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State and finance in financialised capitalism

Definitely worth reading this analysis of contemporary capitalism, class and the State by Costas Lapavitsas. State and finance in financialised capitalism Costas Lapavitsas is a leading Professor of Economics at the School of Oriental and African Studies, University of London, and also sits on the National Advisory Panel of Class. The structural problems within the

Benchmarking Working Europe 2014

The ETUI have released their 2014 report on working conditions in Europe. Well worth a read. BENCHMARKING Working Europe 2014 A4 Web version The year 2010 saw the launch of the Europe 2020 strategy. The new EU strategy had been devised for the purpose of promoting smart, sustainable and inclusive growth that would help Europe

Debt: A Weapon Against the People

This pamphlet follows two recent economic analyses of the crisis and its aftermath published by the Communist Party of Ireland: An Economy for the Common Good (2009) and Repudiate the Debt (2011). In this pamphlet we develop further our analysis of the crisis of capitalism, the role debt plays in the economic system, and, most

The political economy of water charges – an EU dimension

The origin of the planned water charges lies in the EU’s Water Framework Directive (2000), which provided for full cost recovery for water use and whose Article 9 states; ‘Member States shall take account of the principle of recovery of the costs of water services …’ It also required Member States to have in place

Where the Money Leads

‘Traditionally in American history, politics is like a seesaw: When one side is up the other side is down,” said Peter Wehner, a former aide to President George W. Bush. “Now it’s as if the seesaw is broken; the public is distrustful of both parties.” Wall Street Journal (11-04-14) “Follow the money” is a seemingly

State and finance in financialised capitalism

Definitely worth reading this analysis of contemporary capitalism, class and the State by Costas Lapavitsas.

State and finance in financialised capitalism

Costas Lapavitsas is a leading Professor of Economics at the School of Oriental and African Studies, University of London, and also sits on the National Advisory Panel of Class.

The structural problems within the UK and other mature economies were brought to the surface during and after the crisis of 2007-9. This paper argues that these problems are inherent to contemporary mature capitalism and have to do, primarily, with financialisation. The exceptional rise of finance in terms of size and penetration across society, the economy and the policy process, is apparent to all. The rise of finance is a sign of a fundamental transformation of mature capitalism within commercial and industrial enterprises, but also banks and perhaps most strikingly, within households.

The period of financialisation, lasting from the 1970s to the present day, has also wrought profound changes to the social structure of contemporary capitalism. It has been a period of extraordinary income inequality, wiping out all of the gains that came in the period following the Second World War. This paper notes that the ability of the rich to extract enormous incomes has been associated with the financial system. Inequality is a characteristic feature of financialisation.

Financialisation has been marked by the ideology of neoliberalism, promoted by universities, think-tanks and a variety of other institutions. Neoliberal ideology ostensibly treats state intervention in the economy with extreme suspicion, but the reality has been very different. The financialisation of mature economies would have been inconceivable without the facilitating and enabling role of the state.

Intervention by the state has taken several forms, including handing a dominant role to central banks to offer vital support to the financial system by providing liquidity and through their ability to influence interest rates. The state has also offered guarantees to bank deposits, boosted the capital of banks out of tax income and implicitly guaranteed bank survival through the ‘too big to fail doctrine’. Finally, the state has fostered financialisation by altering the regulatory framework of finance. The critically important role of the state was demonstrated at the point of the 2007-9 crisis as the state rescued banks and prevented the collapse of the financial system.


Benchmarking Working Europe 2014

The ETUI have released their 2014 report on working conditions in Europe. Well worth a read.

BENCHMARKING Working Europe 2014 A4 Web version

The year 2010 saw the launch of the Europe 2020 strategy. The new EU strategy had been devised for the purpose of promoting smart, sustainable and inclusive growth that would help Europe recover from the crisis and re-emerge stronger and more prosperous on the other side. In June of the same year, the European Semester was put in place to ensure the implementation and progress of macro-economic policy developments and structural reforms contained in the Europe 2020 strategy.

