Reading Capital 150 Years Hence

Erinç Yeldan

Karl Marx published the first volume of Capital one hundred and fifty years ago. The writing of Capital was aimed at uncovering the operational laws of capitalism, as well as providing a theoretical weapon for the working class in its historical struggle for freedom and equality against the bourgeoisie. We have to remember that the main motivation behind this Herculean theoretical effort was not limited only to a realistic depiction of the conditions of the working class under capitalist accumulation, but to unearth the intrinsic elements of these iron laws in their sheer brutality.

If we are to read Capital once again hundred and fifty years after its publication, we ought to distinguish between Marx’s efforts to understand the logic of capital in its abstract form and his efforts concerning the realization of this logic in terms of class struggle. In other words, if we were to interpret Marx’s writings in a deterministic and mechanical fashion, we would not be able to understand the dynamics of the evolving “new international division of labor” between different countries, different geographies, and the new forms of capital and working classes.

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Washington Rules Change, Again

Jomo Kwame Sundaram

South-south cooperation represents a progressive alternative to the Washington Consensus.

Over the last four decades, the Washington Consensus, promoting economic liberalization, globalization and privatization, reversed four decades of an earlier period of active state intervention to accelerate and stabilize more inclusive economic growth, associated with Franklin Delano Roosevelt and John Maynard Keynes.

The US Wall Street Crash of 1929 led to the Great Depression, which in turn engendered two important policy responses in 1933 with lasting consequences for generations to come: US President Roosevelt’s New Deal and the 1933 Glass-Steagal Act.

While massive spending following American entry into the Second World War was clearly decisive in ending the Depression and for the wartime boom, the New Deal clearly showed the way forward and suggested what could be achieved if more public money had been deployed consistently to revive economic growth.

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The Global Economy Today, Part 3

Arthur MacEwan is professor emeritus of economics at the University of Massachusetts Boston and a co-founder and associate of Dollars & Sense magazine. This is the final part of a three-part series on the era of economic globalization, the distribution of power worldwide, and the current crisis. It was originally published in the January/February issue of Dollars & Sense, commencing the magazine’s year-long “Costs of Empire” project. Parts 1 and 2 are available here and here.

Arthur MacEwan

Global Commerce and Political Power

The rhetoric of free trade, in any case, is simply one of the tools that the U.S. government, its allies, international agencies, and large firms use in shaping the world economy. Economic and political-military power is the foundation for this shaping. Following World War II, when the U.S. accounted for more than a quarter of world output, it had tremendous economic power—as a market, an investment source, and a source of new technology. U.S. firms had little competition in their global operations and were thus able to penetrate markets and control resources over a wide range (outside of the U.S.S.R., the rest of the East Bloc, and China). Along with this economic power, the military power of the United States was immense. In the context of the Cold War and the rise of democratic upsurges and liberation movements in many regions, the role of the U.S. military was welcomed in many countries—especially by elites facing threats (real or imagined) from the Soviet Union, domestic liberation movements, or both.

This combination of economic and military power, far more than the rhetoric of free trade, allowed the U.S. government to move other governments toward accepting openness in international commerce. The Bretton Woods conference was a starting point in this process; U.S. representatives at the conference were largely able to dictate the conference outcomes. In terms of international commerce, things worked quite well for the United Sates for about 25 years. Then, however, various challenges to the U.S. position emerged. In particular, the war in Indochina and its costs, competition from firms based in Japan and Europe, and the rise of OPEC and increase in energy costs began to disrupt the dominant U.S. role by the early 1970s.

Still, while the period after the 1970s saw slower economic growth, both in the United States and in several other high-income countries, the United States continued to hold its dominant positon. In part, this was due to the Cold War—the Soviet threat, or at least the perceived threat, providing the glue that attached other countries to U.S. leadership. Yet, by the 1990s, the U.S.S.R. was no more, and China was becoming a rising world power.

