On the Etiology of What Economically Ails Us (updated)
At New APPS: Art, Politics, Philosophy, Science, Mark Lance writes:
“There is an important article in today’s NYT. What is fascinating about this account of Apple’s iphone production in Asia is not the usual left criticism of Asian working conditions. That is mentioned. Work is structured in an authoritarian manner, for low pay, and with long hours. But a good case is made here that this is not the main issue. Rather, the US simply lacks the economic and educational infrastructure to get the job done at all.
It would be nice if the NYT would delve into the causes of all this. They note that we lack the relevant numbers of workers with the relevant skills, that we lack huge amounts of manufacturing infrastructure, that what manufacturing we have has not kept up with the flexibility needed for 21st century production. They also note that a huge middle class that might have been trained in the relevant sorts of skills are employed in service, financial, and other auxilliary sectors of the economy. What they don’t mention is that public decisions led to this. There are no doubt many decisions over the last 40 years that left us in such a situation, but I’d like to highlight one: military spending. The US--especially since the second half of the Carter administration—has diverted enormous resources from civilian infrastructure to military spending, regularly spending more on its military than the rest of the world combined. One occasionally hears about how this level of spending contributes to deficits and wars, or how it facilitates imperialism and authoritarian regimes abroad, but far less does one hear about how it leads to a country that is incapable of producing actual goods.” [….] *
My response:
However sympathetic I am to the tenor and salutary intentions of this piece, I’m not sure that military spending, as unconscionable or unjustifiable as it may be, is responsible in the first instance for “a country that is incapable of producing actual goods.” And I truly doubt the veracity of the claim (or at least it’s arguable) that “the US simply lacks the economic and educational infrastructure to get the job done at all.” In any case, the National Security State that developed in the midst of material affluence after World War II in the form of “military-industrial complex” has not changed. What has changed, however, are the terms and conditions of capitalist globalization which, roughly, began to appear in the period between 1965 and 1973, that, as David Harvey explains in his seminal work, The Condition of Postmodernity (1990), “was one in which the inability of Fordism and Keynesianism to contain the inherent contradictions of capitalism became more and more apparent.” In the early 1970s, we see the lineaments of a new capitalist logic of “flexible accumulation” (with regard to labor markets and processes, products and services, and patterns of consumption), a logic that in many ways is playing itself out today, one in which has helped to improve the quality of life (less true poverty, although recalcitrant forms of inequality) in many parts of the so-called developing world but has altered the terrain of capitalist democracies in the affluent Northern hemispheric countries.
If one accepts the principal parts of this historical narrative, as I do, than one is not at all surprised by current events and does not believe there’s too much national economies can do (e.g., by way of ‘public decisions’) in the present configuration of economic forces, to alter the course of events in any substantive and long-term fashion. At best perhaps, that is, with a renewed political will and courage, we can hope to salvage the welfare state (which may be why Tony Judt wrote, in Ill Fares the Land [2010], about the Left today simply ‘conserving valuable pasts’ with a ‘defensive’ Social Democratic project), but I fail to see how domestic politics (apart from ex post facto efforts at regulation) can constrain or alter rather uninhibited capital flows that make for the situation Lance describes. In other words, in the first place it’s a story about the logic of capitalist forces trumping democratic decision-making: after all, it’s often labor market conditions that determine where capital (so to speak) will concentrate itself. As Joshua Cohen and Joel Rogers make plain in On Democracy (1983), the nature of “capitalist democracy” places structural constraints on both the articulation and satisfaction of interests within the system. With regard to the latter, for instance, and owing to their control of investment, “the satisfaction of the interests of capitalists is a necessary condition for the satisfaction of all other interests in the system,” which means “the welfare of workers remains structurally secondary to the welfare of capitalists,” a fact we conveniently forget in times of economic abundance and low unemployment but is resurrected in the wake of the cycles, crashes, and panics endemic to capitalism. The decisions of capitalists are directly responsible for the well-being of workers, and thus we see the “interests of capitalists appear as general interests of the society as a whole, [while] the interests of everyone else appear as merely particular, or ‘special.’”
