The Monster Beneath the Muddle: A Response to Matthew Payne on the Politics of Austerity

by Andrew Loewen on June 14, 2012One comment

This post began as a comment on Matthew’s last post, but grew to a point it may as well stand alone, muddle or not. It’d be nice to think that the little dialogue Matthew and I have going (he playing Keynesian reformist and me playing anti-capitalist radical) is of use to more than just the two of us. But that’s for others to say. I should say I’m riffing off Matt’s post here and not addressing him directly (at all) when I mention “liberal pundits” and such.

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To date, the post-2008 history of the PIIGS (Portugal, Italy, Ireland, Greece, Spain) demonstrates how supposed economic “imperatives” trump what limited democracy and accountability parliaments permit. Such is parliamentary capitalism (see also: liberal democracy). We also see time and again how, to quote David Harvey, “capitalism never solves its crises, it just moves them around.” And here, with Harvey, I always want to go a step further than Matt, to understand how neoliberalism and austerity (and bubble economics) emerge out of a more fundamental crisis of accumulation (as we once discussed here).

The basic Keynesian impulse of folks like Krugman is to change policy so as to reset the calendar back to pre-neoliberal times (and I’d be the first to say that Keynesians and radicals are allies in combating the politics of austerity, and also to say that the achievements of the postwar welfare state are undeniable). There are two problems here though:

1) The “golden age” of 20th-century capitalism was in many respects a nightmare of Napalmed peasants, automobilized urban sprawl (as I stress here), and unpaid female domestic work. Ignoring this is inexcusable.

2) The desire to get back to the good old days — perhaps even to the income tax rates of a Richard M Nixon — evades the causal question of why neoliberal politics emerged in the first place.

The chorus: “Thatcher and Reagan.”

Yes, definitely, but a couple proper names can’t stand in for an account of the dynamics of postwar economic history. Truth is, in addition to being a ruling class assault on common people and the planet, the neoliberal project has been coterminous with a kind of bastard Keynesianism: the use of asset-price bubbles as a means to leverage stagnation (Robert Brenner over-generalizes, especially about profitability, but this interview is a good account of this for its clarity). Capitalism has systemic contradictions that yield crisis after crisis, in escalating fashion. It’s not just that the guys and gals at the top are bad people with bad ideas (true as this may be).

Krugman is a good writer and valuable popular polemicist, firing volleys of incisive Keynesian metal into the bloated hegemony of neoclassical economic dogma. But his vision is essentially technocratic and lacks ballast, far as I can tell. I defer here to economist Michael Roberts’ review of the new Krugman book. Roberts praises Krugman’s scathing indictment of the “complacent apologetics of the dominant neoclassical economists,” but he doesn’t let Krugman off the hook on the larger picture:

For Krugman, this solution is simple and would work if it were not for the pigheaded, ideological insanity on the part of the majority of economists and policy makers who want to see government spending cut, not increased. You see, for Krugman, the crisis is not caused by any fundamental flaw in the capitalist mode of production, No, it is as Keynes once put it, like a magneto problem in a car: “the point is that the problem is not with the economic engine, which is as powerful as ever. Instead, we are talking about what is basically a technical problem, a problem of organisation and coordination – a ‘colossal muddle’ as Keynes described it. Solve this technical problem and the economy will roar back into life”.

Really? Does the weak economic growth that the mature capitalist economies have experienced even in the ‘booms’ of the 1990s and 2000s and which came to an end in a humongous slump in 2008, really indicate an economic engine as powerful as ever? Krugman thinks so: the capitalist mode of production is fine: all it needs is a new electrical part, not a totally new engine. But the new part is not being supplied because of the ‘colossal muddle’ on policy that economists and politicians have got themselves into.

The Krugman solution sounds convincing: major public spending instead of “belt-tightening” (if not necessarily a massive jolt to the War Machine sector as in the 40s and into the Cold War era (so-called “military Keynesianism”)). But the massive blind spot, the absent center to Krugman’s analysis (aside from class struggle of course), is profitability. A beast lurks beneath the “colossal muddle” of elite policy and the assumptions Keynesians share with neoclassical economists. Roberts:

Capitalists only invest more if it is profitable to do so, not because it might be in the ‘national interest’. The role of profitability is totally missing in Krugman’s nicely written book. For him, profit is irrelevant: what matters is incomes, spending and saving. And yet Marx’s law of profitability best explains why there will be recurring slumps caused by the tendency for profitability to fall.

