Speaking in Philadelphia Wednesday, November 30, 2011

One Comment

1. Sartre says:

   December 23, 2011 at 11:36 am

   This is my transcription of David Harvey’s talk at the Penn Humanities Forum on November 30, 2011. I I offer it to the archives with all best wishes.

   Ralph Johansen

   http://readingcapital.org/2011/11/22/speaking-in-philadelphia-wednesday-november-30-2011/

   Back in the 1990s there was a saying prevalent, that it’s easier to imagine the end of the world than it is to imagine the end of capitalism. Why? What is it that’s happened that puts us in a situation where it seems that there’s no alternative? And when I think about the origins of that phrase, I think about Margaret Thatcher, the one who said there is no alternative. And she set about to prove her point, saying that she was not out to change how the economy works or to crush the unions (she didn’t say that she was but that’s what she really meant), or to change the institutional arrangements; she said, “I’m really out to change the soul, to change the way people understand their relations to the world, to change the conceptual universe in which people live.”

   And it struck me just recently, when I was in Chile, where another of the heroes of neoliberalism named Pinochet operated, that we realize that while Pinochet is gone and Thatcher is no longer there, Pinochetism and Thatcherism still rule in this world big time. This idea that there is no alternative to capitalism has become so deeply embedded in our psyches and in our consciousness that we cannot imagine an alternative. People still believe not only that there is no alternative to capitalism, but that there is no alternative to the kind of capitalism we’ve got.

   That statement that it was easier to imagine that there’s an end to the world was said to me in the 90s, when capitalism was thriving and it was not clearly apparent that there was a need to think about alternatives. The economy was booming and things seemed to be going fine. Alan Greenspan was delphically proclaiming that the world was doing great . So at that time, it was not easy to imagine an alternative. But you would think, after what we’ve been through since 2007 that the idea that there was no alternative would surely have been thrown to one side.

   But what I find instead at this historical moment is that there is a tremendous bankruptcy of ideas as to what to do.

   Back In the 1930s when there was a crisis there were at least alternative theories lurking in the wings: Keynes and Keynesianism and state involvement in the economy. There was a big battle and also social movements which genuinely envisaged an alternative. There was socialism and communism and they were bubbling around. And so in the 1930s there was a clear sense that there’s an alternative, and that there’s got to be an alternative. And after World War 2 when they kind of solved the economic problem, Keynesianism evolved, in which the state was heavily involved and in which taxation rates were very high.

   I like to remind people that Republicans tell us that taxation policies destroy growth. Back in 1945, the taxation rate on top income was 92%; it did not drop below 70% until Ronald Reagan, who brought it down to
   30%. In that period between World War 2 and Ronald Reagan and particularly before the crisis in the middle 1970s the average rate of growth in the US was around 4 or 5% per year. In other words, this was one of the most successful boom periods in American history, when the top tax rate was always around 70-odd %.

   Since Ronald Reagan, the tax rate has always hovered around 30% and what’s been the average rate of growth since the 1970s? It’s been about 2%. So don’t tell me that high tax rates inhibit growth. These are the kinds of mythologies that prevail. But anyway, in the 1930s there was an alternative, which ran out in the period since for a variety of reasons in the late 1960s and then we had the crisis of the 1970s.

   But in the 1970s there was always another alternative. There was a critique of Keynesianism and of state involvement in the economy, well-lodged in The Institute of Economic Affairs in Britain which influenced Margaret Thatcher, and in the US in the Heritage Foundation and the Business Roundtable and the rest of it, and they’d all been thinking that there was an alternative whereby you intervene in a particular manner in which you destroy the power of labor and thereby raise the profit rate, in a variety of ways, including off-shoring, technological change and outright political assault including coups and military assault in Latin America and all that. So there was an alternative.

   But when you look right now you say, where’s the alternative? In terms of social movements, in terms of actually thinking about it. And here at Penn you have the Wharton School. You’d think that they’d have thought of an alternative by now. But they’re so busy training about how to make money, and why would they want to think of an alternative when a couple of years ago the leading hedge fund managers got 3 billion dollars each in personal remuneration? And when I tell that to students they say. “How do I get there?”

