxist sequence, Badiou’s theory of the event can only make sense within the retreat of that revolutionary sequence. As Badiou (2005, p.483) puts it: “the word itself lies at the heart of the saturation.” The idea of the event is hermeneutically situated in the context of the contemporary retreat of revolutions containing novelty, and hence for those subjectivated to the 20th century’s sequence, the events, for instance, in the Eastern and Central European anti-Soviet uprisings of the late 1980s, are not revolutions insofar as all they did was end up affirming a pre-existing global,


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capitalist status quo and normalising their political and economic regimes within it.

Revolution today?Revolution today?Revolution today?Revolution today? Two notions of revolution have been identified: a non-subjective idea, and a subjective idea—the latter premised on the introduction of novelty. For the non-subjective sociological understanding of revolution, there would probably be no problem in labelling events in the Arab world as revolution as long as they match an adequate number of features present within the sociological knowledge. The question is rather more difficult for those who reserve the term ‘revolution’ Rx’ for socio-economic upheavals that bear a novel event with the potential to form a future sequence of novelty-bearing subjectivation.

At the root of some leftwing fears about events in the Arab world is that these events have more in common with the anti-Soviet pro-democracy liberalisations than they do with the bold revolutions preceding them in the 20th century. On the other hand, there has also been a marked enthusiasm from others for affirming their break with the cynical repetition of pro-Western ‘colour revolutions’ of the past twenty years. Badiou’s principal interlocutor to the Anglo-American philosophical world, Peter Hallward, was unreserved in endorsing their importance:

For whatever happens next, Egypt's mobilisation will remain a revolution of world-historical significance because its actors have repeatedly demonstrated an extraordinary capacity to defy the bounds of political possibility, and to do this on the basis of their own enthusiasm and commitment. (Hallward, 2011) [Emphasis added]

Ray Brassier, however, was more reserved about the potential (note the shift in terms):

But it remains too early to tell what will ultimately come of these rebellions,,,, so I am wary of any overly optimistic prognoses: there are too many powerful vested interests ready to do whatever it takes to ensure the preservation of their privileges, amply assisted by their US and European sponsors needless to say. (Brassier, 2011) [Emphasis added]

What is also significant in almost all assessments is the reduction of the question of these revolts/uprisings/riots/insurrections/revolutions as being against (1) Western influence and (2) neo-liberalism, as pre-conditions for securing their potential, hence a legitimate stake on the term ‘revolution’. But in this reduction a number of other factors have been left by the wayside. In all cases—including the cases of the ‘successful’ examples of ‘revolution’ in Egypt or Tunisia—we have not seen any group take control of the state. A


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most primitive historical condition for the application of the term ‘revolution’ has not been met, which might even make the sociologists flinch. And herein lays the nub of the problem: by not going all the way to capture power, the insurrectionists capacity to affect a shift in the direction of the new, and especially to introduce measures against capitalism, is severely curtailed. Given that, in the context of capitalist globalisation, any genuine socio-economic overhaul is prima facie obliged to face up to the structural reality of capitalism, invocations of justice and democracy are inadequate on their own for this task—ideas are needed. This is why I think Badiou, for all his unreserved affirmation of these events, steps back from calling them revolutions, and settles on the—perhaps too diminutive—term ‘riot’:

In my opinion, the rioters’ disposition arises in interval periods [périodes intervallaires]. What is an interval period? There is a sequence in which revolutionary logic is clarified and where it explicitly presents itself as an alternative, succeeded by an interval period where the revolutionary idea has not been passed on to anyone [déshérence], and in which it hasn’t yet been taken up, a new alternative disposition has not yet been formed. (Badiou, 2011)

Which is to say, for Badiou, as a subject to the revolutionary sequence of the 20th century, a revolution has to also contain an event; and for an event one needs ideas; and today, without an ideological assemblage of sufficient potency to confront and solidify an anti-capitalist program, one is left without a necessary condition for the experimentation and drive to novelty in reordering society that was indicative of those great ruptures of the last century. ‘Revolution’ remains a term that still lies out of reach after the first decade of the 21st century. BibliographyBibliographyBibliographyBibliography Badiou, A. 2005. The Cultural Revolution: The Last Revolution? Positions, 13(3). —––—–. 2006. Being and Event. Trans. O. Feltham. London and New York:

Continuum. —––—–. 2011. Alain Badiou on Tunisia, Riots & Revolution. wrong+arithmetic.

