Wallerstein – more thoughts and a bibliography

My provocative post about Immanuel Wallerstein seems to have antagonised Mark Bahnisch. I devoutly hope that won’t prove terminal to his participation at Troppo, partly because he’s a valued blogging colleague, and partly because his prolific posting takes the pressure off me, but mostly because I think we’re all better served by writing in a “broad church” milieu that deliberately courts a generally-educated audience with diverse views. Otherwise you might as well stick with purely scholarly writing and forget about “public intellectualism” (because we’re just preaching to the converted, so to speak).

In any event, there’s obviously a lot more to say about Wallerstein, and I’m going to have a stab at saying at least some of it, despite lacking the depth of reading on the topic that Mark can bring to it.

I also intend providing a hyperlinked bibliography of writings by and about Wallerstein, listing works provided by both Bahnischs but especially Brian.

My focus in the following discussion is the following extract from Wallerstein’s own summary of his thinking. On my reading, the passage encapsulates the central aspects of Wallerstein’s hypothesis about the future of global capitalism:

I believe that a number of trends have today at last reached points where they threaten the basic functioning of the system. I shall summarize briefly here what I have expounded at length elsewhere.3 Capitalism as a historical system is defined by the fact that it makes structurally central and primary the endless accumulation of capital. This means that the institutions which constitute its framework reward those who pursue the endless accumulation of capital and penalize those who don’t.

But how does one accumulate capital? The crucial prerequisite is obtaining profit from economic operations, the more the better. And profit is a function of the differential between real costs and possible prices. I say possible prices because of course no seller can infinitely increase the price demanded for a commodity and expect to sell it. There are always limits. Economists call this the elasticity of demand. Within the limits of the rate of elasticity, the actual profit depends upon three costs: the cost of labor, the cost of inputs and infrastructure, the cost of taxation.

Now suppose we were to measure these costs globally as percentages of total sales prices and arrive hypothetically at average levels. Of course, this is an operation no one has ever done, and is perhaps not doable. But it is possible to conceive of it, and to approximate the results. I would suggest to you that, over 500 years and across the capitalist world-economy as a whole, the three costs have all been steadily rising as a percentage of total value produced. And the net result is that we are in, and ever more coming into, a global profit squeeze that is threatening the ability of capitalists to accumulate capital. …

Not only am I skeptical that global production is more “efficient” from the point of view of the producer, but I am contending that the curve has been steadily downward. All the so-called triumphs of efficient production are simply attempts to slow down the pace of the downward curve. One can regard the entire neoliberal offensive of the last two decades as one gigantic attempt to slow down the increasing costs of production – primarily by lowering the cost of wages and taxation and secondarily by lowering the costs of inputs via technological advance. I believe further that the overall degree of success has been quite limited, however painful it has been for those who have borne the brunt of the attack, and that even the limited gains are about to be reversed.

So Wallerstein reckons capitalism is caught in an inexorable profit squeeze caused by the unavoidable necessity for taxes, wages and production costs to continue rising as a proportion of the total value produced.

There are three obvious questions. Is this correct? Over what time frame are we talking? And if it is correct, what does it mean?

Let’s take taxes first. It’s certainly true that there has been an evident slow rise in taxes as a percentage of GDP over the century (or less) since universal income taxes became the norm in advanced nations (or “core” nations as Wallerstein calls them). It’s mostly because people expect governments to provide more and more, and the costs of many services, especially medical ones and aged care, become greater and greater as science and technology keep advancing. The experience of the 1980s suggests that it would be possible to arrest this gradual growth in tax take if societies are willing to embrace the minimal government, market-based prescriptions of the neoliberals, but at present we seem to be content to take a less purist approach. In other words, the gradual tax rise is the result of deliberate choices our society is making (or “agency”) rather than any inexorable iron law of history or economics.

The other point to make about taxes is that there’s demonstrably a very wide range of total tax take options in various advanced/core nations, under which market capitalism has had no difficulty surviving and thriving. From around 26% or so of GDP in the US to over 50% in some Scandinavian countries, capitalism has had no problem adapting and shows no sign of crisis or collapse.

The picture with wages and other costs of production is slightly more complex. Wallerstein appears to concede that his claims of inexorable rises are counter-factual over the last 30 years or so anyway, but still asserts his hypothesis holds good in the long run. He achieves this by claiming that capitalists are only postponing their inevitable doom by the desperate expedient of “running away” to under-developed third world (“periphery”) nations where they can exploit low wages and lax regulatory regimes to allow them to “externalise” some of the real costs of production (like environmental damage).

Wallerstein largely ignores (or at least treats as a mere afterthought) the fact that a very significant part of the production cost savings achieved by industry over the last 30 years (and indeed since the Industrial Revolution began) have been attained through technological change rather than exploiting workers through ruthlessly driving down wages.

But even if we accept (as I certainly do) that the mobility of industrial capital has also been a major influence on keeping production costs under control, what does that phenomenon actually connote? The doom of market capitalism, as Wallerstein hyperbolically asserts, or something much more benign (if still in remote prospect)?