   And right now what you see is the world divided roughly into two camps. There is the hysterical austerity camp which largely occupies Europe and the US, which says that the answer to our particular difficulties right now is to retire the debt, because we became too indebted. And it’s interesting to see how capital works, because one of the theses that I work out in The Enigma of Capital is that capital never solves its crisis problems, it simply moves them around. And right now it’s very interesting to watch this game of hot potato. There it was in the housing markets in California, Arizona, Florida and the rest of it, and then it moved to financial institutions and then it floated all around the world and there’s financial difficulty in the states and then amongst all those difficulties all of a sudden there’s a sovereign debt crisis in the states and the state doesn’t know what to do to handle it except by making the people pay. And the people at a certain point are going to say no, we’ve had enough. The people of Iceland voted not to pay, and I think that there are going to be a lot of movements in that direction. We’re beginning to see that in the Occupy Wall Street movements.

   But notice how they’re shifting the burden around. Now I was struck by this yesterday at CUNY where we’re having a demonstration around the increase in tuition. Now CUNY used to be a tuition-free university and I thought that was a great idea. I got my PhD without paying anything. And I think this is a sensible idea, but when you tell people that, they say what planet did you live on. And actually, right now the demand of the Chilean students is for free education. They are probably in the vanguard of a totally indebted class of people who have to pay for their education right the way through. And students in Chile have said enough is enough and they’ve occupied the universities for five months and they say they are going to occupy for another five months until they get some answer to this compelling question.

   But at CUNY, why is that going on and why did it happen? Until the 1970s tuition was free. Who forced tuition into CUNY? Well, the primary force in that change are the Rockefeller brothers. They lived in New York and they didn’t like the fact that they had to support this tuition-free system. They said the rich bankers in Chicago don’t have to do this, why should we, and so they formed the Business Roundtable which hired this body of experts who came up with this idea that educational standards at a tuition-free university are extremely low and provided a very poor education. If you wanted a good education you had to pay tuition. So all of this was put out in radical journals like the Readers’ Digest, and then the Rockefeller brothers paid to have this information from the Readers’ Digest and this panel of experts published in every paper across the CUNY system, as part of the attack on CUNY. So now we’ve got this situation where the banks got into debt and in the process New York City got into debt and they have this crisis and one of the ways they deal with it is to raise the tuition at CUNY. Which does work. It increases student debt. You’re privatizing the debt on the backs of students and you’re creating this indebted class of students. Now this is a good idea politically because as someone said in the 30s about home mortgages, that debt-encumbered homeowners don’t go on strike. Well, the debt-encumbered student has a rather difficult time making political choices which are a bit risky when the debt burden is hanging over them. So debt encumbrance is a real problem.

   So this austerity mantra is an answer to a particular problem, but as we’re seeing in Ireland and in Greece it doesn’t work. What it does is make people poorer and poorer and as they get poorer they spend less and the whole economy starts to go down and down further and further. And Keynes saw that as a problem and he said that the only way to stop it was to have the government step in and get it going the other way, but no, no we can’t do that because the Republicans won’t let you.