In spite of the changes in the world economy, the United States at first appears to have almost the same share of world output in 2016, 24.7%, as it had in the immediate post-World War II period, and is still considerably ahead of any other country. Yet this figure evaluates output in the rest of the world’s countries at market exchange rates. When the figures are recalculated, using the real purchasing power of different currencies, the U.S. share drops to 15.6%, behind China’s 17.9% of world output. Of course, as China has a much larger population than the United States, even using the purchasing power figures, per person GDP in the U.S. is almost four times greater than in China; it would be almost 7 times greater using the market exchange rates.

The rise of China has not moved the United States off its pedestal as the world’s dominant economic power. Moreover, U.S. military strength remains dominant in world affairs. Yet the challenge is real, even to the point that China has recently created an institution, providing development loans to low-income countries, to be an alternative to the (U.S.-dominated) World Bank. Investment by Chinese firms, too, is spreading worldwide. Then there are the military issues in the South China Sea.

At the same time, the United States is engaged in seemingly intractable military operations in the Middle East, and has continued to maintain its global military presence as widely as during the Cold War. Having long taken on the role of providing the global police force, for the U.S. government to pull back from these operations would be to accept a decline in U.S. global power. But, further, the extensive and far flung military presence of U.S. forces is necessary to preserve the rules of international commerce that have been established over decades. The rules themselves need protection, regardless of the amount of commerce directly affected. The real threat to “U.S. interests” posed by the Islamic State and like forces in the Middle East, Africa, and parts of East Asia is not their appalling and murderous actions. Instead, their threat lies in their disruption and disregard for the rules of international commerce. From Honduras and Venezuela to Saudi Arabia and Iraq, if U.S. policy were guided by an attempt to protect human rights, the role of U.S. military and diplomatic polices would be very different.

Continuing to operate on a global level to halt threats to the “rules of the game”—in a world were economic power is shifting away from the United States—this country is threatening itself with imperial overreach. Attempting to preserve its role in global affairs and to maintain its favored terms of global commerce, the U.S. government may be taking on financial and military burdens that it cannot manage. In the Middle East in particular, the costs of military operations during the 21st century have run into the trillions of dollars. Military bases and actions are so widespread as to limit their effectiveness in any one theater of operations.

The potential danger in this situation is twofold. On the one hand, the costs of these operations and the resulting strain on the U.S. government’s budget can weaken the operation of the domestic economy. On the other hand, in the context of the rising challenges to the U.S. role in global affairs and the rising role of other powers, especially China but also Russia, U.S. forces may enter into especially dangerous attempts to regain U.S. power in world affairs—the treacherous practice of revanchism.

Are There Alternatives?

Although globalization in the broad sense of a geographic expansion of economic, political, social, and cultural contacts may be an inexorable process, the way in which this expansion takes place is a matter of political choices—and political power. Both economic and political/military expansion are contested terrain. Alternatives are possible.

The backlash against globalization that appeared in 2016, especially in the U.S. presidential campaign, has had both progressive and reactionary components. The outcome of the election, having had such a reactionary and xenophobic foundation, is unlikely to turn that backlash into positive reforms, which would attenuate economic inequality and insecurity. Indeed, all indications in the period leading up to Trump’s inauguration (when this article is being written) suggest that, whatever changes take place in the U.S. economic relations with the rest of the world, those changes will not displace large corporations as the principal beneficiaries of the international system.

Nonetheless, the Sanders campaign demonstrated the existence of a strong progressive movement against the current form of globalization. If that movement can be sustained, there are several reforms that it could push that would alter the nature of globalization and lay the foundation for a more democratic and larger changes down the road (Sanders’ “revolution”). Two examples of changes that would directly alter U.S. international agreements in ways that would reduce inequality and insecurity are:

Changing international commercial agreements so they include strong labor rights and environmental protections. Goods produced under conditions where workers’ basic rights, to organize and to work under reasonable health and safety conditions, are denied would not be given unfettered access to global markets. Goods whose production or use is environmentally destructive would likewise face trade restrictions. (One important “restriction” could include a carbon tax that would raise the cost of transporting goods over long distances.) Effective enforcement procedures would be difficult but possible.

