[S4 E11] New
In this episode of ACC, Prof. Harvey discusses the new book by Brad Delong, “Slouching Toward Utopia,” which aims to explain the massive creation of wealth over the last 150 years for the upper and middle class, its effect on the world order and why it’s failed to deliver an increasing sense of happiness among that top 50%. Harvey takes us through the history of the various world powers, from Italian city-states to the rise of the US as the global hegemon and the present shift in power that has emerged with China’s rapid economic growth.
Transcript has been edited for clarity
This is David Harvey and you're listening to The Anti-Capitalist Chronicles, a podcast that looks at capitalism through a Marxist lens. This podcast is made possible by Democracy at Work. So welcome to another session of Anti-Capitalist Chronicles. Today I'm going to take up a rather grand theme, but do it through some very particular circumstances. The grand theme was being stirred by some pre-publicity of a book that is supposed to come out very shortly by somebody called Brad DeLong and the book is called Slouching Towards Utopia. I have not read it and I haven't had the opportunity to read it because it doesn't come out officially until September. But Paul Krugman has read it and so has Larry Summers. And both of them are sort of doing the kind of pre-publication publicity.
I would seem to say that this is a book which is going to be a bit like Piketty or whatever, that it's going to be, if you like, the bourgeois account of the world. Now I find it interesting for two reasons. The sketch of the account which I get from Krugman and Summers goes something like this: that for nearly all of its history humanity has been locked into what might be called a Malthusian trap. That any increase in productivity is immediately taken up by population increase. The result of which is that humanity has always been basically living at a sustainable kind of living standard, just about or a real subsistence level standard, if not impoverishment. And that therefore the possibility of humanity emerging from this situation of living at a substantially low level of income and welfare and well-being... the possibility of doing something rather than that is rather rare. And it indicates certain phases of capitalist history where the Malthusian trap has not worked and where there have been real advances in terms of human well-being and human capacity. And that those two phases of this are really dated from the late 19th century, from about 1870 to 1914, then there was the war and the Second World War. And then came another period, were known as the 30 glorious years. Only the French call it Les Trente Glorieuses. Where, somehow or other, social-democracy/technological change got together to create a rather radical transformation.
And the sort of thing you look at would be to say 'well you know back in, say, the late 18th century or even beginning of the 19th century, if you looked at those areas where capital was well established, which was mainly Britain, Western Europe and the Eastern Seaboard of the United States... if you looked at those areas you would see that about the top 10 percent of the population had a great deal of wealth accumulated during this period. But the mass of the population, the other 90 percent basically lived at subsistence level.' And they lived close to the poverty line, could not escape the poverty line. And what happened, however, from about 1850 to 1910 and from 1945 to 1975 was that of course the top 10 percent maintained its position. But then added to it another 40%, if you like, of a middle class. Which is quite well, it well established an adequate living standard. And you could kind of say that humanity had escaped, at least for 50% of the population, the Malthusian trap. The Malthusian side of things was still there, but it applied only now to the bottom 10% of the population very rigorously and the bottom 50 percent of the population in a very general kind of sense.
So this is the argument which is apparently made in the book by Brad DeLong. And the two big questions which are posed; the first: why did, then how did this happen? And so there's, apparently, an account of this which I suspect I would be very critical of, because it's one of those accounts which is looking for a single bullet or two single bullets, or whatever it is, which is going to actually account for everything. When it seems to me I would always want to be talking about the evolution or totality. But the second thing, which I really want to spend some time on, is the fact that these phases of good development, of strong development, of positive development and of the improvement of living standards of actually probably at least half of the world's population, if not more... these features did not correspond to an increasing sense of happiness, of what Paul Krugman calls felicity, felicity didn't go with with all of this. Is that therefore we are now in a situation which is relevant to us where we have to look at a situation where the mass of the world is not thinking of things in a very positive light. And we're surrounded by a lot of very negative signs. For example the shootings at the July 4th parade in Illinois, the shootings at the schools, the mass shootings in the United States. Those sorts of things suggest that there's something going on which is not very, you know, which is not very felicitous at all. The rise of these peculiar conspiracy theories and the return of a lot of right-wing extremism and things of that kind would suggest that we are in a very, very unsettled condition right now. Even in the face of all of the technological changes, which have actually given us the possibility to live a different life. But we're not actually enjoying that different life. So that is the theme of the book, as I gather it from readings of Summer's account of it and Krugman's account of it.