   And here let me just sideline into a piece of Marxian theory. In volume 2 of Capital Marx sets up this interesting model of how a capitalist economy might work. He says in effect., imagine there are only two classes in the society, the capitalists and the workers. Where does the demand come from in that society? Well, the demand comes from capitalists paying workers, who then spend their money on goods, and the demand comes also from capitalists buying means of production. So the total demand is the means of production and the wage bill. So what is the supply that the capitalist creates? Well, the capitalist puts all that to work and actually creates a surplus at the end of the day which is called profit. So there’s going to be more at the end of the day than there was at the beginning of the day. So who’s going to demand that surplus of goods that is there at the end of the day, when the demand that has been launched in is simply the wages that have been paid in plus what they’ve spent on means of production? Demand at the end of the day has to be bigger than that because you’ve produced more than that – you’ve produced a surplus which underpins the profit. And Marx’s answer is that it can’t be the workers who do it, so the capitalists have to do it. So this is a very peculiar economy. The capitalists actually generate the surplus and then they have to find the money to pay for it. Well, this is a very weird economy. Except that there’s a way in which you can answer that question, which is that what the capitalists do is to buy now and pay later. What they do is launch expansion of production the day after, so it’s the expansion of the system the day after that mops up the expansion of the day before. So you need enough money to do that. Now volume 2 doesn’t really explain this very well, but in volume 3 you find that the gap between today and tomorrow is actually filled by the credit system. So that buying now and paying later us actually like issuing IOUs. And the IOUs become larger and larger and larger as time goes on. What this leads to is that the accumulation of capital actually matches the accumulation of debt. And in the history of capitalism there’s a crucial relationship between the two. If you retire the debt you end capital. Now, I read a nice little piece that was sent to the Wall Street Journal which they didn’t publish, which said that well, the Republican Party really does insist on this debt stuff, but it doesn’t really mean it because we know what Reagan did to the debt and we know what Bush Jr. did to the debt, but if they really insist on doing this to the debt then they will end capitalism more effectively than the working class has ever done, because if you end the debt and you end the expansion of the debt economy, you end the possibility of accumulation of capital. That is, capitalism is over. There’s one answer to your question. No question mark about that.

   But this immediately poses some problems about how the debt is managed. And debt management then becomes crucial to the dynamics of the capitalist system. And what we’ve seen is debt management going crazy over the last few years. Now, one of the things that became important to me in writing The Enigma of Capital is to look back and say, this question of the relation between debt and accumulation, how has it actually worked historically? Where has it come from? And I found a very interesting mass of literature from the 16th and 17th centuries in which the historians have created what they call the “fiscal-military state”. And it’s about how debt, especially state debt, and militarization went together. And this is how wars were fought, and what a crucial role this played in the dynamics of the origins of capitalism, one that was being largely unexamined. And out of this came this idea that what capitalism requires is what I call “the state-finance nexus”, which is some form of relation between the state and capitalist power which working together can orchestrate what needs to be orchestrated in terms of this relation between debt accumulation and the accumulation of wealth. And if you look historically you find that this begins to become apparent, particularly in British history, this formation of the “state-finance nexus” Now, in contemporary versions of this. the way this works struck me very forcibly in the wake of the bankruptcy of Lehman Brothers, because who appeared on television after the bankruptcy? You didn’t see the president, you saw Ben Bernanke, at the top of the banking system, and you saw Secretary of the Treasury Paulsen. That’s the “state-finance nexus”. They were it. And they were the ones who came out and said you’ve gotta do this and you’ve gotta do that and you’ve gotta do the other, and Bush kind of said. “Oh. Oh, well, OK then”. We were all like that. They came out, they decided. That was the state-finance nexus at work. And that was a very brilliant performance, because by and large the state-finance nexus doesn’t want to be seen. It always remains hidden. And there’s a great book about the Federal Reserve called The Secrets of the Temple. It’s almost like a feudal institution. It’s like the Vatican, where you can’t tell what’s going on, and you expect it to pump black smoke out one day and white smoke another. Actually, this history is wonderfully recounted in a number of ways. Quite by chance I read a historical novel by Hilary Mantel called Wolf Hall, about Thomas Cromwell, and actually the subtext of that book is about the formation of the state-finance nexus. It’s about how the monarchy had to negotiate with the merchants and the merchants with the monarchy, and Cromwell was the one guy who figured out that you follow the money and he was the one who was crucial in creating this state-finance nexus.