It’s certainly true that corporations have been able to relocate labour-intensive aspects of their operations to low-wage countries over the last 30 years or so, as improvements in communications and transport technology have made this increasingly feasible. And they’ve also been able to use the threat of disinvestment and relocation to pressure unions and governments in “core” nations to moderate wage demands and reduce the regulatory burden. That has resulted in static real wages in the US and only modest growth in Australia over the last three decades or so. But the real wealth of “core”nations has continued to expand enormously, and it hasn’t all (or even mostly) flowed into the pockets of corporations, at least in countries like Australia. Most of the increase has gone to ageing Australians who now control a much larger proportion of the nation’s wealth than they previously did (because there are a lot more of them proportionately).

And not only is this phenomenon of businesses shifting some of their activities to “periphery” (third world) nations not harming the “core” (advanced) nations. It’s undeniably promoting the development and enrichment of the “periphery” nations, contrary to the determinedly pessimistic impression Wallerstein’s rhetoric seeks to create. Look at the spectacular growth of the world’s two most populous nations, China and India, over the last decade. And the equally spectacular growth in the S-E Asian “tiger” economies in the decade before that. World poverty is falling in both absolute and relative terms, despite a still-growing world population. Is that a sign of a failing capitalist system?

It may conceivably eventually prove true that this process of shifting business activities to regions of low cost, resulting in those regions gradually becoming more prosperous and joining the “core” (first world), might eventually result in there no longer being any low labour cost nations to which the capitalists can “run”. Wallerstein seems to be claiming that day is imminent. I doubt it. China and India alone are such enormous nations that even the explosive growth we’ve seen over the last decade is just a drop in the ocean of poverty. And most of South America is still “semi-periphery” at best, while any advances at all in Africa and the Middle East probably won’t occur until they begin grappling constructively with tribal and religious tensions, primitive superstitions and endemic corruption.

But who wouldn’t hope that Wallerstein eventually proves to be correct? That third world poverty is eventually eliminated through the ‘invisible hand’ operation of the global market economy? But that wouldn’t mean the collapse of capitalism through its own internal contradictions. Instead it would mean that capitalism had been so wildly and utterly successful as to have completely eliminated poverty and material want throughout the world, leading to a likely necessity to evolve still more sophisticated (and yet unforeseeable) forms of social and economic organisation. On one reading at least, that’s what Wallerstein is really prophesying.

So why is he couching it in the quaint rhetoric of leftist class and economic warfare? Is it just because he’s mostly speaking to an audience of lefty academics in the speeches and papers I’ve read? Or am I missing something? Maybe the anti-globalisation protestors should start reading Wallerstein properly, tear up their protest banners, and embrace neoliberal global trade as the best and only means of ultimately bringing about Nirvana.

Wallerstein bibliography

Wallerstein’s website

Brian Bahnisch’s essay at Web Diary

Brenner, Robert ‘Towards the Precipice ‘, London Review of Books, vol 25, no 3, 6 February, 2003

Festschrift for Immanuel Wallerstein ‘, Journal of World-Systems Research vol 6, nos 2-3 2000

Goldfrank, Walter L “Paradigm regained? The rules of Wallerstein’s world-system method ‘ Journal of World-Systems Research vol 6, no 2, 2000, pp150-195

Martin, William G. ‘Still partners and still dissident after all these years? Wallerstein, world revolutions and the world-systems perspective‘ Journal of World-Systems Research vol 6, no 2, 2000, pp 234-263

Modern History Sourcebook: Summary of Wallerstein on World System Theory

Wainright, H “Reclaiming ‘The Public’ through the People “ TNI Website, June 2004

Wallerstein, M ‘America and the World: the Twin Towers as metaphor ‘, 2001

Wallerstein, M ‘America Quo Vadis? ‘ Commentary, no. 141, 15 July, 2004

Wallerstein, M ‘Bush bets all he has ‘, Commentary, no. 109, 15 March, 2003

Wallerstein, M ‘The Ecology and the Economy: What is Rational? ‘ 2003

Wallerstein, M ‘Empire and the Capitalists ‘, Commentary, no. 113, 15 May, 2003

Wallerstein, M ‘Globalization or The Age of Transition? A Long-Term View of the Trajectory of the World-System ‘, 1999

Wallerstein, M ‘A Left Politics for an Age of Transition ‘, 2001

Wallerstein, M ‘A Left Politics for the 21st Century? or, Theory and Praxis Once Again‘, 1999 (th essay linked and discussed above)

Wallerstein, M ‘The Modern World System ‘ 1976

Wallerstein, M ‘New Revolts Against the System ‘, New Left Review, 18 November-December, 2002

Wallerstein, M ‘The Rising Strength of the World Social Forum ‘ Commentary, no. 130, 15 February, 2004

Wallerstein, M ‘The U.S. and Europe, 1945 to Today ‘, Commentary, no. 137, 15 May, 2004 (http://fbc.binghamton.edu/137en.htm)

About Ken Parish

Ken Parish is a legal academic, with research areas in public law (constitutional and administrative law), civil procedure and teaching & learning theory and practice. He has been a legal academic for almost 20 years. Before that he ran a legal practice in Darwin for 15 years and was a Member of the NT Legislative Assembly for almost 4 years in the early 1990s.
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Nicholas Gruen
2022 years ago

Yep, that’s what I was thinking. At one point in the essay IW says what he really wants is the elimination of profits. That’s what his theory is predicting. He decries the idea of ‘the inevitability of progress’ but that’s what his theory is. Maybe I’m missing something too. I could go on and on, and in fact started drafting a post, but this talking across paradigms has a low return to the amount of effort put in. I look for signs of whether someone is in good faith or not, and I smell a rat in nearly every paragraph.