Only when we’re able to transcend the socio-economic and political conditions intrinsic to “capitalist democracy” (today’s postmodernist neoliberalism) will we be able to imagine a world in which “public decisions” are no longer invariably distorted or trumped by the turbo-capitalist economic forces in the so-called private sector (an egregious euphemism). In any case, I don’t worry about us producing actual goods so much as our distributively unequal capacity to consume goods essential to the satisfaction of “basic needs” alongside the opulent displays of conspicuous consumption by the upper classes (the allure of which still shapes the dreams of many in the other classes). One world is being created, as Meghnad Desai reminds us, but by the forces of market-led globalization (hence the WTO is displacing the UN/IMF/World Bank as the premier institution for global governance). I’m not saying we shouldn’t, let alone can’t, alter our domestic economic priorities such that spending is directed toward things like infrastructural projects or even actual goods, but given the nature of the National Security State (see, for example, Gary Wills’ Bomb Power: The Modern Presidency and the National Security State [2010]), to which both major parties are committed, in conjunction with this latest phase of capitalist globalization, the prospects for same, alas, appear rather bleak: witness the dismantling of the liberal welfare regime in this country and the cumulatively corrosive assaults on European corporatist and social democratic welfare regimes. It seems we’re consigned to fighting, for the near term at least, purely rearguard actions.
* I've corrected a couple of typos in the original.
Update:
Correspondence with Mark Lance prompts me to further explain why that, even if one accepts the proposition “that there is a massive difference in both manufacturing infrastructure and level of manufacturing-relevant education between major Asian countries and the US,” which I do not, the cause of this cannot be explained by “public decisions,” foremost among them being the increased level of defense expenditures. First, as I say, I don’t believe there to be a “massive difference in both manufacturing infrastructure and level of manufacturing-relevant education between major Asian countries and the US,” even if there are significant differences and especially in certain manufacturing sectors. I don’t have the empirical evidence ready-at-hand but we can leave that disagreement to the side and for the sake of argument accept the proposition as true. Now, what explains it? I would argue that cumulative public decision making, involving defense expenditures or other legislative and public policy directives and initiatives with bearing on the economy are rather beside the point, or at least impotent in the face of the economic forces of the current phase of capitalist globalization.
Capital forces in the form of corporate decision-making, investment, the search for lower production and labor costs, and so on are global in nature: there’s nothing intrinsic to “Asian capitalism” that alters that fact. As long as labor market conditions (including fairly stable social conditions, and even authoritarian politics, and such things as corruption notwithstanding) are more favorable in Asian countries, capital will move there and in fact has moved there: it is that which accounts for disparity in manufacturing infrastructure. Capitalism has, of course, different conditions and effects across the globe, but those are tending toward a “leveling” on many fronts (for instance, and generally speaking, ‘our’ collective ‘affluence’ is diminishing, while ‘their’ well-being is increasing, even if there are some classes more than others that are the immediate and principal beneficiaries of increased capital flows). There’s a price to be paid for admitting more countries to the banquet of wealth-production, and capitalists cannot completely control the various markets or overcome competition, hence they’re driven to make profit and accumulate. It is that which is the principal causal variable in explaining the state of this country’s economy. Nation-state governments no longer control economies as they “did in the halcyon quarter-century of the Golden Age of capitalism.” In Desai’s words,
“The influence of capital—either as portfolio finance or as direct investment—the hegemony of financial markets, the increasing penetration of trade, have been experienced by all the worlds: First, Second and Third. Indeed, this numerical categorization is now otiose. The benefits and costs of capitalism fall symmetrically—though not equally—on all parts of the world. For the first time in two hundred years, the cradle of capitalism—the metropolis, the core—has as much to fear from the rapidity of change as does the periphery.”