Now, in 2014, nearly five years into the strategy, the mid-term review of Europe 2020 is scheduled to take place in order to assess the effectiveness and relevance of the strategy and the mode of its governance and implementation. At a superficial glance, this mid-term review might appear to be taking place at a point in time when claims are issuing from various quarters that Europe is edging itself out of crisis, that the current policy direction is taking effect, and that it is indeed giving Europe the requisite boost to move from economic downturn to recovery. A more careful assessment will reveal, however, that Europe is still experiencing a devastatingly high level of unemployment; that growth is at best fragile; and that, rather than a narrowing of the gap separating us from the targets set for Europe 2020, we are seeing widening divergence, signifying that the current approach is definitely not achieving what it was set up to do. The assessment of the extent to which the European Semester, and in particular Europe 2020, has – or has not – helped Europe get out of the crisis will, accordingly, be instrumental in determining how European-level policies and strategies are to be redirected in the future.


Debt: A Weapon Against the People


This pamphlet follows two recent economic analyses of the crisis and its aftermath published by the Communist Party of Ireland: An Economy for the Common Good (2009) and Repudiate the Debt (2011). In this pamphlet we develop further our analysis of the crisis of capitalism, the role debt plays in the economic system, and, most importantly, the response of the establishment and its attempt to further extend its power and wealth, with devastating consequences for working people’s lives.

When you lend a friend €20, whatever way you put it you are down €20 until they pay you back. Even if they make a commitment to pay you back €30, you are still down €20, and no shop will take your friend’s commitment to pay you back €30 as real money.

However, when a bank lent someone €300,000 for a mortgage, not only did it not deduct €300,000 from its accounts but it actually added the full amount that would be paid back over the lifetime of the mortgage—close to €1½ million—to its assets. It “created” €1.2 million, that doesn’t exist, through the loan.

It is this type of growth—unearned and future—that gave credence to the monetarist belief that there could be unlimited growth and expansion. The lines between asset and liability disappeared on the balance sheets of capitalism. Debt—credit—would make the world go round. Crisis could be overcome.

Or so they told us.

Marx recognised that credit and debt have always played a role in production and consumption within capitalism. But what is different today is the dependence of the system on it, where the rate of profit steadily falls, and the fundamental role it plays in the creation of profit, both as a fund and an avenue for investment. Without debt, capitalism would cease to grow; yet with its systemic reliance on debt capitalism is even more anarchic and volatile, with production and supply even further divorced from demand and consumption. To quote John Maynard Keynes, “when the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.”[3]

This pamphlet outlines the principal points of development in the economic system during the second half of the twentieth century and then looks at the nature and extent of the debt crisis in Europe, particularly here in Ireland, which is exposing the contradictions and vulnerability of European economies and ultimately of monopoly capitalism. The crisis, like any crisis, is an opportunity for some, and the European Union and the Irish establishment have seized on this opportunity to further strengthen their power.

It is a naïve mistake to say, as some do, that austerity is not working. This misunderstands the root causes of the crisis, and the system’s response. “Austerity” is not designed to create jobs. It is not designed to ease the burden being placed on workers’ shoulders. It is not designed to reduce the bankruptcy of states. The purpose of the austerity programmes being imposed throughout Europe, particularly in the periphery but more recently also in core countries, is to free up capital and transfer it to finance houses and institutions so as to shore up the primary source of growth in the system: finance capital.

Get your copy of the pamphlet from Connolly Bookshop, Temple Bar.

The political economy of water charges – an EU dimension

The origin of the planned water charges lies in the EU’s Water Framework Directive (2000), which provided for full cost recovery for water use and whose Article 9 states; ‘Member States shall take account of the principle of recovery of the costs of water services …’ It also required Member States to have in place water-pricing policies by 2010. The Directive was transposed into Irish Law in 2003. The Water Framework Directive, which seeks to commodify water provision through the establishment of the principle of recovery of the costs of water services. The EU took advantage of the ‘bailout’ to make it a condition of the ‘loans’.  This will open the way for the sale of Irish Water either in whole or in part, ostensibly to complete the single market or to promote competition ‘in the interests of the consumer’. This is just one reason why there is such government resistance to a constitutional referendum to permanently retain Irish Water in public  ownership – the other is TTIP.