I’m instinctively hostile to this kind of ideological writing. Its ideology, confusion and I never get any real enjoyment or insights out of it as I would if I were reading Marcuse or Hayek to take to strategically chosen examples. Orwell would make mincemeat of this guy. He is, IMHO, not to put too fine a point on it, a bullshit artist. In a long article predicated on his ‘contention’ that the rate of profit is falling, he shows more interest in this as an ideological artifact and in what everyone says about it – than in its truth or falsehood.

cs
cs
2022 years ago

Well it would be good to get some facts into the argument instead of mere whimlike prejudice. I just looked up the private buisiness net profit rates 1950-96 for the US, Germany and Japan. For the US, profit rate peaked in the early 70s, for Germany in about 1954, and for Japan in about 1966. The US fall from the early 70s is extraordinarily stark. As I said in a comment on an early post, I think the story is more mixed since ’96, but the long term tend seems plain enough. Anyone with some more facts …?

Mark Bahnisch
2022 years ago

Thanks, Ken, that’s a more measured post.

By the way, last night I wasn’t proclaiming an immediate intention to take my bat and ball and go, just saying that people should think about the tone of comments and posts, and that perhaps, since I’m rather stressed and tired at the moment I probably shouldn’t engage in threads where I’m liable to get irritated.

Thanks for your kind words as well.

I still think people are missing the point about Wallerstein. But I lack the time and energy to defend him comprehensively – perhaps as you say, I will at a later point.

But just one illustration of where I think you’re getting him wrong:

“In other words, the gradual tax rise is the result of deliberate choices our society is making (or “agency”) rather than any inexorable iron law of history or economics.”

But Wallerstein agrees with you. He’s not positing any iron laws of history or economics – he’s looking at trends in a particular economic formation (the capitalist World System) over a long period of time and seeing if he can perceive regularities. That’s basic social scientific method. He’s proceeding inductively to test the value of his hypotheses, not starting from concepts and then asserting they explain the facts regardless of any data that doesn’t fit.

It’s also why I recommended Arrighi’s work as he specifically sets out to fill in Wallerstein and Braudel’s theory by deriving testable hypotheses from it and seeing how they fit the empirical data on things like patterns of world trade, growth of financial markets and so on over the last five hundred years.

Work in historical economics or historical sociology usually proceeds from looking at different levels of causation than analysis of the immediate economic situation – a good example from a more orthodox economist is the excellent and recent “The Great Wave: Price Revolutions and the Rhythm of History”.

If we’re looking at Krondatieff cycles, and the longer secular cycles in price movements that almost all economic historians accept are there, then we need a different order of explanation than the analysis of economic trends over a short period of time.

Wallerstein combines this with a political and a social theory – so contrary to your remark, Ken, it’s precisely agency that he’s taling about – the agency of the working class and also the influence of democracy – a factor to which he gives great explanatory weight.

The question he’s really asking is – how did the current system come about and will it persist? It admits of different answers, to be sure, but in attempting to come to grips with it, it’s crucial to understand the historical perspective and the dimension of the research questions in attempting to make sense of patterns occurring over centuries.

Ken Parish
Ken Parish
2022 years ago

Chris

I don’t see how you can confidently talk of a “trend” in the US figures you cite, if the profit rate was rising until the mid 1970s, fell somewhat until the mid 1990s and has been mostly rising since then. It isn’t a clear trend unless you regard only the falling part of the curve as significant. Moreover, there’s an obvious reason for a fall starting in the 1970s, namely the OPEC oil price shock and the need for western economies to adjust to it.

The Japanese figure (if correct) looks more interesting, but the German figure looks frankly unbelievable (unless I’m just not understanding what they’re measuring). Germany had only just begun emerging from the devastation of WWII in 1954, so how could that be its all-time peak of business profitability? Unless profits were being artificially inflated under the impact of US-funded Marshall Plan reconstruction, in which case the 1954 peak is an artificial and somewhat meaningless artefact.

In any event (and subject to what economist readers may contribute – including Nicholas Gruen), I don’t think I’d accept Wallerstein’s doom of capitalism scenario even if it turned out that the long-term trend of declining business profit as a proportion of total production was clearly demonstrable. Manifestly the total size of the economic cake has grown enormously during the period under consideration, and a slightly smaller share of a much bigger cake hardly spells doom for global capital. Moreover, Wallerstein’s hypothesised mechanism of doom (i.e. continued strong growth whereby “periphery” nations become wealthy and therefore no longer sources of low wage labour for the evil predatory capitalists) necessarily implies a continuation of a rapidly growing cake, and thereby a corporate sector that will continue to be able to afford to allow the wealth to “trickle down” without in any way imperilling its own health or survival.