   Now, how does that state-finance nexus work and what is the balance of power within it? This is an important question. We don’t see this relationship and we have to look for indications of it. And perhaps the crucial moment when we saw a switch of power relations was when Bill Clinton was elected to the presidency. And there is this story which I’m sure is not apocryphal where he was sitting with his economic advisers even before he was sworn in and being Bill Clinton there was always this question of how do I get re-elected, and he was asking his economic advisers what to do about economic policy and how to do it, and they were advising him and he was becoming more and more irritable and finally he burst out and said, “You mean to tell me that all my economic policy and my chances of getting re-elected have to be geared to the ideas of a bunch of fucking bond traders?” And the answer was , “Yes.” And look what Clinton did. He came in promising universal health care and what did he give us? He gave us WTO, he gave us NAFTA, he gave us reform of welfare-as-we-know-it, he actually was responsible for what became this sub-prime fiasco; it was in the 1990s that finance began to bottom feed in the housing markets.

   But that remark suggests that, by that time, political power was no longer able to dominate over financial power. And I think that’s very critical to understand. Now, I tracked back a bit and found the point where that conclusion had been arrived at by the great guru economists, in the wake of the stock market crash in 1987, Black Monday, which was also connected to this grumbling crisis of the savings and loan, when more than 1300 banking institutions went under in the US, and when William Isaac actually threatened the banking institutions with nationalization if they didn’t clean up their act. So at that point you had this big meeting of the financial leadership, Volcker and Summers, etc, asking how they were to understand what happened in the tremendous stock market crash of 1987, and of course being economists, they couldn’t agree. But one thing that came out that was fairly consensual was that a crisis of that sort could no longer be managed by the US unilaterally. It would require international agreement, international action. The US heretofore was the hegemon, it could unilaterally do what it wanted and it could order things to be done in the international financial community. After 1987 it suddenly found that it could no longer do it. And thereafter we’ve seen the growth of this question as to where the power is that can manage this whole system.

   And we saw in the wake of Lehman Brothers that the G7 and the G8 were not enough and we went to the G20. And by now you get to the point where the only way power can be exercised over the bond market is by collective action. There has to be almost a global government, which is going to have to consensually decide, it doesn’t have to be unanimous. Hierarchically organized and highly concentric but it has to be able to totally decide what to do and how to do it. What we saw after Lehman Brothers is that they all got together and decided that the system had to be stabilized, and after it was stabilized they all broke apart and went their own ways. And I thought it was rather interesting that Obama went to a meeting of the G20 at Seoul and he had a whole bunch of propositions and nobody listened to him. Merkel said no, we’re not doing that,

   So you’ve got the austerity decision, which is stuck in a kind of mode, and it’s a political decision and a political choice. And I want to go back to this simplistic, overly simplistic actually, conclusion that the political choice is being driven by class power. The political decisions in this country are being driven by class power, and that’s what the OWS people are saying. And you’ve gotta confront that class power. You know, I can’t imagine so many cops would turn up at a Tea Party event. They’d turn up with guns and the cops would say we’ve gotta get out of here. But a hundred students at CUNY and we had something like 300 cops standing outside glaring at them and pushing them around. Seriously, this seems to be a major threat to political power, simply to talk about social inequality. And the political inequality that goes with it. Wall Street owns both political parties, it owns Congress, and I suppose it’s done this ever since Mark Twain talked about the best Congress money can buy. They dominate the media and indirectly they dominate the judiciary and everything else.

   We live in a class-dominated society where the one thing you can’t talk about is class domination. Because, you know, there’s something nasty about that, you might be a socialist or something awful like that.

   And this strategy is of course of long standing, and it’s a way of using the debt for political purposes. Now, there’s a saying, you never let a good crisis go to waste. What we’re seeing now is a couple of crises, but what I’d like to suggest is that there’s a certain continuity here. When Ronald Reagan came to power, what did he do? He reduced the top tax rate from 70% to 30%, as I’ve already said, and he began a huge arms race with the Soviet Union, which was deficit financed, and towards the end of the Reagan administration his top budget director, David Stockman, said, “Well, our plan was to run up the debt in such a way that in retiring the debt we could get rid of all the social programs we didn’t like and cut all the environmental regulations which industry didn’t like.” That, of course, is just what they set about doing. So, the debt was an excuse to do that. It was an excuse to lead a class assault on the welfare structure and a class assault on the environmental regulations.

