quarta-feira, 19 de novembro de 2014

Interview with Zoltan Zigedy

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Politicaleconomy.ie is delighted to have interviewed US communist and political
economy blogger Zoltan Zigedy.

Full text of the interview is available here Interview with Zoltan

Politicaleconomy.ie interview with Zoltan Zigedy


1 – A crisis erupted with the collapse of Lehman Brothers in 2008 but this had
been brewing for some time. Can you briefly explain how you view the crisis?

Economists and pundits alike– caught watching an event unfold that simply could
not happen– portray the 2007-2008 collapse as a singular event, an accident
brought on by an unlikely coincidence of human failings. Of course that
perspective masks the inherent, systemic flaws of the capitalist system.

The seeds of the current crisis were planted many decades earlier. The intense
global competition resulting from the post-war revival of the European and Asian
economies, replete with new technologies, engaging new principles of industrial
organization, and flooding global markets with innovative products, placed
enormous pressure on the rate of profit. The implicit Cold War labor contract–
support US, NATO, and SEATO policies, maintain labor peace, and receive
compensation at least in step with productivity and costs of living– pressured
capitalist profits from below.

The stagnation of the 1970’s resulted.

Capital found a solution: mount an all-out war on workers and their wages. The
slash and burn Thatcher and Reagan axis restored profitability (and the
celebration of its rewards) by feverishly jacking up the rate of exploitation.

The collapse of Eastern European socialism added new markets and cheap labor to
the favorable conditions for profit-making. Not surprisingly, the loss of a
real-world beacon of socialism proved profoundly demoralizing to the labor
movement. Many Western Marxists turned to navel-gazing or the “rethinking” of
the socialist project.

Without filling in the details, the hyper-accumulation of this triumphalist era
stretched the bounds of available productive and safe investment opportunities.
Thus, began the explosion of financial exotica (and financial “profits”!) to
absorb the glut. On the investment side, this took the form of venture capital
and dot.com initial public offerings at the end of the 1990’s; risky speculation
inflated an enormous bubble of virtual value and unsecured debt. As we know,
that ended badly.

Since 2001, capital has sought to rally and sustain profitability. The collapse
of 2007-2008 shows that it is not possible without speculative brinksmanship and
courtship of hazard. That seems to me to still be the case.

2 – There is some debate amongst Marxists about the development of capitalism
post WW11 and the traditional understanding of the declining rate of profits
versus financialisation and super-profit/under-consumptionist theories. Are
these theories conflicting or can we reconcile the declining rate of profit with
financialisation and monopolisation and concentration of wealth?

A. Post-war Marxists, both in the socialist countries and in the West, fell
under the influence of Keynes, locating the principal contradiction of
capitalism in the stagnant (or declining) purchasing power of the working class
(underconsumptionism). This was a convenient and appealing explanation for
crisis, but, unfortunately, it doesn’t fit the facts, misrepresents the
accumulation process, and encourages a turn towards social democracy.

Marxist economists were unjustifiably impressed with the “success” of pump
priming in stemming the seemingly unstoppable economic collapse of the Great
Depression. While, what came to be called “Keynesian” policy may have slowed,
even stopped the bleeding, it didn’t heal the wound. But many Marxists reasoned–
mistakenly– that if force-feeding consumption halted further collapse, then the
crisis was caused by insufficient consumption.

Neither the Great Depression nor the current crisis were preceded by any
consumption shock, an event, if it had occurred, that would have given some
credence to an underconsumptionist explanation of crisis. On the other hand, the
crises did cause a shock to consumption, a major factor in amplifying and
extending the course of crisis. So the facts would seem to suggest that the
underconsumptionists actually conflate cause with effect.

The relatively long post-war period without a major systemic crisis (1945-1972)
further seduced far too many Marxists into acknowledging the success of
Keynesian policy prescriptions. By crediting the perceived stability of the
capitalist system to the welfare state support of consumption, they concluded
that failing consumption was the demonstrated explanation of capitalist crisis.
The severe and lengthy decade of stagflation that followed should have cast some
doubt on that too easy conclusion.

B. The 2007-2008 crash spawned a renewed and welcome interest in the
tendency-of-the-falling-rate-of-profit explanation of systemic capitalist
crisis. Outside of the Marxist mainstream, Henryk Grossman and Paul Mattick,
were often-isolated voices supporting this explanation which drew largely from
Marx’s account in volume III of Capital. While we owe them much for keeping this
theory out of the dustbin, they developed it in a mechanical, formalistic way
alien to Marx’s method. And the new generation of advocates, largely academic
Marxists, have unfortunately followed this road. They fail to understand that
tendency laws– like the tendency of the falling rate of profit– are not logical
demonstrations, but descriptions of social and economic forces that shape the
course of a social structure’s (in this case, capitalism’s) trajectory.

The great value of the rate-of-profit explanation is that it locates the cause
of crisis at the main spring of the capitalist production process: accumulation.
It insists that the ultimate cause of malfunction must and will be found in the
ultimate element that powers capitalism as an economic system: profit.

