One thing about Harvey that I have found over the years is that he tries to be very precise in his language. This makes him prolix, a trait that I can identify with. For years, I had one of his quotes as the header for my personal blog and Facebook pages: “We are, in fact, surrounded with dangerously oversimplistic monocausal explanations.” This is was an anchor for me as I try to understand the dynamics of the economic system that we live in. As students we are often taught to think of linear causes to processes – a form of “first this, then that.” I like to boil Harvey down to the idea that “It’s more complicated than that!” My current header quote is “There is only one true answer to any economic question: "It depends",” from Dani Rodrik. These two quotes illustrate my personal take-away from over a decade of studying the economy that everything is complicated and conditional in a dynamic process.
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Which is to say that Harvey’s conceptions of multiple points of failure for the capitalistic system really resonates with me. From his interviews and writings since the crisis, the big takeaway from Harvey is not that capitalism is broken. Of course, it is broken. The very concept of the business cycle, where there is growth and then suddenly not growth in spite of the same people in the world should show that it is broken, but we’ve been looking at the business cycle as a thing for over two centuries and those who question the very system that creates those cycles are people on the fringe of the discipline because there’s no Koch money in raising the red flag (or a Red Flag). Harvey points to these multiple points of failure. And here’s what really hits for me. Harvey emphasizes that at times any of these seventeen contradictions he identifies in his book on the contradictions can be a point of failure that will tip the economy over. What capital excels at is moving around the crisis points. One fails, gets resolved temporarily, but sooner or later the weakness at the other points will be exposed. This makes me think of the concerns I have had with some of the other view of crisis we have looked at over the course of the class, especially with Minsky. If the financial instability hypothesis holds, the question becomes where do we intervene to make sure that the Hedge form of debt structure is the one that predominates, and the economic system does not tip over into the Ponzi form? If you try to prevent leverage you prevent growth and the people with the megaphone will not like that, and it would be hard to get the voters to settle for a steady-state economy (though we might have to think about that as we come up to the planet’s limits on absorbing carbon pollution). Or, if you look at the structural explanations like Crotty does, you have to change the entire paradigm of the new financial architecture because the options you have to clean up the crisis is essentially handing money over for bad debt and overpriced assets because the only thing worse than bailouts is systemic failure. What Harvey’s enumeration of multiple contradictions shows is that even a judicious and thoughtful regulator under capitalism sets themselves too hard a task as the crisis points move, and what you would find yourself doing is playing regulatory whack-a-mole. As one crisis point was temporarily resolved, yet another shows its face.
What are these crisis points? Harvey identifies seven foundational contradictions, with an additional seven more “moving” contradictions along with three “dangerous” ones to make up the titular seventeen of them in his 2014 book. In an earlier talk from 2010, he identifies these contradictions at a high level based on the Marxian observation that “the circulation and accumulation of capital cannot abide limits,” and once these limits are reached, capital tries to subvert them (1). It is these points where the blockages arise, and the crises are produced. In this circulation, it cannot aim for a steady state. One of the foundational rules for capital in circulation is that it must find growth. And not just growth. It needs to grow three percent one year. The next year it needs to grow three percent on that prior year, to infinity. This can be hard to conceptualize. However, I saw recently a good example. China’s growth in the last year slowed to about 6%. This was alarming to some commentators because it represented a slowdown in the recent expansion, and this might mean a more general global slowdown. But even six percent growth means that China added the equivalent of all of Australia’s output in the last year. Looking at exponential growth it is easy to follow onto Malthusian thinking and imagine that at some point we will hit some physical limit and see that perhaps Malthus was not wrong in his predictions, just too early. These ceilings and blockages are the limits to profitability that Harvey identifies: “Any slow-down or blockage in capital flow will create a crisis” (2). They do not have to be world-historical Malthusian traps, but can also be temporary and local.
One example that Harvey uses to illustrate as potential blockage points is the need to accumulate initial capital. Actors in the financial system need to be able to assemble the financial capabilities in order to invest funds at scale. This creates the need for a financial system at all instead of the convenient fiction that firms invest without any intermediaries. This system itself can be the point of crisis, as Harvey identifies: “Crises have frequently centered on the financial sector and associated state powers either because finance is over-regulated or not innovative enough […] or because it is too powerful and to uncontrollable for the good of the system” (3). This is one of the points of contention with the last crisis. As much as we focus on the financial system as the source of the crisis, and do what we can to regulate the banks and to make sure that the shadow banks are not selling derivatives that they do not have enough capital to invest, this is not the only point of potential crisis.
While the governmental priority is looking at the financial system to fix the problems there, we can be brewing the next potential crisis not just at overreaction and over-regulation at within the financial system, but elsewhere in the economy. Harvey identifies the Labor market as a second place where we can find these structural contradictions that can lead to crisis. If labor is too organized and too powerful, it slows down the circulation of capital in the economy and can lead to crisis. We saw this as a potential cause of slowdowns in the 70s, where strike waves were met with repression and opened the way for the neoliberal turn represented by Reagan and Thatcher that we saw in the discussion of Crotty’s structural identification. This reaction of course opened the crisis of 2007-8 where the financial system crashed the economy. So, we can see with just these two examples in Harvey how the crisis points can vary and fixing an issue at one point just creates new weaknesses.
There are other choke points as well. Nature can be one. If a particular resource is needed, but it becomes hard to obtain, then the whole system can fall out of balance. Here the obvious culprit is oil, and in the future it might be cobalt. Another is the creation of demand. If consumers feel satiated, an economic system that is based on continual growth will falter. Therefore, we need new cars and phones. Ford sold the Model T for decades until General Motors started introducing yearly product cycles. The creation of the new new thing helps drive capitalism, and if that fails, then the whole system can fail (6). Ultimately, Harvey emphasizes that there is no one single point of failure, no unified point of crisis like a falling rate of profit. The analyst’s job is to try to figure out what the contradiction point is that is inhibiting the flow of capital and stopping growth (7). As Harvey points out, the crisis tendencies are never solved, they just get moved around. I likened crisis prevention to whack a mole earlier, and like in that game, the crises keep popping up with no pattern. Crisis comes, it spreads, and is treated in the ways the neoliberal governments know how to treat it, and it moves through time and space until the next crisis. It is never fully resolved. And it can’t be – “Compound growth forever is not possible” (11). We will meander from crisis to crisis until the final one hits. Or: we address these issues and move beyond capitalism towards a different form of “social coordination, exchange and control that can deliver an adequate style and standard of living for the 6.8 billion people living on planet earth” (12-13). Unfortunately, though this class and looking at previous crises and responses and theorizations about them, I’m afraid we will not be prepared for the next crisis. Or the one after that one. Or the one after that one. Causes and cures are hard to pin down.
Harvey, David. “The Enigma of Capital and the Crisis This Time” (2010) The Monthly Review
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