Michael Hudson on Class Consciousness

Here is another extract from Michael Hudson‘s excellent J is for Junk Economics (p.57-8):

Class Consciousness: This term has been associated mainly with the working class, but the elites may have an even stronger feeling of solidarity as a cohesive class. Their view of their place in the economy is much like that of England’s Norman conquerors, who extracted rental and tax tribute. The medieval Arab historian Ibn Khaldun attributed the conquests by pastoral nomads such as Genghis Kahn and Turkish tribes moving into Europe to the binding force of asabiyyah (asabiya), or social cohesiveness. His Muqaddimah, an introduction to a history of the world published in 1377, explained the rise and fall of nations and empires as reflecting the degree to which marauding tribes held together as an ethnic unit, whose mutual aid and shared goals spanned economic classes. Today’s financial class is cosmopolitan rather than ethnic or nationalist, absorbing client oligarchies into its ranks.

What is needed for economic success as a class is self-consciousness of common interests. Labor has won concessions from industry, but has not deterred finance from exploiting wage earners via mortgage lending, personal debt and pension-fund capitalism. Wealth is concentrated at the top of the economic pyramid as banks and bondholders gain control of industry and move to take over governments. Their political aim is to shift taxes off finance and its major clients, and to force taxpayers to pay interest to private bondholders. It seems as if today’s working class (the 99 percent) does not realize that a class war is being waged against them – or that as Warren Buffett said of his own One Percent, “we are winning it.”

The financial strategy in this class war is to popularize “identity politics” prompting voters to think of themselves as women, ethnic or racial minorities, or sexual categories (LBGTQ) instead of economic categories such as wage earners, debtors and/or renters. True identity politics should begin with economic class consciousness, solidarity and mutual aid. There can be little promotion of group self-interest without this.”

Production and realization of surplus value – Marxists, Keynesians and others

Karl_Marx_001This quote is taken from a footnote to Marx’s Capital Volume II (p. 391 in the Penguin edition). The volume was put together after Marx’s death by his friend and collaborator Engels, drawing on extensive notes. The quote provides inspiration for the analysis of one particular contradiction in the dynamics of capitalism :

“Contradiction in the capitalist mode of production. The workers are important for the market as buyers of commodities. But as sellers of their commodity – labour-power – capitalist society has the tendency to restrict them to their minimum price. Further contradiction: the periods in which capitalist production exerts all its forces regularly show themselves to be periods of over-production; because the limit to the application of the productive powers is not simply the production of value, but also its realization. However, the sale of commodities, the realization of commodity capital, and thus of surplus-value as well, is restricted not by the consumer needs of society in general, but by the consumer needs of a society in which the great majority are always poor and must always remain poor.” (my emphasis)

It is important not to take this quote out of context. In addition, despite significant inequality and poverty, Marx was clearly wrong about the majority always remaining poor under capitalism. However, the contradiction described here between the production of surplus value and its realization upon sale, has given rise to plenty of debate among left economists. Continue reading

Trumponomics Part 3: Alternatives

TrumponomicsHere is Part 3 of my series on the book Trumponomics – Causes and Consequences. As it is an early assessment of the economics of the Trump presidency, concrete left policy alternatives do not take up much of the content, but there are some ideas to draw on.

Central to the aim of making the left ‘great again’, to quote one of the authors, is a political programme which pivots away from the dominant liberal, politically correct agenda, and which serves the interests of the masses.

This would be a social democratic platform, offering a radical alternative to the neoliberal ideology which has captured both major parties in the US. Bernie Sanders, despite failing to win the Democratic nomination, gave many a taste of what could be achieved.

