Sunday, August 14, 2011

Roubini: Marx was right. Capitalism may be destroying itself.

From the Daily Kos courtesy of AlterNet:

They claim they're doing cutbacks because there's excess capacity and not adding workers because there's not enough final demand, but there's a paradox, a Catch-22. If you're not hiring workers, there's not enough labor income, enough consumer confidence, enough consumption, not enough final demand. In the last two or three years, we've actually had a worsening because we've had a massive redistribution of income from labor to capital, from wages to profits, and the inequality of income has increased and the marginal propensity to spend of a household is greater than the marginal propensity of a firm because they have a greater propensity to save, that is firms compared to households. So the redistribution of income and wealth makes the problem of inadequate aggregate demand even worse.

Karl Marx had it right. At some point, Capitalism can destroy itself. You cannot keep on shifting income from labor to Capital without having an excess capacity and a lack of aggregate demand. That's what has happened. We thought that markets worked. They're not working. The individual can be rational. The firm, to survive and thrive, can push labor costs more and more down, but labor costs are someone else's income and consumption. That's why it's a self-destructive process.

More here, with links to video.

First, here's a little background on the guy quoted above: suffice it to say, Nouriel Roubini, a well respected mainstream establishment economist, is no communist. But it really sounds like he's familiar with Marx.

And that's the thing.

Even though there are some really big problems with Marx's assertions for a just and productive economy - for instance, the failure of pretty much every large scale attempt at communism - his analysis and criticism of capitalism has always been spot on. I mean, don't get me wrong. It's not like I'm a voracious reader of Marx or anything. I've read the Communist Manifesto, a few excerpts of some of his other works, and gotten bits and pieces here and there, so I'm no expert, but his central notion that the rich exploit the poor while using their wealth to control the political process is undeniable to sane and reasonable individuals. Actually, as playwright George Bernard Shaw once noted, a lot of Marx's critique is totally obvious, once you get away from pro-capitalist orthodoxy.

This notion Roubini's hitting on, business squeezing labor so much that it effectively destroys consumer demand, is a great example. I've said as much myself here at Real Art on multiple occasions, not even thinking that the notion had anything to do with Marx just because it's so obvious. You've got to have consumers, and in order to do that, you've got to pay your labor enough to actually buy the things businesses produce. After all, consumers and labor are the same people. So there is definitely a lower threshold to what you can pay workers in order for a capitalist economy to actually function.

And Roubini seems to be saying that we're very close to crossing that lower threshold. So, if you like, it's not really even about Marx's sense of economic justice: rather, it's about the integrity of the entire economic system we've been propagandized our whole lives to love and champion. If we want it to continue, if we want to have some semblance of the "free enterprise" Americans have to love, enterprise must necessarily lose some of that freedom. That is, the government has to be involved in the economy, has to force what the Fox News people deride as "redistribution" on the business world.

Or there won't be a business world.