Available online: http://wrongarithmetic.wordpress.com/2011/02/02/alain-badiou-on-tunisia-riots-revolution/ [Accessed 18 April 2011]

Brassier, R., 2011. ‘I am a Nihilist Because I Still Believe in Truth’: Ray Brassier Interviewed by Marcin Rychter. Kronos. 4 March 2011. Available at: http://kronos.org.pl/index.php?23151,896 [Accessed 18 April 2011]

Hallward, P., 2011. Egypt’s Popular Revolution Will Change the World. Guardian


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Online. 9 February 2011. Available online: http://www.guardian.co.uk/commentisfree/2011/feb/09/egypt-north-africa-revolution [Accessed 18 April 2011]

Goldstone, J. A., 2001. Toward a Fourth Generation of Revolutionary Theory. Annual Review of Political Science, 4: pp. 139-187.

Lazarus, S., 2007. Lenin and the Party. In: Lenin Reloaded: Towards a Politics of Truth, eds. S. Budgen, S. Kouvelakis and S. Zizek. Durham: Duke University Press.

Kacem, M. B., 2011. A Tunisian Renaissance: Interview with Mehdi Belhaj Kacem. Lacan.com. Available online: http://www.lacan.com/thesymptom/?page_id=1046 [Accessed 18 April 2011]

Nicolapoulos, T. and Vassilacopoulos, G., 2006. Philosophy and Revolution: Badiou’s Infidelity to the Event. Cosmos and History: The Journal of Natural and Social Philosophy, 2(2).

Nathan CoombsNathan CoombsNathan CoombsNathan Coombs is co-editor of the Journal of Critical Globalisation Studies. He is a PhD candidate in the Department of Politics and International Relations, Royal Holloway, University of London. He has been published in the Journal of Political Ideologies, the Monthly Review’s MrZine, and in The Guardian, amongst others. He is currently working on his first book, The British Ideology, forthcoming from Zer0 Books. His PhD thesis presents a critical genealogy of the idea of the event. He can be contacted at: [email protected]

Book Reviews

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Pathologies of Capital Review of The Enigma of Capital: And the Crises of Capitalism by David Harvey. Oxford: Oxford University Press, 2010, pp. 296, ISBN: 978-0-19-975871-5, $24.95 (Hbk.) By Matthew MorganBy Matthew MorganBy Matthew MorganBy Matthew Morgan Since the global financial crisis began to emerge in 2007, we have been treated to first a trickle and now a deluge of books on the topic. Most so far have sought to provide a perspective on the crisis, as it broke, from the inside of either a financial institution or the halls of American political power, focusing on how different responses were formulated. Meanwhile, a second and smaller stream of books has sought to conduct a thoroughgoing analysis of the factors that caused the crisis to occur (see e.g. McDonald and Robinson, 2009; Foster and Magdoff, 2009). What has been missing from this burgeoning literature, however, is a book which places the current crisis within a larger framework, recognising that while the circumstances that led to the crisis of 2008 may themselves be unique, crisis, as a product of capitalism, is not. The Enigma of Capital is an important contribution in this regard as it adopts a systemic perspective and proceeds to demonstrate, in a clear and ‘non-academic’ style, that crisis and instability are inherent to capitalism, revealing the latest crisis as simply the most recent manifestation of this tendency.

Harvey has produced some of the most important works of the past several decades in terms of understanding the present configuration of global capitalism. While the Enigma of Capital incorporates elements from all of his prior books, it is perhaps most closely connected to A Brief History of Neoliberalism (2005). If that book sought to comprehend the formation, extension, and dominance of neoliberalism across the globe, the Enigma of Capital seeks to underline its weaknesses, portraying the economics of neoliberalism as increasingly under strain. For Harvey, the crux of the problem is that the reproduction of a healthy capitalist economy requires a continual compound rate of growth per annum of 3 per cent (2010, p. 27). The rise of financialisation and neoliberalism that began in the 1970s was a response to this imperative, and to the surplus of capital that had been built up in the preceding years. However, rather than being invested in production, this surplus capital was directed towards the acquisition of property or absorbed within the banking system as speculative capital. And whilst temporarily effective, both of these avenues proved to be problematic and fuelled


