I have received a number of emails over the past few days from some of the main principals in the Gindin-Brenner debate over “crisis” that were posted to the Marxism mailing list. They were touched off by Robert Brenner’s comments on Doug Henwood’s statement on LBO-Talk that he agreed with Sam Gindin. The email is unedited. The debate in its entirety can be viewed at http://www.monthlyreview.org/mrzine/bg020108.html.
1. Doug Henwood’s comment:
Thanks to Lou Proyect for pointing this out. There’s a multipart video of a recent discussion on capitalist crisis or not between Robert Brenner (yes) and Sam Gindin (no) at: http://mrzine.monthlyreview.org/bg020108.html.
You won’t be surprised to learn that I’m with Sam on this one.
2. From Robert Brenner: an initial response to Doug Henwood, who said that he agreed with Sam Gindin.
A friend of mine forwarded me the video and your note below from LBO Talk.
In fact, the debate at the Brecht forum, for which you have the video, is about the question of the dynamism of the US economy, not about whether we are today entering an economic crisis, as will be evident to anyone who follows the video. To see this immediately, simply take a look at Sam’s talk, which follows mine, and my initial response to Sam’s talk.
I argued at the Brecht forum, as I have for a long time, that the US economy has experienced declining economic dynamism since 1973, expressed in deteriorating economic performance in terms of virtually all of the main macro-indicators, decade by decade, business cycle by business cycle. The only exception, I argue, is the second half of the 1990s, when the US economy expanded rapidly, in part as a result of the partial but abortive recovery of profitability that took place between early 1980s and 1995 or so and especially as a result of the wealth effect of the “New Economy” equity price bubble of the years 1995-2000. In any case, in my view, however one interprets the 1990s, US economic performance in the seven years since the new business cycle at the start of 2000 put paid to any idea of renewed US economic dynamism, as it has been plainly the worst for any comparable period since 1948. The burden of my argument at the Brecht forum was that, grasping this declining economic dynamism, not least in the current business cycle, is indispensable for understanding what’s happening in the economy today.
At the Brecht forum, I distributed a set of data to support the above. Most of this is readily available in my Economics of Global Turbulence (2006) (EGT), especially p.240, Table 13.1 “Declining Economic Dynamism” and pp.282-283, Tables 15.1 thru 15.6, under the general title “The Decline of Profitability and Its Consequences,” as well as numerous graphs on the path of profitability for the private economy as a whole and for manufacturing for the US, Japan, and Germany.
Sam argued that the shift of the US economy that took place at the start of the 1980s, and to neoliberalism more generally has endowed the economy with new dynamism. I obviously deny this.
The video continues an ongoing discussion between myself and Sam and Leo Panitch. The first installment of which can be found in a collection edited by David Coates, Varieties of Capitalism, Varieties of Approaches, (Basingstoke: Palgrave Macmillan, 2005), where there’s statement of position by Sam and Leo, as well as a critique of me by a student of theirs (Martijn Konings), and a response by me to both Leo and Sam and their student.
Leo and Sam have an article in NLR (n35) that appeared later, partly on the same subject, though without reference to the discussion in the Coates volume.
For the record, I certainly did at the end of my talk venture the view that, yes, we are entering into a recession, which could well be quite serious, though I didn’t get much opportunity, due to time constraints, to say why I think so. I fully stand by this proposition. It should be self-evident that predictions like this must, by nature, have a very tentative character, but I think they can be useful in checking our understandings of the economy, especially if the reasons underlying them are elucidated as clearly as possible.
But, I want to emphasize that the objective of most of my published work on the economy has been to establish the continuing reality of the long downturn into the present and to try to explain it…especially in terms of the trajectory of the profit rate. This will be self-evident even to those who follow the video, especially as I argue there, as elsewhere, that one of the distinctive, distinguishing features of the economic trajectory of the US and other advanced capitalist economies since 1973, by comparison with the period before WWII, has been precisely the avoidance of crisis/ability to avoid crisis-especially through the growth of credit underwritten in one way or another by the state-and the prevalence instead of declining economic dynamism, i.e. the long downturn.
Just to dot the i’s and cross the t’s: it’s sometimes argued against the above that the long downturn is a statistical illusion, resulting from comparing the economy post 1973 with the ostensibly exceptional long boom. However, as I argue in EGT, the long postwar boom 1950-1973 is not so exceptional, when compared to the previous long upturn 1890-1913.and that economic performance/dynamism in both these long upturns is decisively better than in the long downturn after 1973. See EGT, p.xxvii, Table 1.
