C: You mention a crisis of over-accumulation. Can you explain that concept?
H: Capitalists always produce a surplus product. A healthy capitalism has to grow at 3 percent per year; the problem is to find where you can achieve that 3 percent growth...Over-accumulation is any situation in which the surplus that capitalists have available to them cannot find an outlet, whether through labour constraints, market constraints, resource constraints, technology constraints or whatever.
C: In this context you have talked about mechanisms such as a "spatial fix" in which surplus capital is shifted abroad rather than accumulated at home. Would you see the growth of the financial system as another type of "fix"?
H: If you move towards a spatial fix you need a sophisticated financial system to achieve it. To the degree that a spatial fix was being sought after the 1970s, capitalism required a set of international financial institutions that would facilitate the flow of funds to China, India, Mexico or wherever. So the new financial architecture that emerged from the 1970s onwards was, in part, to facilitate ease of capital movement around the world.
But then the financialisation that occurred became an end in itself. You start to find new markets emerging in the 1990s in currency derivatives, interest rate swaps, etc. They grew from almost nothing in 1990 to about three times the output of the global economy in 2006.
C: The explosion of credit that accompanied this also helped capitalists to hold down wages.
H: There were many aspects to the crisis of the late 1960s and early 1970s but one fundamental aspect was the power of labour, and breaking the power of labour became terribly important. This was partly done by migration policies, by outsourcing and offshoring, and also by the political attacks by Ronald Reagan, Margaret Thatcher and others. By 1985 the power of labour had effectively been broken.
Ever since the 1970s we've been in a situation of what I'd call wage repression in which real wages didn't really rise at all. But that led to problems in the market. If you restrict wages you have a problem with aggregate demand. One way that problem was solved was by giving working people credit cards and allowing them to go into debt...
Again a key role was played by financial institutions. The best example I can think of is financial institutions lending money to builders and developers to construct housing, say around San Diego, then facing the problem of who is going to buy this stuff. The financial institutions then lend to working class people so they can buy the houses. After a while there aren't enough "respectable" working class people to lend to, so they start to lend to those with very low credit ratings...
The financial institutions have been operating on both sides - the production and the consumption of housing. They brought the whole of the population into a serious state of indebtedness...
C: The bubbles in asset values also concealed some of the problems.
H: When asset values are rising everybody thinks they are better off...Personally I was expecting a crash in the housing market in 2003. It didn't happen. I kept thinking to myself, am I crazy...?
C: When I last interviewed you for Socialist Review in February 2006 you said, "I'm nervous about the possibility of a major financial crisis breaking out in the US." Just how major do you think the current crisis is?
H: I was nervous about the US situation...in 2003. Back then I said that if the US was any other country it would be visited by the IMF. I think one of the things we have to realise is that if there had been a crisis in 2003, it would not have been as serious as the current one. The crisis will now have to take care of the past six years of profligacy....We are in for a very difficult period. I can't see us coming out of this for a number of years.
But when I say "us" I think there will be a difference in regional impacts. I guess that while East and South East Asia are in a lot of trouble right now, because of the collapse in export-driven industrialisation due to the contraction of the US market, they are likely to be able to stimulate their domestic markets and come out of this with less violence than, say, the US.
The US is going to have to bear the brunt of this crisis, and of course people there are not used to it. If you lived in Argentina you'd be saying, "Not again!"
...Regionalisation is one process that we may see, which would leave the US as one powerful region alongside many others and without the power it has exercised over the global economy.
C: But the problem now is that China is sitting on trillions in dollar-denominated assets.
H: Yes. They are between a rock and a hard place. If they let the dollar decline they lose money. If they continue to invest in it they may lose even more in the long run. There's considerable debate inside China. When they set up sovereign wealth funds, which invested in, say, the Blackstone Group, and lost money, there was a lot of internal criticism.
If there is a run on the US dollar, which is something I think everybody fears and nobody wants to talk about, then the consequences will be catastrophic. Regional configurations such as East Asia will have no option but to go it alone and the same will apply to Europe and Latin America. It will mean competition between regional blocs, the sort of thing that happened in the 1920s and 1930s with very unhealthy results.
C: Does the increasingly global nature of production make collapse into protectionism less likely than in the 1930s?
H: It makes it less likely at certain levels of production but in the face of a crisis you get very rapid reconfigurations. Consider how fast the de-industrialisation of Britain occurred in the late 1970s and early 1980s. The reconfiguration of production relations took place in the space of about ten years. Just because production systems and commodity chains are stretched over multiple spaces it doesn't mean they can't be cut up. You could have China cutting off outside suppliers and adopting an import-substitutionalist policy, which I suspect is going to emerge as a respectable way to deal with the current crisis.
So don't anticipate that just because everything is now more globally connected we can't disconnect it. However, having said that, there are vested interests involved. So there will be a political struggle over this.
C: On your website davidharvey.org you've been running an online reading group of Karl Marx's Capital. Are you surprised by the massive interest this has generated?
H: Yes, astonished! It seems to have come out just at the right moment. I get emails from people saying, "I always wanted to read this book and finally I have got through it," which is gratifying. I have tried to lay out something people can understand and work from, and then develop their own political ideas around...
C: What routes are there out of the current crisis?
H: How we come out of the crisis depends fundamentally on the balance of class power. I don't yet see the emergence of a coherent class opposition to the way, for example, that the British or US governments are trying to get out of the crisis.
We are beginning to get a populist outrage, which could produce something equivalent to political movements that have emerged in Latin America. I'm hoping that a coherent movement will start to crystallise which will say, "We don't want to go out of this crisis only to enter an even deeper one in five years time," and which will demand a radical transformation of the system.
The powers that be are trying to come out of the crisis without changing the fundamental dynamics of class power, but there's a widespread sense that these have to change. It's amazing to see the popular discontent here with Barack Obama's economic team. For many of us, the people he selected were appalling. Fascinatingly, many people in the country would probably agree with us.
http://www.socialistreview.org.uk/article.php?articlenumber=10801
Printer-friendly format
Email this thread to a friend
Bookmark this thread
(1000+ posts)
Send PM |
Profile |
Ignore
