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David Harvey’s The Enigma of Capital and the Politics of the Crisis.

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The Politics of the Crisis and David Harvey’s The Enigma of Capital. 2010.

“Capitalism is dying and cannot be revived”. Very few would repeat today John Strachey’s 1937 prediction (The Coming Struggle for Power). But nobody doubts that the 2008 banking crises shifted the economic and political landscape. Some on the left were certain that capitalism was if not wholly shattered at least seriously undermined. The Socialist Workers Party’s Alex Callinicos has written that the world’s close brush with financial melt-down heralded changes of a “genuinely epochal character”. Capitalism, he claimed, has been as shaken as it was by the Great Depression. A “huge hole” had opened up in Neoliberalism (The Bonfire of Illusions. 2010). This had widened the “boundaries of the possible” for the left.

The Marxist Geographer David Harvey’s   The Enigma of Capital also explores the background to the “mother of all crises”. Today’s difficulties have long-standing origins. One nexus lies in the absorption of a surplus of capital through ‘financialisation’, and the massive expansion of credit to those whose wages had been suppressed to restore profit levels during the initial stage of Neoliberalism. Leveraging (using borrowed money to invest) accelerated the growth of the available cash into a bubble. “Surplus fictitious capital created within the banking system was absorbing the surplus” (Page 30). Pension funds, municipalities, and larger numbers of private individuals (through easier ‘sub-prime’ mortgages, and credit generally), were drawn into an increasingly autonomous financial sector, which employed a dazzling array of profit-making devices in the ‘realm of circulation’. Trouble began in the US ‘sub-prime mortgage’ sector, with worries about the “toxic debts” (that is, hard to repay) behind mortgage-backed securities. * Trust evaporated, as with any run on banks, and the whole system began to fall apart. The crises “cascaded from one sphere to another”. The “Anglo-American model of world economic development” and “free market triumphalism” was discredited (Page 38). If it was not the dawn of a new epoch, it certainly looked for a while as if faith in markets, the cornerstone of neoliberal politics, was severely jolted.

However, Harvey notes that for Marxists, the opposite of crisis, economic equilibrium, is an unusual condition. Capitalism’s present difficulties do not mark a truly novel event. They are “the culmination of a pattern of financial crises that had become both more frequent and deeper over the years since the last big crisis of capitalism in the 1970s and early 1980s.”(Page 6) His views on how Marx originally explained crises is given in his Companion to Marx – which has been discussed on this site (Here).  This is a ‘multicausal’ approach, which has involved  state policy.  Harvey lays emphasis in the present work on the way that governments will try to reconfigure continued growth (at the magical figure of 3%) by political means – putting the interests of the ‘state-financial nexus’ before anything else.

There are many divergent thoughts on the depth to which market societies have been unsettled. At present in Britain politics have concentrated economics. The iron laws of economic necessity are used to justify targeted cuts in public spending, centring on social provision. Or, to put it another way, to secure support for a neoliberal ‘shock’ that will undermine the remnants of the egalitarian social functions of the state. If there was a widely shared view on the left that this period marks a decisive turning point for those who oppose capitalism, the terrain on which it can fight has been defined by these austerity policies. It is the purpose of this article, centred on David Harvey’s writings, to criticise some of the over-optimistic responses to the ‘crisis of capitalism’ and to sketch out some grounds for a more realistic strategy.

First Impressions.

Looking at the post-2008 financial disasters, it could be considered that capitalism had shown, to use the unfashionable words of Engels, that “the crises revealed the bourgeoisie’s incapacity to continue to administer the modern productive forces.” (Anti-Dühring) The way was open for groups within a vanguard (renamed ‘socialist anti-capitalism’) to develop a political project. For Alex Callinicos, this is the occasion to remedy the “chronic weaknesses” of the increasingly diffuse (not to say, chronically ineffective) “alter-globalisation” movement – worldwide protests at capitalist injustice. Demands “against the logic of Capital” would now have resonance. The Bonfire of Illusions argued for “democratic planning” “democratically taking control of the financial markets, nationalising under workers’ control”, “extending social provision” and even a “universal direct income” (Page 141) Callinicos bases his politics on the “strategic role of the organised working class” allied to the anti-capitalist ‘movement’. One might say that he considered the moment ripe for his general ‘anti-capitalist’ strategy, described in An Anti-Capitalist Manifesto. (2003). Through trade unions, social associations and party shapes all these forces should be “engaging with states to achieve reforms.” This, he asserted, is not ‘reformism’ (absorption into capitalist routine) but a revolution through “democratic forms of self-organisation” to “progressively take over the management of the economy.”