For those who are interested, the complete video of the Brecht forum, which was made by graduate students from the sociology department at NYU, is directly below. The version you posted was truncated for some reason.
I’d be grateful if you could put this note on LBO talk, for purposes of clarification.
Thanks much…and Happy New Year!
3. Louis Proyect response to Robert Brenner:
Robert, you wrote:
“In fact, the debate at the Brecht forum, for which you have the video, is about the question of the dynamism of the US economy, not about whether we are today entering an economic crisis, as will be evident to anyone who follows the video.”
You also wrote:
“I argued at the Brecht forum, as I have for a long time, that the US economy has experienced declining economic dynamism since 1973, expressed in deteriorating economic performance in terms of virtually all of the main macro-indicators, decade by decade, business cycle by business cycle. The only exception, I argue, is the second half of the 1990s, when the US economy expanded rapidly, in part as a result of the partial but abortive recovery of profitability that took place between early 1980s and 1995 or so and especially as a result of the wealth effect of the ‘New Economy’ equity price bubble of the years 1995-2000.”
But it is you who are really responsible for joining the words “Robert Brenner” and “crisis” at the hip. In the November/December 1998 copy of Against the Current, you wrote an article titled “The Looming Crisis of World Capitalism“. It was not titled “The Declining Economic Dynamism of the US Economy”. Indeed, the word “crisis” appears 27 times in your article.
You refer to a crisis in this article that might “spell disaster for the world economy”, you point to lower wage growth than during the Great Depression, and compare IMF behavior to Herbert Hoover’s response to the 1929 crash. This would lead an innocent reader to believe that doom was imminent. Perhaps there is a semantic distinction that might let you off the hook here. The article concludes by stating that “it is difficult to see where the forces will be found to counter severe recession.” So maybe there is some kind of difference between a “severe recession” and a depression. I am no expert in the niceties of economic terminology so I am not qualified to answer this.
4. Robert Brenner’s response to my comments at #3:
Thanks for your note.
When I first read your comments, having virtually no memory of this article –senility fast overtaking me–I thought, well, you may very well have a point, indeed more than one point.
I would have been a bit embarrassed, but not really surprised, if I had used the term crisis carelessly at that moment and even, unintentionally, left myself open for a catastrophist interpretation. In early October 1998, roughly the time I was writing this piece–the financial economy was freezing up, and the international financial system seemed on the verge of collapse. For a good inside view of the scene at the time, and how it appeared and felt, see the opening pages of the book The Fed by the leading financial journalist Martin Meyer. Describing the subjectivity of the several thousands of bankers and central bankers and financiers and finance ministers who had just descended on Washington for a meeting of the World Bank and IMF, Meyer writes “It turned out to be an experience they will never forget as long as they live, a weekend of pure terror, as though an asteroid were descending on earth.” Meyer does not hesitate to go on to use the term crisis (and panic) to characterize the economic situation in general, and the financial meltdown in particular. So–I thought to myself –writing pretty soon after this moment–after the NY Fed had been obliged to bail out that hedge fund and Greenspan to cut interest rates outside the regular meetings of the Fed–I could easily have used the word crisis misleadingly and without sufficient thought.
(I guess I should add that, as someone who identifies himself first and foremost as from the political far left and who was here writing in ATC for a left political audience at a time of profound difficulty for the system, I would not have been surprised if I had not shown sufficient “restraint”, and let politics override science. :–))
I should say, more generally, that, the terminology of economic analysts, both Marxist and non-Marxist, on this stuff is not at all agreed upon or very precise. There’s some latitude–and differences–in how crisis, panic, even recession should be used. Unfortunately, it’s far from rocket science. So, that’s another reason I might have used the term unhelpfully.
In any case, on reading your notes, I was preparing myself for a mea culpa. But, when I actually went to the link that you kindly provided and read the text, I found, to my surprise, that there is very little of it that I would disavow (unless, of course, if I had the opportunity to rewrite it “for then,” using what we now know ensued in the short and long run). It’s a pretty fair statement of my view of things at the time. I hope I have learned a lot since then, but my current view would be a development on what’s written there.
I won’t bore you with an explication of the article, but I’d make four main points in response to your notes. .
