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Overripe Economy: American Capitalism and the Crisis of Democracy
Capitalism is in crisis. Overripe Economy uses a historical view to explain how we got here and why. Taking readers through the history of American capitalism--from the ruthless competition of the nineteenth century to the maturation of industrial capitalism in the early part of the twentieth and on into today’s finance-ridden decline--Alan Nasser lays out here in damning detail why the persistent austerity of financialized capitalism is the inevitable outcome of the evolution of the American economy. Capitalism, he argues, ultimately presents us with two persistent austerity, declining democracy, and a privatized state, or a polity and economy characterized by genuine economic democracy.
- GenresPolitics
240 pages, Paperback
Published June 20, 2018
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August 14, 2020
This reads like the political economy part two of the book on fascism which I have just finished. “Overripe Economy. American Capitalism and the Crisis of Democracy” by Alan Nasser (Pluto Press, 2018) essentially argues that the current form of capitalism and associated levels of social dislocation can only be saved at the expense of democracy. Either we transition to some sort of democratic socialism or we are ‘sliding’ deeper into authoritarian, militarized capitalism with varying degrees of fascist elements – a state of permanent austerity and state repression. Importantly, no economic crisis can spell the end of capitalism, only organized working class politics can. The latest on the militarization of the streets in the US must be read in this post global financial crisis authoritarian neoliberalism context.
A few takeaways:
1. While this core argument has been made from a number of angles, the originality of this book is that the core argument is that the ‘permanent state of austerity and state repression’ is the ‘natural outcome’ of mature capitalism. This in turn is based on the concepts of ‘economic maturity and disaccumulation’. Through a political-economic analysis of US capitalism of the 19th century, maturation of industrial capitalism in the 1920s, the rise and fall of the Golden Age and ensuing decline towards the modern area, the book shows that investment was the driving force of capitalism only during industrialization up to 1911 – after this net investment has atrophied and consumption became the key propellent of economic growth.
2. I guess you’ll find this in one way or another in Marx’s theory on the organic composition of capital, but the argument is that once capitalism matured (the book is looking here at the period 1919-1929), a given output can be produced with a smaller amount of capital (as the production of capital goods has also become more productive, driving down the costs of capital good and ever smaller ‘net investment’ required to increase productivity), and a given quantity of capital required a declining amount of labour. As a result both capital and labour were expunged from the production process. As a result, the share of profits in national income during this period grew larger, even as profit became increasingly unnecessary to finance investment in capital and labour. Towards the end of the 1920s, the bulk of surplus profits was increasingly channeled from production to financial speculation. The same stories we are hearing today where there is a decline in private investment (forget about public investments in neoliberalism) despite record profits. This is also why we are again seeing levels of inequality not seen in a century despite unprecedented levels of productivity.
3. Importantly, this pattern is characteristic of mature, unregulated and weak-labour capitalism. Given that surplus is not being invested in either production, wages (low wages), or public consumption (low tax), this will a) lead to insane levels of inequality and poverty and b) a permanent state of austerity and repression to keep the immiserated folks in check.
4. I guess also somewhat foreshadowed in Marx’s Capital (lol), if economic growth is primarily driven by private consumption expenditures, then stagnant wages and ever lower public consumption due to fiscal austerity create repeated crises of overinvestment and underconsumption. There’s also some interesting stuff on how the shift from investment to consumption as the driving force of economic growth in the 1910s and 1920s century created consumerism (and advertisement) and increasingly credit financed consumerism to disguise low wages. Fun fact, in 1910 10 per cent of total retail was financed by credit, by 1929 this went up to 50 per cent. 1928 was the peak of inequality, with 0.1 percent of the families at the top of received as much as 42 per cent of families at the bottom. Sound familiar?
5. Then there’s an interesting chapter on the 1933 New Deal which initiated a temporary shift towards increased public investment and public employment to temporarily address the above mentioned structural contradictions (without going far enough to transform these). It also shows that Roosevelt remained a fiscal conservative and did not agree with Keynes (who reached out to him on multiple occasions) The introduction of various banking regulation acts, especially Glass Steagall which limits commercial banks’ ability to trade in securities, was among the most effective measures in curbing financial speculation. The Glass Steagall was then repealed in 1999 under Bill Clinton which paved the way for the 2007/8 Global Financial Crisis. More on the Democratic Party and the duopoly in a moment. Importantly, the success of the New Deal was also an outcome of labour militancy – this provides important entry points for today – change is not going to come from the political establishment.