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bubbles, with property prices and stock market averages marching upwards in lockstep. For Harvey, this relation of mobile financial capital to fixed productive capital

requires the incorporation of a geographical perspective into any theory that proposes to explain the general accumulation of capital. The accelerating process of urbanisation and the creation of spectacular building projects, such as in Dubai, provide crucial sites for the mopping up capital surplus, while at the same time providing a mechanism for the expansion of credit through the securitisation of mortgages for these new properties. This leads Harvey to argue that:

… rent has to be brought forward into the forefront of the analysis, rather than being treated as a derivative category of distribution as happens in Marxist as well as in conventional economic theories. Only in this way can we bring together an understanding of the ongoing production of space and geography and the circulation and accumulation of capital and put them in relation to processes of crisis formation where they so clearly belong. (2010, p. 183)

Shifting the weight of analysis towards rent and arguing that it now plays a pivotal role in the reproduction of capital is an argument sure to raise some eyebrows in certain Marxist circles, but not all. Harvey's characterisation of financialisation as an attempt to deal with problems of over-accumulation is indebted, as he makes clear, to Giovanni Arrighi's landmark book the Long Twentieth Century (1994). But more of Arrighi’s themes emerge as Harvey analyses the shift towards larger political entities within the global process of capital, identifying a potential shift in hegemonic power away from the United States and towards China. Of course, as a nation with vast financial reserves and a rapidly urbanising population, China in many ways seems destined to overtake the United States. However, Harvey overlooks the political consequences of this hegemonic transition, choosing instead to discuss the potential environmental consequences of China's rise. Here, Harvey’s perspective might be too optimistic for some. Nature, he argues, cannot impose any absolute limits on capital, which can always circumvent, overcome and adapt. The question, therefore, is one of how capitalist dynamics provoke environmental change, and of how environmental change alters social relations. Thus, rather than focusing on the supposed limits to capital accumulation imposed by nature, Harvey argues that our attention should be directed towards the adaptations that will occur in order to navigate around what appeared to be formally insurmountable barriers to continual growth (2010, p. 78). In unraveling the methods through which capital seeks to continually reproduce itself, in examining the consequences of this reproduction upon social life, and in asking which political strategies might be best able to overcome the ceaseless process

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of capital accumulation, Harvey adopts an explicitly non-determinist approach, with varying results. Harvey refuses to ordain any particular segment of society with the inherent ability to disrupt the accumulation process; instead, he draws upon Autonomist literature to argue that ‘revolutionary blockages’ can occur at an innumerable and unpredictable number of points and can be provoked by wide-ranging sections of the population. However, it is when he attempts to deploy this concept as political analysis that his argument is at its weakest. Harvey proposes the existence of seven different ‘activity spheres’ that have co-evolved within the historical evolution of capitalism in distinctive ways. While no single sphere is dominant, the potential exists for a specific sphere to become particularly influential or evolve more rapidly than the others at any one point in time. In contrast to the rest of the book, this section exhibits an overall lack of clarity. It is not certain what exactly is contained within each sphere or how they interact with one another, although Harvey notes that the interactions must be dialectical in nature (p.134). It seems that Harvey is attempting to posit that capitalism is the systemic force that binds all these activity spheres together (and shapes the course of their development), although this point gets lost in the generalities that Harvey employs in this portion of the book. By writing in a non-academic style Harvey appears here to have sacrificed conceptual sophistication in the hope of having an impact upon a wider audience.

The Enigma of Capital is clearly an important addition to the growing literature on the present crisis. While it does conduct an analysis, in the first chapter, of the factors which caused this particular crisis, the majority of the book is dedicated to showing that while it may have occurred as a result of a particular set of decisions, those decisions were rooted within a larger framework which determined the problem and framed the eventual solution. The financial crisis grew out of the solution (i.e. investments in property and stock markets) that capital reached for how to deal with the problem of over-accumulation that began in the 1970s. The current crisis can therefore be traced back to the crisis of Fordism, and should be recognised as the product of an enduring capitalist contradiction: namely, to avoid crisis while struggling to maintain a 3 percent compound rate of growth per annum. By presenting this longer view, and by doing so in an accessible and readable manner, the Enigma of Capital will play an important role in challenging the emerging consensus on the crisis of 2008. The problem is not a bad or improper capitalism. The problem is capital itself. BibliographyBibliographyBibliographyBibliography Arrighi, G., 1994. The Long Twentieth Century: Money, Power, and the Origins of Our

Times. London: Verso.


