The crises of capitalism, animated

This is fascinating. An animated illustration of a talk by David Harvey explaining the post-2007 financial meltdown in Marxist terms. To summarise: when Mervyn King refers to “systemic risk”, what he means is “the internal contradictions of capital accumulation”, comrade.

Even if you’re not in the market for a Marxist explanation for the crisis, this is still an exhilarating ten-minute ride, and as a critique a lot of it rings true. For example:

  • the promotion of home ownership in the US and UK as a means of discouraging debt-laden employees from going on strike;
  • the declining proportion of national income paid out in wages since the 1970s – a decline which is then compensated for by increasing consumer debt;
  • the suggestion that capitalism never resolves its crises: it just moves them around geographically (so that the resolution of a financial crisis in the US contributes to a sovereign debt crisis in Europe);
  • the systematic favouring of the City over industry in the UK since the 1950s, under both the Conservatives and Labour, and the damage caused to our economy as a result.

You can also download the finished illustration for the princely sum of 59p from its creators, Cognitive Media.

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10 thoughts on “The crises of capitalism, animated”

  1. And it’s not a crisis of capitalism; it’s a crisis of interventionism. Mixed economies, where the government intervenes in markets to try to direct them to produce some politically favorable result, are subject to recurring crises, as the distortions induced by the government must eventually correct themselves. Since Marxists think with completely broken and discredited 19th-century tools, like the labor theory of value, alienation, “the internal contradictions of capital accumulation,” etc, they ignore things that Marxian language really has no space for, like the role of the Federal Reserve and the effect of government debt. And, of course, there is the gross characterization of everything that isn’t Marxist-socialist grinding poverty, er, paradise as “capitalism,” which is a bit like Catholics trying to talk about “Protestantism” as a whole, i.e. “Protestant theology” and the like.

    Take, for example, his incredibly simplistic explanation of why we had a consumer credit expansion. Even the few words he spoke are complete nonsense. But of course they would be–his commitment to the labour theory of value basically makes any attempt at explaining money and credit in a comprehensive, coherent way, one reason among many labor theorists are cranks who belong with the young earthers. And because of this, he doesn’t really understand what profits are or what they mean in the economy, so declining profitability in manufacturing is a crisis.

    Government debt and collapsing social programs are crises of capitalism?” Really? One wouldn’t really call governments’ ability to subject citizens yet unborn to future tax obligations a market phenomenon of any kind, yet he merrily dances from the U.S. housing bubble to…the Greek sovereign debt crisis? No connection mechanism is given; the proximity of the two events in time is enough, apparently, for a Marxist to conclude that one is caused by the other.

    He apparently believes that only manufacturing produces wealth, and that everything else is parasitical. Of course, agriculturalists were saying the same thing about manufacturing at the beginning of the 19th century. I wonder if David Harvey believes that college professors create real wealth–or if Google does? Where does information technology fit into Marxism?

    Really, how else can I describe this lecture? It’s crap. You should know it’s crap, and say it is.

    1. *adopts comedy exaggerated Yorkshire accent* “Capitalism ‘asn’t failed, brothers! It’s never been tried!”

      As for the link between the financial crisis and the sovereign debt crisis, I’m assuming the link is that the need for banks to rebuild their balance sheets after the financial crisis has then made it more difficult for countries such as Greece to refinance their debt. That, I would assume, is the kind of link Harvey has in mind.

      And where did he say that only manufacturing creates wealth? From where I was sitting, his point was that the UK economy has become imbalanced by going too far in the opposite direction: the view that a thriving financial sector can compensate for the loss of manufacturing.

      Really, how else can I describe this lecture? It’s crap.

      I entirely agree that the lecture you heard, in which Harvey extolled the Marxist paradises of Actually Existing Socialism, spoke at length on the labour theory of value, made assertions about causation based only on proximity of time and claimed that only manufacturing creates wealth, was crap. I’m not sure that’s the lecture Harvey actually gave, though…

      1. That is not a very good assumption.

        Capitalism hasn’t failed, either. Government has made the crisis much worse than it needs to be, but a truly failed economy? Far from it. For a failed economy, go to Haiti, Cameroon, or North Korea. Capitalism’s fairly resilient to deviations, if you think of capitalism as a centered set…

        All the ideas that I talked about undergirded his discussion. I also did a little background reading on him first. For example, what he said about credit cards, how we “created consumer credit,” supposedly because people didn’t have enough money to buy things, is nonsense. I don’t mean it’s dumb; I mean the words he spoke, as he strung them together, don’t actually mean anything. The only person who might think they meant something would be someone who has some completely muddled understanding of what money and value are–and since David Harvey is an adherent of the labor theory of value, that’s sufficient explanation.

        That’s not to say, for example, that consumer credit isn’t largely harmful to an economy. But the language Harvey uses doesn’t convey that he actually understands *why.* And with his labor theory of value, he wouldn’t.

        I didn’t say he “said” only manufacturing creates wealth, not where I said “apparently;” it’s implicit in the way he talks about finance, and suggested by his Marxism. The reason I bring it up is that lamenting the declining profitability of manufacturing is a favorite hobby of many these days. How does he know how much of your economy should be manufacturing? On what grounds does he argue that Britain is a superior place to manufacture things than other places? Oh wait, he’s not even thinking in those terms. That would require understanding value.