Both sides in the TTIP negotiations have made clear their intention to use TTIP to get access to what is described as “public monopolies;” that is, public utilities including water. These services would then be vulnerable to greater outsourcing and private tendering for service delivery and eventually, to privatisation. TTIP would open up public procurement contracts to the private sector, meaning that social, environmental or “public good” goals in public procurement would be removed. A private monopoly can fix its price at an unaffordable level, as Bechtel did in Bolivia, leading to a popular uprising; the termination of the contract and replacement of the government.

It would also make the nationalisation (or renationalisation) of services or resources virtually impossible, as incredibly, corporations would be able to sue for loss of future and expected profits. This is facilitated by the inclusion of an (ISDS) Investor – State Dispute Settlement clause in TTIP. TTIP would increase the pressure for the privatisation of ‘services of general interest’, such as water services. Foreign suppliers of services of general interest should not be entitled to claim “forgone profits” through ISDS. This provision, in effect would further legalise neo-liberalism as the economic and social framework in Ireland and the EU.

But even if ISDS is removed from TTIP, the main goal remains; to remove regulatory ‘barriers’ which restrict the potential profits to be made by transnational corporations on both sides of the Atlantic. Yet these ‘barriers’ are in reality some of our most prized social standards and environmental regulations, such as labour rights, food safety rules, regulations on the use of toxic chemicals and digital privacy laws. Public water provision is only one of the services under threat from TTIP. Both water charges and TTIP must be defeated!

Frank Keoghan


Where the Money Leads

‘Traditionally in American history, politics is like a seesaw: When one side is up the other side is down,” said Peter Wehner, a former aide to President George W. Bush. “Now it’s as if the seesaw is broken; the public is distrustful of both parties.” Wall Street Journal (11-04-14)

“Follow the money” is a seemingly simple, but telling popular prescription for discerning people’s motives, a slogan made popular by literature and movies.

But it is more than that. It is also a useful key to unlocking the mysteries of social processes and institutions. In a society that affixes a monetary worth on everything, including opinions, ideas, and personal values, tracking dollars and cents becomes one of the best guides to our understanding of events unfolding around us.

Take elections, for example.

Every high school Civics class teaches that elections are the highest expression of democratic practices. Apart from the direct democracy of legend– the New England town meeting or the Swiss canton assemblies– organized secret-ballot-style elections count as the democratic ideal deeply embedded in every US school-age child’s mind.

Let’s put aside the arrogant high hypocrisy of US and European politicians and pundits who deride secret ballots when they result in the election of a Chavez, Morales, Maduro, or Correa. That will make for a juicy topic on another occasion.

Instead, let’s examine what the flow of money tells us about the gold standard of democracy as celebrated in Europe and the US.

Surely, no one would deny that money has a profound effect upon election outcomes. That comes as old news. Even before the dominance of party politics, even before the evolution of party politics into two-party politics, money played a critical factor in advantaging issues, campaigns, and candidates.

To the extent that mass engagement– rallies, outreach, canvassing, etc.– could match or even trump both the corrupting and opinion-changing power of money, electoral democracy maintained an aura of legitimacy. To be sure, buying elections seems a nasty business, but as long as elections remained highly contested extravaganzas drawing interest and engagement, credibility remains intact.

New and changing technologies cast a lengthening shadow over the electoral process. News and entertainment media, like radio, were only too happy to take advertising dollars to promote electoral campaigns. At the same time, these technologies eroded the efficacy of traditional campaigns reliant upon campaign workers’ sweat and shoe leather.

With television and now the internet, the power of media and media dollars has grown exponentially. It has hardly gone unnoticed that these shifts have amplified the power of money and diminished the traditional get-out-the-vote efforts of unions, civil rights, and other people’s organizations.