6. Scary side note which I wasn’t aware of: during the New Deal a class putsch was in the making, with the aim of capturing the state apparatus by replacing the Roosevelt administration with a regime modeled on Mussolini’s Italy. Specifically, in November 1934 a congressional committee discovered that about 24 of the foremost members of the economic elite hatched a generously funded plot to effect a fascist coup – plotters included prominent families, including Rockefeller, Mellon, Bush, Pew and enterprises like Morgan, Dupont, General Motors Corporation and others. They planned to assemble a private army to topple Roosevelt and put the real executive power in the hands of a business-military coalition. Anyway, there was a plot twist and all came out – Wikipedia it 😊
7. Chapter 5 then provides a very insightful overview of the rise and fall of the golden age, showing among other things how from the mid-1960s, the beginning of the end of the golden age, when total debt started to grow faster than the economy. Fun fact: when debt grows faster than GDP, debt has a diminishing impact of economic growth and it takes an increasing amounts of debt to generate an additional dollar of GDP. In the 1970s, an additional dollar of debt increased GDP by 60 cents – in the early 2000s the same amount of debt generated 20 cents of GDP. Mortage debt which stood at 46 per cent of GDP in the 1990s had climbed to 73 per cent of GDP in 2008 – the year of the great meltdown. In other words – and critical to understand the decline of the golden age – both the economy and working households had during the entire post-war period become addicted to debt in order to maintain middle-class living standards. The book (and other Marxists) argues that the golden age and historically high living standards and low inequality were a felicitous accident, the result of a confluence of a number of factors of which all but two – union strength and mounting debt – were inherently temporary.
8. Chapter six provides an excellent account of the ascent of neoliberalism, the financialization of everything and essentially business’s successful capture of the state. Most people I talk to have not really understood this. Some stats, shall we: in 1971 only 175 firms had registered lobbyists in Washington, by 1982 nearly 2,500 did. The number of PACs increased from below 300 in 1976 to 1,200 ten years later. Previously a change in power between Republicans and Democrats meant a shift in policy, after the successful neoliberal coup, neoliberal ideology and financialized policy was consensus in both parties – making voting and electoral politics largely irrelevant to the fundamental organization of the US political economy. Class militancy makes a difference. Spciety’s transformation wont come from the Democratic leadership.
9. The book shows how Carter was the first Democratic neoliberal , liberal on social issues, but fiscally conservative. It was pre-Reagan Democrats who first led the fully fledged assault on postwar liberalism. Carter got the ball rolling, Reagan ran with it and finally Clinton made it the mantra of the Democratic Party. Obama then in 2008 prevented the opportunity to use this historic crisis for social transformation and put wall street in charge, resulting in unprecedented levels of poverty and inequality post 2008. Biden and Harris stand for exactly the same neoliberal Democratic Party. No need to go over this again 😊
10. The rest of the post 2008 is history – austerity, poverty, and elites becoming increasingly fearful of ‘IMF riots’. So predominant was the political economic power of elites that during the first three years of Obama’s economic ‘recovery’ (2009-2012) 116 per cent of income growth was taken by the top 90 per cent. Meaning that the income of the bottom 90 per cent actually fell during this economic recovery - a historic first. We have now reached the highest level of inequality on record since 1913 (after declining rapidly after the war, inequality has grown since 1979).
11. You can read all of this inequality stuff in Piketty, if you have the same to go through the 1,000 plus pages! The bottom line is political: the US is not only an oligarchy but a plutocracy with wealth concentration into dynasties. We are approaching 19th century dimensions of dynastic rule on a global scale. Trump is really one of the expressions of this wider structural change.
12. Importantly for the rise of authoritarianism and fascism: the global increase of mass surveillance and militarization of society, especially in the US, are anticipations of the steps capitalist elites are prepared to take to suppress the resistance embodied in serious social dislocation. A coordinated corporate-military mobilization to suppress dissent and predictable social disorder attending austerity-as-normal portends fascism.
13. Conclusion: the remedy is the democratic and egalitarian deployment of capitalism's two essential resources which now remain idle: investable capital and under-employed labour. The only progressive way forward is the appropriation of the private surplus by the organized working population commanding a genuinely democratic state, and its use to enhance social and private consumption; the spreading of the labour force over the relatively few remaining jobs, with a greatly reduced work week, raised wages and provide for expanded and improved social consumption (education, health, green infrastructure etc). Economic growth in the future must be led by public investment and wages. Alas, these conditions cannot be met under capitalism (for structural causes as shown in the book and in Capital :-). This is the strongest case for the democratization of both the political and and the economic sphered, i.e. for Democratic Socialism.
14. A historic change in very many americans' political consciousness has made it now possible, for the first time in american history, for a great many working people to discuss the merits of socialism.
