Anti-Capitalist Chronicles: How Capitalism Works

this is David Harvey and you're listening to the anti-capitalist chronicles a podcast that looks at capitalism through a Marxist lens this podcast is made possible by democracy at work there is a general consensus not only in this country but elsewhere on the left that the prevailing economic model under which we are operating he's not working for the mass of the people as I talked about in previous broadcasts there is a greater discontent in the world but one of the arguments for that the Democratic candidates for president are making very much that the economy is out of whack and something has to be done to change it but one of the things I would want to argue is that while there's a consensus on this there is not a consensus on how to understand exactly what is wrong with the economy generally speaking the argument on the left is that there is not enough redistribution and that therefore changing the income tax structures the corporate tax structures instituting a wealth tax and so on can achieve some degree of redistribution there can be redistributions in kind through for example freeing up access to college education for free of tuition freeing up access to health care and perhaps even subsidizing access to affordable housing now while all of those proposals and measures of that sort are I think potentially significant and complain Lee improve the lot of in some instances large segments of the population I think there's a case to be made for thinking about the problems of the contemporary economy in a deeper kind of way put bluntly I think most of the proposals which exist out there to transform the existing economic structure are proposals to move away from the neoliberal consensus the neoliberal model would share has become more and more explicit over time over the last 30 or 40 years and to go back to what might be called a more ethical capitalism amore distributive capitalism the more social democratic capitalism and therefore that is what the political project should be about now as I say I'm not against that kind of politics and I think that some of that is not a bad idea but on the other hand I think it fails to really tackle what I see as the the basic underlying problem I come from an intellectual and political tradition on the left but has some attachment thinking about what the French economic historian Rodell called the long dear a that is thinking about long-run transitions how did capitalism arise from the fifteenth sixteenth century onwards how did that long-run transition occur how long did it take what kinds of things did it require and I think right now if we think of the short-run configurations we are missing out on some rather deep long-run problems and it's those that I really want to take up and this and this talk I think the way I would want to look at this is to try to set up a way of understanding how capital works and one of the things that I'm going to argue is that most economists just to take one very influential group of interpreters actually really don't know very well how a capitalist economy works and one of the things that I've derived from years of reading Marx is that where there is a way of understanding the economic process which helps us to identify what some of the key questions are in terms of the long-run evolution of capital and the long-run pressures which exist on capital and why at a certain point capital itself will become if it hasn't already become unsustainable now the way I go about this is to use a certain language that Marx deploys in his thinking Marx likes to talk of something which he calls a totality now I want to make clear that the totality is not something that pre-exists a totality is something that is created through social action and the task of scientific understanding is to mirror and the formation of a totality and the evolution of that totality in a certain way by building as it were a totality in the mind so we have a totality forming in reality at the same time as we have a an understanding of that totality which is how we construct it in our heads and how we theorize what the totality is about now in Marx's totality he's going to argue that there is a process which is creating this totality in that process is a circulation of an accumulation of capital Marx defines capital as value in motion and the value goes through these various processes and procedures and reproduces itself historically over time but also on a daily annual basis now totality that Marx was writing about had within it what he called certain moments and it's this language of totality and the moments that constitute their totality which is actually useful to deploy and addressing the questions which I have in mind the analogy here about moments would be this that there are certain aspects of the totality which are crucial to the reproduction that totality but don't in themselves simply explain that reproduction in other words it's all of the moments taken together which actually explain how the totality functions a simple analogy here would be to say well if you think of the human body and how the human body is reproduced on a daily basis well your lungs have to work your kidney has to work your liver has to work your heart has to work your mind has to work in other words these are the kinds of moments which exist within a human body all of which coming together act in such a way as to engage in the reproduction of the human body preferably obviously in a good state of health now I don't want to take that analogy too far but it's a sort of analogy which I thinks help understand Marx's language of totality and of moments so the totality Marx is looking at is the circulation and accumulation of capital the initial initiating moment and like in any of these things you have to choose to start somewhere but by convention this is where we nearly always start the initiating moment is the money moment and at that moment capitalists come along and they take a certain part of the money which is available and they use that money as capital now the rule here is this that not all money is capital but capital at some point has to go through the money moment so there is some money which is performing as capital and what does that capital do well the money moment is that capital of that money which is going to be used to make more money and that is what capital is going to be about but more is gonna say there's the specific way in which industrial capital makes money and