An unfolding debate about the capitalist crisis
BY EVA CHENG
Released hard on the heels of the 1997-98 Asian economic crisis, which was threatening to become a global meltdown of the capitalist system, Robert Brenner's book-size thesis, "The Economics of Global Turbulence A Special Report of the World Economy, 1950-98", printed in New Left Review (NLR) No. 229, May-June 1998, has attracted considerable attention from the left internationally.
Billed as explaining the root causes of the post-World War II "long boom" and the downturn since 1973, it was suggested by the NLR editors, of which Brenner is one, that it would define Brenner as a "successor" to Karl Marx for his power to "explain the laws of motion of the global economy".
Expectations were also raised by Brenner's considerable reputation as a Marxist analyst, earned especially during a late 1970s debate on the transition from feudalism to capitalism; a debate in which he played a key role with strong class-based argumentation (see T.H. Aston, ed., The Brenner Debate, Cambridge, 1987).
As it turned out, extensive controversies have also erupted around Brenner's new work, with critical responses in various left publications and internet discussion forums. In fact, Verso's decision to publish Brenner's original NLR piece as a book, which may include some of the critical responses as well as Brenner's replies, is likely to take the debate to a wide audience.
Brenner's detailed analysis in "Global Turbulence" — backed by a mass of data — of the long boom and long downturn disguise to an extent the simplicity of his basic argument that the key to the decline of the rate of profit since 1965-73, especially in manufacturing, lies in the persistence of overcapacity and overproduction across the capitalist system.
It's not hard to agree with Brenner on this basic premise, but not necessarily his reasoning. Brenner gives predominant weight to the competitive pressure among capitalists to cut costs as the primary force in driving them to accumulate capital, innovate and develop the productive forces in a manner unprecedented in previous social systems.
He also traces to this very pressure the reason why capitalism tends toward periodic crisis and stagnation — the compulsion to upgrade the technological content of each firm's means of production has brought on a growing proportion of fixed capital whose profitable life cycles become increasingly truncated by newer innovations by rival capitalists.
Fanciful "pure market" theories will argue that those capitalists whose firm's are technologically overtaken can drop out of existing areas of production and move to new lines as if the costs of doing so are negligible. Not so, Brenner argues, stressing that the heavy "sunk costs" already invested in existing means of production and the difficulties in transferring existing market network and other advantages to other product lines would lead many capitalists to stay put and accept a lesser rate of profit.
In this reluctance lies the key to Brenner's explanation of the persisting decline of the rate of profit across the capitalist system since the mid-1960s, which he seeks to illustrate at great empirical length based on data from the US, Germany and Japan.
He further suggested that the US has been able to afford huge and growing current account deficits due to the US dollar's dominance in international transactions. Brenner asserts that the US has been manipulating the dollar's exchange rates in relation to the yen and the mark since the beginning of the long downturn to improve the competitive position of US manufacturers.
The 1985 Plaza Accord (under which the other major imperialist countries went along with US demands), which started the deep and long appreciation of the yen, and to a lesser extent the mark, is key to Brenner's explanation of Japan's decade-long economic crisis. He argues that the 1995 "reverse Plaza Accord", which engineered an appreciation of the dollar in relation to the yen and mark to stop a collapse of the Japanese economy, precipitated the Asian economic crisis because the exports of many Asian countries, their breadlines, were devastated by the rising dollar to which most Asian currencies were pegged.
Brenner lays the bases of his arguments by a savage attack on the mainstream "supply side" theory which blames workers' resistance for the capitalist crisis. He also highlights the role of debt, especially the Keynesian public spending particularly by the US up till the 1980s, not only in containing the crisis but also in prolonging the stagnation. He describes the present US profitability recovery as "very major" but says the largely zero-sum nature of the battle for world markets in manufacturing remains against slow-growing demand.
'Overcompetition'
Despite being presented by NLR as a Marxist analysis of the world capitalist economy, there is a complete absence in Brenner's analysis of the crucial Marxist conceptual tools based on the dichotomy of use value and exchange value under capitalism; capitalists' appropriation of surplus value, of which workers' labour is the only source; and the capitalists' endless chase to bring the labour actually consumed by their workers (concrete labour) to a level matching, if not lower than, the socially necessary labour (abstract labour).
