John Bellamy Foster is editor of US socialist publication Monthly Review, professor of sociology at the University of Oregon and author of a number of books including Marx’s Ecology. This is an abridged interview with him on the economic crisis republished from WIN magazine, the journal of the US-based War Resisters League (http://warresisters.org/winmag).
Are we at the beginning of an economic depression? How much longer do you foresee the economic crisis lasting?
What we have is a very severe crisis now in what economists call the “real economy”, no longer simply in speculative finance. There is no way of accurately determining where the bottom is.
Given the severity of this crisis, which is on a depression not recession scale, it will most likely continue well into 2010 and quite possibly beyond.
In fact, none other than then-president George Bush, in prepared remarks for a November 2008 summit of the central bank governors and finance ministers of the G20 economies, said if governments do not act decisively enough we could be facing “a depression greater than the Great Depression’s”.
What is absolutely clear at this point is that we are confronted with the likelihood of a long period of slow or nil growth, beyond the mere business cycle, since the main means of combating the deeply entrenched stagnation tendencies of monopoly finance capital, i.e. “financialisation” or the ballooning of debt, appears to have reached its limits at present.
The crisis of financialisation thus spells a weak economy for a long time to come. Economists have a euphemism they sometimes use for this situation; they call it an “L-shaped” recovery.
Do you think that the emphasis of the US government on neoliberal economic theory, while ignoring the class basis of the economy, is a contributor to the failure of the government to address the problem of financialisation sooner?
Neoliberal economic theory and policy was no accident, but was the way in which the system responded to growing stagnation tendencies that first began to surface with the economic slowdown of the 1970s, which were manifested in such factors as rising excess capacity and unemployment/underemployment and weakening net investment.
With the economic pie growing more slowly, capital reacted by promoting economic restructuring with the aim of increasing profit margins at the expense of workers’ wages (average real wages for non-agricultural workers in the United States peaked in 1972 and today are at the same level as in 1967), cutting back on social welfare spending, squeezing underdeveloped countries with the help of the International Monetary Fund, and more.
At the same time, capital, driven to maintain and enlarge its profits despite weak investment opportunities, turned to financial speculation. Ever-increasing inequality was a necessary part of providing the cash flow to feed the successive financial bubbles.
Eventually, however, speculation based on home mortgagees ran afoul of the worsening income and increased debt load of households. As defaults spread. the housing bubble popped and the entire financial superstructure began to deleverage, creating cascading defaults and deflation.
Since the fundamentals of the economy were extremely weak, once the financial balloon began to deflate the whole economy started to fall, with the end not yet in sight.
I think it is best to see this as a whole phase of capitalist development, which we could call monopoly finance capital, with neoliberalism as its main legitimating ideology. Of course this period generated extraordinarily bad economics: monetarism, supply side economics, rational expectations theory, new classical economics, etc.
Even the name of the system was changed from capitalism to a vague and essentially meaningless ideological designation of the “free market”. Like orthodox economics in general, it was a means of control and a way of justifying what capital found necessary.
Orthodox economics is not innocent of class analysis; rather the class position that it represents requires the ideological concealment of class relations (class does not exist as a category in neoclassical economics). This, however, does not prevent them from constructing concepts (for example the “natural rate of unemployment”) that are means of maintaining class power.
In contrast, 19th-century classical political economy was explicit about not only class but also the political nature of economics. As Marx explained in Capital, only when the capitalists had conquered the state in the 1830s and ’40s did scientific political economy turn into vulgar political economy.
Neoclassical economics (“vulgar political economy”) was based on a class-analytic perspective that could no longer be openly confessed. Its interests were no longer revolutionary, as in the early stages of capitalist economics, but had given way to the “bad conscience and evil intent of apologetics”.
It is no coincidence that this happened as soon as the working class began to become a conscious force and thus a threat to the status quo. Eventually, political economy was renamed economics.
In order to struggle effectively today, we need, for starters, to change economics back into political economy, making the economy a political/public issue once again.
Capitalism works by way of an “invisible hand”: it needs to be made visible.
You talk about the costs of the economic crisis being borne disproportionately by those at the bottom of the class system. How would you restructure the current economy to function in an equitable way?
In the US at the beginning of this decade, the top 1% of wealth holders combined owned twice the wealth of the bottom 80% of the population.
If this is viewed in terms of financial wealth (which excludes owner-occupied houses), the top 1% taken together had four times the wealth of the bottom 80% of the population. Income inequality is at extreme levels.
When productivity and economic growth goes up, we are told in economics textbooks that this pulls up real wages. Yet, real wages in the United States are the same as they were when Lyndon Johnson was president.