It is precisely the effects and by-products of this “rapidity of change” that, in our case, has “[led] to a country that [may at times be] incapable of producing actual goods.” We have to remind ourselves why capitalists, in the form of transnational corporations or foreign direct investment and so forth, went abroad or to the “developing” world in the first place: in search of cheaper costs of production and labor most notably. So, even if, say, defense spending had not taken off as it did, even if it were considerably less than it is today (and some of that money were directed to education), I don’t see how this would have altered the fundamental thrust of the capitalist globalization. In terms of the affluent nation-states, the primary causal variable is found in the proposition that globalization has meant an international movement of goods, capital and labor which “has increased the inequality and/or volatility labor earnings in advanced industrial societies while constraining the ability of governments to tax the winners from globalization to compensate workers for their loss.” In the face of this basic economic fact, domestic governments are severely constrained in their economic decision-making.
Why does the threat of “capital strikes” remain an effective tool in wage negotiations? Because it’s a credible threat, one carried successfully carried out on occasion (both regionally on the domestic plane and globally) owing to increased capital mobility, and the principal reason workers are willing to make concessions at the bargaining table and accept a lower share of the rent. Absent a social democratic model of development in the Asian countries, I don’t see this situation changing. It’s the impact of globalization in the rich countries, in the form of capital mobility, that explains the decline of manufacturing infrastructure in this country and the rise of manufacturing infrastructure elsewhere, not the simply the cumulative historical impact of “public decisions,” about defense expenditures or other budgetary matters. The relatively free flow of goods, capital, and labor does “create opportunities for enhancing the welfare of the poor in poor and middle-income countries,” and that, I would think is a relatively good thing, despite the immediate impact of increased inequality and income insecurity found in the richer countries. It is therefore a good thing that we find an increased ability on the part of “developing” countries to export goods to the “developed” countries. It is therefore in many respects a good thing for people in these countries that transnational corporations are contributing to the development of an industrial infrastructure, even though their profit often represents merely the ability to take advantage of cheap wages and sub-standard working conditions. The increased rate of growth in foreign direct investment reflects the ability to exploit the comparative revenue-productivity of labor in the developing world, be it in Asia or elsewhere. I can’t fathom how any municipal legislation or policy initiative can alter these global economic trends and forces such that transnational firms, for example, come to decide to reverse their preferences on this score.
“There is an important article in today’s NYT. What is fascinating about this account of Apple’s iphone production in Asia is not the usual left criticism of Asian working conditions. That is mentioned. Work is structured in an authoritarian manner, for low pay, and with long hours. But a good case is made here that this is not the main issue. Rather, the US simply lacks the economic and educational infrastructure to get the job done at all.
It would be nice if the NYT would delve into the causes of all this. They note that we lack the relevant numbers of workers with the relevant skills, that we lack huge amounts of manufacturing infrastructure, that what manufacturing we have has not kept up with the flexibility needed for 21st century production. They also note that a huge middle class that might have been trained in the relevant sorts of skills are employed in service, financial, and other auxilliary sectors of the economy. What they don’t mention is that public decisions led to this. There are no doubt many decisions over the last 40 years that left us in such a situation, but I’d like to highlight one: military spending. The US--especially since the second half of the Carter administration—has diverted enormous resources from civilian infrastructure to military spending, regularly spending more on its military than the rest of the world combined. One occasionally hears about how this level of spending contributes to deficits and wars, or how it facilitates imperialism and authoritarian regimes abroad, but far less does one hear about how it leads to a country that is incapable of producing actual goods.” [….] *
My response:
However sympathetic I am to the tenor and salutary intentions of this piece, I’m not sure that military spending, as unconscionable or unjustifiable as it may be, is responsible in the first instance for “a country that is incapable of producing actual goods.” And I truly doubt the veracity of the claim (or at least it’s arguable) that “the US simply lacks the economic and educational infrastructure to get the job done at all.” In any case, the National Security State that developed in the midst of material affluence after World War II in the form of “military-industrial complex” has not changed. What has changed, however, are the terms and conditions of capitalist globalization which, roughly, began to appear in the period between 1965 and 1973, that, as David Harvey explains in his seminal work, The Condition of Postmodernity (1990), “was one in which the inability of Fordism and Keynesianism to contain the inherent contradictions of capitalism became more and more apparent.” In the early 1970s, we see the lineaments of a new capitalist logic of “flexible accumulation” (with regard to labor markets and processes, products and services, and patterns of consumption), a logic that in many ways is playing itself out today, one in which has helped to improve the quality of life (less true poverty, although recalcitrant forms of inequality) in many parts of the so-called developing world but has altered the terrain of capitalist democracies in the affluent Northern hemispheric countries.