in that specific way is this that the capitalist takes the money goes into the market and buys commodities in the market now this is if you like the second moment in the process which is the transformation of the money into commodities so you buy commodities and the value of the money is reflected in the value of the commodities of its you've bought and there are two kinds of commodities which are crucial in Marx's view the first commodity is labour power which means there has to be a labor market out there and I asked the capitalist can go in there and say okay I want to hire some workers there are some workers standing around a street corner I can hire them and take them in and say okay I'm going to put you to work so the second moment then is the hiring of workers but not only hiring of workers but also hiring of or purchasing means of production and the means of production can be tools it can be machinery it's gonna be raw materials partially finished products or whatever which means it has to be a market out there that I can go into and I can buy all of those things so as a capitalist I start out with all of my value that I control in the money form I then take that and I turn it into the commodity form but the commodities are labor and means of production then as a capitalist I take the labor and means of production and I can't join them in a production process that is I take them into the factory as it were and I put their laborers to work and I put them to work on the raw materials and out of that there comes a new commodity now during this labor process two things happen and the laborer in effect reproduces the initial value of all of the means of production the same time the labourer reproduces their own value because they need enough to live on and at the same time the third point is that the labor also produces what Marx calls a surplus value which is commodities which are over and beyond cost of production at Birth labor and of means of production so that new commodity then is value again in a different form so we went from a money form of value to a commodity form of value a production apparatus of value and then we come back to the commodity form of value which has to be taken into the market and the value has to be realized in the money form again as you sell the commodity in the market and the money form is going to be greater than the initial money form because the surplus value is going to be converted into profit so profit if you like is the money name of surplus-value so this is the the BET what part of the basic process but then the money once it's realized in the market it gets divided up divvied up between various agents that have claims upon it for instance the worker has a claim upon some of the money produced and receives that in the way out form of wages the industrial capitalist because they have done all of the work that I'm talking about is obviously going to deserve some of the other surplus but it may be that the industrial capitalist requires the services of merchants to sell the commodity so the merchants catalyst will make a claim and say I need a certain amount of the value produced because I have helped you sell the product and it may be that at a particular moment industrial capitalist or merchant capitalist does not have enough money to do something so there will borrow money from the banks and so the banks will make a claim upon it and finally the landlords will make a claim because they say you're using my land and you're going to have to pay rent for the use of the land so we get these forms of distribution which are wages the profit of industrial capital merchant capital the interest on any loans the rent and then finally when we go beyond that we see that some of it is going to be taken by the state as so some of the money gets redistributed in that way across all of these different factions but then all of those factions at certain point will have surplus money and so they also then spend it either on you know consuming goods and services or they will invest it into another round and here the cycle is complete and it goes around and it comes back into and once again as money capital going into commodities going into production going into commodity so we get a cycle set up but Marx points out something about this that it's not a cycle it's a spiral and the spiral is there because the incentive to do this whole thing is profit which means that a certain amount of surplus value has to be produced and more surplus have value has to be produced as time goes on because if I'm in competition with you and you start to actually expand and if you expand faster than I do then I'll be driven out so there is competition going on which is going to drive certain amount of the surplus which is being produced in the valley which has been produced back into this cycle again so the cycle as Marx puts it becomes a spiral so economic development then is going to occur through this process and Marx is interesting in this way because he says look the definition of capital here is the process I can't take any one moment of this process and say that is all capital is I say the process is the transformation of value as it goes through all of these different phases and comes back to the starting point so capital is a process it is not a thing now in contemporary economics the tendency is to say that capital is a factor of production it is a thing this is not the way Marx thinks of it at all and the thing is fixed in contemporary economic theory whereas for Marx it buries a lot for instance how much money is there in society that can be made into capital on a given day all kinds of people can suddenly seized hold of money and start to try to today's capital so the amount of capital and society is not bounded by this thing it simply it depends upon the use that is the use of the money has capital depends upon a class of users which means as a capitalist class and the capitalist class can be big it can be small it can be very rapid you know fast moving or slow move me so the amount of capital in society depends upon the fluctuations which are occurring through these different moments of transition in which capital is being transformed from commodity into money or from money into commodity now each one of those transitions which Marx calls Metamorpho sees is is a bit fraught that is I can make a commodity and I can take it to market but I can't find anybody to buy it in which case that value which is embodied in that commodity is lost