Establishing effective employment support for people displaced by changes in international commerce. Such support could include, for instance, employment insurance funds and well funded retraining programs. Also, there would need to be provisions for continuing medical care and pensions. Moreover, there is no good reason for such support programs to be limited to workers displaced by international commerce. People who lose their jobs because of environmental regulations (such as coal miners), technological change (like many workers in manufacturing), or just stupid choices by their employers should have the same support.

Several other particular reforms would also be desirable. Obviously, the elimination of ISDS is important, as is cessation of moves to extend U.S. intellectual property rights. The reforms would also include: global taxation of corporations; taxation of financial transactions; altering the governance the IMF, World Bank, and WTO to reduce their role as instruments of the United States and other high income countries; protections for international migrants and protection of their rights as workers. The list could surely be extended. Changes in international economic relations, however, cannot be separated from political changes. The ability of the United States and its allies to shape economic relations is tied up with military power. Military interventions and the threat of military interventions have long been an essential foundation for U.S. power in the global economy. These interventions and threats are often cloaked in democratic or humanitarian rhetoric. Yet, one need simply look at the Middle East to recognize the importance of the interests of large U.S. firms in bringing about these military actions. (Again, see the box on Smedley Butler.) It will be necessary to build opposition to these military interventions in order to move the world economy in a positive direction— to say nothing of halting the disastrous humanitarian impacts of these interventions.

No one claims that it would be easy to overcome the power of large corporations in shaping the rules of international commerce in agreements or to reduce (let alone block) the aggressive military practices of the U.S. government. The prospect of a Trump presidency certainly makes the prospect of progressive change on international affairs—or on any other affairs—more difficult. There is, however, nothing inevitable about the way these central aspects of globalization have been organized. There are alternatives that would not undermine the U.S. economy (or other economies). Indeed, these alternatives would strengthen the U.S. economy in terms of improving and sustaining the material well-being of most people.

The basic issues here are who—which groups in society—are going to determine basic economic policies and by what values those policies will be formulated. D&

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Trump and “National Neoliberalism”

Sasha Breger Bush

Sasha Breger Bush is an assistant professor in political science at the University of Colorado-Denver.

John Galbraith once noted that, “The only function of economic forecasting is to make astrology look respectable.” I’ve decided that I cannot heed his advice. I take solace in writing and am feeling empowered by it during these dark and strange times. I hope that my notes below contribute to the conversation that’s begun about what we can expect following Trump’s election. If these comments ever make it into history’s dustbin, perhaps those who find them will look upon them sympathetically, for these are uncertain times and no one really knows what will happen next.

I take as my starting point two assumptions:

  1. Despite all the talk of Trump’s election being a backlash to a failed neoliberal project, I believe that neoliberalism is here to stay, at least for a while. Neoliberalism is far too embedded in American society and psyche to disappear with the mere choice of a new president, no matter how historic his election or how different his platform may seem. Neoliberalism is not poised to disappear, I think, but rather to change in form. This is related to my second assumption, which is:
  2. Trump’s xenophobia, nationalism and isolationism will be reflected in new policies and initiatives that start to unfold after he takes office. The extent to which these values will be embraced in the United States and around the world, the manner in which they are incorporated into policy, and the potential national and international backlash to them are uncertain.

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Macri’s First Year in Office: Welcome to 21st Century Neoliberalism

Alan Cibils

Alan Cibils is an Argentine economist and Professor of Political Economy at the Universidad Nacional de General Sarmiento in Buenos Aires, Argentina.

As the United States and the world grapple with the potential implications of a Trump presidency, Argentina is evaluating the results of Mauricio Macri’s first year in office. Macri’s electoral victory on November 22, 2015, marked the end of 12 years of populist, expansionary economic policies and the return to neoliberalism. While government officials and supporters deny this, a close look at the Macri administration’s discourse on economic issues and policies implemented force the conclusion that this is neoliberalism—again.

From campaign rhetoric to economic policy

Macri campaigned as an outsider to politics (despite two consecutive 4-year terms as mayor of the City of Buenos Aires), whose main goal was to solve ordinary people’s problems. His message was that he would keep those policies of kirchnerismo (the previous two presidents were Néstor Kirchner and Cristina Fernández de Kirchner) that had worked and improve or change those that hadn’t.