   What did George Bush, Jr. do? He started two unfunded wars, cut the tax rate at the top, and cut a deal with Big Pharma to give them loads of money. None of it was funded. The debt was run up like crazy. All the time he was in power his vice president Dick Cheney said that Ronald Reagan taught us that deficits don’t matter. That’s the Republicans for you. Deficits don’t matter. What he really meant was once the debt is run up then we’ll be able to go after all the social programs and environmental regulations we don’t like, and what the hell is happening right now? That is exactly what they’re doing. It’s a class assault on the well-being of the most vulnerable people in the population and it’s a class assault on anything to do with environmental sustainability.

   So this is a political choice, and it is a political choice in Britain and in much of Europe. And what they are doing as everybody’s pointing out is succoring the rich and screwing the poor. But that’s been going on for some time. That’s what the structural adjustment program did to Mexico in 1982. That’s what a structural adjustment program is classically like,

   I’m very proud that a book that I published in 2003 looked at the economic data for the US and said, look, in any other case the US was ripe for structural adjustment. Actually it is the case that we are the IMF, and we can’t structurally adjust ourselves. Except that it is now the case that we are being structurally adjusted. The powers that be are busy pushing that structural adjustment on this part of the world.

   So, that’s one part of the world. The other part of the world is doing exactly the opposite. It hasn’t got all the monetarist theory and it hasn’t got all that Milton Friedman stuff. The other part of the world, which is based in China, is doing exactly the opposite. They’re in effect doing a Keynesian program. Now China didn’t just decide that this was a good idea, but political forces, again, were very significant. In China they are deadly scared of political unrest on the part of a populace which has a long history of being pretty restive at various times.

   In the beginning of 2009, just after the Lehman Brothers bankruptcy, China lost 30 million jobs because the export industries crashed. 9 months later the IMF did a study which showed the net job loss in China was 3 million. In other words, the Chinese managed to recuperate about 6 million jobs in about 6 months. How in hell did they do that? Well, one of the things they did was to launch an enormous physical infrastructural development program. It was equivalent to what the US did in the interstate highway program in the 1950s and 1960s. They built whole new cities, they built high-speed train networks, their stimulus package, just the central government’s part alone, was equivalent to what the US had set up. But they also turned to the banks and said to the banks, “Lend.”

   Now, there’s a wonderful moment in Too Big to Fail, the film and Sorkin’s book, in which right at the end, when they’ve made this deal and made the banks accept all this money, and Bernanke says, “Well, I hope that they’ll lend it out”, and Paulsen says, “Oh, of course they’ll lend it out.” Well, of course they might lend it out. And of course they didn’t.

   If you’re a Chinese banker and you don’t do what the government says to do, Boy, you’re in serious trouble. And of course, the banks lent out furiously to the developers, and the result has been a boom in property prices and in development which matches the boom here in the 1990s and 2000s in the US. It’s a huge boom and as a result of that the Chinese have actually launched demand into the world economy at a huge rate. The Chinese have consumed half of the world’s steel output in the last five years, half of the world’s cement supplies. Now, where does steel come from, well, where does the iron ore come from, where does the copper come from, it comes from places like Chile and Australia. You go to Chile and Australia and people say, “What crisis?” Argentina and Brazil are doing fine, expanding by 5 to 7%, because China is expanding at 10%. India is catching up, so half the world is on this expansionary game and the other half is on this austerity game. And in the US people say that the government can’t do anything to expand the economy. You say, “What the hell are they doing in China?” And by the way, take a look at Singapore and a few other places as well, and the only places that have been doing well in the last ten or twenty years have been those where the government has been heavily involved and the economy has been centrally directed. And yet we’ve got this mantra, which is, I don’t know, living on some other planet.

   But the Chinese model is not stable either, for exactly the same reason that the Keynesian thing ran out. China’s gone through the Keynesian thing we had here in the 1960s and 70s almost compressed, in about three years. And one of the things they began to get nervous about is that great bugaboo of Keynesianism, which is strong inflation. Inflation in China has been edging upward and in fact zooming upward, and inflation in many of the countries around them like Brazil and Argentina has become a real problem.