Mark Bahnisch
2022 years ago

“Moreover, Wallerstein’s hypothesised mechanism of doom (i.e. continued strong growth whereby “periphery” nations become wealthy and therefore no longer sources of low wage labour for the evil predatory capitalists) necessarily implies a continuation of a rapidly growing cake, and thereby a corporate sector that will continue to be able to afford to allow the wealth to “trickle down” without in any way imperilling its own health or survival.”

But what happens then? Wallerstein’s point is that the increased tendency to globalise production and the attempts in the West to ratchet down at least the growth in the labour share of GDP has limits. Those limits may not be reached for 50 or 100 years, but they exist.

The contribution of technology to productivity is also a complex and controversial question – his contention (and that of economists like Robert Bremmer) is that the late 90s boom in the US was largely driven by financial speculation and that the apparent dividend from the “new economy” was illusory – as indeed it’s been proved to be.

Mark Bahnisch
2022 years ago

ps – I still think you’re reading to much Marx into Wallerstein, Ken. Braudel and Wallerstein and Arrighi differ fundamentally from Marx on the definition of “capitalism” – perhaps terminological ambiguity is at the root of some of these controversies.

Ken Parish
Ken Parish
2022 years ago

“But what happens then?”

Presumably if global capital’s profits come under real strain, they’ll redouble their efforts to retain or regain it. That’s what happened in the late 1970s following the OPEC oil shock, and the forces of capital had no difficulty persuading policy-makers (even Labor governments) of the wisdom of adopting neoliberal tax and labour market prescriptions. Hence the profit curve downward “trend” was arrested by the early 1990s.

Global capitalism is flux, contestation, uncertainty, dynamism, Schumpeterian creative destruction. Which is, as I read him, partly what Wallerstein (and for that matter Foucault) is saying. Where I differ from Wallerstein is in his patent relentless negativity about global capitalism, because it doesn’t coincide either with observed reality or the logic of his own theory and hypothesised mechanism of doom (unless I’m totally misunderstanding it, in which case you should be able to set me right without spending too much time and effort you can ill afford).

Rafe
2022 years ago

Most likely the poor nations will be emancipated from poverty by western capital and their own efforts, just provided that the there is enough deregulation plus rule of law in the home states so that the fruits are not expropriated by local thugs (usually the government itself). Poverty where it exists in the Third World is mostly self-inflicted, or at least Government inflicted. It could be illuminating to read the late Lord Peter Bauer on developmental economics.
As for the world running out of cheap labour, forget it. By the time the poor nations are all running well, robotics will provide the next generation of cheap labour.

cs
cs
2022 years ago

Well I can’t count them myself Ken, I can only give you the figures, which are from the US Bureau of Labour Statistics and Bureau of Economic Analysis, and for Germany and Japan from the OECD, supplemented by unpublished data from the Japan Bureau of Labour Stats and Ministry of Finance.

I just checked net profit rates to ’99, and the US uptick for the late ’90s wasn’t substantial enough to reverse the long-run trend, and Japan and Germany continued to fall. If I get time later tonight, I’ll try to send you some figures, if you like.

Mark Bahnisch
2022 years ago

” As for the world running out of cheap labour, forget it. By the time the poor nations are all running well, robotics will provide the next generation of cheap labour.”

And how will people earn an income, Rafe?

Ken Parish
Ken Parish
2022 years ago

“I’ll try to send you some figures, if you like.”

That would be appreciated, Chris. Facts are always useful. However, as I observed, it wouldn’t really affect my overall reaction to Wallerstein’s doom hypothesis even if there WAS an unequivocal downward trend in profit as a proportion of the whole, because any adverse effect on global capital is more than countervailed by the massive growth in the size of the world economy since 1954.

Mark Bahnisch
2022 years ago

I think if Chris could find time to post some stats, that’d be great.

Most of the causal explanations I’ve read for the collapse of the Bretton Woods financial system, Nixon’s taking the US off the gold standard, and the related gamut of things since 1973 or so that go under the names of globalisation and neo-liberalism are that the rate of profit started to fall markedly in the 60s. Wallerstein has an explanation for this. If we concede the premise, and some stats would help establish that, then we’re obliged to offer an alternative explanation that fits the facts better than Wallerstein’s if our interest is to refute him, surely?

cs
cs
2022 years ago

Oh, and I second Mark on Ken searching for Marx. Wallers, if I read him right, posits the logic of competition, not class struggle. It’s the horizontal relationship between rival capitals, not the vertical relationship between capital and labour, that is most likely to determine the long run fate of the project. In this picture, neoliberalism is just a gloss, merely aiming to lengthen the period before competition forces lines to be scrapped, not save the show.

Nicholas Gruen
2022 years ago

That’s great Chris. (Your numbers) Wouln’t it have been easy for IW to have referred us to these facts or to have spoken to some consensus (as one would if one were debating greenhouse for instance) rather than putting it forward as his ‘contention’.

Then he could have proceeded to the next stage of telling us

1) what the significance of this was – and why it presaged a crisis for capitalism (rather than nirvana as Ken points out) and;

2) why it wasn’t self correcting – indeed leading to the very state of affairs he describes as a good one in which profit is abolished.

