John Bellamy Foster at Econvergence

More from Econvergence. An amazing talk by John Bellamy Foster.

At the Friday session of Econvergence, John Bellamy Foster spoke at 11 AM, as a workshop named, “The Crisis of Capital: Economy, Ecology, and Empire”. Mr. Foster is the editor of the Monthly Review Press and Professor of Sociology at the University of Oregon, Eugene. The Monthly Review has been the voice of independent Marxism for over half a century and is one of, if not the, primary sources for Marxist analysis in today’s world. His new book is The Ecological Revolution. What follows is a loose paraphrase of his lecture in narrative form, taken from my notes. All ideas are Mr. Foster’s, as is the narrative structure.

Try to think back slightly less than a decade, 2000. We were celebrating the millennium, in an enormous celebration of a new globalized capitalism. It was a new world order, the end of conflict. In the press, there were countless articles saying we had charted the path to endless prosperity. Ben Bernanke in 02 said we had eliminated the business cycle and we had entered “the great moderation”, in which everything works as it should and profits are endless. It was a celebration of capitalism overcoming communism, evidenced in the rise of the stock market to this level, then this level, ad infinitum. It was a celebration of US dominance worldwide, financial and militaristic.

Of course there were protests, notably Seattle 1999, and the roughly simultaneous rise of the anti-globalization movement. But in a sense, we truly were in the end of history, as defined by Francis Fukuyama at the end of the Cold War in 1989. There would be no more crises, and socialism was dead. The ecological issue was moving forward, with the signing of Kyoto by the Clinton administration. Things were looking wonderful for the US in the new millennium.

All that seems ancient history now. The signs were there, if you knew how to look for them under the shield of media propaganda. In the summer of 2000, we had a stock market crash due to the bursting of the high tech bubble. This was followed by a mild recession. The economy recovered very quickly because of the great bubble transfer, creating the housing bubble to revise the economy and correct what was lost by the bursting of the high tech bubble. There was not rapid growth, simply an escaping of the recession. Then came Bush.

Shortly after his “election” and the 9/11 event, by 2003, we were invading Iraq. For many in the activist community and in left circles, the main issue of contention with US hegemony became empire. People across the country and to an extent the rest of the world (those who forgot) rediscovered the US is an empire. In the lead up to the war, the country and world experienced the biggest peace movement in decades. The crisis of US society was now a war crisis, an empire crisis.

At the same time, something had gone wrong seriously in the global environmental movement. It was obvious in 2002, when the US did not attend the World Council on Sustainable Development. There was no acknowledgement of global warming by the Bush administration, and a refusal to sign the Kyoto treaty. At roughly the same time, it was discovered that the darkest fears of the climate change scientists of the 90s were being borne out. Climate change was becoming a far more vast and potentially fatal problem than previously thought. Now, many scientists and scholars had argues for a long time that the ecological crisis of climate changing changes everything else in the ecological system. But the acknowledgement of this as fact in the face of these changes was a dramatic turn. The ecological crisis made us globally realize we will destroy civilization and life as we know it on the planet if we do not correct course.

Then, in the summer of 07, the financial crisis began to rear its head. By the fall of 08, the crisis was full fledged. Initially, it was as deep a crisis as Great Depression, and though some course correction has been undertaken, we are still in the midst of it. The financial practices that created this current problem have not disappeared, indeed, they have continued without much cessation.

The three Es, ecology, economy and empire are endemic of a greater crisis: the crisis of capitalism. The empire crisis is still here, Obama ran on this crisis as a change. But we can see the war has stepped up in Afghanistan, and soon there will be more troops in Iraq and Afghanistan than in Bush’s eight years.

The ecological crisis, too, still threatens us, The ultimate environmental crisis threatening our and half the world species has made it so within half a century our species’ comfortable survival is over without a substantial change. This environmental crisis cannot be related to anything beyond prehistory when humanity was struggling simply to survive in a harsh world.

The three Es are simultaneous, we are facing the planet, the war and the financial crises at the same time. Is it coincidental? Let us consider the possibility that this is the crisis of capitalism. In capitalism, of course, downturns and crises are normal and have been for hundreds of years. So, in light of this natural law of capitalism, we are told this is normal and everything will be fine. But unlike the preceding crises, this is not simply a crisis IN capitalism but a crisis OF capitalism. This crisis of capitalism began in the 70s and we are in the middle of it now, and it is getting worse and worse. The problems of empire, ecology, and economy are all related to crisis of capitalism.