However, when Macri took office it became clear that his program was a major rollback of the populist legacy and a return to neoliberalism. Macri stacked key ministries with corporate CEOs, leading some to state that Argentina was now a CEO-cracy, rather than a democracy. Bloomberg heralded Macri’s arrival to office with an eloquent “Wall Street Is in Charge in Argentina (Again).” Argentine Treasury Minister Alfonso Prat Gay stated the Macri government’s intentions clearly at a G7 minister meeting: “The world is threatened by protectionism and populism, and Macri was elected to emancipate Argentina from these evils.” In other words, Macri would do away with the populist legacy and open the economy to the world.

So, what have been Macri’s main economic policies in his first year in office?

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Social Democracy, the “Third Way,” and the Crisis of Europe, Part 1

Alejandro Reuss

Historian and economist Alejandro Reuss is co-editor of Triple Crisis blog and Dollars & Sense magazine. This is the first part of a three-part series on the historical trajectory of European social democracy towards the so-called “Third Way”—a turn away from class-struggle politics and a compromise with neoliberal capitalism—and its role in the shaping of the Economic and Monetary Union of the EU. It is a continuation of his earlier series “The Eurozone Crisis: Monetary Union and Fiscal Disunion” (Part 1 and Part 2). His related article “An Historical Perspective on Brexit: Capitalist Internationalism, Reactionary Nationalism, and Socialist Internationalism” is available here.

The idea of a united Europe was not unique to neoliberal politicians or financial capitalists, even if their vision was the one that ended up winning out. Rather, this idea cut across the entire political spectrum, from forces clearly associated with giant capitalist corporations and high finance to those associated with the working-class movement. Just as there have been “anti-Europe” or “euroskeptic” forces on the political left and right, there were also diverse forces in favor of European unification, each with its own vision of what a united Europe could be.

Going back to the mid-20th century, leaders of the social democratic, reformist left envisioned a future “Social Europe.” The European Social Charter, adopted by the Council of Europe in 1961, promulgated a broad vision of “social and economic rights,” including objectives like full employment, reduction of work hours, protection of workers’ rights to organize and bargain collectively, rights to social security and medical assistance, protection of the rights of migrants, and so on.

Figures on the revolutionary left, like the Belgian Marxist economist and Trotskyist leader Ernest Mandel, advocated a “United Socialist States of Europe.” This was an expression not only of revolutionary internationalism, but also of Mandel’s view that the working class could no longer confront increasingly internationalized capital through political action confined to the national level.

In other words, the question was not just whether Europe would become united, but (if it did) what form such unification would take.

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September 29, 2016 | Posted in: Uncategorized | Comments Closed

The Mediatic-Parliamentary Coup in Brazil

Matias Vernengo

President Dilma Rousseff was finally toppled down today. Yes, it’s a coup, different in nature to the previous ones (last in Brazil was in 1964), but with the same consequences. I have discussed the nature of the process here, here, here, and here (this last more on the economy, from last year) before. It is a coup that has received discrete support from the US government, by the way, as much as the elected neoliberal government of Macri in Argentina (Obama visited the latter, a government that basically tries to vindicate the last and genocidal dictatorship in Argentina).

A good summary of the mess is available here. Important things to remember: she is NOT implicated in corruption (contrary to Fernando Collor that was impeached in 1992, so that was NOT a coup), and even if one has qualms about the fiscal transfers (“pedaladas”) that are the formal cause for the impeachment (and one shouldn’t really, since these are not crimes of responsibility, or crimes at all), it’s not even clear that she violated the rules by which she was overthrown. Note that the worse that can actually be said, and it was repeated ad nauseam by the opposition, is that she lied during the campaign. And she did. She promised a government against bankers and for the people, with expansion of social expenditures, and did a u-turn, and delivered the neoliberal policies that the opposition was requesting.