This situation of stagnant or declining real wages is actually a product of a long class struggle waged by those at the top against the rest of the society. And it is this growth of inequality — the highest since the 1929 stock market crash — that is at the root of the present economic problem.
Inequality is far greater still if we look at matters from a global standpoint. In 2006, Bill Gates’s wealth was equal to that of the combined GDP of Ethiopia, Niger, the Congo, Burundi, Sierra Leone, Liberia, the Central African Republic, Namibia, Lesotho, Malawi, and Tanzania in Africa — 226 million people.
The immediate issue right now in the US is the question of a new “New Deal” (policies implemented by then-president Franklin Roosevelt in the ’30s to combat the impact of the Depression).
Will there be a launching of work relief programs and other measures that substantially improve the conditions of the majority of the population on a level with the later 1930s? Will there be a resurrection of the Works Progress Administration, the most radical employment program the US ever witnessed?
The answer to these questions is that a genuine New2 Deal will not come about, despite the election of a Democrat administration, unless there is a revolt from below on the scale of the 1930s.
Here I recommend David Milton’s book The Politics of US Labor on the New Deal era. One of the things that Milton demonstrated was that the revolt from below in the ’30s was led by radical syndicalists and communists, who were often ahead of the mass of the workers in terms of making radical demands, but whose militant and far-seeing leadership was crucial to the threat that labor then represented.
It was this mass rise of working people, inspired by socialist and syndicalist leaders, that made some of the more radical reforms of the New Deal-era possible. There is no lack of changes to be made in the US if a class/social movement revolt from below is set in motion.
Government spending in the US is a much smaller share of GDP than in the other advanced capitalist states. This mainly has to do with what Marx called “the respective power of the combatants” in U.S. society. So the only answer is a class-based revolt.
Fred Magdoff and I have coauthored a book The Great Financial Crisis, just now published, that addresses the economic crisis and the question of a New2 Deal.
Nevertheless, a New2 Deal, even if it were to materialise, would not eliminate the deep contradictions of capitalist society or create an egalitarian order. For that a more revolutionary change in society, transcending capitalism, will be necessary.
If this seems extreme, think of the extreme conditions we are living in, both in the United States and the world at large.
World capitalism is in its worst crisis in 80 years. Billions of people in the world are suffering from hunger in the world food crisis that has emerged over the last couple of years.
Science tells us that if we continue with “business as usual” for a decade or two we will be facing irrevocable climate change. This could lead eventually to the elimination of most higher species and the destruction of civilisation — even endangering the survival of humanity itself.
Meanwhile war preparation is expanding in an age of nuclear proliferation and preemptive warfare, associated with declining US hegemony.
In these circumstances, revolutionary change simply means struggling for the sustainable development of humanity and the earth.
My own view is that the only way that humanity can save itself and move forward is a socialism for the 21st century.
Would it work? We don’t know, because it is something that we would have to create through our collective struggles. But as Brecht explained in Buddha’s Example of a Burning House, it is irrational to cling hopelessly to a burning house, as the flames lick its walls and singe our brows, in sheer terror of stepping into the world beyond.
Capitalism is such a burning house.
You have talked about how war spending contributes to an upturn in the economy. What are the benefits to the economy when the government spends on the military? How does this relate to US imperialism?
Using the figures of the Office of Management and the Budget, the US spent about $550 billion on the military in 2007, about equal to the whole rest of the world put together. Actual US military spending was $1 trillion.
Historically, one of the ways in which the US and other capitalist states have gotten out of the economic doldrums is by government spending on the military, which serves the imperial purposes of capital, and does not meet the same resistance from the ruling-class forces as does civilian government spending (which is seen as interfering with the private domain).
However, military spending has become increasingly capital-intensive and technology-intensive, employing relatively little labour for the sums expended. In addition, much of the spending is abroad.
So it is less effective dollar for dollar as a stimulus compared to many other forms of spending. Moreover, if the US were to greatly increase its military spending, it could well set off a world arms race and point to unlimited destruction.
It is worth recalling that World War II was how the US economy escaped the Great Depression. Today, the magnitude of the risk of heading in this direction is beyond all measurement.
What is needed is not more but less military spending, to be replaced by greatly expanded civilian government spending, directed at people’s most pressing needs.
The main reason for US military spending is to keep revolutions from occurring (and to defeat them when they do) throughout the world. It is a means of limiting human freedom globally. All real solutions to the world’s problems therefore require the dismantling of Washington’s military machine.
If today there seems to be an increasing trend toward war it is only because capitalism as a whole has lost its former creative role and is tending toward exterminism in every sense: economic, ecological, and military/imperial.
