David Harvey- The Crises of Capitalism

[Music] [Music] okay so we've been through this crisis and there all sorts of explanatory formats out there and it's interesting to look at the different genres one genre is that it's all about human frailty I mean Alan Greenspan took refuge in the fact it's human nature he said you can't do anything about that but there's a whole world of explanations that kind of say it's the predatory instincts it's the instincts for mastery it's the delusions of investors and greed and and all the rest of it so there's a whole range of discussion of that and of course the more we learn about the daily practices on Wall Street we kind of figure there's a great deal of truth in all of that the second genre is that there's institutional failures that regulators were asleep at the switch the shadow banking system innovated outside of their purview etc etc etc and therefore institutions have to be reconfigured and it has to be a global of effort by the g20 something of that kind so we look at the institutional level and say that is failed and that has to be reconfigured the third genre is to say everybody was obsessed with a false theory they read too much Hayek and believed in the efficiency of markets and it's time we actually got back to something like Keynes or we took seriously Hyman Minsky is theory about the inherent instability of financial activities so we need to reform our theory if you like the next genre is that this is it has cultural origins now we don't hear that much in the United States but if you were in Germany and France so there are many people they're able to kind of say this is an anglo-saxon disease and and it's nothing to do with us and I happened to be in Brazil when it was going on and Lula was kind of saying well first off he was saying oh thank God the United States has been disciplined by the equivalent of the IMF we've been through it eight times in the last 25 years and now it's their turn fantastic said Lula and all the Latin Americans I knew until it hit them which it does and then they kind of changed their tune a little bit so those are kind of a way of which it got became cultural and you can see that by the way in which this whole Greek thing is being handled the way the German press is saying well it's the Greek character it's defects in the Greek character and and there's a lot of rather nasty stuff going on around that but actually there are some cultural features which have led into it for instance the u.s. fascination with home ownership which is supposedly a deep cultural value so 67 68 percent of US households are homeowners it's only 22 percent in Switzerland because it's a cultural value in the United States have been supported by the mortgage interest tax deduction which is a huge subsidy it's been promoted since the 1930s very explicitly in the 1930 was built up because theory was that debt income but homeowners don't go on strike so all along it's been kind of as a cultural value which has been promoted by kind of political economic processes so there's a cultural element in this as well and then there's a kind of notion that is a failure of policy and the policy has actually intervened and there's a funny kind of Alliance emerging between the Glenn Beck wing of Fox News in the World Bank both of whom say the problem is too much regulation of the wrong sort and the big devil in this is of course the way in which the Chinese have been manipulating their currency which is leading to imbalances if I wanted to take up a view my view of this it would be say well actually I think the mortgage interest rate deduction on housing in the United States warps the housing market and so if you really want to take that line seriously you should get rid of that so there are all of these all of these ways and all of them have a certain truth and skilled writers will take one or other of those perspectives and build a story and actually write very plausible kind of story up about this and I thought to myself well what kind of plausible story can I write which is none of the above which is one of the things I always think to myself and it's not hard to do particularly if you're coming from a Marxist perspective because you know there aren't many people who try to do this analysis from a Marxist perspective particularly with the long experience I've had of trying to work through Cinthia and how it works in urban settings and the like and I was really clued into this why by this thing that happened at the London School of Economics about a year and a half ago when her Majesty the Queen asked the economist how come you guys didn't see this thing coming I mean she didn't say it exactly that way but you know it's a sentiment and and they got very upset and then she actually called the bank of government Bank of England said how come you didn't see it coming and and and then the British Academy put forward this got all together all of these economists and they come up this fabulous letter to her majesty and it was and it was was absolutely astonishing it said well you know many dedicated people intelligent smart spent their lives working on aspects of this thing very very seriously but the one thing we missed was systemic risk you say what and then it went on to talk about a politics of denial and all the rest of it so I thought well you know systemic risk from you know I can translate it into the Marxian thing you're talking about the internal contradictions of capital accumulation and maybe I should write a thing about the internal contradictions of capital accumulation and try to figure out the role of crises in the whole history of capitalism and what specific and special about the crisis this time around and there were two ways in which I thought I would do that one was to sort of look at what's happened since 1970s to now and the thesis there is that in many ways the form of this current crisis has dictated very much by the way we came out of the last one that the problem back in the 1970s was excessive power of labor in relationship to capital but therefore the way out of the crisis last time was to discipline labor and we know how that was done it was done by offshoring it was done by you know Thatcher and Reagan and it was done by a neoliberal doctor and it was done all kinds of different ways but by 1985 or 86 the labor question had essentially been solved for capital it had access to all of the world's labor supplies nobody in this