Most recently, the Supreme Court’s Citizens United decision has opened the spigot of unregulated cash into elections, further overwhelming any counter forces to the outright purchase of candidates and election results.

Readers may find nothing new here. The sordid story of money’s corrupting and deflecting influence has certainly been told before, as has the pat remedy offered by reformers. To return to the halcyon days of US electoral democracy is simply a matter of establishing financial limits on campaigns and campaign contributions. By leveling and limiting the electoral playing field, we can restore the legitimacy tainted by money.

Unfortunately, this idealistic solution will itself be overpowered by the power of money. The traditional forces in US politics are not unhappy with buying and selling political power, except insofar as their own money is not put at a disadvantage.

But the reformist panacea would not work even if it were implemented. Advocates of campaign financial reform fail to see that capitalism and informed, independent, and authentically democratic electoral processes are incompatible. Capitalism, unerringly and universally, erodes and smothers democracy. Eliminating, even significantly, reducing the power of money in politics under a capitalist system is an impossibility. The historical trajectory goes the other way.

A Broken System

Since the New Deal era, political partisanship and the accompanying flow of money was linked to Party politics. Corporations and the wealthy gave generously to opponents of the New Deal, the Republican Party. To a great extent, the people power (and significant independent money) of unions and other progressive organizations served as an adequate counterweight to the resources of the rich and powerful. The Democratic Party enjoyed the benefits of this practice.

The television and money-driven election of JF Kennedy in 1960 marked a watershed in both the diminution of issue relevancy and the maturation of political marketing. Money and the advertising and marketing attention that money bought moved to center stage. Key chains, buttons and inscribed pens were replaced by multimillion dollar television advertisements in the buying of election outcomes.

In 1964, the organic link between the money of wealth and power and the Republican Party began to stretch with the campaign of Barry Goldwater. So called “liberal Republicans” of the East Coast establishment recoiled from what they perceived as extremism, leaving Goldwater’s campaign treasuries to be filled by the extreme right’s wealthy godfathers in the Southwestern and Western US (The looney right rebounded to Goldwater’s loss by investing heavily in rallying and expanding the 26 million Goldwater voter base and by buying a broader, louder, but less shrill voice in the media; that project paid off handsomely by 1980).

While it is understandable that donors would spend to their interests– support candidates of shared ideology– things began to change with the Democratic Party’s retreat from New Deal economic thinking, the general decline of traditional Party politics, and the rise of the politics of celebrity and personality. With advertising and marketing domination of electoral campaigns, constructing an attractive personal narrative replaced issues and accomplishments– contrived image replaced content.

Today, the two-party system holds electoral politics in its tight grip. And issue-driven politics has been replaced by the politics of flag pins, winning smiles and a “wholesome” family.

Undoubtedly, the decline of substance in politics further encouraged the activity of sleazy lobbyists and influence peddling. Politicians are not faced with the conflict of principles against powerful interests because electoral politics have turned away from principles.

We see the cynicism of principle in the Republican Party’s rejection of its ideological zealots. So called “Tea Party” radicals sat well with the Republican corporate leaders when they were energizing electoral campaigns, but the zealots were challenged after setbacks in 2012. Today, the Republican corporate god fathers are making every effort to temper party radicalism in order to insure the only important principle: electability.

The Democratic Party, on the other hand, simply ignores its left wing, treating it alternately as an embarrassment or a stepchild. It is this trivialization of principle and ideology that channels the flow of money today.

Barren Politics

I wrote in 2008:

This election cycle has revealed something new: Democrats are raising more money from corporate interests for their campaigns than the traditionally dominant Republicans. This process began before the 2006 elections, accelerated sharply in the Presidential elections, strengthened in the early primaries and continued into 2008. In March, 2008, McCain gained somewhat on his Democratic rivals, but still fell well below the total raised by the two Democrats. Within the Democratic camp, Clinton dominated most corporate contributions until 2008, when Obama enjoyed big gains, pushing ahead through March especially in the key industries of finance, lawyers/lobbyists, communications and health. Wall Street has strongly supported the Democratic candidates over the Republicans. Through the end of 2007, seven of the big 8 financial firms (Goldman Sachs, Citigroup, Morgan Stanley, Lehman Brothers, JP Morgan Chase, UBS, and Credit Suisse) showed a decided preference towards the Democrats. Only Merrill Lynch gave more to Republicans, though they gave the single most to Clinton. The Wall Street Journal (2-3/4-08), while noting that Obama receives a notable number of contributions from small donors, pointed out that “…even for Sen. Obama, the finance industry was still the richest source of cash overall…” Through February, Obama led the other candidates in contributions from the pharmaceutical industry and was in a virtual dead heat with Clinton with respect to the energy sector. These numbers strongly suggest that candidates, especially Democratic Party candidates, are unlikely to challenge their corporate sponsors in any meaningful way.

Clearly, Corporate America was not afraid that Obama or Clinton would step on their toes or even stand in their way. While the Republican message and program were more overtly and adamantly pro-business, big business was not trying to swing the election their way. While they may have differed on social and even foreign policy questions, wealth and power understood that the Democrats would not challenge them on any matters relevant to their business agenda. Six years after, they appear to have been right.

Another way to illustrate the uncoupling of corporate money from party ideology is through the trend in corporate PACs to shovel money to incumbents of either party: In 1978 corporate PACs gave 40% of their contributions to House incumbents; in 2014, that number had leaped to 74%.

Corporations are not trying to deliver a message; they are outright buying all of the candidates.

With respect to this year’s November 4 interim election, corporate PACs have shifted their support– sometimes dramatically– from Democrats in key races to Republicans over the last 18 months (WSJ, 10-29-14). Obviously, neither the corporations nor the candidates have changed their agendas greatly. So it’s not about issues, but electability.

It should be transparent that two-party politics in the age of extreme concentrations of wealth and media influence is far from a rousing example of democratic process. Consequently, we should surely not expect the results of the tainted process to be democratic. Like the commercialization of commodities, the commercialization of politics results eventually in the domination of the market by a few products (parties, candidates) and the minimizing of their differences. We no more pick our leaders than we pick the products offered in the showroom. Corporate America picks them both.

Zoltan Zigedy



Ireland, Still Addicted to Tax Breaks

Taken from http://www.nytimes.com/2014/10/20/opinion/ireland-still-addicted-to-tax-breaks.html

The Irish government decided last week to get rid of a tax loophole that has helped big multinational companies like Apple and Google avoid paying billions in taxes to any government at all. But hold the champagne: Ireland could well replace one problematic tax policy with another, leaving aggressive tax avoidance pretty much intact.

On Oct. 14, Ireland’s finance minister, Michael Noonan, said the country would get rid of the “double Irish” — a provision that allows companies doing business in the country to avoid taxes by making royalty payments to an affiliated firm that is registered in Ireland but has its tax home in another country, often a tax haven like Bermuda that has no corporate income taxes. The provision will disappear for new companies in January, but businesses already using it can continue to do so until 2020.

Still, Ireland, which for years used policies like the double Irish to attract multinational businesses, appears uninterested in true reform. It will create a new provision known as the Knowledge Development Box that will allow technology, pharmaceutical and other companies that make money from patented products and services to pay a discounted tax rate. Officials haven’t said much about what kinds of profits will qualify for the lower rate or what it will be. Experts expect it to be lower than the already low standard corporate tax rate of 12.5 percent.

Ireland is not alone in trying to lure tech companies with very low tax rates. Since last year, Britain has been phasing in what it calls the Patent Box. By 2017, the country will have just a 10 percent tax on profits from “patented inventions and certain other innovations.” That will be less than half its standard corporate tax rate of 22 percent.

There are numerous problems with such policies. For starters, they leave one group of businesses — those that are not fortunate enough to make money with the help of patented products — at a significant disadvantage. Is it fair to have a much higher tax on the profits of, say, a modestly profitable restaurant business than on a highly prosperous technology giant?