If one accepts the principal parts of this historical narrative, as I do, than one is not at all surprised by current events and does not believe there’s too much national economies can do (e.g., by way of ‘public decisions’) in the present configuration of economic forces, to alter the course of events in any substantive and long-term fashion. At best perhaps, that is, with a renewed political will and courage, we can hope to salvage the welfare state (which may be why Tony Judt wrote, in Ill Fares the Land [2010], about the Left today simply ‘conserving valuable pasts’ with a ‘defensive’ Social Democratic project), but I fail to see how domestic politics (apart from ex post facto efforts at regulation) can constrain or alter rather uninhibited capital flows that make for the situation Lance describes. In other words, in the first place it’s a story about the logic of capitalist forces trumping democratic decision-making: after all, it’s often labor market conditions that determine where capital (so to speak) will concentrate itself. As Joshua Cohen and Joel Rogers make plain in On Democracy (1983), the nature of “capitalist democracy” places structural constraints on both the articulation and satisfaction of interests within the system. With regard to the latter, for instance, and owing to their control of investment, “the satisfaction of the interests of capitalists is a necessary condition for the satisfaction of all other interests in the system,” which means “the welfare of workers remains structurally secondary to the welfare of capitalists,” a fact we conveniently forget in times of economic abundance and low unemployment but is resurrected in the wake of the cycles, crashes, and panics endemic to capitalism. The decisions of capitalists are directly responsible for the well-being of workers, and thus we see the “interests of capitalists appear as general interests of the society as a whole, [while] the interests of everyone else appear as merely particular, or ‘special.’”
Only when we’re able to transcend the socio-economic and political conditions intrinsic to “capitalist democracy” (today’s postmodernist neoliberalism) will we be able to imagine a world in which “public decisions” are no longer invariably distorted or trumped by the turbo-capitalist economic forces in the so-called private sector (an egregious euphemism). In any case, I don’t worry about us producing actual goods so much as our distributively unequal capacity to consume goods essential to the satisfaction of “basic needs” alongside the opulent displays of conspicuous consumption by the upper classes (the allure of which still shapes the dreams of many in the other classes). One world is being created, as Meghnad Desai reminds us, but by the forces of market-led globalization (hence the WTO is displacing the UN/IMF/World Bank as the premier institution for global governance). I’m not saying we shouldn’t, let alone can’t, alter our domestic economic priorities such that spending is directed toward things like infrastructural projects or even actual goods, but given the nature of the National Security State (see, for example, Gary Wills’ Bomb Power: The Modern Presidency and the National Security State [2010]), to which both major parties are committed, in conjunction with this latest phase of capitalist globalization, the prospects for same, alas, appear rather bleak: witness the dismantling of the liberal welfare regime in this country and the cumulatively corrosive assaults on European corporatist and social democratic welfare regimes. It seems we’re consigned to fighting, for the near term at least, purely rearguard actions.
* I've corrected a couple of typos in the original.
Update:
Correspondence with Mark Lance prompts me to further explain why that, even if one accepts the proposition “that there is a massive difference in both manufacturing infrastructure and level of manufacturing-relevant education between major Asian countries and the US,” which I do not, the cause of this cannot be explained by “public decisions,” foremost among them being the increased level of defense expenditures. First, as I say, I don’t believe there to be a “massive difference in both manufacturing infrastructure and level of manufacturing-relevant education between major Asian countries and the US,” even if there are significant differences and especially in certain manufacturing sectors. I don’t have the empirical evidence ready-at-hand but we can leave that disagreement to the side and for the sake of argument accept the proposition as true. Now, what explains it? I would argue that cumulative public decision making, involving defense expenditures or other legislative and public policy directives and initiatives with bearing on the economy are rather beside the point, or at least impotent in the face of the economic forces of the current phase of capitalist globalization.