The only way to revive that profitability is through slumps that destroy the value of accumulated capital, so that profitability (relative to remaining value) will then rise and allow the process of accumulation to resume. After a period of a huge buildup of both tangible and fictitious capital over the last 20 years, capitalism went into a Great Recession. But, as in the Great Depression, it cannot get out of this long slump without a massive destruction of dead capital. World War 2 eventually managed to do that. In the 1880s and 1890s, it took a series of major slumps before sustained growth resumed. That is more similar to now. Just more government spending designed to ‘stimulate’ the private sector will not do the trick.

That’s a big hitch. Too big a hitch for serious people to ignore, imho.

But to shift gears and return to Spain, a notable element of current class struggle there is the militant Asturian miners’ strike, which is expanding. Against the liberal rhetoric in which “class war” is something ghastly that only the 1% engages in, it seems necessary to remind people that class war has two sides. Workers wage war too. As under capitalism we must, to live, to provide, to defend and improve our conditions, to affirm our common humanity against the injunction of self-interest. One senses that for many liberals labor militancy is only acceptable under either of two conditions: that it be in the distant past or, if you’re Chris Hedges, that it be somewhere far away.

But striking Spanish miners are bringing the ruckus:

Even firing projectiles at police lines over beers.

“No Estamos Indignados, Estamos Hasta Los Cojones” (“We Are Not Indignant, We Are Pissed Off To Our Balls”).

Richard Seymour comments in the Guardian:

This siege inevitably recalls the 1934 revolt by Asturias miners, which was put down by Franco’s forces, as well as the fact that the first general strike under Franco was the Asturian miners’ strike of 1962. And it is true that the miners have a long tradition of struggle. These are workers who spend much of their lives together, not merely sharing risks at work but living in the same communities. Solidarity is part of the “consolidated habitus”, the taken-for-granted ways of acting that arise, seemingly spontaneously, from the mode of life of these communities. And these are not only traditions of blue-collar class struggle – there is also a tradition of guerrilla activism in these regions, partially originating from the struggle against Franco.

The workers have therefore responded to the government’s attacks in an uncompromising fashion, by blockading motorways, and setting up ad hoc barricades on transport networks. When attacked, they have fought back against police. In one case, workers improvised a rocket launcher.

All too often the rhetoric of US liberal pundits suggests that class conflict only exists because of the kind of people Republicans are, not because of the essential, irresolvable dynamics of capitalism. “If only Republicans weren’t such terrible people, so deluded by demagogues and bad ideas, everyone could get along splendidly and we could solve all our problems.” This is why the liberal lens renders class conflict as policy failure. The drug war isn’t a function of successful capitalist class war, it’s “failed policy.” Vietnam and Af-Pak? Failed policy and not indicative of a bipartisan (ruling class) commitment to imperial geopolitics. Etc. The trick here, as Doug Henwood says, is that this hippie-like “communitarian” philosophy actually underwrites a commitment to capitalism, class domination, a permanent, racialized urban under-class, and imperial slaughter. The disavowal of irreconcilable social interests is partly why Obama’s rousing speechifying had liberals so wet in the eyes. We can all get behind this articulate Harvard man and feel good about ourselves again!

[Obama’s] political philosophy [was] Third Way-ish and communitarian, meaning that he dismissed any idea that there are real conflicts in society because we can all just reason together and do what’s best for all of us. But by saying that, [communitarians] are really just siding with the powers that be, because there are real conflicts in society and there can be no Best for Everyone happy ending.

So to round off, while radicals and Keynesians can agree about the need for massive public spending in the interim, for Keynesians it’s a reactionary impulse to wind back the clock to better days, while for radicals there’s no real “there” to go back to. For us, it’s long past time to take responsibility for the gravity of our historical moment. The old solutions will not do. I repeat Žižek here.

Communism is today not the name of a solution but the name of a problem: the problem of the commons in all its dimensions: the commons of nature as the substance of our life, the problem of our biogenetic commons, the problem of our cultural commons (“intellectual property”), and, last but not least, the problem of the commons as that universal space of humanity from which no one should be excluded. Whatever the solution might be, it will have to solve this problem.

