No 254 Posted by fw, August 19, 2011
“I think we’re in a moment where the forces of austerity have gained the upper hand. . . . with the debt overhang facing the private and the public financial markets, there’s no source of expansionary pressure in the global economy. In that situation, it leads to political disintegration and economic disintegration. So I think the danger is very real. Unless there’s some leaders, or if they’re pushed from the bottom to take an expansionary stand, redistribute income and wealth to those at the bottom and in the middle, I think that we’re in for at least very significant stagnation if not a very serious economic crisis.” Gerry Epstein
In an interview with Paul Jay of The Real News Network (TRNN), Co-director of the Political Economy Research Institute (PERI) and Professor of Economics, Gerald Epstein, comments on Nouriel Roubini’s, Aug 15, 2011, Project Syndicate article, Is Capitalism Doomed? Anyone who’s paying attention is abuzz. Read the article to find out why. Alternatively, watch Jay’s interview, below, with Epstein, which appeared on TRNN today. The interview is also entitled, Is Capitalism Doomed? As usual, the video is followed by my transcript with added sub-headings, Web links and text highlighting.
Paul Jay – The last couple of days a lot of people that follow economics and the blogs have been talking about a piece by Nouriel Roubini. He runs a research think tank in New York and also teaches at NYU. And he’s one of the people generally acknowledged to have predicted the 2008 crash. He’s certainly been acknowledged also as someone who generally believes in markets and capitalism. Well here’s what he wrote just a few days ago:
“So Karl Marx, it seems, was partly right in arguing that globalization, financial intermediation run amok, and redistribution of income and wealth from labor to capital could lead capitalism to self-destruct (though his view that socialism would be better has proven wrong). Firms are cutting jobs because there is not enough final demand. But cutting jobs reduces labor income, increases inequality and reduces final demand. Recent popular demonstrations, from the Middle East to Israel to the UK, and rising popular anger in China – and soon enough in other advanced economies and emerging markets – are all driven by the same issues and tensions: growing inequality, poverty, unemployment, and hopelessness. Even the world’s middle classes are feeling the squeeze of falling incomes and opportunities.”
The title of that blog is, Is Capitalism Doomed? Now joining us to talk about this blog and his state of the global economy is Gerry Epstein. He’s co-director of the PERI Institute in Amherst, Massachusetts. So what do you think? Is capitalism going to destroy itself, which is part of what Roubini says?
Gerry Epstein – Well things aren’t looking too great. I agree with Roubini on that. Of course he used Marx’s name for shock value and to get attention and it’s worked. Marx, of course, wasn’t the only one who has made these kinds of arguments. But there’s no doubt about it. The global economy is having very serious problems now. And some of the ones Roubini pointed out. There has been this huge shift in power and wealth away from the working class and the middle class in many parts of the world. And this along with the financial shenanigans and financial crisis has led to a very serious aggregate demand problem. There’s no set of institutions or agents in the United States, in Europe, and in other economies that has the ability and the interest in spending money, spending income to revive the economy. And the only possible groups that could do this at this point are governments and central banks. And the right-wing forces in Europe and here in the United States are doing their best to make sure that the government and the central banks cannot bring the global economy out of this stagnation and out of this crisis. So things are looking pretty bad.
Paul Jay – I’m not sure how you define right wing because right now if you divide the elite between the liberal neo-liberals and the conservatives or the right left of the elite, they’re all on the austerity train. There are very few elite voices that are talking about stimulus and jobs. I shouldn’t say none because on the financial pages you do see some even investment fund managers saying it needs to be done. But they seem to be very lonely voices.
Gerry Epstein – Well, they’re pretty lonely voices and I think it’s good that people like Roubini are coming out and making the argument to get rid of the austerity push that’s coming from so many quarters. The fact of the matter is, though, with Europe unable and unwilling to play an expansionary role, Obama caving in to the Wall Street forces and the right-wing forces here in the United States, with Japan continuing to be mired in financial and political problems — China’s even cutting back on its demand policies and its economic growth – it doesn’t seem like there’s any place in the world economy that is willing to play an expansionary role. Of course there are plenty of places, including the United States, the Europeans, that could be playing their role but they’re refusing to do that.
Paul Jay – Roubini quotes Marx but he really doesn’t fully quote Marx. Marx’s main point wasn’t inequality and distribution of income. If I understand it correctly it was more that this is the outgrowth of when you have a tiny percentile actually owning the commanding heights of the economy. It’s about who owns the stuff and then the rest falls out if that. And very few people want to talk about that whole issue of ownership. Out of concentration of ownership we’ve all seen what’s happened in terms of financial regulation. The political power that derives from such ownership makes any kind of policy even rational policy that mitigates what’s happening in terms of the crisis, it makes even that impossible.
Gerry Epstein – That’s right. The top 1 percent in the United States has got most of the gains in the economic growth of the last 30 years. And they’ve accumulated more and more political power as well. Marx said that when you had a system that’s run by a very small group of capitalists that’s impoverishing the rest of the economy, the economy is ripe for a revolution. Unfortunately what we’re seeing in this country is the right-wing populous that are taking political advantage of this, partly funded by Koch brothers and other capitalist wealthy business people supported by most of the media. So rather than the workers and the middle class organizing on a progressive or left program that Marx thought would happen to overthrow the system what we’re finding is it’s the right wing that’s mobilized. Of course Roubini said that socialism isn’t an alternative because it was proven to be wrong. That’s certainly not the case. We didn’t have widespread socialism in wealthy countries like the United States. But even if it were true, as Eric Hobsbawm has written, time and time again, it was the threat of socialism and the threat of communism as a viable alternative that forced capitalism to reform. It forced capitalism to redistribute income and wealth.
Paul Jay – In other words, The New Deal you’re talking about and European programs like it?
Gerry Epstein – And not only The New Deal, there’s also the Cold War and the threat of the Soviet Union. This is probably the first time in the history of capitalism where there hasn’t been a strong viable threat from the left in the major capitalist countries. Of course left wing parties have gained important power in some developing countries in Latin America and elsewhere. I think the real challenge facing us is how we can mobilize the working class and the middle class from a progressive direction to really challenge this system as Marx thought would happen.
Paul Jay – How dangerous a moment do you think we are in?
Gerry Epstein – I think it’s a very dangerous moment. I think we’re in a moment where the forces of austerity have gained the upper hand. As in the 1930s, that’s exactly what happened. The forces of austerity gained the upper hand in Europe, they gained the upper hand by 1937 also in the United States. In that situation with the debt overhang facing the private and the public financial markets, there’s no source of expansionary pressure in the global economy. In that situation, it leads to political disintegration and economic disintegration. So I think the danger is very real. Unless there’s some leaders, or if they’re pushed from the bottom to take an expansionary stand, redistribute income and wealth to those at the bottom and in the middle, I think that we’re in for at least very significant stagnation if not a very serious economic crisis.
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