particular instance has cited greedy unions as the root of the crisis nobody this instance is saying is there anything to do with with excessive power of labor if anything is the excessive power of capital and in particular excessive power of Finance capital which is the root of the problem now how did that happen well we've been since the 1970s in a phase of what we call wage repression that wages have been remained stagnant the share of wage is a national income right throughout the OECD countries has steadily fallen it's even steadily fallen in China of all places so that there are less and less being paid out in wages well wages turn out to be also the money which buys goods so where few diminish wages then they've got a problem with where's your demand going to come from and the answer was well get out to credit cards we'll give everybody credit cards so we'll overcome if you like the problem of effective demand by actually pumping up the credit economy and American households British households have all roughly tripled their debt over the last 20 30 years and a vast amount of that debt of course has been in within the housing market now here too there's something very interesting which is when you look at the nature of the crisis everybody talks about the subprime crisis but nobody interprets it as a crisis of urbanization but it is a crisis of urbanization it's a crisis of urban form which had a lot to do a course with the suburbanization of the United States the continued proliferation of suburbanization and and all was going into it and so the the so the have the the property market became the center of crisis formation now this is not the first time that's happened since 1970s one of the ways in which she you often we solved the labor problem was offshoring in order to offshore you needed a new financial architecture which meant that you needed to reform finite global financial institutions and you did that in such a way that everything became very volatile you know currencies were moving all over the place and the volatility has actually contributed to a large number of crises since the 1970s so we've had hundreds of crises since the 1970s and many of them are being focused on housing and property development in the United States we had a huge savings and loan crisis and back in this country and 87-88 there was a real problem in the housing market so the Japanese land market crashed in 1990 in Japan hasn't covered recovered since in 1992 the Swedish banking system had to be nationalized because of the excessive development and property market the Southeast Asian crash in 1997-98 was triggered by excessive property development in Thailand and you suddenly look around and you see this world since 1970 been highly volatile a lot of the money's been flowing into things like housing and property development and a lot of that has gone bad and gone sour you've had these crashes after crashes after crashes and when you look back and you look at the pattern of crises since the 1970s you would see that present one and in this I think Lula is right there actually I remember writing around 2005 that if you looked at the aggregate data of the United States it should be like Argentina in 2001 and everybody looked at you said impossible but now the Argentinians are kind of saying yeah yeah you do look like we all were in 2001 the only thing is you haven't had a few revolutions and you haven't thrown our presidents and things like that which we do so so this is the volatility of the thing and so there's a long historical pattern here where you see crises forming and dissipating moving around Southeast Asia not East and Southeast Asia moved to Russia moved to Brazil moved to Argentina in fact it's just and and out of this comes a theory which is very very important but that capitalism never solves its crisis problems it moves them around geographically and what we're seeing right now is a geographical movement of that everybody says well ok everything's beginning to recover in the United States and then Greece goes bang and everybody says what about the pigs you know Portuguese you know that interesting they call them pigs Portugal and and you know Ireland and Greece and Spain sovereign debt crises and it's interesting you had a finance crisis we should find that in the financial system you sort of half solved that but at the experience expense of a sovereign debt crisis so the way in which the crisis gets manifest it moves from one place to another as a wonderful thing that I learned long long ago reading angles on the housing question when when angles kind of wrote the bourgeoisie has no solution to the housing problem other than moving the problem around and I think this is brilliant image and I make the same argument about crisis formation and when you look back it moves it around moves it around in different ways so moves around geographically and and of course we see the recovery being uneven geographically the Chinese roaring along right now but there but I'm very concerned about how they're roaring along there they're actually into a huge property boom property values in Shanghai doubled last year and the same thing has been going on a bit in India in other words they've they're getting out of the problem by doing what the United States was doing and getting into it and and a lot of that is debt financed and there's a peculiar way in which debt financing works it actually works in terms of both the beginning of the cycle of accumulation at the end of the cycle of accumulation and the best way to think of this is simply the image of the of the financial institution that lends money to developers to develop tract housing around San Diego and then lends money to buy us to buy up the housing so they operate on both the supply and demand and of course that can go on and on and on and on it has a things like that have a Ponzi character they have this kind of asset they asset building now what I did in the book was to talk a little bit about that history but also to talk theoretically about it and I tried to argue that actually if you look at the accumulation process of capital you see a number of limits and a number of barriers and there's a wonderful language that Marx uses in the grundrisse er where he talks about the way in which capital cannot abide a limit it has to turn it into a barrier which it then circumvents or transcends and then when you look at the accumulation process you look at