A different ‘anti-capitalist’ position, with more influence than the organised left usually gives it credit, refuses any engagement with the state and conventional politics – indeed with parties as such. John Holloway, whose presence looms large on this terrain, places faith in a multitude of do-it-yourself ‘refusals’ of capitalist servitude. In Crack Capitalism (2010) he wishes us to develop our “power to”. To pursue this objective through established politics, through parties and the state, (‘taking power’) is to enter a “false terrain”. “A political organisation which focuses its action upon the state inevitably reproduces these characteristics of the state as a form of relations.” (Page 59) Left-wing parties, “tend to reproduce the objectification of the person which is the core of capitalist social relations.”(Ibid) True anti-capitalism is therefore a kind of anti-politics, avoiding all taint from the ‘fetishism’ of separating the ‘they’ (masses, electors) from the ‘we’ (party, politicians).

His anti-partyism apart Holloway remains partly on the same terrain as Callinicos. He asserts “capitalism is in its deepest crisis for many years”. But instead of making politics, the moment has come simply to “stop making capitalism”. Does this, as Harvey claims, depend entirely on a picture of the ‘activity of labouring (Page 133) In fact Crack Capitalism supports a ‘refusal’ so all-encompassing it extends from not turning up to work to guerrilla warfare in the jungle. “We start from being angry and lost and trying to create something else (Page 20 Crack Capitalism). How exactly do we halt the “terrific destruction that surround us? For that, “There is no right answer, just millions of experiments.” (Page 256)

Harvey does not neglect his own wide-ranging search for shoots of resistance to capitalism. As a result of the crises, there will be, a “prolonged shake-out in which the question of grand and far-reaching alternatives will gradually bubble up to the surface in one part of another.”(P 225) There are the “alienated and discontented” who “for whatever reason, see the current path of capitalist development as a dead end if not to catastrophe for humanity.”(Page 340) There are the “deprived and dispossessed” – from wage earners, the ‘precariat’ in unstable employment to the landless. Nevertheless, there are no certainties about “who the agents of change will be”. Indeed The Enigma of Capitalism is not certain about political agencies at all. The problem is the more acute in that for Harvey, like Callinicos in The Enigma of Capital it is the “state-finance nexus” that has to be changed. The Enigma of Capital considers that left progress ultimately depends on “seizing state power, radically transforming and reworking the constitutional and institutional framework that currently supports private property, the market system and endless capital accumulation.”(Page 256)

There are some left strategies, which have concentrated on changing the institutional framework, the ‘state-finance nexus’. Robin Blackburn’s response to the “credit crunch” was to advocate a “public-utility finance system” on a supranational and “eventually global basis”. Blackburn convincingly argues that a seriously anti-capitalist government would have to grapple with credit and money. Such a regime could “curb corporate excesses, re-direct resources to useful ends, promote egalitarian goals, and build the capacity for popular invigilation and administration of financial and corporate affairs.” (New Left Review. No 56. 2009). The problem is that for the moment the prospect of any government adopting this scheme is as remote as the successful popular uprisings of which Blackburn finds few signs.

The Barriers to the Left.

So what is holding the left back from becoming a real political force, let alone taking power? For Harvey the central problem is that,

“in aggregate there is no resolute and sufficiently unified anti-capitalist movement that can adequately challenge the reproduction of the capitalist class and the perpetuation of its power on the world stage. Neither is there any obvious way to attack the bastions of privileged for capitalist elites or to curb their inordinate money power and military might. There is, however a vague sense that not only is another world possible……but that with the collapse of the Soviet empire another communism might also be possible.”(P 226 –7)

It is not just that the alienated and discontented have at best only a ‘vague sense’ of something better. A stable political way of identifying the problems of those deprived and dispossessed is not obvious either. There is no “political force capable of articulating” the alienated-discontented-deprived-dispossessed groups in an ‘alliance’ or giving voice to a coherent programme and strategy that would offer a real alternative to capitalism.”(Page 227) For Harvey Lenin’s question, What is to done? cannot be answered. We are caught in an insoluble dilemma. The “lack of an alternative vision prevents the formation of an oppositional movement, while the absence of such a movement precludes the articulation of an alternative?” (Ibid)