In my view, a robust explanation of capitalist systemic crisis can only emerge
by beginning with the crucial role of the rate of profit, the determinant that
keeps the capitalist class in the reproduction game or, as the system stumbles,
out of the game and on to the side lines. I believe that a comprehensive
contemporary explanation of the nature of capitalist crisis is yet to appear,
though I have offered modest sketches in my writing.

C. “Financialization” is not an explanation of the crisis. Instead, it is too
often merely a characterization (like its sibling, “globalization”), a handy
descriptor of an aspect of the current crisis. No one would accept “atomization”
as a worthy explanation of what happens in an atomic reaction. Nor should we
accept “financialization” as more than a neologism useful in indicating that
some kind of financial shenanigans played a role in the present crisis. My own
view is that “speculation” and “risk taking” better capture the financial
dimensions of the ongoing crisis for those needy of a concise handle.

When pressed to unpack financialization to reveal an explanatory theory, its
advocates reference familiar developments: deregulation, the growth of
financial institutions, their penetration of non-financial corporations, their
development of new and and exotic schemes and instruments, etc. But these
developments, in most cases, have been unfolding since Lenin’s time. Moreover,
there is no obvious link between these developments and the onset of economic
crisis. That link is easily provided by declining profitability, however. One
need look no further than Countrywide, Washington Mutual, Merrill Lynch, and
Lehmann Brothers to see how speculation and risk-taking eviscerate profits and
generate an economic retreat and panic.

Can there be a synthesis of three contestants for a Marxist theory of crisis?

I think not. But there are aspects of each that should inform a Marxist theory
of crisis. No adequate Marxist theory can fail to address financial innovation
and the peculiar status of financial profit; it must pay particular attention to
the amplifying effect of debt. And the one-sided class struggle plays an
undeniably important role by generating hyper-exploitation, the consequent
super-accumulation, and the resulting abundant capital in search of the elusive
return. That said the tendency for capitalism to generate downward pressure on
the rate of return remains the centerpiece of any adequate theory of capitalist

3 – We hear much being made of a US recovery but you describe it as ‘slug-like
motion’, what is the real state of the US economy today?

The US economy is in the doldrums. It lacks momentum to escape the doldrums, and
it remains precariously afloat. It remains afloat because willingly or
unwillingly the rest of the world accepts a part of its burden. The PRChina
continues to purchase enormous quantities of US debt, along with Japan. It
remains afloat because the rest of the world has yet to challenge the dollar as
the global means of exchange, allowing it to weaken or strengthen according to
the needs of the US economy. It remains afloat because the US sets the rules of
trade, commerce, and exchange to its own benefit. That’s the reward for imperial

Domestically, the US economy is on the life support system that economists call
“the wealth effect”. That is, economic activity is founded on the subjective
sense of well-being fostered by stock market increases and increases in the
value of homes. Both increases today have little or no connection to market
realities. Of course, the wealth effect only applies to those owning homes and
financial assets.

The rest rely on stagnant wages and benefits and assuming debt (household income
is at the same level as 1990). Capital continues to wring every drop of value
from US workers. A comrade recently computed that the starting wage of an
autoworker at a unionized (UAW) shop, adjusted for inflation, is commensurate
with that of a Ford worker in 1914, a moment when Henry Ford “generously” raised
the wages of the workers so that they could buy his Model T’s.

Going forward, the prognosis is no better than continuing stagnation. A shock,
possibly reverberating from the EU, Brazil, China, or Japan, could yet rock this
shaky stability. Moreover, there are many signs that pre-collapse financial
practices are again stretching the bounds of rationality.

4 – You have compared the period we are in to the 1930’s and have challenged the
notion that the New Deal investment brought about a recovery pointing to the
role WW2 played instead. Do you see war is a policy tool being used today and
what are you concerns about this?

William Z Foster, a US Communist writing early in the Cold War period, developed
the idea of military Keynesianism. The value of his work– minimized and
neglected because of intellectual anti-Communism– was to expose the connection
between militarism and government economic policy. For the US ruling class, the
idea of “pump priming”, fiscal intervention through the public sector, was much
more appealing if it were rendered through spending on open ended contracts with
military corporations and armaments rather than spending on human welfare. The
former gave government revenue to corporations, the latter some alms to the

That same ruling class drew important lessons from the thirties and forties: the
most complete recovery from the Great Depression was accomplished swiftly by
Hitlerite German militarism. And the US economy only began to recover vitality
with the military buildup leading to US entry into World War II.

After the fall of the Soviet Union, there was much talk of a “peace dividend”
and a radical reduction of military spending in the US.

It didn’t happen– a fact that surely demonstrates that militarism is
inextricably embedded in US economic policy since there was no and could be no
serious threat to US security in the immediate aftermath of the Cold War.

Nonetheless, the lap dog media machine has been conjuring up new enemies in
order to keep the US public from objecting to militarism. Interestingly, one can
observe public opinion shift from skepticism to consent over the course of the
constant monopoly media war campaigns.