where the barriers and limits might lie and the simple way to look at it is to say look a typical typical circulation process of accumulation goes like this you start with some money you go into the market and you buy labour power means the production you put that meat then to work with a given technology and organizational form and you create a commodity which you then sell for the original money plus a profit now you then take part of the profit and you recapitalize it into expansion for very interesting reasons which I probably can't get into here but that's what you do you've got to do there are two things about this one is there are a number of barrier points in here how is the money got together in the right place at the right time in the right in the right volume and that takes financial ingenuity so the whole history of capitalism has been about financial innovation and you could even go back to the sort of the formation of stock markets you can go back to all these things so it's always been about financial innovation absolutely essential and financial innovation has the effect of also empowering the finance ears and the excessive power of the Finance ears can sometimes they do get greedy no question about it and if you look at financial profits in the United States they were soaring after 1990 are going up like this profits in manufacturing were coming down like this and you could see the imbalance in this country I think the way in which this country has sided with the City of London against British manufacturing since the 1950s onwards has had very serious implications for the economy of this country if actually screwed industry in order to keep you know finance ears happy and and and you so you see those tensions and that all arises because of the power of the finances then the problem of the labor market I don't have to go into that but you know back in the 1970s there was indeed a real problem in the labor market not a problem there right now that's not where the barrier is there's then a problem in means of production it's a complicated story there but behind that lies the question of the limits in nature are there limits other natural limits and people are talking about that now this comes back although it's interesting that question always comes back when there's a crisis it came back in 1970s when there was a crisis remember limits to growth and all that kind of stuff it always comes back and I think one of the thing reasons it comes back is because what you know whether it's real or not there's another interesting question where the Peak Oil is real or not it's an interesting question but capitalists when there's a real problem start saying well the problems not me it's the limits in nature see you displace you displace the problem of capitalism by saying it's a natural you know it's it's natural somehow so there's that problem then there's a problem of Technology's an organizational form that continuous innovations in that that are absolutely essential for the dynamics of system but on the other hand continuous innovations particularly when they go very fast can be very disruptive so you can get crises forming out of the patterns of technological change and you can document that historically then there is the problem of crises in the labor process the discipline of labor again back in the 60s and 70s labor discipline on the shop floor was a real problem not a problem anymore they found docile labor forces all over the place so it's not really a problem anymore and then there's a problem of the market how you know where's the more gonna come from at the end of the day where's the more money coming from the more effective demand now as an interesting question there where that extra effective demand is going to come from and their effective demand their various ways in which could be solved historically you could say well actually was all the feudal lords who had all that gold and you could actually you know sell stuff to them and so there was if you'd like a gold reserve a money reserve in the feudal classes I mean there's a bit of that left and there's a lot of gold in the Vatican which they may have to sell off to pay for the sins of their priests but that's another question but there's not much left there's not much feudal residual there then there's an outside of the system which Rosa Luxemburg talked about you know the word nineteenth-century a lot of silver in China so you get the Indians to grow opium to sell to the Chinese the silver comes to India and then the Indians have to pay the silver for the textiles which are which are imported from Manchester so you get something of that than that kind you can't do that anymore so the effective demand has to be internalized that is the demand has to come from within the system and the only way that can be is by expanding the system so that in effect what happens is the you mop up yesterday's excess product by tomorrow's expansion in order to do that you need credit on the end of the system so the financier is stepped in at the end of the system as well so the financier start to play this absolutely crucial role in the whole process now the result of this is that you have got a system which historically has expanded since 1750 if I can read Madison's data right at around 2.25 percent per year compound right if you look at all of the you know the general stuff in the financial press and everywhere else people will say well a minimum of expansion of this system is 3% okay it's better if you'd get more than that but if it's less than that it's getting sluggish and people are having real problems and of course you get to zero you're in crisis so crisis is defined a black of growth lack of the 3% growth so there's this big struggle to maintain growth compound growth now in 1970 compound growth given the size of the global economy meant you had to find new profitable investment opportunities for something through something like zero point four trillion dollars now if you want to resume 3% compound growth you've got to find profitable opportunities for 1.5 trillion dollars in twenty years time you're going to need three trillion dollars of profitable investment opportunities part of the thesis I've got going here is that actually we are an inflection point where compound growth of that sort is no longer really feasible and actually looking backwards at what's happened since 1970 you would say there are plenty of signs of that plenty