   So, here you have half of the world’s economies with deflation and the other half with inflation, one half on monetarism and the other half on Keynesianism. Well, we’ve tried both of those solutions, sequentially in time, and they didn’t work. Now we’re having half doing one and the other half doing the other, neither of which is going to work. So where’s the third solution?

   In the China case, they’ve started to cut back, and just today I read that suddenly property prices started to crash in China; they went down by about 20% in some of the key cities in China, and everybody started to panic, and now what has the government done, it’s gone back to the banks and said, “Lend, lend, get back in the game.” So there’s a frantic attempt on the part of the Chinese government to stabilize things by playing those games, and in the same way in the US and Europe we’re seeing attempts to deal with the sovereign debt problem in very peculiar kinds of ways.

   So, the point of all this is that at this particular time I don’t see any major alternative on the horizon in terms of what capital can do. On the basis of what’s been going on in the last 30 years, I can make some rough predictions as to where things might go. And this is a bit like weather forecasting, where I was assured by one of my colleagues who’s expert at this that if you say the weather tomorrow is going to be roughly the same as it is today, you’re going to be about 60 % right, and there’s an enormous effort to get the predictability up to about 80% of the time. On that basis, what can we expect?

   I’ve already mentioned this seemingly key switch where the bond markets have come to dominate sovereign political power, but also there’s the overthrow of democratically elected governments and the appointment of technicians who are doing the will of the bond markets. We’re seeing this very strongly in parts of Europe, and although we’re not seeing it here in the US, it’s happening here as well. Two governments now [Greece and Italy], and if you don’t do what the bond markets want you’ll be in that group too. So if that’s the case, what’s happening in those bond markets and how can we understand what they’re doing and the direction in which they’re moving?

   So what does this mean for democracy? There’s a very interesting problem that lies behind this, and this is what I really want to emphasize: for capitalism, which has always been about expansion, about growth (have you ever heard anyone who’s pro-capitalist say he’s anti-growth?), in effect a crisis is defined as zero growth. Since when is zero growth a crisis? It turns out that zero growth is one of the best things that can happen to the environment, but leave that aside.

   Historically, the value of goods and services has grown at a rate of about 2.5% per year, but that’s a compound rate of growth. Marx has a wonderful argument where he says, well, this guy in 1780 calculated that if he had invested a sovereign each day beginning at the birth of Jesus Christ there would now be enough sovereigns to fill half the solar system. This is what compound growth does. 3% growth is considered a reasonable way for capitalism to work; 4 to 5% is really good; at 10% people begin to worry about overheating, etc. Less than 3% and you’re in trouble; 0% you’re in crisis. That’s the general story you’ll get from the mainstream press. Everybody saying omigod we’ve got to get back to 3% growth, this year they’re forecasting a rate of 1.2%, etc. So capitalism is about compound growth, 3% around Manchester in 1780 was no problem. 3% compound growth right now is a real problem.

   Because when you think about the global economy and where it is, the frontier has closed, the Soviet Union collapsed, that’s now opened up, China has entered the system. There’s no geographical frontier. OK, there are parts of Africa that haven’t been meaningfully absorbed, there are parts of central Asia, but strictly speaking, in the same way that there was a big impact when the frontier in the US closed in the 1890s or whatever, the global frontier has closed. There is no way in which you can expand the system. That doesn’t mean that there are no geographical outlets, because you can enter into creative destruction, you can de-industrialize all over the US, much of which has happened, you can de-industrialize much of Britain and turn them all into condominiums and shopping malls.

   So, yes you can readjust the whole geography internally by intensification and transformation, one of the things you’ll notice and this comes back to this weather forecasting about whether tomorrow is going to look like today, is that, as finance has become more liberated from the 70s onward and able to do its thing, it’s become more volatile; it’s started to develop completely new market structures. Many are rather old and minor, but have become major very quickly like hedge funds, etc. That suggests that the credit system itself is starting to generate new market possibilities. New possibilities for the accumulation of wealth, and that is precisely what we have been seeing in the financial markets since the1990s. And as the credit markets generate more and more wealth internally, people can suck more wealth out of these financial markets. Much of the concentration of wealth that’s occurred in the world has occurred of course through sucking the wealth of the financial markets. I mean the hedge fund managers, as I mentioned, three billion each. I thought it was pretty outrageous when in 2003 the leading hedge fund people got 250 million each, but now they get 3 billion. One of them got 3 billion last year and he’s having a hard time this year, poor fellow.