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Foster, B., and Magdoff, F., 2009. The Great Financial Crisis: Causes and Consequences. New York: Monthly Review Press.

Harvey, D., 2005. A Brief History of Neoliberalism. Oxford: Oxford University Press. McDonald, L. and Robinson, P, 2009. A Colossal Failure of Common Sense: The Inside

Story of the Collapse of Lehman Brothers. New York: Crown Business.

Analogies of Crisis Review of The Creation and Destruction of Value: The Globalization Cycle by Harold James. London: Harvard University Press, 2009, pp. 336, ISBN: 978-0-674-03584-3, £14.99 (hbk.) By Liam StanleyBy Liam StanleyBy Liam StanleyBy Liam Stanley In this accessible study, Harold James places the recent global financial crisis in historical context, arguing that economic crises create ruptures in the constant and contingent ‘cycle’ of globalisation and deglobalisation. It therefore speaks directly to the question of how the recent crisis is best understood, situating the conjunctural crisis of the prevailing financial order within a broader theory of global cycles. James’ main aim, however, is to return to the events of 1929 and 1931, and to ask what these might be able to tell us about the recent crisis.

The first two chapters outline his previous works on globalisation and the Great Depression, and thus may not be of great interest to those already familiar with James’ back-catalogue. His aim in these earlier works was to address the globalisation debate of the 1990s, and, in particular, to take issue with the then popular view that globalisation is an ‘irreversible’ or ‘natural’ process. Here he reiterates these arguments, emphasising the de-globalising effect of wars and financial crises, and characterising the Great Depression as a key moment that kick-started the ‘de-globalising interwar period’. Hence, rather than a natural and constant force, globalisation is for James a cyclical process wherein moments of crisis cause economic orthodoxy to be undermined and prompt states to act against global integration. However, upon close inspection, this is more of a caveat to the mainstream than a critique of it. Those interested in reversing, halting or modifying globalisation will not find much comfort in James’ analysis, as it veers worryingly close to the economic determinism that many find uncomfortable about the mainstream globalisation literature. Whether intentional or not, using the term ‘reversible’ suggests it can be changed by ‘people’. However, his argument appears to imply that whilst the direction of the globalising force may shift contingently through uncontrollable crises or wars, these forces are very much that: uncontrollable.

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The main thesis presented in this book extends upon this kind of analysis, arguing that economic crises represent the ‘destruction of value’ within the globalisation cycle. Pleasingly, his analysis extends beyond the frequently rehearsed suggestion that ‘no financial crisis has ever been resolved at an international level’ (e.g. Germain 2009, p. 680). For James, the destruction of value is two-fold. On the one hand, there are rapid changes in the basis of monetary valuations. This inability of the market to correctly value certain assets leads to increased uncertainty and a subsequent decrease in confidence. As a result, financial institutions lose trust in one another. This has a ‘spillover effect’, which “intensifies the process of disintegration” (p. 231). Hence, on the other hand, ‘immaterial’ values are also destroyed – or in James’ words: “the globalization collapse becomes a story of changing values in both the usual senses of the term, as monetary and ideal values are shaken” (p. 231). However, James fails to convince that, despite the rather grand rhetoric of some elites, the old value order has broken down. Nor does he pose what an alternative set of values may consist of, other than the “need for an ethic of personal responsibility that cannot simply be subsumed in some vague sense of corporate culture” (p. 276). James shows little interest in engaging with the seemingly relevant International Political Economy (IPE) literature. Yet with comments on how there is a new kind of ‘radical uncertainty’ about ‘institutional design’, he veers close to rehashing the jargon, if not the analysis, of much institutionalist and constructivist research (e.g. North, 1990; Blyth, 2002). It is disappointing that this avenue is not explored more fully, but it perhaps offers a clue as to the intended audience of the book.