One key means which capitalists use to increase the extent of their appropriation of surplus value is by intensifying the labour process. Speed ups, less pay, longer working hours and poorer conditions are some overt ways to achieve this. A more concealed but important means lies in the increased mechanisation of the production process (increasing what Marx called the "organic composition of capital").
In tracing the origin of the falling rate of profit, instead of locating it within this class battle, Brenner spends his main efforts digging through the competition between capitals, even holding it up as the ultimate problem.
In his critique in Monthly Review (MR), June 1999, John Bellamy Foster hammered Brenner for this flawed focus on "overcompetition" at the expense of the critical analysis of the struggle between capital and wage-labour. David McNally, in the same edition of MR, took issue with the crucial absence of Marxist value analysis in Global Turbulence, a point also raised by Foster and other commentators.
Brenner's reply to Foster and McNally in MR, December 1999, helps a great deal in laying bare his positions on these important questions, which were much less clearly spelled out in Global Turbulence.
Brenner's defence
Brenner says, "my denial of the deep roots of economic downturn in general, or the current long stagnation in particular, should be sought in class struggle ... in no way implies that I doubt the source of capitalist profits are to be found solely in the exploitation of workers". He continued, "But, although exploitation constitutes the only source of surplus value, and although class struggle is significant for the distribution of income, there is no reason to take it as a matter of dogma that the mechanism driving economic crisis and stagnation should be sought directly in the capital-labor relation.
" ... it is impossible to derive the law of accumulation merely from the existence of wage labor alone ... in economies where the social-property relations have failed to render the direct producers subject to competition, the law of capital accumulation will not hold, even if wage labor is common; in economies where the social-property relations have rendered the direct producers subject to competition, the law of capital accumulation will prevail, even if wage labor is absent".
Brenner's reply has made it clear that his analysis on these fundamental questions of class society is a long way from the traditional Marxist understanding.
Many other points of significance for understanding post-war capitalism were also raised by Foster and other commentators on Global Turbulence which we have no space to take up in this article. Some of them were also taken up by Brenner in his MR reply.
Hope in disappointment
Andy Kilmister's critique, in International Viewpoint, January 1999, is a short but sharp piece in which he concludes, "Analytically, despite individual insights, Brenner fails to help us understand the long boom and the following downturn, and by extension the current economic crisis ... the most obvious political conclusion that can be drawn from Brenner's work is a reformist one — the USA, EU and Japan should jointly agree to co-ordinate their production and share out markets more equitably".
The piece by Ben Fine, Costas Lapavitsas and Dimitris Milonakis in the Spring 1999 issue of Capital & Class is a detailed critique seeking, among other things, to locate Brenner's "intellectual trajectory" in relation to a variety of academic theories as well as its place in relation to the 1970s British debates on profitability and capitalist crisis. They also challenged Brenner's neglect of the role of credit as well as the internationalisation of production and finance.
"In short", they argue, "no value, no dialectic, no mediation between abstract and general concepts and more complex, specific, historical outcomes, and no class relations, ultimately leading to more or less selective and arbitrary theoretical and empirical fragments".
The April 1999 issue of Against the Current also carried two useful responses, by Mary C. Malloy and Charlie Post, and Hillel Ticktin. The magazine's June 1999 edition carries another two responses, by Loren Goldner and Peter Camejo of which the latter is highly controversial. There was also a piece by Michael Lebowitz in Historical Materialism last year.
In his critique, McNally has made a fair point which is also shared by some other left commentators, "... the current round of turbulence of the world economy is an opportune moment for the renewal of Marxist critique of mainstream economics. Yet radical analysis lags behind events". This vacuum explains the great expectation placed on Global Turbulence, as well as the great disappointment. But a great deal can be gained for the left in this unfolding debate.
["The Economics of Global Turbulence" is also to be published as a Verso book this year.]