The Global Economic Crisis and ‘Possible Futures’

Originating from the World Public Forum meeting of 2008, these three volumes are part of a Possible Futures Project. The editors are prominent American social scientists: Craig Calhoun, being President of the (American) Social Science Research Council and Director-elect of the London School of Economics, and Georgi Derluguian Professor of Sociology at Northwestern University. The editors claim, with some justification, that the thirty six articles in the three volumes represent some of the world’s leading social scientists. A wide range of critical voices and a few Marxist authors are assembled, including Manuel Castells, Ha-Joon Chang, Craig Calhoun, Saskia Sassen, Daniel Chirot, David Held, Mary Kaldor, David Harvey, Giovanni Arrighi, and Immanuel Wallerstein.

The collection is arranged in three volumes each dealing with the ways that history and the challenges of the economic crisis ‘shape possible futures’. The papers are multi-disciplinary with contributions particularly from economists, political scientists and sociologists. In volume 1, the writers consider the nature of the crisis itself and seek to place it in historical context and consider patterns of new possibilities. In volume 2, the objective is to connect the financial crisis to other issues: global governance, financial regulation, environment, conflict, security, and the relevance of religion, ethnicity and nationalism and media. In volume 3, contributors consider ways to secure economic growth; shifts of production, people and services between different parts of the world; potential winners and losers, and the prospects for a new possibly multilateral world order. This is a wide agenda and the three books contribute considerably to our understanding. As one might expect, the nature of the crisis is more deeply understood than are the prospects for a possible new world order.

The essays reflect the diverse intellectual heritages of the contributors, all articulating critical views of the economic crisis and its effects. As Craig Calhoun points out, crisis urges a call to action. But what type of crisis and what form of action? One might distinguish three major approaches in the essays. Firstly, those who take a short term approach. They outline and condemn the conditions which led to the financial bubbles and seek changes mainly in the national economic and financial mechanisms to achieve a stable financial order. Secondly there are those who view current economic (and particularly monetary) institutions to be inappropriate in the context of a globalised and globalising economy. Such writers seek solutions in new economic and financial architecture, and recommend the strengthening of international financial organisations, such as the IMF and (or) the creation of new global institutions to regulate global finance. Third are those who adopt a wider and deeper analysis and consider the global crisis to be a consequence, or expression, of underlying economic, ideological and political developments. They contend that global crises will continue if underlying contradictions remain. These essays dwell on much more than the global crisis and consider the economic and military hegemony of the core societies, the rise of China, the dominant ideology of neo-liberal capitalism, and the rise of a global capitalist economy.

The most popular short term explanation regards the economic crisis as a dynamic derived from underconsumption. Underconsumption leads to a decline of profit from production and reliance on financial sources of profit which take the form of derivatives and other financial instruments. The lack of regulation furthered and legitimated by neo-liberalism allowed financial bubbles to occur. The remedy then is massive redistribution of income to increase the share of labour concurrent with the adoption of traditional social-democratic policy reliant on Keynesian methods of demand management, instrumentally through the state’s fiscal powers. The problem here, as many of the contributors note, is that state financial systems are no longer autonomous financial bodies. The crisis in Greece brings out that single countries alone cannot ‘solve’ crises which are not of their own making. And it is politically difficult to stimulate Keynesian-type public spending in conditions of high public debt.

An important alternative to neo-liberalism is grounded in the work of nineteenth century German economist Friedrich List. The essays by Ha-Joon Chang, Manuel Montes and Vladimir Popov all focus on the harm done by policies predicated on the Washington Consensus and discuss policies which promote growth in underdeveloped countries. They expose the double standards of the advanced economies, the leaders of which currently advocate for their own countries expansionary policies, involving government bailout of companies – quite the opposite to the medicine they have prescribed for the South.

Moreover, these writers contend that policies of the WTO hinder the development of the third world and promote the interests of the advanced countries. As Ha-Joon Chang puts it: ‘Macroeconomic policy on a global scale is’Keynesianism for the rich and monetarism for the poor’. (Volume 3, p.43). Successful development policy for the rich countries in the early historical phase of development has involved protection of national industries; an important role for state owned enterprises and strictly regulated FDI (Foreign Direct Investment). Chang convincingly grounds his argument in economic history. Much of the reasoning here is that a fundamental reform of the global system is unlikely – even if the crisis were to worsen. ‘To put it bluntly, there is simply too much money, too much power and too much intellectual prestige at stake for the neoliberal regimes to go quietly’. (p.61).