Since James is an historian, it is perhaps unsurprising to see an entire chapter dedicated to the events associated with the Great Depression. The start of this section makes it sound particularly novel, and potentially one of the more interesting aspects of the book. James discusses how historical references provide “a power template for understanding the contemporary predicament” (p. 8). Chapter 2 even starts with a basic Lexis content analysis of major newspapers showing that the 1929 crisis is referenced more often than 1931 (p. 37). Indeed, in claiming that “people refer back to past crises, and historians come to be prophets” (p. 8), it sounds as if James might even have gone down the avenue of exploring the role of historical representation in interpreting recent events. However, it soon becomes apparent that he envisages himself as one of these prophets, and he spends much of his time analysing the events of 1929 and 1931. But instead of trying to work out which crisis – 1929 or 1931 – really represents ‘the best analogy’ for the current predicament, it would perhaps have been more interesting to analyse how the collective faux-nostalgia of the Great Depression et al. has been utilised by some elites in order to open up particular discursive spaces and legitimise certain courses of action. In other words, to analyse the effect of such analogies, as opposed to their historical accuracy and the lessons they may teach us. Whilst James’ effort is both a


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well-researched piece of history and an adequate introduction to the armchair intellectual, it will not offer much to those well versed in the relevant debates within the contemporary IPE literature. BibliographyBibliographyBibliographyBibliography Blyth, M., 2002. Great Transformations: Economic Ideas and Institutional Change in the

Twentieth Century. Cambridge: Cambridge University Press. Germain, R., 2009. Financial Order and World Politics: Crisis, Change and Continuity.

International Affairs, 85(4), pp. 669-687. North, D. C., 1990. Institutions, Institutional Change and Economic Performance.

Cambridge: Cambridge University Press.

Timing the Event Review of Badiou and Derrida: Politics, Events and Their Time by Antonio Calcagno. London: Continuum, 2007, pp. 136, ISBN: 9780826496171, £70 (hbk.) By Hannah ProctorBy Hannah ProctorBy Hannah ProctorBy Hannah Proctor In contemporary continental philosophy, a rest, it seems, is never as good as a change. While continuity is lumbered with associations of conservatism, rupture and flux are by-words for political radicalism. This book, a paean to the Badiouian concept of the event, is a sober advocation of decisive political intervention as a philosophical position. As its subtitle indicates, Antonio Calcagno’s Badiou and Derrida: Politics, Events and Their Time is not a general study of its eponymous philosophers, but an analysis of “the nature of and relationship between politics and time” (p. 1) in their writings – the phrase appears three times on the book’s opening page. And for Calcagno, the Badiouian concept of the event, a temporal intervention that radically interrupts the existing situation, plays the leading role in this drama. Reversing the order of its title, the book is structured as two discrete chapters on Derrida and Badiou respectively, sandwiched between remarks outlining Calcagno’s specific approach to their work. Calcagno’s sympathies lie squarely in the Badiouian camp; he is, he states, “working within the framework of Badiouian ontology” (p. 104). Calcagno argues that Badiou’s notion of the event provides a solution to the Derridean “aporia of the double bind” (p. 2) which, with its insistence that all possibility is coupled with impossibility, Calcagno finds insufficient in the face of concrete political activity.

So, other than to generate more results in library catalogue searches, why

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include Derrida in this book at all? Calcagno gives two reasons for doing so: Derrida’s work contains a significant consideration of politics and time, and this aspect of Derrida’s work has not been closely analysed heretofore. Calcagno’s reading of Derrida is focused on the philosopher’s later writings, with an emphasis on the notion of ‘democracy to come’. Calcagno, following Simon Critchley, observes that the term ‘democracy to come’ refers not to some ideal political configuration that might emerge in the future but to a structure whose temporality is “advent... arrival happening now” (p. 12, quoting Critchley). Crucially, this temporality is a constant – democracy is always ‘to come’ but never comes; it is always arriving but never fully present; it is a promise never quite kept. At this juncture Calcagno turns to Derrida’s notion of diffèrance, carefully attempting to unpick the knotty relationships between politics and time it contains, before expressing his own frustrations with it. Diffèrance colours all experience, for Derrida, which, according to Calcagno, results in profound undecideability: meanings are never fixed, full presence is unattainable, traces are constantly being erased, the present is always deferred, the possible forever haunted by the impossible. Meanings float along in the stream of time but are simultaneously delayed by the currents of diffèrance, which prevent them from ever washing up whole on the shore. If Derrida’s argument that there is nothing outside the text is taken seriously, Calcagno argues, if we accept that diffèrance structures everything, then political experience and action must also be characterised by undecideability. It is this ‘aporia’ or ‘lacunae’ that most frustrates Calcagno.