But here is where I have another interest in Brad DeLong. Because back in 2008/2009 I wrote an interpretation of what was going on in terms of the fiscal crisis and the financial crisis of those years. And I wrote a piece about why the stimulus was bound to fail. And it got taken up many, many places, quite a lot of feedback on it and quite a lot of commentary on it. And it elicited a particular commentary by Brad DeLong. And he was particularly rude about what it was I was doing. So to understand what I was doing I was actually intrigued with the idea that the financial crisis, which was kind of when it begins to be felt, towards the end of the 1990s and which culminates in 2007/2008, was a sign of something which was very appealing to me to think about. Which comes from the reading of, or rather comes from the reading of Ferdinand Braudel the economic historian by the economic sociologist Giovanni Arrighi. And Arrighi kind of wrote a book really talking about shifting hegemony within the global world system. And what he basically documented was the way in which capital initially (particularly merchant capital and finance to some degree) really took off in the Italian city-states in the 14th/15th centuries and that this was, if you like, the original heart of the political economy of what capitalism was about. And it had its tentacles stretched outside through the merchant system and the likes with the/to the elastic system that developed a trade across all of Europe, to Europe and so on. And we start to see a shift in hegemony from the Italian city-states to the Low Countries, to Belgium and Holland and in particular to Amsterdam. And Amsterdam became, if you like, the capital of global capitalism because of the activities of the merchants and the trading empire the Dutch set up. But that lasted 'till the end of the 18th century when Britain started to take over and became hegemonic. And then Britain, if you like, came to dominate global capitalism, being the leading political economic power calling the shots around the world militarily and economically and all the rest of it, and doing that up until around 1914. And at that point the United States started to step into the role of becoming the world hegemon. And particularly after 1945 there was no question as to who was the top dog within the capitalist world, leaving outside, of course, the communist world. And that top dog was the United States. And from about the late 1980s through to 2008 there started to be some challenges to U.S hegemony. And one of the things that Giovanni Arrighi concentrated on was a phrase from Braudel which kind of says the end of a hegemony is signaled by a strong phase of financialization. And what Arrighi did in his book was to look at the strong phase of financialization that allowed the transfer of hegemonic power from the Low Countries to Amsterdam, the transfer of financial power from Amsterdam to London and then the transfer of financial power from London to New York. So if a phase of financialization precedes a shifting hegemonic structure, it seemed to me that it might be important to look at 2007/2008 and the financial problems that have led up to it. Which included the East Asian financial crisis, the bankruptcy of Russia and the bankruptcy of Argentina and places like that, leading into the financial crisis of 2001, which then was briefly overcome by very loose monetary policy, and ultimately culminating in 2007/2008.
So in 2008 I kind of said 'well is this a sign of a shifting hegemonic condition?' And if it is a sign of a shifting hegemonic tradition, where's the new hegemon likely to be? And this, obviously was likely to be in East Asia, particularly concentrated with the rise of China. And therefore we had to deal with and look very closely at what was going on in terms of the financial crisis and what its relationship was to the radical transformation of the Chinese economy and the radical growth of the Chinese economy. To the point where by the time we get to, sort of, 2020 China is an economy almost as large as the United States. In purchasing power parity it's larger than the United States. In terms of conventional kind of currency values it's less than the United States. But about a third of the world's growth after 2007-2008 was coming from China, and from China alone. So that China was definitely actually very active in overcoming the crisis of 2007/2008. And all I said in 2007-2008 was 'we have to look at this kind of shifting hegemony.' And I used a language about, you know, tectonic shifts in power structures in the global economy of this sort. And I was kind of saying we have to understand the uneven geographical development of capitalism, the slackening off of the power of the United States after the 1990s onwards and the growth of Chinese power as being very significant. And it was intriguing to me that it wasn't only Chinese power, it was also Chinese power relative to the other holders of the major U.S debt. U.S treasuries were very much owned by foreign governments. China was a major owner of treasuries, Russia was a major owner of treasuries and Japan was a major owner of U.S treasuries. So they're the ones who actually held the U.S debt, the U.S was heavily involved in the debt. And I pointed this out and said 'well, you know, this creates a very, very complicated situation.'