The metaphor of the free market is gone. The system is facing internal and external limits-not only abstracts but also material reality. It is not only ecology, empire and capitalism as they exist in the US and Europe, but also the entire structure of inequality that is the problem. In the past two years, we have seen a hunger spike, a food crisis, the biggest in decades at the least. There are over a billion people hungry worldwide. This inequality fuels itself by continuing and maintaining structures that keep the majority wanting and an opulent minority having. Hunger, though one of the worst extremes of the problem, is simply the most relative explanatory example of this problem, and is related to imperialism, such that those who are hungry must continually defer to those in power to merely survive.

There are fundamental questions of wealth in this society. The economic crisis, in which we live right now, has made this apparent to even the most brainwashed observer. There is a recovery in the works, perhaps, which will result in inventories restocked, profits up, and some expansion of markets for US and European companies. But the underlying problem is severe. Unemployment in the US and most of world is way, way up. The new official unemployment data shows 9.8 percent unemployment, but real unemployment, including part time workers who want and need full time work, is over twice that. The number of discouraged workers is rising even faster.

No economist thinks any recovery will be fast. With consumers unable to spend, with investment down, it will be a sluggish recovery if at all. The important thing to understand is that growth rate, the real one adjusted for inflation and time, has slowed down. It was slower in the 70s than 60s, slower in the 80s and 90s than 70s and slower in the 00s than 90s; and now, in 08 and 09, we are experiencing the deepest economic crisis since depression. So how have the top tiers of society and industry dealt with the continuing reality that the real rate of growth has been slowing down? They adapted neoliberalism, a strategy adopted at the top of this society to deal with this type of crisis.

Neoliberalism operates like this- if the pie is not expanding, where do your profits come from? You can only get them by changing distribution levels of wealth, which becomes a zero sum game. In order for this strategy to be effective, you must reduce income shares elsewhere in the economy to support your income share rising, illustrated by the fact that real wages in 07 or 08 were at same (adjusted) level in 1967. This means that if you were born in 1968 or later, real wages have not risen in your lifetime, as a whole. At times, like the tech bubble boom, they may have risen, but as a whole have fallen further than they have risen. In this same time period, wealth, productivity and profit have gone up, but wages have not.

The economic conditions we currently face include creeping economic stagnation. This idea of creeping stagnation comes from an Keynesian economic argument that advanced capitalist economies have tendency toward stagnation, as investment as relative to GDP goes down. It is a byproduct of the maturity of the economy. In a young economy, you build means of production from scratch, so investment, employment and consumption are never down for long. Once the infrastructure is in place, the economy is mature, and in a mature economy investment dries up. The markets for production are lacking in a mature economy, and corporations will not invest unless they believe there is a use for their product. With no use for it, there is nowhere to sell it. And if corporations and investors do not see where they will sell their products, they will not invest. Even if there is a market, at times the suspected profit to new investment is too low, and this also leads to a lack of investment.

There is a monetary surplus due to inequality. This surplus is caused by the savings at the top of the society, once the investment opportunities are not as bountiful, those who have reaped their profits in the building of the economy see no valid reason to continue to invest. And of course, redistributing the wealth around society as a whole, even if it meant greater consumption and thus a larger and more profitable economy, is completely unacceptable. So if they do not invest it, what do they do? Their answer, the answer that provides continual profits, is to take the surplus and speculate with it in the financial sector. Speculation on the rise of asset prices, such as real estate and stock is known as financial investment, which is leveraged with more and more borrowing.

In capitalist economies, it used to be bubbles were at peak of a boom, but in the last decades they have been speculative financial balloons which lift the economy for a time and spur growth- though not rapid growth. When these balloons burst, we were told it was the fault of the financial class and their irresponsible practices. As far as this goes, it is true in that the bursting of the bubble is the direct cause for the current crisis. But even before the bubble was lifting the economy, the economy was relatively stagnant. Real wages had not risen for decades, yet even though wages were stagnant, more people working stablilized household income. Eventually, however, declining real wages caught up with them and the only way people could keep their consumption going was through borrowing. In this way, consumers were brought into financialization by mortgage leverage, as a logical next step to their necessary consumption being fueled by money they did not have. This debt was increasingly securitized, as globally the middle and lower classes were encouraged to borrow on homes and take cash for equity, but eventually the bubble became unsustainable and burst. This expansion of debt had become necessary to fuel the economy, expressed in the sub-prime market, in which the lower quality debt resides.

The US government has committed 13b in loans, subsidies and buyouts on behalf of financial interests to be delivered within a year. This amount of money is about equal to the GDP of the country. The government expects this back, or at least the majority of it. The emphasis on bailing out banks is trying to get financialization going again, the real economy is not a priority. When the automakers came, hat in hand for help, they were laughed at, but bankers were revered and knelt to by the political class, and given pretty much everything they asked to. The distinction of treatment between the real economy, which actually produces physical products, and the financial economy, which produces nothing but false inflated money, tells a lot about the state of our political process currently.