Other writers turn their focus to the need for institutional reforms. David Held and Kevin Young contend that traditional government institutions are inadequate to meet current policy needs which call for a global perspective. They widen the nature of crisis to include three domains: the governance of global risks in finance, security and the environment. They look for solutions which will enhance the capacity and responsibility of global governance. These authors point to the need for a single regulatory authority. They consider the lack of consensus and inertia in setting up effective regulatory bodies. The desired outcome for this group of writers is the evolution of effective and representative global institutions with ‘the capacity to create credible regulatory frameworks and to invest directly in the provision of global public goods and the mitigation of global public bads’. (Volume 2, p.40). Their vision is for ‘a coalition of political groupings ‘ [to] emerge to work with such an agenda, comprising European countries with strong liberal and social democratic traditions, liberal groups in the United States ‘ that support multilateralism and the rule of law in international affairs’.’ (p.41). They also see positive participants in the form of nongovernmental organisations, transnational social movements, as well as actors in ‘geopolitically resurgent states’, such as Brazil, India, China and Russia.

Manuel Castells and Emmanuel Wallerstein highlight the global character of the crisis, though each has a different mode of analysis. Castells rounds on Gordon Brown’s proposed ‘London Consensus’ – the perspective that the state could recover its steering role and manage capitalism on behalf of capitalists with residual benefits for the people. Such a ‘capitalist perestroika’ is not possible: briefly, Castells argues that public spending cannot be increased, demand cannot be raised as the financial conditions will restrict lending, the new conditions will also amplify unemployment, the crisis may outlast governments and finally, financial constraints will mean that the pool of available credit will sharply fall. His conclusion is that new economic conditions will lead to a new set of economic transactions. Castells couches his interpretation in the language of a technological paradigm based on a new global economic culture. This involves a three tier economy: a ‘revamped informational capitalist economy’; an enlarged public and semi-public sector and a smaller market sector with tighter regulation of financial institutions; and a use-value economy (Volume 1, p.205). Castells’s vision is for a non-consumptionalist economic culture in which consumer and producer cooperatives, and voluntary for-profit producer cooperatives would directly produce use-values. Barter networks and non monetary exchange through the internet would replace the market. He opines that one should follow the example of Michelle Obama’s cultivation of tomatoes and vegetables on the White House lawn, and considers that transportation in cities would be transformed if we made wider use of cycles, skateboards and walking. Volunteer based social services and voluntary associations would help to switch from the market and decommodify exchange. As Castells puts it: the ‘decisive battle against capitalism may not be about the means of production but about the means of consumption.’ (p.209). He envisages a confrontation between different economic cultures.

Wallerstein concurs with Castells that capitalism is ‘no longer viable’ (Volume 1, p.84). Following Marx, he believes that it no longer offers capitalists the opportunity to pursue the accumulation of capital. He asks us to ‘orient our own political choices in the light of our own moral preferences’ (p. 86). In this context he envisions a ‘fourfold battle’ between the camp with the strategy of ‘the spirit of Davos’ which is itself divided and on the other side another divided camp in the ‘spirit of Porto Alegre’. Thus he contemplates a ‘confusing situation’ intellectually, morally, and politically’ with an outcome that is ‘fundamentally unpredictable and uncertain’ (pp.86-7). Like Castells, however, he seeks to construct an alternative decommodified mode of production not dependent on the profit motive.

David Harvey also follows a Marxist course and has the advantage that he spells out the conditions in which the capitalist mode of production might be transformed. Recognising that the ideological, institutional, judicial, military and media power are under tight political control, he contends (following Marx) that to break out of capitalism a concurrent ‘dialectical unfolding of relations’ between seven movements within the social body politic is required (Volume 1, p. 109). These are: technical and organisational forms of production, exchange and consumption; relations to nature; social relations between people; mental conceptions of the world, embracing knowledge and cultural understandings and beliefs; labour processes and producing of specific goods, geographies, services, or affects; institutional legal and governmental arrangements; and the conduct of daily life and the activities of social reproduction (p. 110). Previous attempts to create a communist or socialist alternative have failed, he contends, because there was a lack of dialectic movements across all these elements. However, Harvey somewhat disappointingly comes to no conclusions on how differences on the left can be overcome.

