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A review by almartin
The Enigma of Capital: And the Crises of Capitalism by David Harvey
2.0
Picked this up because Harvey was the only person I had run into who had a plausible explanation why $500K+ condo towers were suddenly being thrown up in downtrodden parts of Brooklyn, as summarized in n+1:
Let me save you some time and distill the argument he's making here:
1) Capitalist economies expand. They generate surplus on the order of 3%/year.
2) That money needs to go somewhere. New investment opportunities are pursued! The financial sector can never stay still, as new surpluses require new outlets.
3) 3% compound growth gets really, really big over a long time horizon. Think Archimedes, give me a lever long enough, etc.
4) Need to continually expand makes the entire system prone to shocks and crises. Misallocation is inevitable when searching for new places to make use of the surplus.
Let's give Harvey his due -- as far as it goes, this is some incredibly insightful analysis as to why financial crises seem to constantly reoccur. If this was a long magazine article that laid out 1-4 and called it a day, it'd be a hugely important work. But Harvey's technical analysis is interwoven with a hazy, poorly articulated political program that calls the whole work into question. In brief:
1) He doesn't engage with any other thinker beyond Marx. Hayek gets a dismissive mention 200 pages in. Krugman and Samuelson are quoted, but only to establish that economists "didn't see it coming." Fine. But what about the bigger question about the (un)sustainability of growth? This is literally the central argument in the book.
2) His conception of the politics of "the capitalist class" is so reductive as to be childish. The interests or thinking of "the capitalist class" are a get-out-of-jail ticket that Harvey uses to resolve any apparent contradiction in his political analysis. p. 270: "But the Party of Wall Street, having won its battle to preserve tax cuts for the most affluent, then came to its senses. It decided that two years of total austerity was too much to take." Oh did it!? Not only is total unanimity in the "capitalist class" assumed, but apparently they have the ability to change course on a dime. Whatever your politics, this is nonsense, and it's plainly lazy analysis.
3) The matter of alternatives. I'll even concede to you that the "no alternative" argument is the last refuge of a scoundrel etc etc. Here is what I am saying: If you don't have an alternative to offer (and I don't think Harvey's even fooling himself with his vague call for 'political mobilization'), don't casually throw out a call for revolutionary violence. p. 250: "It would also be comforting to think that all of this could be accomplished pacifically...but it would be disingenuous to imagine that this could be s, that no active struggle would be involved, including some degree of violence. Capitalism came into the world...bathed in blood and fire...the odds are heavily against any purely pacific passage to the promised land."
Harvey’s answer was that under capitalism land becomes “a pure financial asset”; land price is a claim on future revenue treated as a present-day asset. “Mortgages,” Marx said, “are mere titles on future rent.” And Harvey completes his thought: “Land price must be realized as future rental appropriation, which rests on future labor” (our italics). The big risk, naturally, is that you will attribute to real estate far more present-day value than can later on be returned to it by labor (in the form of the portion of total income devoted to housing). A bubble occurs not when people pay for real estate with money they don’t yet have—as always happens, given the availabilty of credit—but when they pay with money they will never have, out of wages they will never receive—out of wages no one will ever receive.
http://nplusonemag.com/intellectual-situation-your-marx
Let me save you some time and distill the argument he's making here:
1) Capitalist economies expand. They generate surplus on the order of 3%/year.
2) That money needs to go somewhere. New investment opportunities are pursued! The financial sector can never stay still, as new surpluses require new outlets.
3) 3% compound growth gets really, really big over a long time horizon. Think Archimedes, give me a lever long enough, etc.
4) Need to continually expand makes the entire system prone to shocks and crises. Misallocation is inevitable when searching for new places to make use of the surplus.
Let's give Harvey his due -- as far as it goes, this is some incredibly insightful analysis as to why financial crises seem to constantly reoccur. If this was a long magazine article that laid out 1-4 and called it a day, it'd be a hugely important work. But Harvey's technical analysis is interwoven with a hazy, poorly articulated political program that calls the whole work into question. In brief:
1) He doesn't engage with any other thinker beyond Marx. Hayek gets a dismissive mention 200 pages in. Krugman and Samuelson are quoted, but only to establish that economists "didn't see it coming." Fine. But what about the bigger question about the (un)sustainability of growth? This is literally the central argument in the book.
2) His conception of the politics of "the capitalist class" is so reductive as to be childish. The interests or thinking of "the capitalist class" are a get-out-of-jail ticket that Harvey uses to resolve any apparent contradiction in his political analysis. p. 270: "But the Party of Wall Street, having won its battle to preserve tax cuts for the most affluent, then came to its senses. It decided that two years of total austerity was too much to take." Oh did it!? Not only is total unanimity in the "capitalist class" assumed, but apparently they have the ability to change course on a dime. Whatever your politics, this is nonsense, and it's plainly lazy analysis.
3) The matter of alternatives. I'll even concede to you that the "no alternative" argument is the last refuge of a scoundrel etc etc. Here is what I am saying: If you don't have an alternative to offer (and I don't think Harvey's even fooling himself with his vague call for 'political mobilization'), don't casually throw out a call for revolutionary violence. p. 250: "It would also be comforting to think that all of this could be accomplished pacifically...but it would be disingenuous to imagine that this could be s, that no active struggle would be involved, including some degree of violence. Capitalism came into the world...bathed in blood and fire...the odds are heavily against any purely pacific passage to the promised land."