A hazy ‘alliance’ between all-embracing categories of the exploited, oppressed, fed-up and fearful-for-the-future (to put it as pejoratively as possible) is not going to grapple with this particular difficulty. Harvey casts doubt, a mere hundred or so years later, the Erfurt Programme’s (1891) claim that, “the militant, politically self-conscious divisions of the industrial proletariat furnish the power which is behind the socialist movement; but the more the influence of the proletariat affects the ways of thinking and feeling in vogue among allied social groups, the more will these, also, be drawn into the movement.” To the principal author of Erfurt, Karl Kautsky, it was these workers, with the “mass of the population” who are the motors of change. The contradiction between capitalism’s burgeoning ‘productive forces’ (growth) and its inability to organise the economy without crises, make a choice plain. The exploited (workers) and the ‘non-exploiting’ classes will be forced to choose between “going down in degradation or overthrowing the system of private property”. To change over from capitalism the vehicle of Parliament, pressured by the people, and reformed by socialist political parties, plays a central role. Socialists are there, when the time has come to gasp the levers of power, to cite Engels, to show how we might master Nature and the blind economic forces of society and “subject them to our will.” (Anti-Dühring)

These ideas had wide influence throughout the German Social Democrat-led 2nd International, up till the Great War. They continue to form a kind of bedrock ideology for many socialists, though they are normally severely amended. Harvey follows the modern Marxist consensus that there will never be such a decisive “final crisis” or the possibility of building socialist parties around the working class (if for the 2nd International, with allies). He advocates, a “broader notion of an alliance of forces in which the conventional proletariat is an important element, but not necessarily an element that has a leadership role”. This reveals a, hardly novel, scepticism about the leading role on the left of industrial-factory workers. (International Socialist Review. Sept/Oct 2010) Doubts about how far anyone can subject the economy, let alone Nature, to total rational control, are more muffled. Instead we have references to “radical egalitarianism”, institutions based on “common interests”, “democratic administrative procedures”, “free exploration of social relations” “technological innovations” “in pursuit of the common good.” (Pages 230-231)

There are plenty of difficulties with the 2nd International’s vision if they are only lightly corrected. The industrial working class has shrunk in size in Western countries. Even the category of propertyless wage earners has altered, instead of stable employment we have what Harvey calls the “precariat” (those unfixed), and the development of the productive forces are as dependent on “immaterial” labour (technological concepts and ‘programs’) as physical artefacts. The identity between any category of the working class and socialism, which Erfurt registered as a fact, has long diminished – it never extended to the United States or far outside of Europe. The road to power through Parliament looks less appealing after a decade when Parliamentary Socialism turned into the Third Way. Equally, overthrowing private property does not seem today a recipe to end the world’s problems, famously ecological ones.

But what has Harvey to put in place of the classical socialist Road to Power? He, thankfully, does not discuss the near-messianism and obscurity of Alain Badiou’s “another communism” and ‘communist hypothesis’ embedded not in institutions but in Fidelity to the Ontology of the Event. Yet often he is little clearer than this “Leninism without a Party”. On the one hand, for him the base of actual and potential opposition to capitalism is as wide as Michael Hardt and Toni Negri’s plural and multiple “multitude”, “composed potentially of all the diverse figures of social production” (Multitude 2004). On the other, Harvey would wish for “a grand alliance of all the deprived and the dispossessed everywhere. The aim would be to control the organisation, production and distribution of the surplus product for the pong-term benefit of us all.” (Page 247) However this isn’t on the cards, so we wander through a variety of ‘epicentres for social change’. These span radical NGOs, left parties, anarchists and autonomists, grassroots organisations, organised labour, social movements, and ‘identity’ movements, “women, children, gays, ethnic and religious movements all demanding an equal place in the sun.”(Page 258) Having read this versicoloured list many times since the 1980s I can only say: it forms a rainbow that gleams only at first sight.

