Hedge fund Marxism?

Roben Farzad in Shortcomings of Capitalism: 'Our Grandchildren Have No Value' Bloomberg Businessweek 03/01/2012 references this article, which has a somewhat different title than the Businessweek headline indicates: Jeremy Grantham, Your Grandchildren Have No Value (And Other Deficiencies of Capitalism) GMO Quarterly Letter Feb 2012. GMO is an asset-management firm.

Karl Marx is the classical critic of capitalism, just as Adam Smith is understood to be its classic advocate. Today's worshipers of the Great God Free Market would be appalled at what Smith had to say about some things, like the detrimental effects of corporations. But the symbols are well established.

Generally, when any business publication, or in this case company newsletter, invokes Karl Marx, it's usually as kind of a talisman to ward off the evil effects of critics of any failings of capitalism. But in the real world, there are recurring practical problems with capitalist economies, some of which Marx and his 19th century followers perceived even then. Grantham writes:

Karl Marx went on and on about the tendency of capitalism to so fixate on growth that in time it would forget the need to put on a friendly face for society and would drive home too clearly and brutally its advantage over labor. Ironically, in some way he and Engels looked forward to globalization and the supranational company because they argued it would make capitalism even more powerful, over reaching, and eventually reckless. It would, they claimed, offer the capitalists more rope to hang themselves with or, rather, to be hung with, in the workers’ revolution. The rope for the job, they suggested with black humor, would be bought from briskly competing capitalists, eager till the end for a good deal. Well, time marches on and it’s going to be hard to have a workers’ revolution with no workers. Organizing robotic machine tools will not be easy. However, Marx and Engels certainly got the part right about globalization and the supranational company increasing the power of capital at the expense of labor. To interfere with Marx's apocalyptic vision, we need some enlightened governmental moderation of the new globalized Juggernaut (even slightly enlightened would be encouraging) before capitalism gets so cocky that we have some serious social reaction.

But for me capitalism’s complete fixation on growth at all cost that Marx concentrated on is not as important as the other issues discussed here. Capitalism, by ignoring the finite nature of resources and by neglecting the long-term well-being of the planet and its potentially crucial biodiversity, threatens our existence. Fifty and one-hundred-year horizons are important despite the "tyranny of the discount rate," and grandchildren do have value. My conclusion is that capitalism does admittedly do a thousand things better than other systems: it only currently fails in two or three. Unfortunately for us all, even a single one of these failings may bring capitalism down and us with it. [my emphasis]

This isn't something you're likely to hear Barack Obama or Republican candidates for the Presidency say: "Capitalism, by ignoring the finite nature of resources and by neglecting the long-term well-being of the planet and its potentially crucial biodiversity, threatens our existence." This is also something that classical economics, including its Marxist variety, recognized scarcely if at all in the 19th century. They saw nature primarily as an object for human activity. Which of course it was and is.

But idea of overloading the physical capacity of the planet to support humanity was not a primary concern. The main form in which it appeared in the 19th century was in Thomas Malthus' worries about overpopulation, which were deeply flawed, as subsequent events have shown.

The rest of the statement quoted above, though, is typical business-press puffery. No, we don't have capitalism with no workers. As Keynes understood even in the 1930s, we have an economic system in the developed world that could provide necessary employment and income to everyone while requiring less working hours than are typical for the employed even today. See Keynes' Economic Possibilities for our Grandchildren (1930).

Marx and other critics of capitalism saw fairly early that capitalism had a boom-and-bust tendency, which is today commonly known as the business cycle. It's existence is fairly noncontroversial, though in today's Republican Party with its often sneering hostility to science, it would be surprising to find some people hotly disputing it. The New Deal instituted stabilizing mechanism like better regulations on banks, deposit insurance, Social Security and unemployment insurance that have even now prevented the United States from having as severe an economic downturn as the Great Depression. Although, as Paul Krugman has been pointing out, in some parts of Europe like Britain, the current one has arguably already been worse. And it isn't over yet. With the neoliberal ideology embraced by corporate Democrats and, in a more extreme form, by the Republicans, those stabilizing mechanisms here and in Europe have been seriously compromised. And if its advocates have their way, will be compromised further.

If we want to get all geeky and historical here, Marx and his 19th century followers in the Social Democratic parties did see a tendency in capitalism to impoverish the workers. And they did see the globalizing tendencies of the system, though they could hardly have foreseen the present-day role of derivatives or the International Monetary Fund. The pollution of the air and water was evident in the 19th century, but the scope of today's environmental challenges with global climate change was not yet in sight.