of signs of that since the 1970s less and less growth has been about making real things and more of it has been about asset bubbles and all the rest of it in other words you look back at the pattern people couldn't find anything to invest in was profitable except investing in you know derivatives of insurances on derivatives of insurances and and and so you get more and more things of that sort and you start to get new markets forming which a fictitious markets one of the big ones right now is carbon trading carbon traders the ridiculous kind of concept but on the other hand we're gonna have a big market in it and already people will be making a bundle out of carbon trading on European markets and they're going to try and make a bundle even more so we're going to cut these so we already see in the past these fictitious markets forming which are absorbing part of the surplus that couldn't be absorbed in real real production we can have more and more and more of that put in physical terms imagine 3 percent compound growth when capital was constituted by what was physically going on in Manchester Birmingham a few other hotspots in the global economy say in the 1750 1780 imagine 3 percent compound growth on everything that's going on in China right now everything that's going on in Europe everything's going on in North America much of Latin America Africa not so much maybe you know I mean physically it starts to look horrendous when you start to say the 3% compound growth on that and I think that is the underlying problem everybody says we've got to get back to growth you can't do it and actually the only way you can do it is by creating fictions that cannot last and so we're going to get increasing speculative activity in other words you can't regulate financial institutions if you prevent the financial institutions from creating fictitious markets that is where we're going that is where we have been going over the last thirty years and we're going to go there even more more after now the result of this is to say look I don't think compound growth forever is the possibility politically this means that you need to get a hold of the creation of the surplus somehow or other there has to be social control over the production and utilization of the surface surplus which is going to require a completely different form of economy from that that is given to us by the capitalist rules of engagement so we have actually any sensible person right now would join an anti-capitalist organization and and you have to because otherwise we're going to have this continuation and notice it's a continuation of all sorts of negative aspects for instance the racking up of wealth you would have thought the crisis would have stopped that actually more billionaires emerged in India last year than ever they doubled last year the wealth of the rich I meant just read something this morning in this country has has accelerated just two years just last year what happened was that mainly leading hedge fund owners got personal remunerations of three billion dollars each in one year now I thought it was obscene and insane a few years ago when they got two hundred and fifty million but they're now hauling in three billion and as the famous statement think by Andrew Mellon was way back in a crisis he said assets returned to their rightful owners ie him and and that that in effect is is the plug of financial the financial world right now yeah their assets are gonna return to us now that's not a word world I want to live in and if you want to live in it be my guest but you've got to start thinking and what bothers me about academia and as Laurie mention is I don't see us debating and discussing this I don't have the solutions I think I know what the nature the problem is and unless we're prepared to have a very broad-based discussion that gets away from you know the normal kind of problem you get in the political campaign and you know everything's gonna be okay here next year if you vote for me yeah it's crap you should you should you should know it's crap and and and and say it is and and we have a duty it seems to me those of us are academics and seriously involved in the world to actually change our mode of thinking now changing the academic mode of thinking is not going to revolutionize anything but on the other hand it's a necessary condition for some revolutionary change to occur it has to occur in many many different areas and and this seems to me as a main main point I would want to make about the book that crises get moved around both in terms of their form it's a financial crisis and an effective demand crisis right now it gets moved around geographically here it's you know in Southern California or now it's in Greece and and after Greece is over it'll be in Spain or it'll be in Ireland or them like God you might have a sovereign debt crisis in this country and what were the politicians say then poor things I mean it's just so we moved it around so it moves around and this these these kinds of ways and and we have to get a grapple grasp on that that's in effect what I was trying to say is that what I can tell you and show just considerable degree is how it's moving around why it's moving around and what the inherent problems are in it well I've spoken long enough so let me leave it there thanks very much I just want to it just a couple of things I'd like to raise with you I don't want to hog this at all because there are so many people here and I'm certain you've got so many questions just interested because we're course all in the middle of the election campaign here at the moment and of course it's interesting I don't know whether you've had a chance to look at the way in which the various candidates and political parties are talking about the economic crisis and talking about the resolution of the economic crisis it seems to me just to mention something I just mentioned to you before the ways in which almost members of the Labor Party have been instructed persistently instructed to refer constantly to the global nature of the economic crisis as though they've all been taken into a room and stole that they must say global but in fact I mean this this idea that there is this is something which has affected the the entire world and there's nothing specifically to do what is going on in the UK you would like to suggest is really a myth yeah and and and beyond that I mean it's so interesting I mean in Germany they they kind