The standard narrative surrounding the current economic crisis goes something like this. It is not quite certain who or what is to blame for the near-collapse of the financial sector, but deregulation, loose monetary policy, reckless lending and bankers’ greed all have played a part. Right now, we need to start sorting out the mess. Regulation should be introduced that prevents market actors from taking excessive risks, and we all should re-embrace values such as prudence and thrift.
If this narrative is to be believed, the crisis was caused by individual misconduct in the marketplace and poor political decision-making. This in turn suggests that it’s got nothing to do with the dominant economic-political order. David Harvey, an A-list geographer known to a wider audience for his online lectures on Karl Marx and his Brief History of Neoliberalism, disagrees with this perspective. He contends that capitalism can’t exist without crises, and that the current crisis results from the measures taken to contain earlier ones.
The main chunk of Harvey’s book is dedicated to describing the ‘flow of capital’ – the lifeblood of the global capitalist system – and to explaining why this flow is disrupted time and again. Harvey follows Marx, who stresses that capital is not a thing, but an ever-expanding movement. Industrial capitalists expend money in order to hire workers and buy machinery as well as raw materials. The workers produce products, which the capitalists can sell at a profit. The capitalists then reinvest this profit (or part of it). This means that the whole process starts again, but on a bigger scale. As Harvey emphasises, capitalists are spurred on by the need to remain ahead of competitors.
The constant accumulation of capital means that capitalism is expanding and evolving all the time, but this is by no means a smooth process. Harvey detects a number of potential barriers to accumulation – for example, limited natural resources and raw materials; a limited pool of people to hire; acts of resistance by workers; and insufficient demand for products. Harvey’s key point is that barriers such as these cannot be removed but only repositioned. In other words, dealing with them in one place and at one time tends to recreate them in another place or at another time, and possibly in a magnified form. Once the barriers become too big to be shifted, capital accumulation
is disrupted and a crisis starts.
Harvey’s brief account of the current crisis illustrates this point. He argues that in the 1960s it became harder for capitalists to employ extra workers on conditions right for capital accumulation. This was because there was full employment, and because workers formed strong trade unions. Capitalists reacted by (a) increasing the share of women and immigrants in the workforce; (b) using labour-saving technologies such as robots; (c) transferring production abroad; and (d) allying themselves with union-busting politicians such as Ronald Reagan and Margaret Thatcher. As a result of these strategies, wages started to stagnate or even decrease. Capitalists had dealt with the problems of hiring and resistance, but in so doing, they had created the problem of demand.
In the US, this was addressed by extending people’s access to mortgages and consumer credits. At the same time, capital was redirected from production into the financial sector, and regulations obstructing its global flow in and out of assets were removed. The profit opportunities thus created led banks to extend ever more credit, but without increasing the deposits they held accordingly. Eventually, some banks got into trouble. As a result, inter-bank lending stopped, and the credit markets froze. There were massive losses, and banking capital got devalued.
In sum, circumventing the demand barrier by inflating debt prepared the ground for one of the deepest capitalist crises in recent history. The bottom line of Harvey’s counter-narrative is that we got where we are not due to the greed or the hubris of the self-styled ‘masters of the universe’, but due to the political-economic dilemmas created by the barriers to accumulation. Ultimately, the operational logic of capitalism is to blame for our predicament.
This suggests that getting out of the mess means going beyond capitalism: ‘There may be no effective long-term capitalist solutions… to this crisis of capitalism,’ Harvey remarks. He concludes his book by discussing Lenin’s question: what is to be done?
If Harvey’s global perspective allows him to provide a persuasive account of a truly global crisis, it prevents him for providing a convincing answer to this. He provides us with the truism that everything is connected, and concludes that there is no privileged point of political intervention: ‘The trick is to keep the political movement moving from one sphere of activity to another.’
This statement has little practical relevance. In fact, it diverts attention from the pressing question of where and how to start building an anti-capitalist political project. I suspect this can only be answered by paying much closer attention to the specific conditions for political action in different parts of the world. The global flow of capital may be a good entry point for discussing the crisis, but it doesn’t seem to be the right exit point.