In part, the bizarre anti-Russian campaign, the demonizing of Putin, is only
rational in the framework of an economic explanation of militarism. The US
expects to spend over a trillion dollars during the next three decades
modernizing its nuclear weapons program. This can solely be justified to the
public by inventing threats from a nuclear power. Nuclear weapons are not
necessary against men in sandals with AK-47s, rocket propelled grenades, and
improvised explosive devices. But Russia has nuclear weapons.

The liberal magazine, The Nation, recently documented the financial ties between
retired military leaders and the armaments industry. The same ex-admirals and
generals exposed in the article are omnipresent in the US media, posturing as
experts on foreign policy while sounding the call for confrontation and
aggression. They serve as the transmission belt of militarism to the public and
the governing bodies.

It is no mystery why we live under the constant threat of violence and war.

5 – How do you define the system globally? There is much talk of neo-liberalism
and finance capitalism or financialised capitalism but how do you best
understand it?

It is easy to fall into the trap of taking a snapshot of the global capitalist
system and drawing hasty conclusions, of announcing a new stage, a new trend, a
new era… Certainly that makes for a provocative, but quickly outdated, article
or book or garners appearances on talk radio shows. Over the last several
decades we’ve been treated to new intellectually fashionable buzz words such as
“neo-liberalism”, “globalization” or “financialization”, portentous theories
like the decline of the nation-state, and sheer nonsense like Hardt and Negri’s
Empire. Fortunately, they, and their ilk, only distract; they seldom persist.

Rather than take that tantalizing bait, I will note some important trends. The
last three decades have been marked by significant changes in the international
division of labor. A veritable revolution in logistics along with political
changes in Eastern Europe and the PRChina integrated new armies of workers into
the global capitalist system. Together, these developments ushered in a shift of
manufacturing to far flung, low wage areas. Accompanying this shift has been the
rise of finance, insurance, real estate and services in those countries
experiencing a decline in manufacturing. This new division of labor fostered a
dramatic growth in the global rate of profit, a level of profitability that has
now run its course.

Labor markets in previously low wage areas are now tightening while the crisis
and unemployment have slammed workers’ compensation in the formerly high wage
countries. Global wage convergence is the ultimate, predictable outcome of labor
market competition without restraint or protection.

Those workers from formerly extreme low wage areas (PRC, India, Brazil, etc.)
who have had a taste of a better life, now and want more.

Those workers who have been devastated in the vise of international competition
and crisis-induced unemployment want to restore and improve their standard of

Standing in the way of winning these demands is a still resilient, resourceful
capitalist system; and frequently standing in the way of fighting for these
demands are complacent institutions and leaders– union leaders, politicians, and
political parties– that are ill-serving workers in the twenty-first century.

Fanciful expressions and speculative theories only obscure the fact that the
logic of capitalism and imperialism, capital’s international manifestation,
still rule in the twenty-first century.

6 – Globally, the system is objectively in crisis on many fronts , yet in the
‘west’ it’s politically and cultural hegemony remains unchallenged in any
serious way. Is it still a case of progress will likely come from the periphery
within Imperialism?

Unquestionably, the struggle against imperialism, particularly in the Middle
East and in Latin America, has occupied center stage and has posed more of a
challenge to ruling elites than has the anti-capitalist struggles in the West.
Even more disappointing is the absence in the West of a formidable
anti-imperialist movement– an anti-war, anti-interventionist movement– in
solidarity with Middle Eastern and Latin American anti-imperialism. This is not
a particularly noble chapter in the history of the Western left.

Any thoroughly objective assessment of capitalism today will reveal stark
vulnerabilities. It will challenge the sustainability of the shaky global
economy, question the viability of the corrupted, undemocratic political system,
and abhor the vulgarity and nihilism of bourgeois culture.

Still, the goal of replacing capitalism with a profoundly more just and
democratic system appears far off. Some have given up on the task, retreating to
incrementalism or accommodation, believing unrealistically that we can gradually
or surreptitiously undermine capitalism. Still others have visions of nineteenth
century utopias, cooperative communities coexisting with monopoly capital. Free
market theocracy has bred a generation disposed to worship the gods of
individualism and spontaneity as instantiated on the left by anarchism. In
short, left politics in the West churn in a cauldron of wildly idealistic and
misguided ideology.

Of course this is frustrating, especially for students of history and the
workers’ movement.

Disillusionment and confusion are not new to the socialist project. One-third of
the Communist Manifesto is devoted to exposing the dead-end roads and
far-fetched ideologies that Marx and Engels contested in their time.

Lenin scathingly recorded the dismal condition of the Russian left after the
failed 1905 revolution. Should we be surprised, after the history-altering
dismantling of European socialism nearly twenty-five years ago, that much of the
Western left has yet to find its bearings?

And yet, as Lenin’s example shows so well, it is precisely when there is
widespread political disarray that Marxism (and Leninism) are so desperately
needed to bring clarity and unity to the anti-capitalism struggle.

I think we are in such a moment.

Political Economy
October, 6, 2014

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