Ken Parish
Ken Parish
2022 years ago

“And how will people earn an income, Rafe?”

That’s the big question, isn’t it. It will certainly happen one day (and probably within a century or so) that robots, nanotechnology etc will result in a situation where the vast majority of goods and services will be produced without human labour. Even the machines will be maintained by other machines. Sci-fi writers have long speculated about such scenarios, but we can now reasonably confidently predict such an era.

As you ask, what happens then? It will certainly mean a major rethink of the fundamental social and economic principles on which we currently operate. I think this sort of scenario is much more likely, even credible, than Wallerstein’s “profit squeeze” hypothesis (which understates the dynamism of capitalism and the significance of technological change IMO). I would agree with Wallerstein, though, that we can’t predict what sort of society would ultimately flow from such a scenario. It might conceivably one where leisure and creativity are highly prized, and ruthless exploitation of people in the interests of profit becomes a thing of the past. But many other less optimistic scenarios are also possible.

Mark Bahnisch
2022 years ago

“It might conceivably one where leisure and creativity are highly prized, and ruthless exploitation of people in the interests of profit becomes a thing of the past.”

Which was kind of the optimistic scenario of futurists in the 50s and 60s (think the Jetsons also…).

Arguably, what we’ve seen in the states with deindustrialisation and technology is the creation of a Marxist lumpenproletariat who either get forced into low-paying service jobs, or cast aside altogether into the black economy – which also reinforces the internal “war on drugs” etc, massively rising rates of incarceration and the general privileging of order over liberty. Or you distract the mob with consumer gadgets and wars –
panem et circenses. While simultaneously running massive budget deficits to finance perpetual war and to redistribute income to the rich through massively unfair tax cuts and huge corporate subsidies. Which, Ken, as you’ve correctly argued before, is not neo-liberalism.

So Wallerstein’s alternative scenario of a more authoritarian polity and economy is one plausible one – as it’s an extrapolation from trends already evident.

Evil Pundit
2022 years ago

But your scenario isn’t coming about either, Mark, except in the minds of left-wing propagandists.

C.L.
2022 years ago

Will one of you please post ‘An Introduction to Wallerstein’ so everyone else can know what the f*** you’re all taking about?

C.L.
2022 years ago

Will one of you please post ‘An Introduction to Wallerstein’ so everyone else can know what the f*** you’re all talking about?

Ken Parish
Ken Parish
2022 years ago

CL

My previous post from yesterday was meant to serve as an introduction to Wallerstein’s thought. Just scroll down a couple of posts.

Nicholas Gruen
2022 years ago

Future gazing is harmless enough, but the idea of people who so fail to impress me otherwise ruminating on what will happen in a hundred or so years is risible to me. Its like old conversations at the student union. I went and looked up an old quote by Keynes which is apposite, if not entirely on point.

“Burke ever held, and held rightly, that it can seldom be right tos sacrifice a present benefit for a doubtful advantage in the futures. it is not wise to look too far ahead; our powers of prediction are slight, our command over results infinitesimal. it is therefore the happiness of our own contemporaries that is our main concern; we should be very chary of sacrificing large numbers of people for the sake of a contingent end, however advantageous that may appears. we can never know enough to make the chance worth taking. there is this further consideration that is often in need of emphasis: it is not sufficient that the state of affairs which we seek to promote should be better than the state of affairs which preceded it; it must be sufficiently better to make up for the evils of the transitions”.

cs
cs
2022 years ago

I agree with that quote Nicholas, but Keynes in that instance was talking about concrete predictions for investment purposes. No-one dreamed of the distant possible future more than JMK:

“There are changes in other spheres too which we must expect to come. When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals. We shall be able to rid ourselves of many of the pseudo-moral principles which have hag ridden us for two hundred years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues. We shall be able to afford to dare to assess the money motive at its true value. The love of money as a possession – as distinguished from the love of money as a means to the enjoyments and realities of life – will be recognised for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease. All kinds of social customs and economic practices, affecting the distribution of wealth and of economic rewards and penalties, which we now maintain at all costs, however distasteful and unjust they may be in themselves, because they are tremendously useful in promoting the accumulation of capital, we shall then be free, at last, to discard.”

And because we are in the blogosphere, I add Keynes’ all-time favourite Bentham quote, in praise of the the courageous creative thinker, a quote with which all materialists will, or should, concur:

“The career of art, the great road which receives the footsteps of projectors, may be considered as a vast, and perhaps unbounded, plain, bestrewed with gulps, such as Curtius was swallowed up in. Each requires a human victim to fall into it ere it can close, but when it once closes, it closes to open no more, and so much of the path is safe to those who follow.”

Go Wallers …

Rob
Rob
2022 years ago

“The love of money as a possession – as distinguished from the love of money as a means to the enjoyments and realities of life – will be recognised for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities”.

If Keynes is talking about miserliness – the acquisition of money for the mere purpose of posessing it – it’s a good thing he was an economist and not a historian.

Way back in the 11th century the religious recognised that the desire to posess of money for its own sake was evidence of overweening moral turpitude. Indeed, they even came up with a new vice – avarice – to describe it. It was a response to the emergence of the new money economy that replaced the gift and vasallage structures of the feudal system, and gave rise to the eremetical and conventual movements of those times.