These tax policies also create a dangerous race to the bottom, with each nation trying to outdo the others in tax giveaways. If left unchecked, this could make it impossible for any nation to tax profits from a fast-growing part of the economy. Governments, of course, must still pay for public services, so they will have to levy higher taxes on individuals, which will fall most heavily on the middle class and the poor.

It is particularly depressing that countries like Britain and Ireland are engaging in such beggar-thy-neighbor policies given their public commitments in international forums to behave differently. For instance, the Group of 20, of which Britain is a member and at which Ireland is represented through the European Union, has made ending tax avoidance a priority. If even G-20 countries cannot resist the temptation to create giant loopholes, how can the international community ever hope to persuade other nations that are tax havens to change? Getting countries to cooperate with one another on tax policy is beginning to seem like a far-fetched idea.


Eurozone design failure

Eurozone Design Failures by Paul de Grauwe

I analyze the nature of the design failures of the Eurozone. I argue first that the endogenous dynamics of booms and busts that are endemic in capitalism continued to work at the national level in the Eurozone and that the monetary union in no way disciplined these into a union-wide dynamics. On the contrary the monetary union probably exacerbated these national booms and busts. Second, the existing stabilizers that existed at the national level prior to the start of the union were stripped away from the memberstates without being transposed at the monetary union level. This left the member states “naked” and fragile, unable to deal with the coming national disturbances. I study the way these failures can be overcome. This leads me to stress the role of the ECB as a lender of last resort and the need to make macroeconomic policies more symmetric so as to avoid a deflationary bias in the Eurozone. I conclude with some thoughts on political unification, and the dangers of unification without democratic legitimacy.

Below are a number of  graphs from this report that show how Ireland’s ‘debt’ crisis results directly from the perverse nature of the Irish economy’s role as conduit for US and European capital and the subsequent socialisation of private debt.

Declining support for EU

These referendum results show a steady decline in support for the European Union and the political, social and economic direction it has taken and directed member-states to follow.

As the global economy continues to stagnate and the ‘recovery’ falters more austerity is to come as the EU and the US drive home their agenda for big business and the wealthy.

Progressives in Ireland have to challenge the EU and not just ambulance chase on issues in Ireland. For this we need a principled movement not caught up in short term electoral opportunism.

TTIP represents the challenge of the day and public awareness must be raised on this issue. Unions must be won over to campaign and standing up against TTIP and the EU/US elites. ISDS, while being the most offensive part of the TTIP negotiations, is not the only concern.

A broad alliance is growing around the TTIP Information Network www.ttip.ie this needs to be built on and expanded as does the progressive union positions that are being taken.

Europe said no to burning the bondholders!

There has been much debate about could we have burnt the big bondholders, and if so why didnt we, who was this protecting and who made the ultimate call on it.

Below is a revealing and insightful quote from Ray McSharry, former Minister for Finance, former EU Commissioner, Bank of Ireland Board member and close friend of then Minister for Finance Brian Lenihan.

“Brian [Lenihan] had been keen to burn the big bondholders and we discussed this on a number of occasions. One morning I got a call about a quarter past eight and it was Brian. He told me that he was able to burn the bondholders and he was very happy because the European Central Bank President, Jean-Claude Trichet, had toldhim he could do it.

‘This would have improved Ireland’s position significantly and it was going to be a big story, but later that day a now despondent Brian rang me back. He said Trichet had changed his mind because he realised that the main casualty if the bondholders were burnt would be big German and French banks. This was a disgraceful decision because the ECB is supposed to represent the interests of Europe generally, but they were clearly under the sway of the German and French banks. Even today, I still would not have much confidence in the ECB and until Europe gets a totally independent entity to defend its currency, the euro will remain a fragile currency.”—Ray MacSharry, former minister for finance and member of the EU Commission

Extract taken from Murphy, O’Rourke and Whelan (eds.) in Brian Lenihan, in Calm and in Crisis (Merrion Press, 2014).

Interview with Zoltan Zigedy

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 crisis.

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 domination.

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 people.

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 living.

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.