The notion of the progressive impoverishment of the workers was based on English political economy, and on the work of David Ricardo in particular. But Marx and the Social Democrats did see that pressure from unions and from workers parties could force the adoption of reforms that would counteract that tendency to some significant degree, even before the rise of the Revisionist movement within Social Democracy in the 1890s, which was focused entirely on reform and rejected a fundamental reorganization of capitalist economies. In Marxist theory per se, the coming to power of the working class and the transformation of capitalism into socialism was seen as the result of the internal contradictions of capitalism embodied in the class struggle between workers and capitalists. They didn't understand that contradiction as being strictly dependent on the impoverishment of the workers or the impossibility of reform within capitalist economies.

What we do see in today's globalization - a fuzzy but common term - is that, whatever theoretical frame one places it into, that the capitalist system does have a tendency to create severe inequality which produces genuine misery for significant portions of the population. And the tendency to cyclical crises/depressions/recessions/business cycles is still very much with us. That the damaging features of the system can be mitigated by reforms is not in serious doubt. That the One Percent will resist such reforms is also in no such doubt.

One thing the Occupy movement accomplished is widespread alteration in vocabulary. The opening sentences of the Businessweek article linked above are, "The top 1 percent is hardly known for its altruistic, sharing-is-caring streak. Self-interest and self-absorption are more its M.O., as illustrated in my colleague Max Abelson’s at once hilarious and terrifying look at Wall Street 'bonus withdrawal.'"

Tags: capitalism, karl marx

Old thoughts in a new context

Pharoah Akhenaton and the world economic crisis: is there a connection? (No, I haven't suddenly gone all New Agey or something)

Robert von Heusinger, chief editor of the business section of the Frankfurter Rundschau, writes about Die Frohe Botschaft des Jahres (The Joyful Message of the Year) 25.12.2008. The joyful message? "Der Glaube an die Überlegenheit des freien Marktes, an seine Weitsicht und Risikoeinschätzung, ist dahin." (The faith in the superiority of the free market, on its breadth of vision and its evaluation of risk, is gone.)

Rosa Pereda in El País, El dios monoteísta sobrevivió a Akenaton 24.12.2008, reflects on how the monotheistic faith of the famous Pharaoh Akhenaton, aka, Akenaton, Ikhnaton, Amenhotep IV or even Neferkheperure Amenhotep, who ruled Egypt 1353–36, according to the timeline accepted by John A. Wilson in the Encyclopedia Britannica. For a century or more, Akhenaton has been a fascinating figure, the subject of many a novel, historical investigation and speculation. Combining some of each of those three genres was Sigmund Freud's Der Mann Moses und die monotheistische Religion (English title: Moses and Monotheism).

What does a 14th century BCE Pharoah have to do with today's world economic crisis? Funny you should ask.

Akhenaton insisted on the worship of a single god, the sun god Aton, whose name forms part of the Pharoah's own name. He forcibly suppressed the cults of the other gods. Wilson's dating of his rule gives him around 17 years in power. Pereda's dating as it appears in El País is, to put it generously, eccentric. She refers to his having ruled in the 1700s BCE, which is way off. And to his period of enforced worship of Aton only as lasting 60 years, which is also far too long. He may have reigned as co-regent with his father for a short period, but his rule and his enforced Aton religion didn't last 60 years.

But it seems unavoidable that the monotheistic (one-god) ideas of Akhenaton had some distinct influence on Hebrew concepts of God. Historical and Biblical research since 1939 haven't tended to reinforce the particulars of Freud's speculation that Moses haad been a priest of Akhenaton in Egypt. And even in the plain text of the Hebrew Bible, it's clear from the endless complaints of prophets and chroniclers that Moses' people had less than a unanimous devotion to strict monotheism.

Still, the ancient Near East was part of a cultural circle extending from Egypt to Greece and including Canaan/Israel. Egyptian religion did have a large influence on religious notions throughout that area. Or, to put it another way, the Hebrews' religious revelations were understood in a context heavily shaped by Egyptian religion. Just as early Christian religious concepts of Jesus as God in human form who died and rose again was understood in a context shaped by the stories of the Egyptian god Osiris, who died and rose again.

Where the story of Akhenaton and his monotheistic religion does fit nicely into Freud's conceptions was that it was a case of the "return of the repressed" on a world-historical scale. After his death, Akhenaton's religion was supressed, his capital city of Tell al-Amara destroyed, and even his statues destroyed to try to wipe that collective memory out of existence. But it emerged again, in a form that proved to be remarkable potent in history, in the form of Hebrew monotheism. (Putting it this way is not to deny or minimize the distinctive constructions of the ancient Jewish religious tradition.)