Sanders styled himself a ‘socialist’, but by the standards of Europe, his policy proposals were far more social democratic. He certainly was not calling for the revolutionary overthrow of capitalism, but merely a larger role for government in the economy. Continue reading

The US does not have the highest living standard in the world (Ha-Joon Chang’s Thing 10)

23-things-they-don-t-tell-you-about-capitalismAnother telling extract from Ha-Joon Chang’s 23 Things They Don’t Tell You About Capitalism (p.102-3, 111):

“The average US citizen does have greater command over goods and services than his counterpart in any other country in the world except Luxembourg. However, given the country’s high inequality, this average is less accurate in representing how people live than the averages for other countries with a more equal income distribution. Higher inequality is also behind the poorer health indicators and worse crime statistics of the US. Moreover, the same dollar buys more things in the US than in most other rich countries mainly because it has cheaper services than in other comparable countries, thanks to higher immigration and poorer employment conditions. Furthermore, Americans work considerably longer than Europeans. Per hour worked, their command over goods and services is smaller than that of several European countries. While we can debate which is a better lifestyle – more material goods with less leisure time (as in the US) or fewer material goods with more leisure time (as in Europe) – this suggests that the US does not have an unambiguously higher living standard than comparable countries.

…There is no simple way to compare living standards across countries…by focusing just on how many goods and services our income can buy, we miss out a lot of other things that constitute elements of the ‘good life’, such as the amount of quality leisure time, job security, freedom from crime, access to healthcare, social welfare provisions, and so on. While different individuals and countries will definitely have different views on how to weigh these indicators against each other and against income figures, non-income dimensions should not be ignored, if we are to build societies where people genuinely ‘live well’.”

The Strange Capitalist Embrace of Austerity Viewed in Terms of Marx’s Falling Profit-Rate Law – via heteconomist

An interesting post from Peter Cooper at his heteconomist blog on a topic I have discussed before: the effects and limits of government policy on the rate of profit.

Profitability in a capitalist economy provides both the motive for investment, and the source of it via companies’ retained earnings.

Keynesian policies to expand demand can work to increase growth, but in Marxist terms they are limited by their effects on the rate of profit.

Austerity could perversely raise the growth rate over the medium run by restoring private sector profitability, even if it dampens growth initially.

If this idea is right, one can see that capitalism is often not a ‘nice’ system. It may be unrivaled in its capacity for wealth creation, but this is typically done so unevenly and often unfairly. Intervention can mitigate some of this, but within limits.

Trumponomics Part 2: Consequences

TrumponomicsSince taking office Trump has proved unpredictable, but what are the likely outcomes of his policies? His executive orders aside, he has not had it all his own way, despite Republican majorities in both houses of Congress.

Yesterday I outlined the economic causes of the rise to power of this ostensibly populist president. This post reviews some of the potential consequences of Trump’s economic policies, as discussed in the book Trumponomics.

Jobs and growth

The centrepiece of Trump’s economic strategy, if in fact it has any coherence at all, is a pledge to put ‘America first’ and raise the growth rate of the US economy from its currently sluggish 2% per annum, to something like 4%. In doing so, he has promised that this will create 25 million jobs over ten years.

The pledge on jobs, if it is achieved, would in fact be nothing special when looking at the US record since the last recession. Continue reading

Trumponomics Part 1: Causes of the phenomenon

TrumponomicsAs promised, here is a review of some of the ideas covered in the fairly weighty tome Trumponomics – Causes and Consequences, recently published by the World Economics Association.

The book consists of 30 chapters, each one written by a different author. They are wide-ranging, but all come from a left perspective on economics and politics.

I am not going to review it chapter by chapter, but thought I would discuss some of the main ideas. As there is plenty to get through, I have divided it into three posts to be published this week: part 1 – causes, part 2 – consequences, and part 3 – alternatives.

Part 1 – Causes

A number of the chapters discuss the reasons for the electoral success of Donald Trump. The book is written by economists, so inevitably many of them have an economic basis. However, since their sympathies are with left wing heterodox thinking, much of it could be classed as political economy, which often incorporates political, historical and sociological ideas to an interdisciplinary analysis.

Broadly speaking, the rise of Trump can be explained by patterns of socio-economic change in recent decades which have left many behind; by the perception that particular elites, including the Democrats, have become disconnected from the concerns of ordinary people and have been captured by Wall Street and the ideology of neoliberalism; and by a campaign whose rhetoric successfully appealed to raw emotion rather than to rationality alone. Continue reading