Capital forces in the form of corporate decision-making, investment, the search for lower production and labor costs, and so on are global in nature: there’s nothing intrinsic to “Asian capitalism” that alters that fact. As long as labor market conditions (including fairly stable social conditions, and even authoritarian politics, and such things as corruption notwithstanding) are more favorable in Asian countries, capital will move there and in fact has moved there: it is that which accounts for disparity in manufacturing infrastructure. Capitalism has, of course, different conditions and effects across the globe, but those are tending toward a “leveling” on many fronts (for instance, and generally speaking, ‘our’ collective ‘affluence’ is diminishing, while ‘their’ well-being is increasing, even if there are some classes more than others that are the immediate and principal beneficiaries of increased capital flows). There’s a price to be paid for admitting more countries to the banquet of wealth-production, and capitalists cannot completely control the various markets or overcome competition, hence they’re driven to make profit and accumulate. It is that which is the principal causal variable in explaining the state of this country’s economy. Nation-state governments no longer control economies as they “did in the halcyon quarter-century of the Golden Age of capitalism.” In Desai’s words,
“The influence of capital—either as portfolio finance or as direct investment—the hegemony of financial markets, the increasing penetration of trade, have been experienced by all the worlds: First, Second and Third. Indeed, this numerical categorization is now otiose. The benefits and costs of capitalism fall symmetrically—though not equally—on all parts of the world. For the first time in two hundred years, the cradle of capitalism—the metropolis, the core—has as much to fear from the rapidity of change as does the periphery.”
It is precisely the effects and by-products of this “rapidity of change” that, in our case, has “[led] to a country that [may at times be] incapable of producing actual goods.” We have to remind ourselves why capitalists, in the form of transnational corporations or foreign direct investment and so forth, went abroad or to the “developing” world in the first place: in search of cheaper costs of production and labor most notably. So, even if, say, defense spending had not taken off as it did, even if it were considerably less than it is today (and some of that money were directed to education), I don’t see how this would have altered the fundamental thrust of the capitalist globalization. In terms of the affluent nation-states, the primary causal variable is found in the proposition that globalization has meant an international movement of goods, capital and labor which “has increased the inequality and/or volatility labor earnings in advanced industrial societies while constraining the ability of governments to tax the winners from globalization to compensate workers for their loss.” In the face of this basic economic fact, domestic governments are severely constrained in their economic decision-making.
Why does the threat of “capital strikes” remain an effective tool in wage negotiations? Because it’s a credible threat, one carried successfully carried out on occasion (both regionally on the domestic plane and globally) owing to increased capital mobility, and the principal reason workers are willing to make concessions at the bargaining table and accept a lower share of the rent. Absent a social democratic model of development in the Asian countries, I don’t see this situation changing. It’s the impact of globalization in the rich countries, in the form of capital mobility, that explains the decline of manufacturing infrastructure in this country and the rise of manufacturing infrastructure elsewhere, not the simply the cumulative historical impact of “public decisions,” about defense expenditures or other budgetary matters. The relatively free flow of goods, capital, and labor does “create opportunities for enhancing the welfare of the poor in poor and middle-income countries,” and that, I would think is a relatively good thing, despite the immediate impact of increased inequality and income insecurity found in the richer countries. It is therefore a good thing that we find an increased ability on the part of “developing” countries to export goods to the “developed” countries. It is therefore in many respects a good thing for people in these countries that transnational corporations are contributing to the development of an industrial infrastructure, even though their profit often represents merely the ability to take advantage of cheap wages and sub-standard working conditions. The increased rate of growth in foreign direct investment reflects the ability to exploit the comparative revenue-productivity of labor in the developing world, be it in Asia or elsewhere. I can’t fathom how any municipal legislation or policy initiative can alter these global economic trends and forces such that transnational firms, for example, come to decide to reverse their preferences on this score.
posted by Patrick S. O'Donnell at 1:05 PM
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