In an attempt to bridge the gap between thought and action, theory and practice, Calcagno stresses Derrida’s personal political convictions and activist activities beyond his philosophical work, which he sees as running counter to the theories expressed on the page. If Derrida really believed that everything was undecideable, Calcagno asks, then why would he bother to vocally oppose capital punishment? Yet while this perhaps deliberately naïve line of argument might highlight the shortcomings of Derrida’s position, it does not solve the problem: even when making concrete political demands, Derrida does so from the position of deconstruction. Calcagno characterises Derrida’s work as a decisive intervention into the history of philosophy that despite asserting that everything is undecideable did paradoxically involve committing to a definite stance, an unshaking fidelity to flux: “the intervention of deconstruction over any other political way” (p. 56). Yet Derrida’s philosophy, according to Calcagno, has no way of accounting for such an intervention. It is here that Calcagno turns to Badiou, whose notion of the event provides a theory for such a subjective interruption of the existing situation.

Calcagno walks the reader through the main landmarks of Badiou’s theory, but his main focus is the event, in which politics and time converge. If time is intervention, the temporal rupturing that brings about radical change, then politics is the thinking through


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that follows in the wake of events (p. 61). Although Badiou’s ontology retains the Derridean vacillation between impossibility and possibility, Calcagno claims that Badiou overcomes the gaping aporia that Derrida opens up by introducing the event which allows for subjective intervention and fidelity that can treat multiplicity as unity by ‘counting as one’.

What Calcagno brings to the table is an advocation of ‘kairos’ – “a timely or appropriate strategy to be taken at a specific time, given certain circumstances” (p. 98) – as a supplement to Badiou’s evental temporality which, he claims, is overly dependent on the decisive action of an intelligent subject. Introducing this concept allows Calcagno to place an emphasis on the pre-political (that is, pre-evental) configuration of a situation that allows for an event to burst on the scene at a particular moment. The situation, for Calcagno contra Badiou, is therefore more than an indifferent multiplicity as it must be ripe for an event to occur. Calcagno’s kairos thus waters down the Badiouian event: transforming it from a radical white-hot rupturing into more of a lukewarm gradual shift. This also plays down the very element of the event (subjective intervention) that Calcagno initially highlights as the element of Badiouian ontology that sets it apart from Derrida. Yet despite the minor innovation of the ‘kairos’, this book is more concerned with proselytising Badiou than with carving out its own philosophical approach.

This is not a book for the uninitiated. And with a cover price of £70 is hardly likely to attract a mass-readership. In the preface to the English translation of his magnum opus Being and Event (2005), Badiou immodestly claims that the almost 20 year delay between its publication in French and its eventual appearance in English only serves to underline its importance as a great work of philosophy. Badiou summons great writers at the behest of his own philosophical vision. The same could not be said for Calcagno. Despite his advocation of concrete political action, this is not a rousing tract but an intricate subdued academic thesis. Calcagno’s prose hardly crackles and fizzes with the energy of radical political conviction. For Badiou, philosophy is strictly speaking not one of the domains in which an event can occur; philosophy proceeds out of events in the realms of politics, love, poetry and mathematics. In a sense then Calcagno can only metaphorically speak of Derridean deconstruction in the Badiouian vocabulary of the event. But if I am permitted to indulge in the same indiscretion, Calcagno might be seen as being faithful to an event, but not intervening in such a way as to dramatically puncture the existing status quo. But perhaps it is precisely this kind of carefully considered fidelity that forms part of the thinking through of politics that Badiou himself advocates. BibliographyBibliographyBibliographyBibliography Badiou, A., 2005. Being and Event. Translated by O. Feltham. London: Continuum.

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