And I came across a well-authenticated account which struck me as very, very intriguing, that in 2008 one of the institutions... a set of institutions that went close to belly-up in the United States were the housing finance institutions Fannie Mae and Freddie Mac - very, very large institutions. They were technically private, but everybody understood them to be actually backed up by state power and that the state was going to bail them out if necessary. So these two institutions; nobody knew exactly what to do with the fact that they were holding a mass of mortgages which were supposedly valued, you know, at X trillion dollars but the market value was kind of almost nothing. So what was going to happen to these two financial giants? And who held the stock of these two financial giants? Well, apparently two of the major stockholders in Fannie Mae and Freddie Mac were the Chinese government and the Russian government. And the Russians apparently in 2008 approached the Chinese and said 'hey how about we just crash all of our, you know, dump all of our stock in these institutions and this will create a crash in the market and it will be seriously embarrassing to the United States.' And so the Russians were proposing to the Chinese that they jointly do this action against U.S finance and U.S financial institutions. And, in fact, so crash Fannie Mae/Freddie Mac and it will put the United States government in very, very, very deep trouble. So the Russians were proposing that. The Chinese refused. And for an obvious reason. The Chinese needed the U.S market to revive. The crash of the U.S consumer market was having a dire effect upon Chinese industry. Chinese exports to the United States collapsed to about one-third of their previous levels because of the crisis in the United States. And the Chinese had nothing to gain by crashing the U.S economy even further. So even the third of the consumer market the Chinese were still working with would disappear. Russia, on the other hand, had none of those problems. It was not actually selling to the U.S market very much. And so it didn't have to look to a revival of the U.S market. So the Chinese basically rebuffed the Russian proposal. But I mentioned this just to give you an idea of the sorts of games that were being played around this financialization.
So I had two problems with the way in which the U.S was coming out in 2007-2008. First I did not think that the stimulus was big enough. It was something like 600 billion dollars. And it would probably have taken two or three trillion dollars to do it. And I've noticed this time around the stimulus which has been set by the Biden Administration has been very much colored by this idea that they didn't make a big enough stimulus package back in 2008. And in fact they should have done but they didn't. And so one of the reasons why we've seen these two trillion and three trillion dollar packages coming out of the Biden Administration has been the recognition that is what it should have been done back in 2007-2008. So part of my argument was that. And partly also was saying that even that would be difficult. Because that would mean the U.S would have to go into greater and greater debt and its debt holdings were by, you know, largely from China, Russia, Japan and a few others. And this was making the U.S in a sense vulnerable to what it's creditors might demand of it and that there's a certain power which resides with creditors over debtors. And the U.S as a major debtor during that period was therefore vulnerable in some ways. Now, so that was part of my argument which DeLong didn't agree with at all.
The second argument was: look, we have to understand the geography of all of this, and the way in which, you know, these shifts in hegemonic power are occurring; the rise of China, the emergence of East Asia as a central configuration. And I started to use this language, which was actually used in a National Intelligence report in the United States, which was to say that wealth is gradually accumulating in East Asia. It used to be that we extracted wealth from East Asia. We're now actually conceding wealth to East Asia. East Asia understood as a totality of what was going on in the region, which would include increasingly, of course, China as a major anchor, but then, going alongside of it, Japan. Which was, you know, fourth or fifth largest economy in the world. And South Korea, which had become a major economy. And Taiwan, which is a major economy. And, of course, to some degree Singapore. So if you put all of the, if you like, all of that together, you would say 'well maybe that's the configuration of the new hegemonic configuration, there's not going to be one single state, it's going to be a collection of states.' And what's so interesting about thinking of it in those terms was there was very close coordination going on between the East Asian economies on the one hand politically and that they were very nationalist and very antagonistic to each other. So they had, if you like, a political antagonism about who was top dog and who was not. And they were playing games with each other and, boy, not at all friendly with each other. But when it came to economic coordination they were actually rather together. And when China started to set up this East Asian Development Bank as a rival to the International Monetary Fund there was some real heft in that decision. That's the kind of thing that got the US very, very nervous and very mad. So all I was kind of saying was we should really look at this and the like.