In this as in so many other things, the medieavals were well ahead of us.

Back to the future…..?

Mark Bahnisch
2022 years ago

We should all reread Umberto Eco’s “Name of the Rose”.

Nicholas Gruen
2022 years ago

Chris,

Keynes speculated about the distant future – or rather the generation of his grandchildren. But his economic speculation in this regard was pretty simple – relying on compound interest over a long period of time. Likewise he offered some sceculations in the General Theory on the declining rate of interest and the ultimate ‘euthanasia of the rentier’ which he regarded with satisfaction, not alarm.

But they were offered as just that. Speculations.

His serious writing – the writing about which he was seeking to offer guidance to others was focused on the here and now. In this writing he was explicit and trenchant in his adherence to Marshall’s advice to avoid ‘long chains of deduction’.

His speculations beyond that seem to me to have been offered as not much more than musings onto which he tied the ribbon of his hopes – and hoped that these together would move and persuade us to good states of mind and good intentions. They work fine for me, but I think you’d agree that they don’t form the theoretical basis to any intellectual edifice that he was building.

Mark Bahnisch
2022 years ago

“His serious writing – the writing about which he was seeking to offer guidance to others was focused on the here and now.”

Which I think was Keynes’ criticism of capitalists – short term horizons. I don’t know that the serious/non-serious distinction’s that easy to draw here, Nicholas – the point was made in “The General Theory of Employment, Interest and Money”. “In the long term, we’re all dead.” Why would it be somehow illicit to look at the shaping of an economic order over centuries? I don’t see anyone objecting to Polanyi’s “Great Transformation” or for that matter Adam Smith on how we got to Mercantilism?

Rob
Rob
2022 years ago

Don’t encourage me along the path of my favourite enthusiam, Mark! I thought you were watching TV, anyway.

I’ll start quoting Hildegard of Bingen next.

cs
cs
2022 years ago

Broadly I agree Nicholas, but I keep a saver. Keynes was a complex, interesting guy. I think there is room to speculate on his big picture, and its relations with his practical guidance, but in insisting on the distinction between which, we completely agree.

James Farrell
James Farrell
2022 years ago

This is all pretty confusing for a poor old conventionally trained economist. The rate of profit is not something there are official statistics on, and it’s not a variable that has any consequences in orthodox models. The concept is only used by Marxians. Even post Keynesians these days prefer to talk about capacity utilisation, which is more amenable to measurement. Recent debate amongst Marxians owes itself, I think, mostly to Robert Brenner’s ‘Economics of Global Turbulence’. I wonder what data Chris is referring to. You can easily get data on the share of profit, which shifted upwards in most indistrial economies in the eighties. But to calculate the rate you need to agree on the denominator, and this is a methodological quagmire. Orthodoxy in any case prefers to distinguish between rentier income, for which the real interset rate is a proxy, and entrepreneurial earnings. Then there’s the talk about inoputs as a cost: all income is resolved into wages and surplus in national accounts, and whereas an individual country can experience a rise in raw material costs, the world as a whole cannot. I’m also a bit confused by the references to the price of labour as though it was a independent causal variable in relation to profit. There’s really only one distributive variable: if wages go up, profits go down – it’s two ways of saying the same thing. Other statements, such as that capitalism is all about accumulation, accumulation requires profits etc. are really too imprecise to permit of any evaluation. In short, this economist is out of his depth in this type of economic debate.

cs
cs
2022 years ago

Fair enough James. Brenner’s work is seminal, and orthodox. But you are quite right, it all depends upon the denominator, the absence of which in any meaningful or ‘objective’ sense also means the orthodoxy is stuffed, which sends us to other sorts of measures. Brenner has taken the theory on its face, and traced trends. I agree the theory has an absolute flaw, but you can’t have it both ways.

Brian Bahnisch
Brian Bahnisch
2022 years ago

As a confused non-economist I thought I’d throw this one in.

“As Heinrich Haussmann has shown, a single pfennig (about half a US cent) invested at five per cent compound interest in the year AD 0 would have yielded, by 1990, a volume of gold 134 billion times the weight of the planet. Interest payments, in other words, are feasible only in the short term. As debt can be paid only by generating value, capitalism seems destined to destroy the planet.” (from George Monbiot, “The Age of Consent” p239)

George got this one from Bernard Leitaer (professor of economics and “formerly the world’s most successful currency trader”) in “The Future of Money”, 2001).

Bernie, it seems has the answer – demurrage, or negative interest. We then save the planet, but capitalism, it seems, has to go.

James Farrell
James Farrell
2022 years ago

I’m not what the example is meant to show, Brian. In principle, the penny could have been lent and relent at five percent or more over the two millenia. Once the total became very large, however, it would have been difficult to find someone who wanted to borrow all of it, even at a zero interest rate. At this point, the unlendable surplus money would have been spent, pushing down the price of gold. Unlimited accumulation of financial capital has never been possible, and why should it be?

James Farrell
James Farrell
2022 years ago

Should read: ‘I’m not SURE what the example is meant to show…’.