Our slogan today should no longer be simply Rosa Luxemburg’s “Socialism or barbarism” but “Socialism or exterminism”.
Resistance to war is resistance to an entire system of destruction.
What we have is a very severe crisis now in what economists call the “real economy”, no longer simply in speculative finance. There is no way of accurately determining where the bottom is.
Given the severity of this crisis, which is on a depression not recession scale, it will most likely continue well into 2010 and quite possibly beyond.
In fact, none other than then-president George Bush, in prepared remarks for a November 2008 summit of the central bank governors and finance ministers of the G20 economies, said if governments do not act decisively enough we could be facing “a depression greater than the Great Depression’s”.
What is absolutely clear at this point is that we are confronted with the likelihood of a long period of slow or nil growth, beyond the mere business cycle, since the main means of combating the deeply entrenched stagnation tendencies of monopoly finance capital, i.e. “financialisation” or the ballooning of debt, appears to have reached its limits at present.
The crisis of financialisation thus spells a weak economy for a long time to come. Economists have a euphemism they sometimes use for this situation; they call it an “L-shaped” recovery.
Do you think that the emphasis of the US government on neoliberal economic theory, while ignoring the class basis of the economy, is a contributor to the failure of the government to address the problem of financialisation sooner?
Neoliberal economic theory and policy was no accident, but was the way in which the system responded to growing stagnation tendencies that first began to surface with the economic slowdown of the 1970s, which were manifested in such factors as rising excess capacity and unemployment/underemployment and weakening net investment.
With the economic pie growing more slowly, capital reacted by promoting economic restructuring with the aim of increasing profit margins at the expense of workers’ wages (average real wages for non-agricultural workers in the United States peaked in 1972 and today are at the same level as in 1967), cutting back on social welfare spending, squeezing underdeveloped countries with the help of the International Monetary Fund, and more.
At the same time, capital, driven to maintain and enlarge its profits despite weak investment opportunities, turned to financial speculation. Ever-increasing inequality was a necessary part of providing the cash flow to feed the successive financial bubbles.
Eventually, however, speculation based on home mortgagees ran afoul of the worsening income and increased debt load of households. As defaults spread. the housing bubble popped and the entire financial superstructure began to deleverage, creating cascading defaults and deflation.
Since the fundamentals of the economy were extremely weak, once the financial balloon began to deflate the whole economy started to fall, with the end not yet in sight.
I think it is best to see this as a whole phase of capitalist development, which we could call monopoly finance capital, with neoliberalism as its main legitimating ideology. Of course this period generated extraordinarily bad economics: monetarism, supply side economics, rational expectations theory, new classical economics, etc.
Even the name of the system was changed from capitalism to a vague and essentially meaningless ideological designation of the “free market”. Like orthodox economics in general, it was a means of control and a way of justifying what capital found necessary.
Orthodox economics is not innocent of class analysis; rather the class position that it represents requires the ideological concealment of class relations (class does not exist as a category in neoclassical economics). This, however, does not prevent them from constructing concepts (for example the “natural rate of unemployment”) that are means of maintaining class power.
In contrast, 19th-century classical political economy was explicit about not only class but also the political nature of economics. As Marx explained in Capital, only when the capitalists had conquered the state in the 1830s and ’40s did scientific political economy turn into vulgar political economy.
Neoclassical economics (“vulgar political economy”) was based on a class-analytic perspective that could no longer be openly confessed. Its interests were no longer revolutionary, as in the early stages of capitalist economics, but had given way to the “bad conscience and evil intent of apologetics”.
It is no coincidence that this happened as soon as the working class began to become a conscious force and thus a threat to the status quo. Eventually, political economy was renamed economics.
In order to struggle effectively today, we need, for starters, to change economics back into political economy, making the economy a political/public issue once again.
Capitalism works by way of an “invisible hand”: it needs to be made visible.
You talk about the costs of the economic crisis being borne disproportionately by those at the bottom of the class system. How would you restructure the current economy to function in an equitable way?
In the US at the beginning of this decade, the top 1% of wealth holders combined owned twice the wealth of the bottom 80% of the population.
If this is viewed in terms of financial wealth (which excludes owner-occupied houses), the top 1% taken together had four times the wealth of the bottom 80% of the population. Income inequality is at extreme levels.
When productivity and economic growth goes up, we are told in economics textbooks that this pulls up real wages. Yet, real wages in the United States are the same as they were when Lyndon Johnson was president.
This situation of stagnant or declining real wages is actually a product of a long class struggle waged by those at the top against the rest of the society. And it is this growth of inequality — the highest since the 1929 stock market crash — that is at the root of the present economic problem.