Well, Brad Delong didn't like this at all. And I shouldn't probably do this but I gotta do it because it's rather... I find it rather amusing, but he read my piece and he says the following: he says 'after 10 extremely dense paragraphs of what can I call it? I can't call what David Harvey does pointless intellectual masturbation, because what David Harvey does does not feel good at all.' And then he goes on to say that, a little bit further on in his commentary he says this: he says if we forced Harvey to turn his... into an argument we would see that the argument he would be making does not hold together. But, of course, we cannot say that Harvey's argument does not hold together, because he does not make one, he doesn't understand Keynes, probably never read Hicks, does not understand Friedman and I'm sure has never heard of Patinkin, or Tobin, or Modigliani, yet somehow he thinks he has a standing to make judgments as to the likely success of Keynesian policy moves.' Actually goes on to say 'Harvey can and does say any damned foolish thing he pleases.' The proper form of his argument is this: if we assume that Harvey intends to make any sense he must be attempting to say and then reconstruct something out of the rubble of what he's talking about. This was not a very complimentary comment. I replied to it by saying 'I don't see why I should read Hicks rather than Joan Robinson or Galbraith.' And, in any case, I was largely riffing off Arrighi and Braudel, which I suspect this guy is not familiar with.
So here's the situation. So I then kind of thought to myself 'I am going to do something that I would very rarely ever want to do and I checked it, how he's doing in terms of citations in Google's citation index.' And he has 16,586 citations over his lifetime. I have 306,782 citations over my lifetime. Which is very close to about a Paul Krugman who has a 266,000. So ,you know, after all, let's take it that at least some people are making sense of what I'm doing and understood what I was doing and thought it was an interesting question to pose but I was not, you know, classical enough and the neoclassicals are simply... So I suspect that what we're going to get from this argument by Brad DeLong is an attempt to reconstruct the details of what happened from 1870 to 2010; concentrating on these two periods in which there was a radical redistribution of wealth, the creation of a middle class, the movement away from a society which was 10% at the top and the 90 percent going to the rest to a society that was 10% at the top, 40% in the middle and 50% in the base. And maybe even, in some instances, depending upon where you were, the base would be even smaller. So that what we have is actually a revolution in the distribution of income and the distribution of wealth and power.
And his (according to Krugman...) argument is that we have to explain where this technological dynamism is coming from. And he apparently has three particular explanations, or three bullets, if you were, which are part and parcel of the situation. And the first is the rise of the corporation. Now to me, yeah, the rise of the corporation is important in the totality of the story we'd want to tell. It'd be very difficult to tell that story without actually looking at the conversion from household capitalist economies to joint stock companies, into massive contemporary corporations. Yes indeed, a centralization of capital that's going on, and all those sorts of things, is a terribly important theme. And it's one which I've referred to and would want to refer to again. So the corporation has a role to play. But to say that it's THE role is stretching it a bit - more than a bit in my view.
The second feature was the rise of research institutes. Now this is something which I think is very important. But I would put it in a different term. First off, it is clear that the corporations organized research units to try to improve their product. And to improve their competitive situation. And things like Bell Laboratories and so on were the sorts of things which we're talking about. And that was critically important. My own view is that was, yes that was part of the story but it was, it should be embedded in two issues. One is: where is the research occurring which is going to produce the new forms? And a lot of it is occurring in the research institutes and the research universities. In the United States, with its research institutes, it's research universities played a crucial role. This is with the MITs, the Stanfords, the CalTechs, even Carnegie Mellon and so on. The research universities of the United States played a very, very critical role, particularly after 1945. And really the research universities in the United States gave the United States unparalleled advantages over the rest of the world. And one of the reasons why the United States managed to maintain its hegemony in the way it did was through the research universities. And, by the way, the research universities weren't simply accumulating local research talent. The great thing about the research universities was they basically set out conditions of employment to attract people from all over the world. So when you go to any of these labs you'll find Italian, you'll find German, you'll find British, you'll find either scientists, people, they're all of the talent of the world in a sense I guess gets caught up in being drawn to MIT, drawn to Carnegie Mellon, drawn to CalTech and so on. And so that if there's a powerful research unit, for example the British had a very, very good quantum computing unit and it was taken lock-stock-and-barrel and brought to the United States, given much more favorable terms - much more favorable salaries, much more favorable funding and the like... so that quantum computing came to the United States that way. After World War II the United States recalled the rocket scientists from Germany and brought them in. After the collapse of the Soviet Union a lot of the Russian scientists who were working on space programs and the like are also brought to United States. So the United States, through it's import of talented labor, through the creation of research universities and the like, has been a major force in terms of technological innovation.