Mark Bahnisch
2022 years ago

I’ve emailed a number of commenters on this thread a copy of Giovanni Arrighi’s “The Economics of Global Turbulence” – which I consider to be a good summary of the best work done in World Systems Theory on economics – if you’d like a copy, send me an email.

Tom Davies
Tom Davies
2022 years ago

Am I correct that Wallerstein thinks that a market economy will work when return on capital is, say 10%, but will stop working when that return falls to some lower, non-zero number? Is there any reason to think he’s correct? I suppose you could destroy capitalism by 100% taxation of profits, but which government would be silly enough to do that?

Reading http://www.transformaties.org/bibliotheek/wallersteinleftpol.htm, I wonder why he says “The capitalist world-system has resulted in the greatest geographic polarization of wealth and privilege the planet has ever known. And the top priority of the world left must be to decrease the gap radically and as rapidly as possible.” when he has already said that capitalism will, as part of its own destruction, raise incomes in ‘the periphery’ to the same as at ‘the center’? He would like all immigration restrictions lifted — something that pure capitalists would have no problem with, but which in the short term would play havoc with the West’s welfare states, even as it raised average global incomes.

His idea that ‘medium-sized decentralized, competitive non-profit structures’ can replace privately owned companies seems to ignore the question of how capital is allocated. This seems simply a return to central planning. He suggests public hospitals as a model — not encouraging, given how hard it is to get the hospital system to react to demographic changes and move resources to where the people are.

Overall I think I don’t understand the things the Left takes for granted, e.g. “The basic issue is the decommodification of the world’s economic processes. Decommodification, it should be underlined, does not mean demonetization, but the elimination of the category of profit. Capitalism has been a program for the commodification of everything. The capitalists have not yet fulfilled it entirely, but they have gone a long way in that direction, with all the negative consequences we know.”

What is it about profit which is wrong? This seems to be a fundamental principle of Wallerstein’s, but one which he doesn’t try to explain.

Mark Bahnisch
2022 years ago

Tom, as I understand it Wallerstein isn’t making any determinist argument about a particular rate of return on capital. He’s arguing that consequences flow from falling returns on capital – ie business will try to maximise returns through cutting labour costs, and the costs of production through shifting it to low wage countries.

But because he’s writing as a sociologist, he’s not writing in such a way that actors must be constrained by laws – such a worldview would be much more characteristic of neo-classical theory. He’s suggesting that business has choices – and those choices include the ability to put political strategies into effect – a prime example over the past few years being the statements by various companies that they were considering no longer being based in Australia, another current one being the very loud lobbying by the BCA for all sorts of wishlists – including ratcheting down wages at the bottom end of the labour market.

So, if the ability of labour to organise in the core is impeded, then Wallerstein thinks increased inequality results. Over a long period of time, history shows us that workers do organise but he’s concerned about fairness now and also he doesn’t take anything for granted – his theory has agency built into it and he looks at the different ways government and business may respond (often very violently or with very repressive legislation towards unionisation in the periphery if the last few years’ experience is anything to go by).

As to decommodification, the basic argument is that the allocation of goods on the basis of cost doesn’t produce an allocation which ensures that everyone has access to essential goods – ie healthcare, education, housing at an acceptable standard in order to allow them to freely choose how to enjoy their lives. That’s not quite the same as Wallerstein’s understanding, perhaps, but that’s my view, and it’s a fairly basic position in social democratic thought which seems to be an increasingly odd and alien position to many these days.

Nicholas Gruen
2022 years ago

I think you’re right Tom. The more I think about this, the more confident I am that if we were to return to this page in ten – maybe five – years time most of the people taking the ‘left’ side in this debate will think how silly it was. Come on guys – I know its irritating to have someone not take your position seriously

Mark Bahnisch
2022 years ago

I very much doubt he’s kidding around, Nicholas.

As I commented earlier, a lot of the detailed analysis of economic patters within the World Systems Theory tradition has been done by Giovanni Arrighi – I emailed you his critique of Brenner and his views on current global economic conditions.

Wallerstein is interested, as I’ve said before, in how to conceptualise capitalism over a long period of historical time, but I guess I’ll get in trouble for saying he’s a big picture thinker.

Tom Davies
Tom Davies
2022 years ago

On decommodification, Wallerstein makes a distiction between ‘decommodification’ and ‘demonetization’, which I don’t follow. Do you know what ‘demonetization’ (which he doesn’t want) is?

I don’t see a conflict between social democratic principles and for-profit operation of schools, hospitals and housing — the state can transfer resources to people who would otherwise not be able to afford medical care, without there being any need for the state to own the hospital, or employ the doctor. That’s how we provide unemployed people with food, cars, tvs etc. today.

Speaking of repression of unions in the periphery: http://www.asianlabour.org/archives/001832.php

And a short but interesting comment about the relationship between sociologists and economists (halfway down): http://www.marginalrevolution.com/marginalrevolution/2005/03/what_ive_been_r.html

Mark Bahnisch
2022 years ago

Tom, it seems to me that marginalrevolution.com is a bit sanguine – in Australian universities, both sociology and economics have shrunk in institutional and research terms over the last decade or so. It’s turning around now in sociology, I hope the same is the case for economics. Unsurprisingly, sociology has fared best when it hasn’t been collapsed into hodgepodge “transdisciplinary” schools. I gather economics is on its last legs in some Business schools.