   So I think that what we have here is a category which I really like in Marx which is called fictitious capital. But actually, fictitious capital has always played a dynamic role in capital for the reasons that I’ve mentioned, such as getting to today’s supply from yesterday’s demand, But fictitious capital has become much more significant in the system. So what we’ve seen is almost a closure in the manner in which fictitious capital works. Now when you use the phrase fictitious capital, people say that’s a very abstract concept, give me an idea of what you mean. There’s a very interesting positionality of financial institutions. Who lends the money to build tract houses around San Diego? The financial institutions. The tract has been built, the laborers paid, and at the end of the day the houses are there. Whom do they sell them to? Well, they sell them to some people who need a mortgage to buy them. Who provides the mortgage? The same financial institutions that actually funded the development., and in fact they had package deals when the developers started to build, where you can get in on it even before it’s built. So the financial institution regulates the supply and the demand, and because it regulates supply and demand it’s moreover in a position thereby to manipulate prices. And soon you get the asset bubble in the property market going on and on and on. And if at the end of the day they can’t get anybody to buy because they can’t qualify for the credit, they’ll say, well, instead of 20% down we’ll say 10% down, and after that 5%, and we get our money out of fees anyhow, so why don’t we package the mortgages and sell them to some unsuspecting municipality in Norway, assuring them that they’re as safe as houses. And the fact that later on they won’t be able to pay their police services, too bad.

   And so what we’re seeing are more and more signs of fictitious capital operating in this way and immense wealth being extracted in this way by certain classes in society. And along with that goes a tremendous concentration of wealth and income, and that wealth and income has tremendous implications for the wielding of political power. So we arrive at this prediction: that if this continues and I don’t see any radical changes coming from pretty much any quarter, we’re simply going to perpetuate a system in which one-half of the world is is going to be drawing immense wealth on the basis of fictitious operations, while the rest of us will be looking for enough to eat, and we know already that the amount of poor and hungry children has been increasing in the US and we’ll see that increase in the rest of the world.

   So here is that one scenario. And you ask the question, who is really confronting the dynamics of that scenario, and is able to tell us exactly why this is happening in the way that it is happening? This takes a lot more hard work and a lot more hard thinking. Frankly, we just don’t have the institutions and thinkers that are prepared to grapple with these sorts of questions, to the degree that they need to be grappled with and I try to do my little bit but I’m pretty isolated. And certainly I would never get interviewed on the main stream media. That’s not so true in Britain, where I have been on BBC, which still has a residual of something or other that doesn’t exist in the US.

   So, you look at that, and you’re looking at a rather dismal situation.

   The other possibility is the China model, and it’s interesting, there are a number of think tanks in this country, and I’ve been reading commentaries on them, many of which are beginning to say this big stuff going on is so big that obviously democracy can’t work, that we need these macro decisions to be made by an elite group of people, and we need to set up a form of government in this country which rather parallels that of China. They’re not saying it in quite that way, but In effect that’s what they’re saying. Because all this democracy in Washington screws things up, I mean, look at it, it’s just a mess. And so what we’ll do is have democracy that will be local. We’ll have democracy about what kind of trees get planted in your park, things like that, but the big macro questions will be handled by an elite group. So the China model seems to become rather attractive, as a form of government that can actually work; but as I have suggested, the 3% compound growth, which is not quite being achieved globally right now, through this balance with China growing at 10% and India at 9% and the US at 1% and Europe at 0%, that scenario is not possible to go forward over the next 50 years.