Inequality is far greater still if we look at matters from a global standpoint. In 2006, Bill Gates’s wealth was equal to that of the combined GDP of Ethiopia, Niger, the Congo, Burundi, Sierra Leone, Liberia, the Central African Republic, Namibia, Lesotho, Malawi, and Tanzania in Africa — 226 million people.
The immediate issue right now in the US is the question of a new “New Deal” (policies implemented by then-president Franklin Roosevelt in the ’30s to combat the impact of the Depression).
Will there be a launching of work relief programs and other measures that substantially improve the conditions of the majority of the population on a level with the later 1930s? Will there be a resurrection of the Works Progress Administration, the most radical employment program the US ever witnessed?
The answer to these questions is that a genuine New2 Deal will not come about, despite the election of a Democrat administration, unless there is a revolt from below on the scale of the 1930s.
Here I recommend David Milton’s book The Politics of US Labor on the New Deal era. One of the things that Milton demonstrated was that the revolt from below in the ’30s was led by radical syndicalists and communists, who were often ahead of the mass of the workers in terms of making radical demands, but whose militant and far-seeing leadership was crucial to the threat that labor then represented.
It was this mass rise of working people, inspired by socialist and syndicalist leaders, that made some of the more radical reforms of the New Deal-era possible. There is no lack of changes to be made in the US if a class/social movement revolt from below is set in motion.
Government spending in the US is a much smaller share of GDP than in the other advanced capitalist states. This mainly has to do with what Marx called “the respective power of the combatants” in U.S. society. So the only answer is a class-based revolt.
Fred Magdoff and I have coauthored a book The Great Financial Crisis, just now published, that addresses the economic crisis and the question of a New2 Deal.
Nevertheless, a New2 Deal, even if it were to materialise, would not eliminate the deep contradictions of capitalist society or create an egalitarian order. For that a more revolutionary change in society, transcending capitalism, will be necessary.
If this seems extreme, think of the extreme conditions we are living in, both in the United States and the world at large.
World capitalism is in its worst crisis in 80 years. Billions of people in the world are suffering from hunger in the world food crisis that has emerged over the last couple of years.
Science tells us that if we continue with “business as usual” for a decade or two we will be facing irrevocable climate change. This could lead eventually to the elimination of most higher species and the destruction of civilisation — even endangering the survival of humanity itself.
Meanwhile war preparation is expanding in an age of nuclear proliferation and preemptive warfare, associated with declining US hegemony.
In these circumstances, revolutionary change simply means struggling for the sustainable development of humanity and the earth.
My own view is that the only way that humanity can save itself and move forward is a socialism for the 21st century.
Would it work? We don’t know, because it is something that we would have to create through our collective struggles. But as Brecht explained in Buddha’s Example of a Burning House, it is irrational to cling hopelessly to a burning house, as the flames lick its walls and singe our brows, in sheer terror of stepping into the world beyond.
Capitalism is such a burning house.
You have talked about how war spending contributes to an upturn in the economy. What are the benefits to the economy when the government spends on the military? How does this relate to US imperialism?
Using the figures of the Office of Management and the Budget, the US spent about $550 billion on the military in 2007, about equal to the whole rest of the world put together. Actual US military spending was $1 trillion.
Historically, one of the ways in which the US and other capitalist states have gotten out of the economic doldrums is by government spending on the military, which serves the imperial purposes of capital, and does not meet the same resistance from the ruling-class forces as does civilian government spending (which is seen as interfering with the private domain).
However, military spending has become increasingly capital-intensive and technology-intensive, employing relatively little labour for the sums expended. In addition, much of the spending is abroad.
So it is less effective dollar for dollar as a stimulus compared to many other forms of spending. Moreover, if the US were to greatly increase its military spending, it could well set off a world arms race and point to unlimited destruction.
It is worth recalling that World War II was how the US economy escaped the Great Depression. Today, the magnitude of the risk of heading in this direction is beyond all measurement.
What is needed is not more but less military spending, to be replaced by greatly expanded civilian government spending, directed at people’s most pressing needs.
The main reason for US military spending is to keep revolutions from occurring (and to defeat them when they do) throughout the world. It is a means of limiting human freedom globally. All real solutions to the world’s problems therefore require the dismantling of Washington’s military machine.
If today there seems to be an increasing trend toward war it is only because capitalism as a whole has lost its former creative role and is tending toward exterminism in every sense: economic, ecological, and military/imperial.
Our slogan today should no longer be simply Rosa Luxemburg’s “Socialism or barbarism” but “Socialism or exterminism”.
Resistance to war is resistance to an entire system of destruction.
From: International News, Green Left Weekly issue #781 4 February 2009.
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