SO CLOSE TO AN INSIGHT!:

Autumn of the Empire (Joshua Clover, 18th Jul 2011, Los Angeles Review of Books)

It is the pivot of the early seventies that concerns Robert Brenner, arguably capital's most lucid contemporary historian, as well. He lingers there with remarkable and sustained insight in The Economics of Global Turbulence. The brute situation, far more striking than most will admit, can be summarized in a single stark fact: During the "Long Boom" of 1948-1973, the lowest annual profit rate in the U.S. industrial sector was still higher than the highest such rate in the ensuing period, the "Long Bust." This fact is all the more shocking for being so contrary to the largely accepted story -- often centered around the Reagan presidency, or Clinton's "new economy," depending on one's party preference -- of recent American history as one of minor falls and major lifts.

Brenner's argument about how this came to pass is rigorous and buttressed by extraordinarily careful empirical research. With the Long Boom came an intensification of capital's intrinsic logic. Brutal competition between industrial firms led to accelerating investment in the latest technology, the newest factory -- or Fabrik, to use the more suggestive German word. This endlessly expensive struggle over fabrication methods replaced workers with machines, drove down profit margins, and correspondingly forced companies to increase the scale of production in order to earn anything at all. Less profit per widget, ergo more widgets! But alas, fewer industrial workers to buy them up: a version of the "general glut" that nineteenth century economists mostly believed was impossible.

To this point, Brenner's study follows rather closely the theory of capitalist crisis developed by Karl Marx around the ambiguously named "Law of the Tendency of the Rate of Profit to Decline." Marx's theory presented a challenge to the various prophets of equilibrium. Two centuries ago, French political economist Jean-Baptiste Say forwarded the proposition that supply and demand always balance themselves, because "products are paid for with products." Marx disproved "Say's Law" rather decisively. Marx being anathema to the doxa of professional economists, it would have to be disproved yet again, this time by a fellow bourgeois economist, John Maynard Keynes himself, before it could be put away (only to return, zombie-like, surviving against the massive weight of evidence in some quarters -- cough Chicago cough).

Marx argued that the tendency toward volatility and crisis was an intrinsic contradiction in capitalism's mode of generating value. On the one hand, real profit (that is, systemic accumulation, as opposed to one merchant merely getting the better of another) could only arise from the extraction of surplus value from productive labor, to be realized as profit in the market. On the other, the coercive competition among enterprises compelled a struggle for greater productivity -- which meant more and more efficient machines, organizational forms, and use of raw materials, requiring ever fewer productive laborers. Agribusiness is the great historical example of this, from the cotton mill to the "green revolution," but the tendency exists across the economy. Since productive laborers are both the lone source of new value and are ceaselessly expelled from the production process, crisis is inevitable.

To resolve this dynamic, a quite different kind of equilibrium was proposed. This is the "creative destruction" celebrated by its Austrian apostle, Joseph Schumpeter, in which the economy shakes itself apart amidst much destruction of value and great human immiseration, then reassembles itself so as to renew the process of accumulation. As profit plummets toward zero, a given line -- automobiles, say, or consumer electronics -- should "shake out," with the weaker firms folding up their factories and heading home. Such a fratricidal fab-war, according to the theory, should restore profitability and even serve as a forcing house for the invention of new lines to tempt the consumer.

Why, then, did this not happen in the seventies, as the U.S. economy went through a bruising series of shocks and declines? In an irony of position, Brenner's history from the left approaches, as if the political spectrum were a torus, the far right ideas of the Austrian School of Economics (in particular their "liquidationist" belief that the government should never intervene against the failure of businesses, lest inefficiencies be unnaturally preserved). But Brenner is less interested in libertarian prescriptions than in a fact-based description of what happened and why. He persuasively debunks the idea that industrial profits were squeezed by wages; indeed, real wages have stagnated and even decreased in the last four decades. This has been concealed only in the sphere of rhetoric: Statistics about "household earnings" desperately hope you won't notice that households now require multiple incomes to keep up. That wasn't feminism sending women into the tender mercies of the labor market -- or rather, it was, but at the same time the migration to the workplace was part of a protracted disaster for the working classes, masquerading as opportunity.

So, let's review: beginning in the late-60s/early 70s, you have a revolution in which women demand that they be added into the workplace. This at the exact same time that blacks have finally defeated Jim Crow and are themselves being fully integrated into the workforce. Incredibly enough, the US economy manages to do all this, though at the inevitable cost in productivity and profits. After all, you can't just add millions of employees for purely social, rather than economic, reasons and expect it not to impact your bottom line. Now, if your primary goal as a society was profits and individual income rates, this could indeed be seen as a disastrous result. But, if your primary goal was self-fulfillment, or what we might call "the pursuit of happiness," then it seems more like a spectacular success.

Of course, as we might have predicted, women aren't finding that employment makes them all that happy after all, while men are discovering that not working doesn't suck, and families are finding that having both parents working doesn't increase happiness. Meanwhile, technological innovation and globalization have served to drive down the cost of living and vastly improve the quality of life, and home ownership, IRAs, 401ks, etc. have sky-rocketed household wealth. It is against this backdrop that we've shaken off a good bit of our excess employment and corporate profits have managed to boom despite an ostensible Depression.

This is exactly what creative destruction feels like.

Posted by oj at August 18, 2011 6:11 AM
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