15. The emergence of both Tea party and Green party and the Bernie Sanders movement attest that a good number of Americans' conviction that greater possibilities are desirable and possible and that the current duopoly will not permit their realization. The Republican party was defeated by Trump and the Reaganized Democratic Party no longer sustains the hopes of the working people. Most voters now identify as Independent (even if they vote for the 'lesser evil') - Americans' political identity is in the process of transformation. With this comes transformative social and political possibilities unknown since the 1930s. Bernie may have lost against the big capital financed Democratic Party machinery but change is underway with many socialists winning seats in Congress and at state levels. Transformation is in the cards, but so is fascism.
A few takeaways:
1. While this core argument has been made from a number of angles, the originality of this book is that the core argument is that the ‘permanent state of austerity and state repression’ is the ‘natural outcome’ of mature capitalism. This in turn is based on the concepts of ‘economic maturity and disaccumulation’. Through a political-economic analysis of US capitalism of the 19th century, maturation of industrial capitalism in the 1920s, the rise and fall of the Golden Age and ensuing decline towards the modern area, the book shows that investment was the driving force of capitalism only during industrialization up to 1911 – after this net investment has atrophied and consumption became the key propellent of economic growth.
2. I guess you’ll find this in one way or another in Marx’s theory on the organic composition of capital, but the argument is that once capitalism matured (the book is looking here at the period 1919-1929), a given output can be produced with a smaller amount of capital (as the production of capital goods has also become more productive, driving down the costs of capital good and ever smaller ‘net investment’ required to increase productivity), and a given quantity of capital required a declining amount of labour. As a result both capital and labour were expunged from the production process. As a result, the share of profits in national income during this period grew larger, even as profit became increasingly unnecessary to finance investment in capital and labour. Towards the end of the 1920s, the bulk of surplus profits was increasingly channeled from production to financial speculation. The same stories we are hearing today where there is a decline in private investment (forget about public investments in neoliberalism) despite record profits. This is also why we are again seeing levels of inequality not seen in a century despite unprecedented levels of productivity.
3. Importantly, this pattern is characteristic of mature, unregulated and weak-labour capitalism. Given that surplus is not being invested in either production, wages (low wages), or public consumption (low tax), this will a) lead to insane levels of inequality and poverty and b) a permanent state of austerity and repression to keep the immiserated folks in check.
4. I guess also somewhat foreshadowed in Marx’s Capital (lol), if economic growth is primarily driven by private consumption expenditures, then stagnant wages and ever lower public consumption due to fiscal austerity create repeated crises of overinvestment and underconsumption. There’s also some interesting stuff on how the shift from investment to consumption as the driving force of economic growth in the 1910s and 1920s century created consumerism (and advertisement) and increasingly credit financed consumerism to disguise low wages. Fun fact, in 1910 10 per cent of total retail was financed by credit, by 1929 this went up to 50 per cent. 1928 was the peak of inequality, with 0.1 percent of the families at the top of received as much as 42 per cent of families at the bottom. Sound familiar?
5. Then there’s an interesting chapter on the 1933 New Deal which initiated a temporary shift towards increased public investment and public employment to temporarily address the above mentioned structural contradictions (without going far enough to transform these). It also shows that Roosevelt remained a fiscal conservative and did not agree with Keynes (who reached out to him on multiple occasions) The introduction of various banking regulation acts, especially Glass Steagall which limits commercial banks’ ability to trade in securities, was among the most effective measures in curbing financial speculation. The Glass Steagall was then repealed in 1999 under Bill Clinton which paved the way for the 2007/8 Global Financial Crisis. More on the Democratic Party and the duopoly in a moment. Importantly, the success of the New Deal was also an outcome of labour militancy – this provides important entry points for today – change is not going to come from the political establishment.