it gets devalued it gets destroyed because I cannot sell the commodity you know I cannot realize the value of the commodity in monetary form now it could similarly be the case where if a lot of capitalists suddenly decide to change as much money as they possibly can and go into the market to buy labour power and I get there and they find there not enough labourers in which case again the cycle comes to an end so what Marx does is to say the cycle which is going on is not only a spiral but it's also subject to interruptions and disruptions and blockages and the like and frequently his languages that there are many barriers to be overcome in this process and the barriers are important and if capital can't surmount the barriers or circumvent the barriers then you get a crisis on your hands so Marx's theory of crisis it is not you know sort of a mechanical theory it's that the flow of value is blocked for some reason or other and it can be blocked anywhere it can be blocked by the bankers suddenly freezing which is one of the things that happened in 2007 it could be blocked because there's not enough raw materials out there let's say all of the miners go on strike and so suddenly there's a shortage of materials it can be blocked because there are not sufficient two parts we see a virus which is struck in China right now and it's hitting certain parts of the commodity chains and so we suddenly see Factory is closing down and in Germany and South Korea because the parts factory in the center of and in Wuhan in China cannot work because of the existence of this virus so any blockage anywhere for any reason is likely to cause serious problems and and this means that there is a necessity to keep this whole flow in constant motion keep its continuity and there is a requirement for a non crisis prone capitalist dynamic but now I want to come to what it seems to me to be one of the crucial questions over time the expansion of this system that is the conversion of this system from a cyclical form which is simply a repetition of day and night as it were over time going from a cycle to a spiral poses a whole set of stresses and strains upon the economic dynamic and I've argued that the cycle has to be converted into a spiral because without without that the whole kind of profit motive wouldn't work and the whole kind of production of surplus-value would not take place so the spiral form is significant and what this does is mean that the system has to grow over time and it has to grow at a compound rate or put it this way not so much it has to grow to compound rate but that the way a healthy capitalist system exists is through the existence of a compound rate of growth and historically we see a lot of data that show is that actually the compound rate of growth of a capitalist economy which is quote satisfactory is around 3% per year and if you go to the financial press you'll see them saying things like well growth needs to be pushed up it's not 3% if it goes to 5 or 6% well maybe it's getting a bit overheated and so on so 3% is adequate 1% is sluggish 0% growth is means that's a crisis because something is blocked and the system cannot expand so there is a tendency then for capital to engage in an exponential compounding growth now what this means is that for instance the size of the global economy has to double about every 25 years and that doubling every 25 years gets you into this thing or the famous kind of sequence that if you double one you get to two if you double - you get to four if you double for you get to eight if you get to double 8 to get to 16 you can then you get to 32 this is what compounding growth looks like and you can see that it soon becomes very much bigger and Marx was very well aware of this because a lot of people have been discovering the power of compound growth at the end of the 18th century and what Marx does is to actually set up a little commentary in capital about somebody who was writing about the power of compound growth and it was a man called Richard Price who wrote a book in 1772 and price was very much enamored of the power of exponential growth and thought that it could be mobilized for all kinds of purposes but he also saw the following but the consequences could be absolutely astonishing money bearing compound interest he says increases at first slowly but the rate of increase being continuously accelerated it becomes in some time so rapid as to mock the power of the imagination one penny put out at our saviors birth to five percent compound interest would before this time at 1772 have increased to a greater sum than would be obtained in a 150 millions of Earth's all solid gold 150 millions of earths also in gold but if that money had been put out to simple interest it would in the same time have amounted to no more than seven shillings four and a half pence this is the difference between simple interest which doesn't compound and compound interest compound interest then goes very fast now where Marx was writing and the compounding of economic growth in a capitalist system really began to take hold towards the end of the eighteenth century let's say 1780 which is a kind of conventional time when we might think about when the Industrial Revolution and capitalist revolution really took off so from about 1790 onwards we have been working with compound growth and when Marx was writing of course that compound growth really was at that part of the curve where was it only increasing very slowly when Marx is writing a total capitalist global economy was mainly what was happening in Britain some of Western Europe and the eastern seaboard of the United States and then a few outliers elsewhere where merchants were trading I mean it was a very small part of the world for example when Marx was writing most people when they've had breakfast on the table would be having it on the basis of what was grown in their backyards or what was grown locally would have nothing to do with the circulation of capital in other words most of the world was self-sustaining in its and its food supply and did not rely upon the circulation of capital to put breakfast on the table but we're now of course in a very different situation and in 1950 if the global economy was at four trillion dollars by the time you get 2000 is 40 trillion dollars it's now about 80 trillion dollars and if we're going to double over the next 25 years by 2050 we're gonna have to grow have a global economy which is something like 160 trillion dollars and which means that we're going