And this actually comes back to something which I do take from Marx very seriously. Which is that Marx kind of argues that technological change largely comes from the coercive laws of competition forcing capitalists or states to seek out the most advantageous forms of production. And in the case of states, of course, it's the most advantageous forms of military equipment and military research and the like. So the competitive... what lies behind this is, to me, the coercive laws of competition which are forcing technological change and pushing it very hard. And through institutions and the formation of the university or the corporation we start to see the fantastic kind of technological innovation which starts to come on board after 1860 or so. And which then governs this whole period that Brad Delong is talking about. But the key thing here is to say there was a moment, and Marx records this, when technology became a business, when you no longer innovated to improve your own structure of production, you innovated to actually come up with generic technologies which were going to change the systems of production everywhere. Which is, of course, what computer logic does, what robotization does and so on. You can apply it to almost everything.
So this is indeed a very important story to be told here. But it has to be embedded in the notion of the totality. So that while Brad DeLong kind of says 'well, it was just research institutes for the corporations.' No it wasn't. It was this whole kind of emphasis upon technology, through the unleashing of a technological... the coercive laws of competition and the way in which relative surplus value marks a key category, becomes a business opportunity in itself, in which the business of technological change starts to become critical. And that business, of course, allows for the recuperation of some of the benefits of technological change through licensing and all the rest of it.
Now the third thing that Brad DeLong talks about is globalization. I take globalization to be an effect rather than a cause. Globalization is an effect of the rising mass of surplus which has been produced. It becomes necessary to absorb the surplus that you go global. Yes, you go global. In order to go Global you have to establish a rules-based international order which is what the leading hegemonic power of the time, the United States, does. And therefore Braudel's argument that hegemony lay with the United States. He didn't make this argument about the United States, but you would, following Braudel's argument, make the argument that the United States became hegemonic. It became hegemonic, it became the center of technological dynamism, it became the powerhouse in the global economy, it became, actually, the power that structured a form of international order that was advantageous to the United States. And the case is that free trade is, of course, established by that rules-based order. And it's a rules-based order which is advantageous to United States. And that free trade, of course, is something which is established after the break with the Bretton Woods system in, sort of, August 15th, 1971 when the U.S went off the gold standard. So here you have, I think, an interesting kind of set of questions. And these questions are therefore significant to look at. And I'd be very anxious to see the book when it comes out. And I'll probably write a review of it, which will annoy Brad DeLong no end.
There was, if you cared to follow up, a debate between Brad DeLong and myself, and you can do it on the web. It's kind of entertaining in the sense that he uses almost every rude word he can possibly find and I sort of find it amusing. And there are a lot of people who kind of piled in on the debate. So you can see what was said. But one of the themes that I took up in my response was to talk about the arrogance of the economists. The economists kind of think that... I mean when Brad DeLong kind of says 'well you know I don't understand Friedman, I don't understand Keynes, I don't understand this,' you know I could well say to him 'he doesn't understand Marx, he doesn't understand Braudel, he doesn't understand Arrighi.' And in any case there are economists around like Piero Sraffa and so on who were kind of very undermining of everything that Brad DeLong's concerned with. So he's a typical kind of hatchet man, if you like, of the economists. And specializes in being extremely rude and getting away with it. But like I say, I don't find the story that has been told by Krugman has been the interesting story. I don't find that terribly convincing in terms of understanding where, you know, where the innovation was coming from, what it was about. And I would argue that by reading the first part of Volume One of Capital - the Theory of Relative Surplus Value you've got a very, very good understanding of where technological change comes from. And in the broader issue you understand something about what happens when technological change itself becomes a commodity. It becomes a business where research institutes and so on can actually look to make money out of the licensing of their capacities and the licensing of their goods and so on.
So this is something which I think we're going to look at again. And I'd be very interested, like I say, waiting for the book to come out because then I'll have much more to say about it. And since I owe him one, as we say in the business, I shall enjoy doing a thorough review of it.
Thank you for joining me today. You've been listening to David Harvey's Anti-Capitalist Chronicles, a Democracy At Work production. A special 'thank you!' to the wonderful Patreon community for supporting this project.
Transcript by Brendan Tait
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- "Slouching Toward Utopia" by J. Bradford DeLong
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