What comes next is more of the same neoliberal policies that are spreading throughout the continent, support for free trade, privatization, including cuts to social security, lower real wages, fiscal adjustment, and more unemployment. The economic collapse of the last year and half is far from over.

Originally published at Naked Keynesianism.

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What Next for the EU?

Jayati Ghosh

Even before the results of the UK referendum, the European Union was facing a crisis of popular legitimacy. The result, especially in England and Wales, was certainly driven by the fear of more immigration, irresponsibly whipped up by xenophobic right-wing leaders who now appear uncertain themselves of what to do with the outcome. But it was as much a cry of pain and protest from working communities that have been damaged and hollowed out by three decades of neoliberal economic policies. And this is why the concerns of greater popular resonance across other countries in the EU – and the idea that this could simply be the first domino to fall – are absolutely valid. So the bloc as a whole now faces an existential crisis of an entirely different order, and its survival hinges on how its rulers choose to confront it.

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Inflation Targeting and Neoliberalism

Regular Triple Crisis contributor Gerald Epstein is a professor of economics and a founding co-director of the Political Economy Research Institute (PERI) at the University of Massachusetts-Amherst. In early May, he sat down with Triple Crisis co-editor Alejandro Reuss to discuss the rise of “inflation targeting”—the emphasis on very low inflation, to the exclusion of other policy objectives, in central bank policy-making—around the world. This is the first of three parts.

Part 1

Alejandro Reuss: When we talk about central banks and monetary policy, what precisely is meant by the phrase “inflation targeting”? And how does that differ from other kinds of objectives that central banks might have?

Gerald Epstein: Inflation targeting is a relatively new but very widespread approach to central bank policy. It means that the central bank should target a rate of inflation—sometimes it’s a range, not one particular number, but a pretty narrow range—and that should be its only target. It should use its instruments—usually a short-term interest rate—to achieve that target and it should avoid using monetary policy to do anything else.

So what are some of the other things that central banks have done besides try to meet an inflation target? Well, the United States Federal Reserve, for example, has a mandate to reach two targets—the so-called “dual mandate”—one is a stable price level, which is the same as an inflation target, and the other is high employment. So this is a dual mandate. After the financial crisis there’s a third presumption, that the Federal Reserve will look at financial stability as well. Other central banks historically have tried to promote exports by targeting a cheap exchange rate. Some people have accused the Chinese government of doing this but many other developing countries have targeted an exchange rate to keep an undervalued exchange rate and promote exports. Other countries have tried to promote broad-based development by supporting government policy. So there’s a whole range of targets that, historically, central banks have used.

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A Note on Development Under Risk in the Arab World, Part 2

Ali Kadri

Politics, Economics, Industry, and Trade

(Part 2 in a Four-Part Series)

It is true, but more so a truism, to assert that reviving the debilitated economies of the Arab World requires an end to conflicts and the creation of a politically stable environment, conducive to both domestic and foreign investment—investment of the higher output to capital ratio type—along with rising internal demand. Yet, as true as this assertion may seem, the regional security/insecurity arrangement is now anchored in a bellum americanum, or continuous war condition, emerging from more acute international divisions over regional control. The spinoffs of war on the political and economic side are regressive. On the national political scene, a process of “selective democracy” similar to the one practiced in ancient times—as opposed to universal or popular democracy—enshrines the right of the few at the expense of the many. On the macroeconomic side, policies may have taken a turn into a sort of extreme neoliberalism, as in lifting subsidies on essential commodities in countries that already experience a high rate of child malnutrition (Everington 2014).

Politics and Economics

The current policy interface between external shocks/conflicts and the national economy is based almost entirely on the unrealistic assumptions of an even playing field, a risk-free environment, and a market that works best with little government intervention. Not that demanding a limited role for the government in the economy would be necessarily functional anywhere, but to propose a small government under war or war-like conditions, as did the international financial institutions (IFIs), is beyond the pale. When the elephants in the room–the wars or their resonances and the lopsided institutional context–are overlooked, then it is no longer myopia which is causing the past errors to be repeated, it is rather its marked lack of will to carry out development.

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