to have to find 160 trillion dollars of ways of making money and making profit so now this starts then to become a real serious kind of problem because if you double the size of the monetary economy you may also find yourself having to double the size of the actual physical commodities which you're producing and then you ask yourself the question what does this mean well what it means for example in in the term of global warming and and other areas like this starts to be pretty catastrophic if for example you have to double the number of cars in a society every 25 years and you look at the automobile industry in China where there are almost no cars forty years ago there was old bicycles if you look at that and what you see is this compounding growth which is suggesting that there have to be new ways of accelerating the production of goods and services and there are some very interesting features of this for example after the crisis of 2007 2008 there were certain spheres that underwent very rapid growth I tell you one of the areas that grew dramatically and that was tourism now tourism is a very interesting commodity to produce because the consumption time of tourism is instantaneous you basically what tourism sells is an experience so it's not as if you take a consumer good and you hang on to it for five years it's naughty you know so so you're selling an experience so actually capital has started to commodify all kinds of experiences and tourism is a is a big one of them and if you look at the tourist numbers it went from something like 800 million in 2008 to something like 1.2 or 1.4 billion tourists visits now so one of the ways in which capital is expanded has been by expanding tourism it's also expanded by developing new forms of economy like a cola-cola before I think the Netflix economy where there's a lot of labour put into the creation of a Netflix episode the Netflix episode is shown and it is consumed in one hour you can also could be consumed afterwards because the longtail can be consumed collectively in one house so just because I'm watching it doesn't preclude somebody else from watching it so Netflix is great you see for the kind of consumerism which fits with the need for a rapid turnover time and instantaneous consumerism but tourism depends upon of course the building of all sorts of infrastructures hotels highways it also entails a lot of flying and and and also a lot of travel so actually tourism is not so good for the environment when you think of it in the pressure it puts on the resources is very high now what all of this means is that we've got to that point in the exponential growth that point of compounding where you start to get this leap upwards that what was not a problem for my and was not a problem in say 1950 started to become a problem in the 1970s and now is becoming a chronic problem which is how to absorb the increasing mass of output which has to be there in order to accommodate compounding growth so the rising mass of goods the rising mass of services the rising mass of money and debted nests and so on is starting to become a real serious kind of kind of problem which needs to be addressed and it cannot be addressed by wealth tax it cannot be addressed by all these mechanisms that are many people are talking about it has to be addressed by having some way of controlling this spiraling system of compounding growth which is putting such immense pressure not only economically but also socially and politically and interestingly in terms of altering people's lifestyles because when I mentioned this argument about you know Netflix and and and the like and the need to create forms of consumption which are instantaneous what that does is to change the qualities of everyday life look at the way in which you consume your cellphone you are constantly on it you are constantly using it in other words this becomes a way of organizing daily life which is also becomes much more stressful and here it means that time is going to be used up time is going to be absorbed so not only we're gonna have to absorb product new more products where we're going to have to absorb more and more of people's time in the consumer activism which is required to absorb this vast increase in the total output of goods and services which is going to be needed if the society is not going to be in total in total crisis all the time in fact what we're likely to see I'm sure are crises and crises and crises many crises that get overcome many crises that lead to reformulations some macro crises so we're going to be very crisis prone because the kinds of barriers that marx identifies when he's talking about the circulation of capital those barriers are actually becoming larger and larger and requiring more and more effort and more and more sophistication in order to be overcome this is what I would call the long during crisis that's the long DeRay crisis we should be thinking about and it is not being addressed even as people clearly see about this economy which we constructed is not working for the mass of the people and it is highly problematic in terms of its environmental requirements environmental stresses and it's psychological stresses on the qualities of daily life even though clearly people see all of that they are unable to say what the long-run long do a problem is and the longer a problem is compound growth cannot go on forever and we were reaching this decision point where the continuity of human life is being threatened by the need to assure the continuity of capital endless capital accumulation now obviously when I put it in those terms everybody will say hey listen if I have a choice it's going to end with endless capital accumulation and the continuity of that has to close down because the continuity of human life is much more important than the continuity of endless capital accumulation with that we'll talk about other aspects of this in the next gen broadcast thank you for joining me today you've been listening to David Harvey's anti-capitalist chronicles a democracy at work production a special thank you to the wonderful patreon community for supporting this project

Channel: Democracy At Work

Views: 26,493

Keywords: Richard Wolff, democracy, work, labor, economy, economics, inequality, justice, capitalism, capital, socialism, wealth, income, wages, poverty, Marx, wealth gap, income gap, culture, war, trump, psychology, geography, globalization, yt:cc=on

Id: BGmEUR3gDew

Length: 32min 16sec (1936 seconds)

Published: Thu Feb 13 2020