It’s not my field, as they say, but I understand some interesting work has been done in economic sociology recently.

I’m not sure off the top of my head what ‘demonetization’ means, but I suspect he means he doesn’t want to do away altogether with markets as an allocative mechanism.

Part of my problem in responding to this debate (which I didn’t initiate) is that as I’ve noted several times, I think people are bringing certain preconceptions to their reading of Wallerstein and World Systems Theory, and also that as I’m in the middle of finishing off my PhD thesis, I simply don’t have the time to do the reading I’d need to do in some of his longer books to adequately defend him, let alone summarise his theses. Links have been posted which would enable people to access (some of) this material, should they choose. But I think I’ll bow out.

I will say that classic social democracy stood for universalism in service provision of healthcare, on the grounds that allowing some with the resources to purchase healthcare would undermine the viability of the universal system and political support for it. Clearly that wall’s been breached in Australia and Britain, but I’d continue to defend the contention on principal that for profit organisations ought not to be involved in healthcare on social democratic grounds.

But I might do that some other time.

Tom Davies
Tom Davies
2022 years ago

Thanks Mark, I do appreciate the time you give Troppo, although considering your other commitments perhaps I should be appalled :-)

Mark Bahnisch
2022 years ago

My supervisor’s happy, Tom, with how it’s going so I’m happy. Fortunately I am a very fast writer (or unfortunately sometimes…)

Brian Bahnisch
Brian Bahnisch
2022 years ago

This is very frustrating. I log on, get up to date with other comments and it’s time for me to log off.

James, the point of the pfennig is that for Monbiot capitalism is inherently expansionist. Hence we have a choice of saving the planet and domesticating capitalism or letting it rip and everything goes down the gurgler. That’s crudely put, but Wallerstein has similar concerns.

Monbiot is not a dill IMO, but he’s also not an economist. I thought there must be an obvious flaw in his argument but I couldn’t see it. You’ve explained it nicely thankyou.

Tom, I don’t think Wallerstein thinks we are all going to be rich. It’s just that the capitalist trick of running off and finding new cheap labour to maximize profits will come to an end at some point.

Chris, maybe it’s not a class thing, but Wallers does seem to see inevitable conflict and exploitation between capital and labour. I think he sees one class in capitalism, but then there’s all the rest. I’m not sure I understand this part of his thinking all that well.

Right now I’d like to say that I don’t see Wallers as contemplating the end of capitalism, rather CAPITALISM AS WE KNOW IT. And more particularly how it relates to other features of the ‘system’. The ‘world system’ is being destabilised to the extent that when a new equilibrium is established there will be significant discontinuity with the past system. Life as experienced within the new system will be substantially different, but not necessarily better.

I’ve really got to go, but I reread my Webdiary piece earlier this evening (see Ken’s link) and I can’t say it any better than I did then.

Nicholas, I see Wallers’ strength as his big picture analysis of how the system has worked since about 1450. I don’t think he’s all that at good at specific prescriptions for the future and I found his example of the hospital as, shall we say, too simplistic to be useful. I said at the end of my piece that I think we need to go beyond Wallers and sketched some of the areas that interested me. That’s where I want to put my effort with the limited time I have at my disposal.

That having been said, I had intended after the Webdiary piece last year to give my own reactions to Wallers, especially his stated drivers that, in his estimation, will cause major instability to the system. Hope springs eternal but don’t hold your breath.

Niall
Niall
2022 years ago

CL sums up my own feelings on posts and threads such as these, and judging by the initial rejoinder by the resident Centrist, I’d suggest these type of ‘discussions’ are little more than a case of “my dick’s bigger than your dick”. Does anyone really care either way?

Michael Warby
2022 years ago

Having read this and the previous post on Wallerstein, I am confused whether, with ‘labour cost’ Wallerstein is talking about

(1) wages share of GDP
(2) average wages bill for companies
(3) labour unit cost

He seems to leap from one to another in a way which is confusing and confused.

As to his claim on taxation, that states can consume the resilience of their surrounding society is obviously true — consider the Roman Empire, North Korea today, etc. But to claim there is some secular global trend which will go on to the point of systemic collapse seems a very big proposition. And, over the long history of capitalism, surely not true — the C19th was surely a period when govt share of national income declined notably.

Nor am I persuaded by his obsession with the peripheray. The vast bulk of economic activity takes places within the capitaliist core and always has. I simply do not believe the peripherary is as essential as he seems to require.

Finally, the basic truth about capital is that it is becoming more plentiful. That is what long-term rising living standards mean — capital becoming more plentiful compared to people. Surely the bigger the capital base, the less important new accumulation becomes. A point reinforced if risk factors are trending down.

Nor, following on from the risk factor point, do interest rates exactly suggest some looming capital crunch (their long term trend is clearly downwards, as anyone familiar with medieval economic history will be aware, and for obvious reasons). And I fail to see why capital supply should not respond to price signals.

To the extent I can work out what Wallerstein is saying, it seems either confused, false or tangential.