of say you know it's made in USA on the other hand German industry was booming by exporting to the debt-laden US economy and and they're they're pretending it has nothing to do with them when in fact it had everything to do with them and and again and again and again you'll do it you'll see people avoiding you know dealing with it and and and the Greece thing and and and actually the same thing is particularly interesting if it wasn't for German investment around the Mediterranean littoral and around all those condominiums that are now standing empty the Spanish economy would not probably be heading down the chute as it is right now so in other words the Germans have played a key role in creating the problems in Greece and and and United States and they say it has nothing to do with them they were good honest Germans just working on what they were doing and you know but everybody does this the people in the US do it they blame China you know it's a Chinese and I'm sure the Chinese blame the US I mean so there's a tremendous kind of game being played here which actually talked about the politics of denial it's real what about the relative insulation relative insulation in some countries from this man we all know about ISIL and the way Iceland does it we're went the whole line and came partly engaged in Indies at the spurious forms of investment but what about countries which somehow managed to escape the worst effects what was it about the nature of those countries about their economic policies which in allowed them that degree of insulation well it berries I mean you know the neoliberal line was not universally adopted and it is probably true there that say Germany did not dismantle its social protections or Sweden didn't dismantle its social protections in the same way when the problems arose they didn't have the need for a stimulus package in the same kind of way but then there's some very odd things for instance I was in Lebanon last summer and I said how's the house the crisis affecting you and they said not at all they said well why not and they kind of said well you know we have such a huge building program three rebuilding after the Israelis bombed us there that actually we have full employment and and you know and you kind of go well this is bizarre you know what are we going to do suggest that actually the solution for United States is to have somebody bombed the United States and then they can then then they'd have a stimulus program you know that might work you know but it's so it's so interesting when you go to two different places you find different policy networks and and and so there's an what I call an uneven geographical development of it and and it's very hard to track I mean I would not have expected the crisis erupted in Greece the way it's done and the way in which that is now threatening the whole euro which is actually then gonna be troubling for the whole global financial system I wouldn't have expected that there's a lot of unintended consequences and flows and interactions which and the remittances the the fact that in in in New York a large number that servants are from Haiti the flow of remittances to Haiti has dropped up like like crazy and Haiti's being and you know before before the earthquake it was in dire trouble because of the lack of remittances same is happening in places like Kerala in India which we rely on it and and you know the interconnectedness is is is is there and you've got to track it all in it very difficult to do if only one person who's thinking about it one one other question that was a political question about the contemporary situation but are we're talking about the future I mean you provide a very dramatic description of neoliberalism and the emphasis upon individuality and personal self fulfillment and entrepreneurship and all of this did I mean at a time when you might have thought some sort of collective reaction to the recurrent crisis of capitalism was being demanded this is the time when neoliberalism appears to have unleashed individuality in a form in which we've never seen it in history before so there seems almost a paradox there where can we look for hope in the idea of some collective response to these recurrent crises when individualism is so rampant yeah I mean one of the things I found that sounds very distressing there's some survey data on people who lost their homes the United States and the primary source that they blame for it is themselves they don't blame the system not at all and and but this is the depths of an ideological configuration and and it takes a long time to shake that up the one cause for hope I have is that we should look back say in the United States there's a collapse of 1929 it wasn't until 1933 that you start to see the big collective social movements that kind of say enough is enough and and you start to see immense pressure on Roosevelt to do something like you know Institute all of those things that we now with like social security and and you know you know reforms of the banking system and all the rest of it and it took about four years before that really came to mature of maturation one of the arguments are making the book is I think we're in a legitimation crisis the legitimacy of neoliberal kind of ideology is in question and but nobody knows exactly what to put in its place and I think it's a searching for what to put in its place but it's going to take a little while I think before if you like that legitimation crisis produces a political movement of some kind at least that's my hope you

Channel: RSA

Views: 135,903

Rating: 4.7937064 out of 5

Keywords: David Harvey, capitalism, sociology, university of new york, rsa, the rsa, royal society of arts, the enigma of capital, david harvey, stock markets, markets, ethics

Id: 26o22Y33h9s

Length: 31min 14sec (1874 seconds)

Published: Thu May 06 2010

Reddit Comments

[u/Heidegger]

Mah comrade

[u/[deleted]]

This lecture from last November on resource based economics is pretty interesting(if your turned away by the fact that its the guy from the zeitgeist movement, give it a chance):

https://www.youtube.com/watch?v=K9FDIne7M9o

[u/wescotte]

I know very little about economics but I feel like I agree with what is being said. I feel Capitalism is unsustainable in the long run and it feels like we've been teetering on it's limits for awhile now. I'm curious though what he (or other economists) feel are potential solutions to these problems?