A system doomed to crisis

KARL MARX and Frederick Engels famously described capitalism in The Communist Manifesto as a kind of insatiable monster, constantly tearing down the world in order to create it all over again. "All old-established national industries have been destroyed or are daily being destroyed," they wrote. "They are dislodged by new industries, whose introduction becomes a life and death question for all civilized nations."

Readers of David Harvey's new book The Enigma of Capital and the Crises of Capitalism will feel the power of Marx and Engels' analysis anew as an explanation for the economic disasters of the last several years. The book explains how the economic meltdown of 2007-2008 was the result of 30 years of rampant greed, deception and planning on the part of the capitalist class to find new ways to pillage and plunder.

The special villains in Harvey's book are the finance managers and world banks that benefited first from neoliberal deregulation in the 1970s, and then from state-sponsored support for limitless profit-making in the 1980s. As Harvey puts it, "It was almost as if the banking community had retired into the penthouse of capitalism where they manufactured oodles of money by trading and leveraging among themselves, without any mind whatsoever for what the working people living in the basement were doing."

Those actions culminated, as we now know, in the Obama bailout of the banks and financial industry. Yet Harvey sees the bailout as only the latest necessary "crisis" in capitalism intended to reboot the rich to plunder again.

WHAT EXACTLY is capitalism, then, why is it always in crisis, and how to fight it? These ancient questions motivate Harvey's book and take him deep into capitalism's history. Drawing from Marx, Harvey argues that capitalism from its beginnings has faced several "barriers" to its survival, which it must always leap over in order to continue. These "barriers" have produced the constant "crises" of capitalism, from the 1848 workers' revolutions against capitalism itself, to the Great Depression of the 1930s, to the current global collapse.

The first of these barriers, according to Harvey, is capitalism's constant need to make profit. Harvey argues that capitalism must grow at an annual compound rate of about 3 percent just to sustain itself. There are, however, constant threats to this rate of growth. The first is labor, which always threatens to decrease capitalist profits by fighting for higher wages, threatening to strike or resisting new means of production, like technological innovation, which often replaces or destroys "labor" itself. Thus, Harvey argues that capital must always "discipline" labor by keeping wages low, breaking worker resistance and forcing changes in production, often at the physical and financial expense of workers.

Harvey views neoliberalism of the 1970s period, with its deregulation of free markets, encouragement of globalized investment and attacks on trade unions, as a specific set of disciplinary practices on labor meant to keep wages as low as possible and to pit workers in one country or geographic area against another.

Yet these capitalist practices created yet another "crisis" in capitalism, according to Harvey, that produced a second barrier endemic to the capitalist system. Falling worker wages worldwide decreased workers' ability to consume. Since consumption of goods helps to create profits for capitalists, both workers and bosses "lost." New means of production also created new cycles of unemployment. At the same time, increasing numbers of low-wage immigrant workers, harvested by capitalism's need for a "reserve army of labor," created a vast new "bottom" for the economy.

The result was an imbalance: not enough money going into capital markets to create profit. Credit and the financial markets, Harvey argues, stepped in to solve the problem: lending massive amounts of money to workers (in the form of credit cards and personal financing) and to business (in the form of capitalization loans). Capitalism essentially "floated" its 3 percent compound growth by borrowing against itself.

We all know how that story ended: massive housing foreclosures by people, whose wages couldn't pay for their homes, and massive failures by lenders like Fannie Mae, whose loans could not be recouped.

But there is more to the story. Harvey argues that the solution and failure of "credit" finance capitalism was really a kind of solution to yet another "barrier" endemic to capitalism--namely, the problem of the "surplus." Surplus is another word for profits. Since capitalism depends on constant competition, Harvey writes, capitalists must constantly reinvest their surplus somewhere in order to keep the rate of profit at 3 percent or higher annually.

By 1973, Harvey argues, capitalism faced a number of "barriers" to investment of the surplus. These included "environmental constraints." Harvey reminds us that ever since the era of "primitive accumulation" in early capitalism, nature and the environment have been raw material for capitalist production. By the late 20th century, capital had used up such massive amounts of environmental resources that contemporary ecologists now use the term "second nature" to describe the manmade or manufactured forests, lakes and rivers, dams---even synthetic crops---that capitalism has literally produced. The disappearance of abundant and cheap "natural" resources and their replacement by nature that is now part of capitalist "infrastructure," thus requiring maintenance, has threatened the compound rate of growth, while threatening the planet with ecocide.

Harvey, a geographer, also examines what he calls "spatial constraints" as a barrier to capitalist growth. As Marx and Engels famously argued, capitalism must always leap over national borders in order to seek out new markets and new means of production. This tendency produced both classical imperialism (the British in India) and classical colonialism (the European nations in Africa).