Of note are a number of contributors who in different ways cast doubt on a socialist outcome. Daniel Chirot argues that Marxists are wrong to see crisis as the beginning of the end of capitalism. Taking the depression of the 1930s as an example he opines that depression and war are possible political outcomes. Fernando Coronil considers the significance of criticism of neo-liberalism, which he interprets as challenges to aspects of capitalism rather than to capitalism itself. Forms of opposition to neo-liberalism, he contends, define the boundaries of the Left, not socialism. And he points out that Leftist presidents, elected after Chavez in Latin America, define their policies as ‘deepening democracy and limiting neo-liberalism’. [T]he pursuit of a deeper democracy has been their common ground’. (Volume 1, pp. 240-41) Socialism, for nearly all the contributors, is not a viable counter-ideology and in these books, the idea of a communist alternative has no champions at all.

A second theme revolves around changes coming from the shifting balance of power within the world economic system away from the hegemonic core. Jomo Kwame Sundaram and Felice Nioelle Rodrigues, for example, reject the practicability of a ‘decoupling’ of Brazil and India from the world economy. However, these countries, as well as China and Russia all have large economies and are less well integrated into the world economic system. They are able to use their own large markets to counter the effects of world economic crisis. China (following the earlier example of the USSR) is highlighted by many of the authors as an alternative model. Its economy has had an indigenous design, not based on any Western model. State control secured trade protection, the undervaluation of the exchange rate and control of international capital flows – all of which secure internal development. How long these conditions will prevail under WTO membership, however, remains problematic.

A frequently underestimated result of the rise of China is an emerging alternative ideology to the Washington Consensus provided by the ‘Beijing Consensus’. This political orientation challenges the assumption that Western neo-liberal economics provides a universal economic standard, and that gross domestic product should be the main criterion of economic progress. Sustainability, equal income distribution (despite being sadly lacking in contemporary China) and self-determination are considered to be important criteria for national well-being. Moreover, the Beijing Consensus viewpoint rejects interference into the domestic affairs of foreign countries, military interventions and trade embargoes. Whether these policies could form the basis of an alternative bloc (provided by the BRIC countries) seriously challenging the current hegemonic core is contentious. Clearly, the current internal class contradictions in countries like China and Russia could be resolved in favour of their emerging globalised capitalist classes who support private property, free markets and entry into the world system; but nationalist and socialist interests may form an alternative bloc to further statist, and anti-capitalist alternatives based on public ownership and political hegemony.

The three volumes are timely and provide a convenient reference point for those seeking an introduction to current thinking on ‘possible futures’ and will supplement such works as The Real Utopias Project Series (six volumes of which have been published by Verso). The collection shows the diversity, and somewhat pessimistic, thinking in the social sciences. ‘Possible futures’ are most clearly defined in the economic sphere but much less so in politics and society. While the papers cover many approaches, very few of the papers put social class at the centre of their argument. Leslie Sklair’s theorising on the global capitalist class seems a particularly important omission. Differences between the global capitalist class and a state based capitalist class help to explain contradictions within capitalist societies and particularly in countries undergoing transformation such as Russia and China. They also explain why governments and international organisations find it so difficult to influence behaviour and they provide a strong barrier against many of the reforms suggested by contributors to these books. The economic possibilities are the most adequately formulated, and they provide trenchant criticisms of neo-liberalism; the favourite alternatives, however, are various forms of Keynesianism, as well as a possible decoupling of some countries, such as China, from the global economy. The two major alternatives to market capitalism of the twentieth century – Soviet type planning and national socialist state capitalism – are not mentioned. The problems of ‘mending the bubbles’ are addressed, but the means of transcending capitalism both as a political project and as a mode of production remain unstated. When even the leading hegemonic powers, the USA and the UK, find it necessary to nationalise major financial institutions and auto producers, it is remarkable that one searches in vain for a ‘possible future’ with state owned and controlled banks and a large publicly owned sector. Whereas public opinion and street protests show a widespread disenchantment with ‘capitalism’ and electoral democracy, not one of the contributors notes their relevance for the attainment of an alternative future. While the authors point to the severity of the crisis for capitalism, it is also noteworthy that socialism is either ignored or regarded as unattainable.

Business as Usual: The Roots of the Global Financial Meltdown. (Vol 1).
The Deepening Crisis: Governance, Challenges After Neoliberals (Vol 2).
The Aftermath: A New Global Economic Order (Vol 3).

New York University Press. New York and London, 2011

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This post was written by David Lane