   That is, something radically different has to happen. And that something radically different can either mean that capital moves into that fictitious world where there would be a kind of virtual capitalism where people would be living on vast amounts of wealth and power, probably a concentration of wealth and power that would have 50 families controlling 80% or 90% of global wealth, which is not impossible given the current dynamics. In India for example, there were 26 billionaires 5 years ago, and there are now 69; the billionaires in China are now catching up with those in the US; so these concentrations of wealth are already there and they are not going away. They’ve not been hurt by the crisis; in fact, they’ve increased during the crisis.

   So you either look at an increasingly polarized society where the wealthy will be living in their ghettos and the rest will be scrabbling for scraps around everywhere else; or else there’s going to be some kind of radical eruption against all of this. So then the question arises as to where do you start and what do you have to do in order to devise an anti-capitalist economy. What would an anti-capitalist economy look like. That in itself is an extremely interesting question. because what it has to do with is talking about what is the nature of capitalism and what is it that we have to be anti. And there are again two arguments that come out of Marx, volume 2: the 1st is that money is not capital; commodities are not capital;even the buying and selling of labor power is not capital. What is capital is a class relation between capital and labor in the act of production, that allows capital to extract a surplus from the work of the laborer.

   What that leads to is to say that, well, the alternative to capitalism has to be worker self-management. And Marx again and again says that the associated laborers in charge of their own production processes making their own decisions is the basis of any alternative system.

   Now, this is odd, because you know Glenn Beck always goes on about how Marxists are about state domination, and that’s not true. Marx is about the associated laborers controlling their own production process. But at the end of volume 2 you have a problem. How do you actually control and coordinate the activities of all these many, many groups all controlling their own production? How do you make sure that, if you want to make a car, enough steel is there, that enough rubber is there? How do you work out these proportionalities? The general idea, theoretically under capitalism is that the market does it for you, and that the alternative, which is centralized state planning, is a disaster. And right now the left doesn’t want to talk about centralized state planning because the left is all about local action; it’s all in favor of the associated laborers controlling their own production but not thinking about questions of coordination.

   So how does coordination work? Well, actually, the corporations know how to do it, because the corporations don’t work through the market very much; they actually have a control and command system back through their supply chains. They send an order down their supply chain, saying we want so much steel, we want so much of this and so much of that, They don’t go out and haggle in the market and say, now I’ve got the steel and now I can do it. No, no, they orchestrate, they have a just-in-time system, where they say, we want so much steel on this day and so much on the day after that, so actually corporations engage in centralized planning in a very sophisticated way. And it’s not hard at all to imagine the capacity for centralized planning that exists in corporations. Walmart, for example, does it beautifully. It’s not hard to imagine taking that over and turning it to a social purpose rather than just turning it over to mere profiteering. And when I say that, people say, be like Walmart? And my answer is, well, they’ve come up with some techniques that we can use; and we shouldn’t run away from talking about these techniques just because Walmart has them. We should really study those things, and figure out how it works.

   Because the one centralized economy which really worked extremely well was in World War 2 in the US. Which was when Roosevelt called all the corporate heads to Washington and said, “You know how to plan all this stuff. Get it done. We want the ships, we want the tanks, we want the aircraft, and we want it done, and we want it done fast.” And boy, did they get it done and boy, did they do it fast. And that was one of the things that terrified corporate capital, that they were the agents of a centrally planned economy. Which was actually something that Marx envisioned. He talked about joint stock companies, and he said that these are associated capitals. The individual capitalist is gone. The associated capitalists know how to do these things. That is the transitional organization that can take us into another world.

   So this is one of the ideas that I’d like to trot out – that there is an alternative, and that it already exists. We just have to go in and find out how it’s working right now and how we can convert it to something completely different. That is what we need to do. But before we do that, we’ve got to demystify all this nonsense which we’re taught by neoliberal economists and even the Keynesians , that somehow or other, deepening what we’re doing is going to be the answer to the difficulties that we’re in. Compound economic growth forever is impossible. An alternative has to arise in which there is a zero growth economy. Economic inequality has to be eradicated. Environmental degradation has to be stopped. And there’s only one way to do it. And that’s to end capitalism.

   Thanks very much.