Underneath there is one big gap. Harvey informs us that communists have “no political party” – at present. This misses the obvious rider that Marxists, beginning with Marx and Engels, have always sought to create political mechanisms, starting with the 1840s Communist League. As opportunities towards the end of the 19th century proved favourable, they centred on the only vehicles that, as a real force could “seize,” state power – parties. Believing that “another world is possible” is hollow without finding these political means to achieve it. ‘Co-evolution’, that is, tracing out a galaxy of different social contradictions and movements, is a multi-causal method well adapted to analysing crises. It is not a good political strategy. In other words, instead of looking at the multi-hued sources of ‘resistance’ and encouraging their combination, we should put the construction of this shared home our priority

The Barriers of Capital.

The Enigma of Capital is not primarily a political analysis but an attempt to make plain what is often hidden amongst the shifting shapes of the economy. This is its strength. But at present the economic and political have become closely intertwined. He question is no longer if or how the left should respond to the 2008 banking crisis, but what to do to resist the austerity programmes governments are inflicting in order to sustain capitalism. These have reached extreme levels in Iceland and Greece. In Britain the Liberal-Conservative Coalition is using cuts in pubic spending not only to restore stability at the expense of most wage-earners and the poor, but as a pretext to reshape radically public instructions around a retrenched ‘market state’.

The judgement that bank nationalisations indicated a real change-over from Neoliberalism rapidly proved false. Discredited or not the Anglo-American model of economic governance held sway. As Callinicos was obliged to update in the Preface to The Bonfire of Illusions, neo-liberalism soon made a comeback. Harvey, while he initially saw a retreat from dogmatic faith in the free-market – flagged by a willing use of state power. But this was accompanied by measures at the expense of the majority. Red Pepper (April/May 2010) David Harvey observed that since the 1970s the principle that “state power should protect financial institutions at all costs” has been upheld. In The Enigma of Capital the thought is expanded. “When the financial system and the ‘state-finance nexus’ fails, as it did in 1929 and 2008, then everyone recognises there is a threat to the survival of capitalism and no stone is left unturned and no compromise is left unexamined in our endeavours to resuscitate it.” (Page 56 – 57). To save “the existing financial system” “they’re bailing out the banks, the capitalist class, forgiving them their debts, their transgressions, and only theirs.” (Red Pepper). Both he and Callinicos argue, this may well lead to another cycle of speculation and bust, and the underlying problems of capital accumulation and the realisation of surpluses have not gone away. But the panic of 2008 has largely evaporated.

Left economists have explained the way in which ‘financialisation’ has drawn in ever-broader layers of people, including the poor. Sam Ashman writes that, “the profit made by financial institutions out of the personal income of workers is a form of financial expropriation, seen as additional profit generated in the realm of circulation.” (Historical Materialism. 17 2009) The dependence of states on the same financialisation process is equally significant. The National Debt is, for Marxists, a condition of accumulation, as the state seeks money on the market to finance necessary projects that capital cannot manage on its own (infrastructure, transport, education, health) To the free-marketers this is not just (as for Marx) ‘unproductive’ in a technical sense (that is not directly profitable for capital) but a drag on the economy. Neoliberals seek to bring about a condition, as Marx described in the 19th century, “The separation of public works from the state,” and “their migration into the domain of the works undertaken by capital itself” as a mark of the “degree to which the real community has constituted in the form of capital” (Page 531. Karl Marx. Grundrisse. 1973)

The paradox the only way they have found to do this is to pay for privately undertaken public works (that is state functions) out of general revenue. Outsourcing, or scheme like the Public sector Finance, which form the ground of many states’ response to the financial crisis, is a way to transfer tax revenue into private hands – at a costly premium. It is perhaps the central contradiction of the present austerity measures. Cuts are proposed to pay off the national debt (held to be ‘too high’), and the economy is to grow in the spaces left free by a retreating state. But the state finances ‘unproductive’ (but needed) services through taxation, at either a higher cost than it would pay to do the work itself, or at a lower quality. This will mean either more long-term spending, or it will undermine the quality of the infrastructure needed to restore profitability and smooth the cycle of accumulation.