1. I do use the term crisis, quite liberally, to characterize what was happening at the moment with respect to what might be, very loosely, called the economic peripheries–Russia, Brazil/Latin America, and above all East Asia (which was, of course, by this time, hardly a periphery in the sense of underdevelopment.) For these regions, there was truly profound economic crisis in any sense of the word you would want to use, with quite disastrous consequences for the populations and their standards of living and indeed for the ongoing functioning of those economies. There was deep, and deepening, crisis of these regions, and, especially because of the financial reverberations, it looked like this might envelope the advanced capitalist economies. So, I would stand by my use of the term crisis, multiple times, in reference to this stuff: everybody, Marxists and non-Marxists, used it in this way, and in retrospect quite correctly…although, of course, the underlying analyses of these crises, especially of the East Asian crisis, differed among themselves (in this text, I think I express my view that the analysis of much of the left–that the crisis was merely a financial one resulting from the opening of capital markets–was insufficient…but that’s another story). .
2. As you will see, I do not use the term crisis to describe what was yet happening in the US and the Advanced Capitalist Economies more generally, thus in the world economy as a whole. What I tried to say was that the deepening crisis of much of the world outside the advanced capitalist world did pose a serious threat to the US, Europe, and Japan, and thus the global system, especially because their underlying performance had been weak over the longer term, and ever weaker. I offered my account of the long downturn to explain this long term weakness and vulnerability.
3. I argued that, against the background of long term and declining growth systemwide, that the US–and thus the world economy that was so dependent upon it–was at that time facing especially serious difficulties. This was because the partial, but important, rise in the rate of profit, especially the manufacturing rate of profit, that had taken place in the US between the early 1980s and 1995/7 was in the process of reversal. The reason for this was that the forces that had driven this rise–especially increasing export competitiveness made possible by the low dollar, as well as the repression of real wage growth for a decade–were dissipating. With profitability declining, how was the US going to continue to expand and drive the world economy?
4. I concluded on, in retrospect, a too pessimistic note–the quote you adduce–because I could not really see, against that background of weak “fundamentals,” plus the apparent exhaustion of the economic policy tool box, what was going to push the US forward. The Clinton administration had rejected Keynesianism in the standard sense and turned decisively to neoliberalism, “the free market.” Its manufacturing sector faced a rising currency, plus global over-capacity more generally, exacerbated by the East Asian crisis. How was it going to go forward?
What I didn’t see then–the source of my misplaced short-term pessimism– was the huge, if temporally limited, capacity of the wealth effect of rising asset prices to provide the demand needed to underpin continuing economic expansion. The economy’s underlying problem was insufficient growth of aggregate demand, reflecting reduced profitability. But, I didn’t yet see the shift that had taken place in the Fed’s policy to stimulating the economy, pushing up demand, by way of the stoking of asset price bubbles– first in equities, then in housing. This is what came to substitute for Keynesian demand management–what I would call bubblenomics or asset price Keynesianism. It is this regime of bubblenomics that has underpinned the evolution of the global economy between 1995 and the present.
Still, management of the economy by bubbles is a very limited policy instrument. There was no recession in 1998, but there was a very sharp loss of momentum for the economy in 2000-2001 when the wealth effect of rising equity prices was reversed, when the stock market crashed. And this did issue in the recession that I had thought was coming in 1998. That recession looked to many people at the time as if it was going to be very serious, but it was, in fact, rendered very limited by Greenspan’s turn to a new bubble–the housing bubble. I can’t say that I saw that coming at the time, in 2000-2001, either. But, that bubble, too, obviously had to have a very brief half-life…and, it has. It is, in my view, the crisis of bubblenomics, as expressed in the collapse of the housing bubble and ensuing housing crisis and the related sub-prime cum banking crisis, that is the immediate source of the severe problems of the US economy today. (I don’t thank anyone would dispute the use of the term crisis in the foregoing respects),
As you may have noticed, there was a fair amount in my talk at the Brecht forum that continues this line of analysis. But, whatever the strength or weakness of this analysis, I don’t see it as crisis mongering or catastrophist. It is, rather–as I insisted in my note to Doug that I sent you–above all an attempt to grasp the long term underlying lack of dynamism, indeed declining dynamism, that has plagued the US and advanced capitalist economies more generally…and to use the understanding of that declining dynamism to frame and grasp medium term and short term developments, as well as government policy responses.
All best wishes, Robert
5. Response from Leo Panitch
Amidst what will obviously continue to be an ongoing debate – with even the appropriateness of the term “downturn” as open to questioning as the appropriateness of the term “crisis”, and with the whole point of Sam’s and my work being to theorize the role of the state rather that just treat it as a deus ex machina – let me just correct Bob [Brenner] on one misstatement here. In Sam’s and my piece in NLR 35 we do indeed make explicit reference to Brenner’s response to us in the Coates book. It appears very clearly in footnote 14 attached to the following argument on pp. 113-114, as follows:
A faltering colossus?