This spatial conquest, Harvey argues, was the means by which capitalism reinvested its surplus necessary to growth. Today, Harvey notes, "only substantial zones of Africa, though thoroughly ravaged by exploitation of their natural resources, along with remote usually interior regions of Asia and Latin America, have yet to be fully colonized by capital accumulation." Capitalism thus faces a crisis of "space" for investment of surplus.

Harvey argues that beginning in the 1980s, the new capitalist economies of China and East and South Asia temporarily helped overcome this barrier by becoming, in effect, a new dumping ground for capitalism's global surplus. New consumer markets there helped to keep profits high for traditionally powerful Western economies.

China's growth into a production-centered, export-driven economy has changed that, Harvey argues. It no longer absorbs the surplus of other productive economies, including the U.S., which has in turn seen its "compound" growth slow. This explains in part why China is now financing the U.S. debt. Harvey sees China's and East Asia's emergence as capitalist nations as a significant change or break with the historic "flow" of capital from East to West. He is unsure of the consequences for capitalism long term, but anticipates that China will soon face its own problem of surplus investment and compound growth.

HARVEY TURNS in the last chapter of his book to a reformulation of Lenin's classic statement to suggest solutions to the current and ongoing crises of capitalism: "What is to be done? And who is going to do it?" This chapter is likely both to interest and frustrate those of us already involved in anti-capitalist movements.

Harvey offers a theory of "co-evolutionary" radical politics meant to join spheres of social life and the people within them who are not now united. He calls for an anti-capitalist movement concerned with the impact of capitalism on the human relationship to nature; daily life and reproductive practices; technologies and organizational forms; labor processes; and the "capture of institutions and their revolutionary transformation." Underlying all of these efforts, Harvey writes, must be the conception of a new society based on the elimination of private property; the participation of working people in self-governance and the administration of economic equity; and "radical egalitarianism" to eliminate racism, sexism and other social bigotry.

Human beings must replace a mode of "profit" with a mode of "development" of democratic social relationships, Harvey argues. This movement must also replace the "accumulation through dispossession" of capitalism, which takes land and resources from people while killing their bodies and souls, with the separation of the capitalists from their own compound surplus: "Capitalism," he writes, "will never fall on its own. It will have to be pushed. The accumulation of capital will never cease. It will have to be stopped. The capitalist class will never willingly surrender its power. It will have to be dispossessed."

The weaknesses in Harvey's analysis of how to fight capitalism are several-fold. First, it does not recognize class struggle and the working class as still the most potent threats to capitalism. Second, his book pays little attention to already ongoing anti-capitalist movements that are doing much of what he calls for.

When he does cite contemporary movements, he often times misses the mark, praising the Zapatistas in Mexico or Argentinian autonomista movements. These movements have not created sufficient solidarity with broad-based anti-capitalist organizations. They have, in fact, resisted conceiving of anti-capitalist struggle as international, a fundamental tenet of all effective socialist strategies. Finally, his conception of "co-evolutionary" anti-capitalist politics, by equalizing so many discrete political activities, suggests a process of endless coalitionism that could blunt or negate the revolutionary potential also embedded in each of the capitalist crises he describes.

What can we take away from Harvey's book, then, as socialists already committed to at least some of its goals?

First, his book explains how the recent economic collapse is already a rebuilding point for capitalism. Global investors are already buying up today's devalued and foreclosed properties now in order to make profits on them later. The class struggle will only be sharper as a result. Second, globalization has created new reserve armies of workers, many of them immigrants, precisely in order to increase labor's availability and to depress wages everywhere. This problem, a facet of capitalism's "uneven development," will only recreate a new phase of this unevenness, as some countries are drained of workers who congeal and struggle to survive in another. Planetary inequality is doomed to increase.

Third, socialists need to support worker protest and demonstrations in all countries (the U.S., France, Britain, China, etc.) against capitalist profiteering, while at the same time pointing out that credit cards; public roadways; prairies, urban and rural; Nandigram in India and the Amazon in South America; and the built environment are all points of capitalist accumulation and sites of struggle.

Nothing is impervious to capitalism. Nothing is outside of its reach. As Harvey puts it, "Capital is the lifeblood that flows through the body politic of all those societies we call capitalist, spreading out, sometimes as a trickle and other times as a flood, into every nook and cranny of the inhabited world."

Finally, Harvey's book reminds us that socialists have always had right. Capitalism is doomed to fail---over and over again. It is time for us, the angry victims of its failures, to win our own final victory.