6. Scary side note which I wasn’t aware of: during the New Deal a class putsch was in the making, with the aim of capturing the state apparatus by replacing the Roosevelt administration with a regime modeled on Mussolini’s Italy. Specifically, in November 1934 a congressional committee discovered that about 24 of the foremost members of the economic elite hatched a generously funded plot to effect a fascist coup – plotters included prominent families, including Rockefeller, Mellon, Bush, Pew and enterprises like Morgan, Dupont, General Motors Corporation and others. They planned to assemble a private army to topple Roosevelt and put the real executive power in the hands of a business-military coalition. Anyway, there was a plot twist and all came out – Wikipedia it 😊
7. Chapter 5 then provides a very insightful overview of the rise and fall of the golden age, showing among other things how from the mid-1960s, the beginning of the end of the golden age, when total debt started to grow faster than the economy. Fun fact: when debt grows faster than GDP, debt has a diminishing impact of economic growth and it takes an increasing amounts of debt to generate an additional dollar of GDP. In the 1970s, an additional dollar of debt increased GDP by 60 cents – in the early 2000s the same amount of debt generated 20 cents of GDP. Mortage debt which stood at 46 per cent of GDP in the 1990s had climbed to 73 per cent of GDP in 2008 – the year of the great meltdown. In other words – and critical to understand the decline of the golden age – both the economy and working households had during the entire post-war period become addicted to debt in order to maintain middle-class living standards. The book (and other Marxists) argues that the golden age and historically high living standards and low inequality were a felicitous accident, the result of a confluence of a number of factors of which all but two – union strength and mounting debt – were inherently temporary.
8. Chapter six provides an excellent account of the ascent of neoliberalism, the financialization of everything and essentially business’s successful capture of the state. Most people I talk to have not really understood this. Some stats, shall we: in 1971 only 175 firms had registered lobbyists in Washington, by 1982 nearly 2,500 did. The number of PACs increased from below 300 in 1976 to 1,200 ten years later. Previously a change in power between Republicans and Democrats meant a shift in policy, after the successful neoliberal coup, neoliberal ideology and financialized policy was consensus in both parties – making voting and electoral politics largely irrelevant to the fundamental organization of the US political economy. Class militancy makes a difference. Spciety’s transformation wont come from the Democratic leadership.
9. The book shows how Carter was the first Democratic neoliberal , liberal on social issues, but fiscally conservative. It was pre-Reagan Democrats who first led the fully fledged assault on postwar liberalism. Carter got the ball rolling, Reagan ran with it and finally Clinton made it the mantra of the Democratic Party. Obama then in 2008 prevented the opportunity to use this historic crisis for social transformation and put wall street in charge, resulting in unprecedented levels of poverty and inequality post 2008. Biden and Harris stand for exactly the same neoliberal Democratic Party. No need to go over this again 😊
10. The rest of the post 2008 is history – austerity, poverty, and elites becoming increasingly fearful of ‘IMF riots’. So predominant was the political economic power of elites that during the first three years of Obama’s economic ‘recovery’ (2009-2012) 116 per cent of income growth was taken by the top 90 per cent. Meaning that the income of the bottom 90 per cent actually fell during this economic recovery - a historic first. We have now reached the highest level of inequality on record since 1913 (after declining rapidly after the war, inequality has grown since 1979).
11. You can read all of this inequality stuff in Piketty, if you have the same to go through the 1,000 plus pages! The bottom line is political: the US is not only an oligarchy but a plutocracy with wealth concentration into dynasties. We are approaching 19th century dimensions of dynastic rule on a global scale. Trump is really one of the expressions of this wider structural change.
12. Importantly for the rise of authoritarianism and fascism: the global increase of mass surveillance and militarization of society, especially in the US, are anticipations of the steps capitalist elites are prepared to take to suppress the resistance embodied in serious social dislocation. A coordinated corporate-military mobilization to suppress dissent and predictable social disorder attending austerity-as-normal portends fascism.
13. Conclusion: the remedy is the democratic and egalitarian deployment of capitalism's two essential resources which now remain idle: investable capital and under-employed labour. The only progressive way forward is the appropriation of the private surplus by the organized working population commanding a genuinely democratic state, and its use to enhance social and private consumption; the spreading of the labour force over the relatively few remaining jobs, with a greatly reduced work week, raised wages and provide for expanded and improved social consumption (education, health, green infrastructure etc). Economic growth in the future must be led by public investment and wages. Alas, these conditions cannot be met under capitalism (for structural causes as shown in the book and in Capital :-). This is the strongest case for the democratization of both the political and and the economic sphered, i.e. for Democratic Socialism.
14. A historic change in very many americans' political consciousness has made it now possible, for the first time in american history, for a great many working people to discuss the merits of socialism.
15. The emergence of both Tea party and Green party and the Bernie Sanders movement attest that a good number of Americans' conviction that greater possibilities are desirable and possible and that the current duopoly will not permit their realization. The Republican party was defeated by Trump and the Reaganized Democratic Party no longer sustains the hopes of the working people. Most voters now identify as Independent (even if they vote for the 'lesser evil') - Americans' political identity is in the process of transformation. With this comes transformative social and political possibilities unknown since the 1930s. Bernie may have lost against the big capital financed Democratic Party machinery but change is underway with many socialists winning seats in Congress and at state levels. Transformation is in the cards, but so is fascism.
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