But we are likely to have an even bigger problem growing in our world, the ecological crisis. The key to understanding the ecological crisis is that the biosphere is limited and the world economy continues to grow, using up resources that are becoming scarcer and scarcer. But accumulation continues, building up the stores of private riches- after all, we must continue the growth of the economy. The problem, in a nutshell, is the economy gets bigger while ecosystem stays the same. The problem is not CO2- it gives us life, it is part of the bio-geo-chemical process of the planet. The real issue is can we get the treadmill of accumulation to stop, and how. On the one hand, if the economy slows, the planet will be that much better, but people will starve.

Marx said labor is how humans relate to nature. With the industrialization and urbanization starting in the 19th century, food and fiber was taken from the country and given to cities, where waste accumulates and does not return to the soil in the natural sustainable fashion. This results in the soil becoming sick in rural areas, leading to the need for guano, then later chemical fertilizers to create the conditions necessary for the continuance of large scale agricultural production. The risk to nature from our society means we are operating on an ecological balloon, as ancient sunshine, or petroleum, is being used up and destroying the earth and the subsequent survival capabilities for future generations to follow. We cannot deal with this unless we deal with the system.

Will technology save us? This idea is based on the idea that magically, we, with less throughput, can survive at our current level of comfort and gadgetry. This is a flawed premise to begin with, because the increase of efficiency expands the system and increases private wealth and energy use. The hope for our society to somehow innovate or invent our way out of this crisis is the wrong direction.

The empire crisis did not go away with the election of Obama, Obama posing as a peace candidate was laughable- the system is operating much the same as before. With Obama’s expanding of the wars in Iraq and Afghanistan, the troop level in both theaters will be more than it was when Bush was in power. This increase, coupled with the incursions into Pakistan and the threats to Iran, increase the world conflict possibility. In addition, there are seven new bases going into Colombia, which just happens to border Venezuela and Ecuador. The same week we announced these new bases, we announced tacit approval for coup in Honduras. Honduras, as well as Venezuela and Ecuador, are very critical of neoliberalism. The State Department told the coup leaders to make the coup look legal so we could be justified in our support.

Empire comes from the fact that capitalism is a system built into states, and stability comes from hegemony. Thus, in the world as analogous to a wild frontier, the US is the sheriff and Europe and Japan are the posse. This is a paraphrased quote from a Bush official who is now the head of the Council on Foreign Relations. The posse sometimes lynches other countries, and sometimes the posse acts as vigilante, taking the law into their own hands. The US is still the hegemonic power, though wounded, and, like a wounded elephant, is very dangerous. The wounds come from these factors, among others- the US imports most oil and has a large trade deficit in general. Thus, the US needs to monopolize main sources of power. Understandably, not all the other countries like this status quo, increasing world tension, but the policy of Washington is to maintain US hegemony by any means possible. Increasing world tension, the US has upped its arms sales from one-half of two-thids, meaning two of every three ordinance murders in the world are directly caused by US manufacturing. Add to that the fact the US spends as much on its military as the rest of the world combined, the question of why becomes urgent. Are we attempting to stimulate the economy by production?

The paradox of wealth is a complicated issue, but let’s try to put it in simple terms. In classical economics, Lord Lauderdale, David Ricardo and Karl Marx make a distinction between use and exchange value. If we take exchange value as the definition of wealth, wealth is everything in the world that is useful to human beings, anything whether abundant or scarce has intrinsic value in the world. But private riches demand scarcity, demand exchange value, monetary value, profits. In order to have exchange value something must be scarce. Therefore, in order to create wealth privately, scarcity must be created. We live in a system where private riches can expand by destroying public wealth to create the scarcity necessary for the increase of the private definition of wealth; in other words, if something is scarce by overuse, then people have become rich by destroying public wealth.

These definitions have created great controversy in the study of economics, which threw out value as use value and only define it as exchange value. To economists, then, the extension of private riches and the expansion of wealth are the same thing, leading to the Lauderdale paradox, in which one must create scarcity and promote private wealth, yet increasing wealth by this definition is only increasing private riches. Economically, if all the mortgage debt defaulted, then some would win and some would lose. Undoubtedly, canceling the mortgages would make the majority of people better off.