In any historical perspective, the notion that the power of such an empire might be eroded in the space of a few decades appears unlikely. This always made claims that the decline of American economic power was undermining US hegemony seem rather overblown. But what about today? To begin with the material basis of the empire, a few selected facts are worth noting:
– The real rate of growth of the American economy (GDP) in the twenty ‘golden years’ of 1953-73 was 3.8 per cent, while the growth of the other advanced capitalist states was considerably higher; the US rate of growth in the past two decades (1984-2004) was 3.4 per cent-not only higher than the rate of growth in all the periods before the golden age (1830-70, 1870-1913 and 1913-50), but higher than the other G7 countries in this period.
 For the historical comparisons, see Angus Maddison, The World Economy: A Millennial Perspective, Paris 2001. Growth rates: Bureau of Economic Analysis (BEA), National Income and Product Accounts (NIPA) tables, 1950-73; 1984-2004.
A contrasting assessment of us growth performance, based on a different periodization, is offered by Robert Brenner, ‘The Capitalist Economy, 1945-2000: A Reply to Konings and Panitch and Gindin’ in Coates, Varieties of Capitalism, pp. 215-16. By making 1973-96 rather than 1984-2004 his period of comparison, Brenner includes the crisis decade of the 1970s (whereas our concern is with economic growth following the turn to neoliberalism) and leaves out the relatively high growth rates of the late 1990s and after the 2001 recession.
– US manufacturing productivity growth for 1950-73 averaged 2.5 per cent, well below that of the other advanced capitalist countries; for 1981-2004, it increased to 3.5 per cent, running ahead of all the other G7 economies. Notably, in terms of attracting investment, the rate of US manufacturing productivity growth has also run ahead of growth in labour compensation.15
– In 1981, the US spent almost as much on r&d as Japan, Germany, the UK, Italy and Canada combined; by 2000, it was spending more than the other G7 countries combined. The US share of global high-tech production (aerospace, pharmaceuticals, computers and office machinery, communication equipment, scientific instruments) was relatively steady at 32 per cent between 1980 and 2001, while that of Germany was halved (to 5 per cent) and Japan cut by about a third (to 13 per cent).16
– The volume of American exports since the 1980s has been growing faster than any of the other G7 countries: for 1987-2004, average annual export volume of the other G7 countries increased by a range of 4.5-5.8 per cent, while the US averaged 6.8 per cent.17 The sales of American corporations abroad (not included in the trade accounts) were at $3 trillion in 2002, well over double the overall exports from the us.18 The share of after-tax corporate profits relative to US GDP earned by American corporations in their domestic and international operations is currently at the highest level since 1945.19
6. Response of Patrick Bond
Aside from data, where Bob has terrific material to use against Leo/Sam/Martin in the David Coates book Approaches to Capitalism, I think there’s a bit of a semantic problem here.
If you take away ‘catastrophism’ or ‘breakdown’ or other red-flag words about economic crisis, how about considering Robert Cox’s definition, from his Production, Power and World Order (1987): ‘the economy must undergo some structural change in order to emerge from a crisis; in a cyclical downturn, the same structure contains the seeds of its own revival’.
In other words, if you need something like a countervailing logic – in my view, destruction of overaccumulated capital (on a much greater scale than simple obsolescence or wear-and-tear) – to get a capitalist system out of its stagnation, then you have a crisis. A recession is just a regular business cycle.
And then we can talk about matters such as crisis displacement (not resolution), via relative/absolute s.v. extraction, and spatial, temporal and accumulation by dispossession strategies.
But if Cox’s use of the word makes sense, then why not describe the period since the early 1970s as a crisis, insofar as sustained and extreme forms of (combined/uneven) devalorisation have visited many parts of the world, in ways that they didn’t – within economic logic – during the prior decades…
7. Response of Sam Gindin
Amongst the many issues involved in this debate, let me focus on four:
1. I do not think Bob’s graphs/tables should be dismissed, but I think they tend to an economistic view of the past quarter century. Leo and I have argued that this past period the American empire was at the center of one of the most dynamic in capitalism’s history in terms of the MAKING, DEEPENING AND PENETRATION-EXTENSION OF GLOBAL CAPITALISM.
This strikes me as self-evident in terms of the degree to which – in the economic sphere, politically, and culturally – labour and ‘the commons’ have been further commodified, the former Soviet Union and then China integrated, India brought in as a site of accumulation, the European model pushed towards the neoliberalism of a purer capitalism, Asian savings (and Middle-East oil profits) made available to the continued reproduction of America’s central global role, neoliberalism internalized by workers and by workers’ organizations, etc etc ETC. Rather than an age of decline, it is the last quarter century has been the golden age of global capitalisms.