From where I sit Keynesianism is not only an insufficient response to these problems, it mostly refuses even to recognize them. We owe it to ourselves and future generations to rise to the occasion of 21st-century reality, rather than huddling behind the consolatory fictions of a past “golden age.” This is not only a time to combat the austerity of the present; it’s a time to think about the future.

One comment

Matthew on June 14, 2012 at 6:09 pm. #

Hey, Andrew, thanks for the thoughtful engagement. I think you are right about the centrality of profitability here but hanging your hat on the imminent collapse of capitalism due to profitability declines has bedeviled folks since Rosa Luxemburg’s time. Right now profitability is extraordinary and certainly isn’t being driven by underlying economic strength but rather what might be called “wage theft.” I started writing a longish post on this but gave up my own muddle on this as hopelessly muddled. But the gist of it was that remarkable gains in productivity were not being devoted to the consumption/wage fund at all. This is sort of the essence of Stalin’s economic policies–that essentially Soviet workers recieved no increase in real wages from 1928 to 1954, despite massive investments in infrastructure. Note, Stalinism was not a market economy. That means I tend to divorce this conversation from economic systems (with apologies to both neo-liberal economists and Marxists, I’m not quite sure I know what capitalism is, given its vast temporal and spatial diversity), rather I tend to concentrate of politics. To be fair, this primacy of politics is completely consonant with your concerns with class struggle, so I don’t see us gong back to some proper economic policy and the politics working themselves out on their own (which I don’t think even Krugman or Robert Reich, to name two well-known liberal economists, believe anymore if they ever did).
But on the issue of class struggle and politics, I don’t see Fordist production systems and technocratically managed economies to be some sort of “golden age” either. I sometimes think you’re a bit too narrow in your definitions of class struggle, Andrew which I take to be alot more variegated and successful in the last (and even its predecessor!) century than you. Not only labor but the civil rights movement, the anti-imperialist movement, the feminist movement, the civil rights movement, and yes even bohemians, beats and punks were all class struggles. If there was a Golden Age, it was won in the sitdowns in Flint, the march to Selma, the sewers of Stalingrad and the Mothers of the Missing. In so far as the “liberal” narrative is a narrative of “rights granted” I vehemently disagree (as I think you do, Andrew) and prefer the narrative of rights won. Too many liberals, I agree, see LBJ as the guy who “won” civil rights and give a nod to MLK but of course is was all those people being beaten, firehosed, dynamited and jailed (and yes, lynched). So, actually I do see a bit of golden age (and actually many “golden waves”),but not at the hands of liberal managers. Maybe none of this was revolutionary with a capital “R” like 1789 or 1917, but it was plenty revolutionary.
And, of course, economic and political elites saw them as such as well. They wanted to “manage” them as much as possible and, when “management” failed, repression was used–often viciously (as the overthrow of Greek and Chilean democracy show). The failure of ’68 has had as many ramifications for the world as those of 1848 and I always find it historically ironic (can history have irony?) that the left (CP China for instance) and the right (pro-business Western political parties, for another), found common cause in structurally transforming economics, society, politics and culture in ways we know now as “globalization.” Solidarity is a serious word in my lexicon since it’s a word that can change the world, indeed it is the only one that ever has.
But as for the details, I’ll let the folks fighting for dignity and humanity work that stuff out. I’m sure these details will be very different depending on the place and the people engaging in that most subversive of crimes, solidarity. And yes, even liberals and moderates, too, can find themselves engaging in solidarity, too. Nostalgia is not what I’m selling (and, he can speak for himself but I suspect neither is Krugman [who Obama’s policies,for instance, as “more mush from the wimp.”]). Krugman’s great advantage, as was Keynes, is not in a coherent political program–he seems to me to primarily interested in ameliorating suffering, which is not an evil thing, after all–but in pointing off that the reigning orthodoxy is an Emperor whose bare-ass is flapping in the wind.
For my part, I have lived in places where neo-liberal policies were wedded to authoritarian politics (by “liberals” and “democrats” no less), Russia and Kazakhstan in the 1990s and the human cost of such “structural reforms” are nearly impossible to convey to those who haven’t seen them up close. This, not expertise, is why I repeatedly return to this story of “austerity”–the clever patter and reasonable men in suits need to be resisted (though not necessarily with cold beers right at hand).