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Sunday, February 22, 2009

Robert Brenner on the Crisis

Robert Brenner, a professor at UCLA, is most widely known for his re-sparking of an old, largely academic dispute about the transition from feudalism to capitalism. The Brenner debate brought much fury, though in a rather limited, confined community of Marxist scholars, to a question that took on far more self-conscious importance than the matter probably deserved. Much turned on how one understood feudalism and capitalism, yet the various disputants managed to pull in all the old controversies troubling the academic left for the last century.

This is not to belittle the question – actually a very interesting matter – but to remind how scholars, aloof from the urgency of party politics and robust class struggle, can drain a subject of the very life that might teach something useful to those thirsting for political understanding.

Apart from his position in this academic dustup, Brenner demonstrated a tenacious grasp of the Marxist method and an admirable ability to plow up tendencies and organize the historical data meaningfully.

Some years later, Brenner authored a lengthy paper, The Economics of Global Turbulence: A Special Report on the World Economy, 1950-1998, in May/June 1998 issue of New Left Review. In this book-length article, he sought to bring some deeper and more revealing understanding to the trajectory of post-war capitalism. Though ambitious, Brenner attacked this matter with a wealth of impressive economic and social data that challenged the then triumphant notion of capitalist stability and growth. As the Clinton golden era drew to a close, Brenner was one of the very few to see the precarious state of global capitalism. Certainly, he was among the even fewer embedding this projection in a Marxist framework.

Today, “Marxist” scholars are returning from the wilderness to offer alternatives to an anxious public thirsty for alternatives to the barren well of neo-liberal thinking. Those who did not flee the tradition in the face of the capitalist counter-revolution of the late twentieth century occupied themselves with fixing the “errant” ways of Marxist thought. Marxism was “rethought” and “reconstructed” in ways that accommodated the new perceived realities, the smug claim that There is No Alternative. For the most part, those returning from the wilderness are today offering an eviscerated, superficial caricature of Marxist thought: Marxism-lite. Of course they command the greater attention of the media.

Robert Brenner has not made these accommodations, nor has he been the darling of media attention. Nonetheless, he offered an interview on the current crisis to a Korean newspaper, Hankyoreh (, in late December of last year. His careful thoughts are well worth reviewing. His comments are in italics.

1. What mainly accounts for [this crisis] is a deep, and lasting, decline of the rate of return on capital investment since the end of the 1960’s. The failure of the rate of profit to recover is all the more remarkable, in view of the huge drop-off in the growth of real wages over the period. Brenner correctly seeks and locates the source of crisis in a tendency for the rate of profit to decline. Profit – both absolutely and relatively – is the lifeblood of capitalism, determining its stability and growth. But it is not the militancy of labor that accounts for the pressures on profits since real wages have grown very little over this period.

2. I don’t think it’s helpful to counter-pose… the real and financial aspects of the crisis. As I emphasized, it is a Marxian crisis, in that it finds its roots in a long term fall and failure to recover of the rate of profit, which is the fundamental source of the extended slowdown of capital accumulation right into the present. Brenner locates the origins of the crisis in the economy and not, as is the fashion, just in the financial sector (specifically, degraded mortgages). They are only a manifestation of the far deeper illness plaguing capitalism since the long post-war expansion.

3. The persistent weakness of aggregate demand has been the immediate source of the economy’s long term weakness…Since the start of the long downturn, state economic policies have tried to cope with the problem of insufficient demand by encouraging the increase of borrowing, both public and private… But because profitability had still not recovered… US authorities ended up adopting an approach [that]…[b]y keeping interest rates low… made it easy to borrow so as to encourage investment in financial assets. They were able to borrow on a titanic scale, vastly increase their investment and consumption, and in that way, drive the economy. So private deficits replaced public ones. What might be called “asset price Keynesianism” replaced traditional Keynesianism. With the ratcheting down of labor militancy and a long era of retreat and concessions by labor, the opportunity to grow profits became limited by diminished consumer resources. Investment opportunities were restricted – and consequent profitability – by stagnant incomes. I might add that public spending was restrained as well by a draconian neo-liberal ideological assault upon social welfare and public institutions. Debt – deferred payment - became the motor force for restoring profitability. Brenner is insightful in viewing this as a kind of perverted Keynesian stimulus.

4. Today, the recession is making the [financial] meltdown worse because it is exacerbating the housing crisis. The meltdown is intensifying the recession because it is making access to credit so difficult. It is the mutually reinforcing interaction between the crisis in the real economy and financial sector that has made the downward slide so intractable for policy makers and the potential for catastrophe is evident. This contradiction, stated so clearly by Brenner, captures the trap in to which policy makers have stumbled. Because the malady is rooted in a long term, chronic tendency of the capitalist system to strangle its own profit potential, policy makers are scrambling to restore profit while attempting to rescue a financial system dragging down that same potential. Where the massive debt was counted as an asset in the virtual expansion of the last two decades, it has now become of doubtful realization and, therefore, is counting as a dubious liability. Of course it’s not just the housing crisis that feeds the failure to meet debt payment, but also debt in commercial real estate, credit cards, student and auto loans, etc. that fall into default. While seldom noted, the “solution” – planned or unplanned – that capitalism offers to such a deep crisis is radical “restructuring”: the demise of smaller enterprises, the absorption of others, in short, the concentration and further monopolization of capital.