2. Why then the alleged leaden age in terms of specific macro economic measures? Like others, I’ve argued that the 1950-73 period was exceptional (let me leave the ‘why’ aside for now). This implies it is not a valid basis for judging the subsequent period. Bob insists – on the basis of data derived from Maddison (the standard source) that 1950-73 was in fact ‘not so exceptional’ and impressive when compared to the previous long upturn 1890-1913.
It’s worth noting that Maddison himself saw 1950-73 as exceptional. In his 2001 tome ‘The World Economy: A Millenial Perspective’ he states: “The ‘golden age’, 1950-73, was by far the best in terms of growth performance. Our age, from 1973 onwards (henceforth characterized as the “neoliberal order”) has been second best. The old ‘liberal order’ 1870-1913, was third best, with marginally slower growth than our age'(p 125). He adds that in the advanced capitalist countries per capita growth in 1973-98 ‘fell well below that in the golden age, but was appreciably better than in 1870-1913’ (p 128). Part of the difference re Bob’s assertion is the exact time period chosen (Maddison uses 1870-1913, Brenner 1890-1913), but that doesn’t change the overall conclusion re world growth. Even Bob’s tables show that in Europe and Japan growth was twice as fast in the 1950-73 period than in the base Bob uses. In terms of macro performance, there can be no doubt that 1950-73 was a unique golden age for Europe and Japan. For the US, this is – as Bob says – not as clear. But we need to be careful in such long-term comparisons. The US was at a particular stage of explosive development in the narrower period of 1890-1913 with immigration playing a crucial role; measured in per capita terms, US performance in the 1950-73 period – and especially the period leading up to the mid-60s – was higher than in 1890-1913, as even Bob’s data shows.
3. So what then of Bob’s argument re steady decline since 1973 ‘by almost every macro indicator’ First, there was a clear upturn in US performance after the early 1980s. Bob admits as much but tries to negate this in a way I find confusing. He refers (in his comments below) to the ‘partial but abortive recovery of profitability that took place between the early 1980s and 1995’ and sees this as a prelude to ‘the second half of the 1990s, when the US economy expanded rapidly’. But doesn’t this indicate – in spite of the negative tone – an actual 20-year period of success in reversing the crisis? I don’t deny that the latter period did not match the mid-60s peak but ‘peaks’ can’t be the standard and that particular short peak was simply not sustainable (in some ways, it was as much a bubble as future ‘bubbles’).
Furthermore, to extend this into a steady ‘decline’ is not convincing; Bob makes, I think, too much of small variations that result from a particular periodization (eg whether going from 3.2% to 3.0% represents a significant trend). For example, the table below presents (somewhat arbitrarily) the past half-century (1957-2006) by decades and – though the latter decades are below the 60s – there is no significant continuous decline.
4. Finally, dynamic or not, capitalism does remain vulnerable to crisis. Leo and I have argued that the American state is not omnipotent but operates through other states, which means that it is dependent on the uncertain conditions of class relations within various social formations. Moreover, because finance is so central to the discipline and development of capitalism, and finance is inherently so volatile, potential crises are always on the agenda. The point, however, is that these cannot be understood in terms of a continuing crisis of the 1970s; it can only be grasped in terms of: a) how the balance of class forces has changed since the 1970s (and how this continues to change); b) the role of finance – not as a temporary stop-gap measure to postpone crises but as a permanent dimension of capitalist discipline, accumulation and restructuring; and c) the evolution of state capacities, above all led by the American state, to contain and manage crises – not to prevent them, but to limit them. In this regard, we have to recognize that the crises of the 1970s ended – for capital – with the Volcker shock and the subsequent defeat of labour and emergence of finance, and (to repeat) we must move on to analyze the present and its crises anew, on the basis of the new terrain.
Finally, as I said at the forum, I don’t see myself (or the left generally) as especially knowledgeable in figuring out whether a recession is coming. What has been interesting is that over the past fifteen years, there was no year of negative growth in the US, so a recession seems ‘due’ and would itself not be earth-shattering news. The question is whether capitalism will survive such a recession and even come out stronger for it. Absent any resistance from US workers re limiting the scope for how the American state and American capital can respond, and given that the rest of the capitalist world – including China – is also anxious to limit any such crisis in the US, I see no reason to doubt capitalism’s on-going capacity to not only stumble on but to do so in an expanding way.