The financial rescue has rapidly developed, in addition, a logic of its own. Interviewed in the American International Socialist Review (Sept/Oct 2010) David Harvey states, the response to the crisis shifted “from the financial institutions, then to state finances, and then to the people in terms of austerity and unemployment.” If the cornerstone of the financial rescue-package in many European countries is now to reduce the state’s deficit as just described, the rest of the parcel is more ideological. In the UK it is the pretext for a ‘shock’, that is, policies that will abolish the last social democratic institutions of society, from health and welfare to education, muffled by rhetoric about the ‘Big Society’. In Britain swingeing cuts in public spending, mass redundancies of civil servants, obligatory unwaged labour for the out-of-work, more ‘outsourcing’ of public services are underway. Redundancies will contribute to a rise in mass unemployment. The idea that volunteers could replace municipal employees is mooted. From the world of leveraging, derivatives, hedge funds, speculative bubbles, banks teetering on the brink, and credit going haywire we come down to the prospect that the state is unable to maintain a local public library without unpaid help.

David Harvey considers that there will be “a huge struggle between the state and the public sector unions in particular”. With its union base the left is caught up in mounting defensive campaigns against these cuts. Such a necessity makes it hard to see how the “boundaries of the possible” have widened for more radical projects. If there is a “crisis of legitimacy” it is because the market state is unable and unwilling to meet the needs and wishes of a population that hankers after social democratic provision, not revolution. Slavoj Žižek accurately described our position, “we will have to reinvent aspects of the new, just to keep the machinery going and maintain what was good in the old – education, healthcare, basic social services.” (New Left Review. No 64. July/Aug 2010). One needs to qualify this. The principal novelty we have to discover is a method of stemming the neoliberal tide – something the left has not found during the last three decades. Only then will we be in a position to discover how to transform the ‘social’ provision that the Liberal-Tory Coalition aims to hand over to private interests.

The Politics of the Future

The Enigma of Capitalism distinguishes between socialism and communism. “Socialism aims to democratically manage and regulate capitalism in ways that calm its excesses and redistribute its benefits of the common good.”(P 224) Spreads wealth, social provision. “Under socialism, the production if the surplus is typically managed either through active interventions in the market or through the nationalisation of the so-called ‘commanding heights’.”(Page 224) Communism, contrast, sought “an entirely different mode of both the production and the distribution of goods and services.”(Page 224) Rethought, it is powerfully attractive, “Horizontally networked, as opposed to hierarchically commanded, systems of coordination between horizontally and self-governing collectives of producers and consumers are envisaged as lying at the core of new forms of communism. Contemporary technologies of communications make such systems seem feasible.”(P 225) One expresses reservations about this is related to taking over the mechanisms of captialist accumulation. That is, what place growth has in this future. At times Harvey seems to suggest that expanded production is in itself questionable, which may not be the view, when put to the vote,  of an egalitarian society.

Yet, it would seem that communism, whatever the attractions of ‘another world’, is not on the agenda. To Harvey, “The core problem is how you are going to absorb capitalist surpluses in a productive and profitable way. My view is that social movements must coalesce around the idea that they want more control over the surplus product. And while I don’t support a return to the Keynesian model of the sort we had in the 1960s, I do think there was much greater social and political control over the production, utilisation and distribution of the surplus then” (Red Pepper).

The fight over cuts is of this ilk: a fight over the production, use and distribution of surpluses. Campaigning against spending reductions will, self-evidently, be based on multiple ‘epicentres’ of resistance. But the neoliberals, in Conservative and New Labour and shape have “succeeded in privatising the production of the surplus.” (Page 224) The Liberal-Tory Coalition is not going to change this – the central mechanism driving reductions in public spending. To alter our position fundamentally we have to get our hands on how the surplus is managed. Multiple resistances, or a patchwork of campaigns are excellent. Robin Blackburn’s suggestions for socialising credit have a part to play. But they are not enough. The French revolt over pensions demonstrated one thing above all: without political power exercised through government, all the resistance in the world is, for the present, bootless.

* An indispensable guide to these and other financial terms is given in Historical Materialism. 17.2 2009.


Written by Andrew Coates

November 8, 2010 at 12:42 pm

2 Responses

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  1. […] crises; it merely moves them around. As David Harvey points out in his excellent new book — The Enigma of Capital and the Crises of Capitalism — austerity measures are merely a way of socializing the losses and privatizing the gains. […]

  2. […] crises; it merely moves them around. As David Harvey points out in his excellent new book — The Enigma of Capital and the Crises of Capitalism — austerity measures are merely a way of socializing the losses and privatizing the gains. […]

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