5. The idea of [“financialization”or]of a finance- led capitalization is a contradiction in terms, because, speaking generally…sustained financial profit making depends on sustained profit making in the real economy. To respond to the fall in the rate of profit in the real economy, some governments, led by the US encouraged a turn to finance by de-regulating the financial sector. But because the real economy continued to languish, the main result of de-regulation was to intensify competition in the financial sector, which made profit making more difficult and encouraged ever greater speculation and taking of risks. Brenner is correct to dismiss the fashionable “financialization” thesis which merely gives a pretentious name to a process requiring deeper analysis and understanding. Like the popularity of the shallow term “globalization”, nominalizing an observed phenomenon draws us no closer understanding its mechanism. However, Brenner does fail to note the division of labor in the global economy that stands behind the US economy’s dependence on the financial sector. It was not just de-regulation that pushed the financial sector forward, but the shifting of different capitalist functions to advantageous areas: manufacturing to low-wage areas, financial manipulation to wealthy, high consumption areas.

6. The triumph of Obama in the election is to be welcomed. A victory for McCain would have been a victory for the Republican Party and give an enormous boost to the most reactionary forces on the US political scene… That said, Obama is, like Roosevelt, a centrist Democrat, who cannot be expected, on his own, to do much to defend the vast majority of working people, who will be subjected to an accelerating assault from corporations trying to make up for their collapsing profits by reducing employment, compensation and so forth. Obama’s backed the titanic bailout of the financial sector, which represents perhaps the greatest robbery of the US taxpayer in American history… He also supported the bailout of the auto industry, even though it is conditional on massive cuts in the compensation of the auto workers. The bottom line is that, like Roosevelt, Obama can be expected to take decisive action in defense of working people only if he is pushed by way of organized direct action from below. The final point – the absolute necessity of pressure from working people to secure any gains for the masses – cannot be stressed enough.

7. I think that is probably the case [that only the crisis can resolve the crisis]. At first in the early 1930’s, the New Deal and Keynesianism were ineffective. In fact, through the length of the 1930’s, there was a failure to establish the conditions for a new boom, as was demonstrated when the economy fell back into the deep recession of 1937-1938. But, eventually, as a result of the long crisis in the thirties, you shook out the high cost, low profit means of production, creating the basic conditions for high rates of profit… all that was missing was a shock to demand. That demand was provided of course by the massive spending on armaments for World War II... [B]ut you needed a system-cleansing crisis first. Brenner’s understanding of Marxist crisis theory is buttressed well by his Great Depression example and equally apt for today: a “system-cleansing” is the order of the day, but not an answer to shrinking consumer demand brought on by declining incomes and employment and growing insecurities.

8. I think the Chinese crisis is going to be a lot worse than people expected, and this is for two main reasons. The first is that the American crisis, and the global crisis more generally, is much more serious than people expected, and in the last analysis, the fate of the Chinese economy is inextricably dependent upon the fate of the US economy, the global economy. While Brenner’s point is sound, he may underestimate two factors: the Chinese have a huge potential and largely untapped domestic market with huge reserves potentially available for its development. And, secondly, the Chinese financial sector was, for the most part, not infected with corrupted US “assets”.

9. None of the world’s elites are trying to exploit the crisis, and the US’s enormous economic problem’s, to challenge US hegemony. Perhaps they are not setting out to challenge US hegemony, but there are underlying economic forces unleashing a current of economic nationalism. How this emerging nationalism plays out may yet, in fact, establish a new economic order. Here, I think, Brenner overlooks deeper economic factors and the logic of capitalism, while elevating political postures - a mistake he seldom makes.

10. …Now the crisis has revealed the total bankruptcy of the neo-liberal mode of economic organization… It has been very powerfully manifested in the opposition by American working people to the bailouts for the banks and financial sector. What they are saying today is “We are told that saving the financial institutions, the financial markets, is the key to restoring the economy, prosperity. But we don’t believe it. We don’t want any more of our money going to these people who are just robbing us”. So there is a big vacuum ideologically. Thus there is a big opening for left ideas. The problem is that there is very little organization of working people, let alone, any political expression. So one can say that there is this very big opportunity created by the change in the political environment, or the ideological climate, but that by itself is not going to provide a progressive outcome. So, again, the top priority for progressives – for any left activists – where they should be active, is in trying to revive the organizations of working people. Without the re-creation of working class power, little progressive will be possible, and the only way to recreate that power is by way of mobilization for direct action. Only through working people taking action, collectively and en masse, will they be able to create the organization and amass the power necessary to provide the social basis, so to speak, for a transformation of their own consciousness, for political radicalization. As a careful, open-minded historian, Brenner has drawn the right conclusions from his economic analysis and study of past working class struggles. Indeed, there is a vacuum - a vacuum unprecedented in our lifetime – begging to be filled with a radical vision. He is correct to note that our charge is to embed that vision in the working class movement, the most essential agent for change. I would add that this charge requires both a vital vanguard organization as well as a class-conscious labor movement to succeed and begin the trek towards working class power. Phony patriotism aside, this is the road-map to addressing the real “terrorism” against working people presented by the catastrophic crisis.

There is much to learn from Robert Brenner’s analysis and I would urge readers to read him carefully. I would only fault him for failing to fully appreciate the impact of the counter-revolution in the European socialist countries, an event that left a profound impact upon the direction of the world economy in the closing decade of the twentieth century.

Zoltan Zigedy

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