        Greece’s inability to borrow money at low interest has to do with what interest actually is. Understanding interest requires understanding money. Understanding money requires understanding value. Understanding money and value requires not being a Marxist.

      2. *adopts comedy exaggerated Yorkshire accent* “Capitalism ‘asn’t failed, brothers! It’s never been tried!”

        To elaborate on an earlier remark, it’s rather ridiculous to point to a sector of the economy dominated and orchestrated by a handful of government-empowered oligopolies, working in collaboration with government agencies to produce a result dictated by politicians, and call it a “failure of capitalism.” That’s like installing a cheap Maxtor HDD in your computer, and, when it inevitably crashes, calling it a “failure of digital computing” and scrapping your whole PC.

  2. Clever drawing. Less clever economics. (Notably, Harvey claims that wages and salaries are the ‘only’ way you can pay for goods purchased. The man’s a fool. Shopkeepers aren’t fussy about whether you earn your crust as a noble member of proletariat, or from exploiting the workers as a stinking capitalist. They just want your money.)

    the declining proportion of national wealth paid out in wages since the 1970s

    1. Income, or value added. Not wealth, which is, ahem, accumulated capital.

    2. Is Harvey right? My figures show the shares in the UK and US staying roughly static from 1970 to 1995 (they terminate at 1995). I have data for Germany and Japan as well, one of which shows sharp growth followed by a plateau and the other shows slow growth followed by slow decline back to a shade below where it started.

    3. There’s no reason why it has to be ‘compensated’ for by consumer debt. Consumers could live within their means. Isn’t it curious how the Marxist critique of capitalism lionises workers as noble and honest, but demonises consumers as feckless and craven to forces they cannot understand? Especially since workers and consumers are, to a large extent, the same people!

    1. Harvey claims that wages and salaries are the ‘only’ way you can pay for goods purchased. The man’s a fool.

      I think the point was that if wages diminish as a product of national income (my bad: corrected in the post) then that affects the ability of people to purchase goods.

      As for the figures Harvey is using: I’d have to look at his book, which I’ve ordered from the library.

      There’s no reason why it has to be ‘compensated’ for by consumer debt. Consumers could live within their means.

      Well, yes. But isn’t Harvey’s point not that consumers were justified in “compensating” themselves by helping themselves to extra debt, but that making that debt available was necessary in order to keep up levels of demand for capital’s products and services?

      In other words, had consumers spent the last thirty years living within their means, the economy would have stagnated and even (at a number of times) nosedived.

      There is a name for societies in which consumers are encouraged to live within their means and in which personal debt and unnecessary consumption are discouraged, and so on. I’m pretty sure that name is not “capitalist”, however.

      1. In other words, had consumers spent the last thirty years living within their means, the economy would have stagnated and even (at a number of times) nosedived.

        On what grounds? Consumer credit enhances your purchasing power today by harming it tomorrow. Without the massive expansion of consumer credit we’ve had in recent years, consumer preferences would tilt toward different kinds of goods, the “tomorrow goods” rather than the “today goods.” Rather than “stagnating,” the current structure of the economy would favor those goods–whatever they might be. (In general, our capital structure would probably favor the kinds of goods people plan to buy, rather than impulse buys, so perhaps more cars and high-quality furniture, and fewer restaurants and video games.)

        And, of course, with less borrowing and more saving, this makes real loanable funds more available for capital development, which is essential for the growth of an economy.

      2. I think the point was that if wages diminish as a product of national income (my bad: corrected in the post) then that affects the ability of people to purchase goods.

        I get that. But it’s still wrong. It makes the ceteris paribus assumption about a load of things (e.g., prices, behaviour, output) which is a useful assumption for modelling: but as we know, ceteris is not generally paribus in the real world.

        There is a name for societies in which consumers are encouraged to live within their means and in which personal debt and unnecessary consumption are discouraged, and so on. I’m pretty sure that name is not “capitalist”, however.

        You describe a society in which the large majority of the population is encouraged to accrue and to deploy personal financial capital, and say that isn’t ‘capitalist’. I would agree, to the extent that consumers are being manipulated (and particularly if manipulated by the State); I disagree, to the extent that consumers are accruing and deploying personal financial capital, which is a highly capitalist thing to do.

        But then, you’re also asserting that consumers have been manipulated into loading up on mortgage debts by their governments. Manipulation and no capital accumulation. That must make our countries even less ‘capitalist’, right?

      3. There is a name for societies in which consumers are encouraged to live within their means and in which personal debt and unnecessary consumption are discouraged, and so on. I’m pretty sure that name is not “capitalist”, however.

        Mass consumer credit was basically invented in 1980, so I guess that whatever Smith, Bastiat, Mill, Keynes, Mises, Hayek, and Friedman writing about, it wasn’t “capitalism.” Also, even in these modern times, living outside of your means is typically discouraged by collection agencies, bankruptcy courts, free interest rates, the necessity of feeding yourself, and the social requirement that banks make a profit to continue to operate.

        Of course, we could encourage living outside of one’s means if the government nationalizes or bails out banks, federal subsidies for people who borrow too much money, federal intervention to prevent property from being seized from debtors, government welfare programs to guarantee debtors a decent standard of living, and a government agency directed to fix interest rates. I don’t know what you call such actions, but I’m pretty sure the name is not “capitalist.”

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