Pereda's analogy may be even more forced than Freud's historical speculations about Moses. But she compares the end of the Cold War and the end of the Soviet Union to Aknaton's monotheistic period in ancient Egypt. (Her 60 years of the Akenaton religion may have come from trying to hard to force the analogy between his rule and the Soviet Union's existence.) Communism as Europe knew it for 60 years has collapsed and is almost universally seen in the West as a failed enterprise. The traditions of Soviet-style Communism are obviously not completely dead, as they are carried on in some form in contemporary Cuba, China and Vietnam.

But in Europe and the United States, as well as in much of the world, the end of the Cold War was generally seen as the unambiguous triumph not only of Western-style democracy, but also of Western capitalism over the systemic challenge that Soviet Marxist-Leninism represented.

But now, writes Pereda, after a long run of economic neoliberalism, in which privatization, light regulation of markets, and the nearly unrestrained power of international capital were the hallmarks, "Por primera vez en mucho tiempo vuelven viejas palabras: se habla de crisis del sistema capitalista." (For the first time in a long time, old words are returning: people speak of a crisis of the capitalist system.)

Her point is not to predict some imminent return of the European revolutions of 1871, 1917 or 1918. Her real point is that we are experiencing a kind of "return of the repressed", though she doesn't use that phrase. The fact that capitalism has some systemic faults has once again become too obvious to ignore. Though that will surely not stop those who have some interest in ignoring them from trying to get others to do so. She writes:

En cualquier caso, el mundo que salga de esta crisis, global como ninguna, será distinto del que nos metió en ella. Y ojalá sea para bien. Porque también puede ser puro río revuelto, ganancia de pescadores. Y ya sabemos quién pesca.

[In any case, the world that emerges from this crisis, global in its dimensions like no other, will be distinct that that with which we went into it. And I hope for the better. Because it can also be purely a turbulent river, profitable for fishermen. And we know who fishes.]

That bit about fishing is probably a literary reference I don't immediately recognize. But I think my translation gets the basic idea across.

And here is her Akhenaton analogy:

El dios abstracto, personal y único de la Biblia no era el físico y solar Atón. Pero coincidía con él en su unidad esencial. Y le ganaba en su extraterritorialidad, aunque, como él, era dios de un pueblo. También eso fue cambiando: todo cambia, hasta los dioses. El "socialismo real" ha caído por su peso, pero no sería raro que lo mejor de su doctrina vuelva por la ventana. Y que, en el encuentro raro entre las realidades y los deseos, accedamos a un cambio sustancial. Un cambio poco cruento, espero.

[The abstrct god, personal and singular, of the Bible was not the physical and solar Aton. But it coincides with him in his essential unity. And he increased in his extra-terratoriality while, like him [Aton], he [Yahweh] was a god of a people. And this also changed: everything changes, even gods. The "real existing socialism" [of the former Soviet bloc] fell of its own weight, but it would be unusual that the best of its doctrine returned through the back door. [Literally, "through the window"]. And that, in the unusual meeting between realities and desires, that we experience a substantial change. A not very bloody change, I hope.]

Pereda goes a long way around and uses some sloppy ancient Egyptian history to get around to a philosophical-literary point about history. But for all the faults of her presentation, it's still an interesting historical analogy.

And I do believe that, in some sense, the United States in particular never seriously evaluated the implications of the end of the Cold War or made practical adjustments that such an evaulation would have indicated. And now the reckoning may have become inevitable. William Pfaff wrote in Will the Pentagon Be the Next U.S. Institution to Crash? TruthDig.com 10/02/08:

The nuclear physicist Leo Szilard once remarked that the fall of the Soviet system would eventually lead to the fall of the American system. He said that in a two-element structure, the interrelationship and interdependence are such that the one cannot survive without the other.

This comment has been relayed by a friend, and as Szilard has passed to his reward I am in no position to explain his reasoning, but it is possible to restate it in political terms, and we are seeing the result in finance and in war. I think that Szilard was implying what a very intelligent opponent of the United States also said when the Cold War ended. Georgi Arbatov, former head of the U.S.A. and Canada Institute of the Soviet Union, said to an American interlocutor: We are about to do something truly terrible to you. We are going to deprive you of your enemy. [my emphasis]

When capitalism evantually does give way to some qualitatively different economic system, it's likely to be less as a result of the internal contradictions of capitalism as the Leninists of the 1930s saw them than to the physical limits imposed by the environment.

Still, the current crisis has forced even mainstream economists and political leaders, at least for a few months, to grapple with the real consequences of systemic problems of the capitalist world economy instead of only talking about tinkering at the edges with essentially metaphysical entities like "the market economy" and even "the market" as conservative economists had come to mystify it.

Tags: akhenaton, capitalism,marxism