The question of conservation as opposed to privatization is not helped by these absurd notions of economists that have influence on the climate debate. William Nordhouse, a climate economist, in 1997 said if we have a failure of agriculture because of climate change, it would have little effect on economy because agriculture is only three percent of GNP. Wilford Beckerman agreed, adding that even a drop of fifty percent would only be a drop of one-point-five percent of GNP. This is ludicrous. Even a twenty-percent drop in agricultural output would result in food shortages across the world, and prices would go up- this is a no brainer to any six-year old. These economists have no idea that people need food, it is not real to them because they see the world in the abstract, as numbers, not as reality. Nordhouse in 1993 said we should pack up our tools because climate change would not have effect on the economy, if any effect, it might cause GDP to fall by one or two percent. A group of natural scientists responded, yes, but we’ll all be dead. Civilization would collapse. These statements illustrate the fact that the system profits on scarcity and treats nature as free good, and has no fundamental understanding of biological realities.

How can you have such disparity when your country is so wealthy? When everything is measured in economic cost and numbers, reality is disregarded for economic efficiency. The American health care system is a good illustrative example of this. If someone dies because they don’t have health insurance, it is no cost to the real economy, rather it is a cost to the social economy. Preventable health care deaths are seen as external costs that are not measured. In the US, we do not have a health system, we have a health market, and as a health market, we have a very efficient system, because of the profits, not the level of care provided. As far as quality of care worldwide, the US is around thirtieth in the world, passed by Cuba, one of the poorest countries in the world- but they have different priorities there, these priorities do not include capitalism as practiced by US.

So what is happening in China? The capitalist class practices capitalism through the auspices of the state communist party. The common people there are more exploited than anywhere imaginable. And China is facing major struggles. We should expect societal problems to arise and continue to arise. China is not likely to be an example of positive change. China must change course.

And what is happening in Latin America? Venezuela and Bolivia are attempting to create a twenty-first century model of socialism, but whether they succeed or not is up in the air. The imperial hand, or foot, is coming down hard, attempting to quash the idea that it is possible to make the revolution by and of the people and stop it spreading.

Starbucks, application of the three Es to their crisis in the company, in which they have began to use instant coffee instead of brewed. Can we make this analogous to our present day situation? Marx starts with the commodity, now why would he do this? He does this because it is the cell form of the capitalist system. Take any commodity, coffee at Starbucks or a car at GM- examine it, you find the basic social relations of the system. The reason instant coffee is being used by Starbucks is it is cost effective. You are attempting to reach an increasingly impoverished population with your product, the demand for which has gone down.

What is the real cause absence of growth of production? The issue of the economy fundamentally is the rate of growth of the entire economy. It is possible to have a stationary economy, you do not need economic growth to improve peoples lives. Even with no growth, with a jobs program, people would have jobs, this would not necessarily grow economy substantially, but people would be better off as a whole. But mere growth is not satisfactory to those at the top if the distribution is not in their favor. In the 1980s the top 1 percent were equal to the lower 80 percent, but recently it has become twice as much as the bottom 80 percent.

Is the economy recovering? Look at the trend rate of growth- what we are seeing is a very stagnant rate of growth across the board. This rate is getting worse and what people want to be diminishes as far as expectations go, the reality simply is putting goals outside of peoples’ reach. While the economy can be propped up by military or state, this is not enough. The financial system creates bubbles of growth, but as we have seen, they pop, and though the state will intervene to stop full-on depression, it will not stop a recession. Add to this in the factors that in a stagnant economy jobs are hard to get and wages are held down to continue the distribution in a favorable way to the rich. We need a new economy that puts people first. There are people willing to work, jobs to do.When we look around the US we can see the enormous 3E crisis, and it may seem people aren’t doing anything. But there is more revolt going on then we are told.

Can socialism replace capitalism? First off, labor is corrupt. It has become business unionism, run by neoliberals. Real labor in the US has been crushed ever since McCarthy. The real problem lies with the labor movement itself, which has become part of the ruling coalition. This is, of course, an illusion. Regardless of the reality, the labor unions want to remain junior partners in the ruling coalition, and thus do not represent their constituents. The current labor movement has abandoned the majority of the working Americans. The labor movement supports imperialism as well. So we can, and should, say goodbye to them and start anew.

The economics of scarcity shapes our consciousness and our influences our actions-are there any economists who believe in creating a value based economy and creating money to match the services?There are economists on the left who believe the answer is socialism, the kind of twenty-first century socialism you see being developed in Venezuela. This involves moving from a monetary based exchange to a value based exchange, a socialism of a kind, but a new socialism. We also need an ecological revolution. Ecology offers the potential for a way in which we place value and what we consider wealth to sustain ourselves and the world around us. No country owns the earth, not even all the people own the earth, they are but trustees- Marx (paraphrased). The only part of the national wealth we all take part in is the national debt. We live in a failed system, a system that cannot provide food for its people. It will destroy us all if we don’t decide to be creative to create the kind of destiny for humanity and future generations we would like to see.