on October 5, 2012
David Harvey begins his book, The Enigma of Capital: And the Crises of Capitalism, by looking at the financial crisis that first raised its ugly head in 2007. He examines a sequence of seemingly unrelated events that occurred over the last thirty years or so - including oil crises, debt disasters, real estate and dot com bubbles and their bursts, along with multiple international bailouts - then introduces the reader to some of the factors that might help expose their underlying connections. Harvey doesn't see these individual events as the cause of the current crisis, but instead looks at the big picture through the lens of Marxist philosophy to see whether they might be the result of a neoliberal system that fostered a new surge of capitalistic greed, and the `moral hazard' that accompanied it, beginning in the 1970s. In the process, he points out that crisis is an inevitable feature in capitalist economic growth, which, when tied to capitalism's need to maintain a minimum 3% per year profit surplus for reinvestment, problems with excess capital accumulation can, and indubitably did, cause problems that affect the economy today. According to Harvey's analysis, an inordinate amount of this surplus capital was not reinvested in the production of goods or services, but rather became the catalyst for a dangerously expanding financials-based market. This diversion of capital produced two results; 1) it increased the wealth of those in the elite capitalist class and, 2) decreased the wealth of those in the lower classes. Throughout the book, Harvey uses Marxist theory to reiterate how capitalism's weaknesses are observable when the flow of capital is changed or diverted from a production-focused flow (which is more likely to bring some amount of wealth to all involved), to one that serves only to build wealth for one group at the expense of another.
Harvey uses the first chapter to explore the facts building up to the current crisis, starting with the displacement of Keynesian economics by neoliberalism during the 1970s and progressing to the growth of the financials-based capitalist economy of today. He looks at a few smaller crises that arose along the way, including the Arab Oil Crisis in 1973, the New York City bankruptcy, problems in Japan, Norway and south-east Asia, and the U.S. savings and loan crisis. He also looks at various small scale attempts at correcting the current crisis, many of which were failures in and of themselves. Upon examining these issues, he writes "there is, we have to conclude, some inherent connectivity at work here that requires careful reconstruction." (Location 150). Harvey also explains the underlying principles of neoliberalism, which he describes as a "class project" that served to centralize wealth and power in the hands of elites by spreading "rhetoric about individual freedom, liberty, personal responsibility and the virtues of privatization, the free market and free trade" (Location 161). The results of this "class project" included a strengthening of the notion that banks need to be protected at all costs, a loosening of governmental regulations meant to protect society from capitalist abuses, the weakening of workers' rights, and a growing global economy through laissez-faire economics. It is these factors, according to Harvey, that started the world on the path of a growing wealth inequality between the social classes.
In the second chapter Harvey explains the nature of capitalism, focusing primarily on it as a system of capital flow, but looking also at how it operates within and upon society and the social order. He points to its origin as a means by which money is sent in search of more money, which in the beginning was through the power of production. The continuing profits allowed for reinvestment, which is viewed by economists as a requirement for competitive reasons. This reinvestment allowed capitalists to `grow' their business in order to stay competitive, all the while creating new (though not always good) opportunities for a growing and willing labor supply. Chapter 2 also looks at the beginning of a "state-finance nexus", a system that ties together politics and economics due to the controlling influence of the bourgeoisie class on the government. This change gave the growing capitalist class greater opportunities to build wealth through the "dispossession and destruction of pre-capitalist forms of social provision" (Location 675). Harvey then points to the growing elite financial class that was able to gain control over producers, merchants, landholders, developers, wage laborers and consumers" through the growing credit system (Location 735). Capitalism, it seems, needed capital to gain more capital, something those with the greatest wealth took advantage of early on through lending and debt creation. The new paradigm put money at center stage in the commodities market.
In chapters 3 through 5, Harvey looks primarily at how the flow of capital has affected society through the creation of an economic system which attempts to balance the surpluses within the capitalist system. He also defines seven activity spheres capable of creating barriers that capitalism must overcome in order to continue its minimum 3% growth. These include; 1) technologies and organizational forms, 2) social relations, 3) institutional and administrative arrangements, 4) production and labor processes, 5) relations to nature, 6) the reproduction of daily life and of the species, and 7) mental conceptions of the world (Location 1825). In overcoming one barrier as it is met, new barriers often arise in other areas. Harvey says this occurs because "the relations between the spheres are not causal but dialectically interwoven through the circulation and accumulation of capital" (Location 1915).
In chapters 6 and 7, Harvey looks at the role globalization has played in the history of capitalism, including the flow of capital across borders, the change in societies due to labor relations, the consumption and dispossession of natural resources, all through "creative destruction". He relates the effects of a growing financial capitalism throughout this process, including the notion of spreading risk as well as opportunity, and the idea of a global community ripe for the picking. Harvey points out that global capitalism has its internal problems as well. One is brought about by the disconnection between individual financial players, which he sees as a likely catalyst to the current crisis - the "radical disjuncture in time-space configurations" that made it difficult for financiers to fully see what their investors/traders were doing (Location 2840).
In his final chapter, Harvey reminds us that "at times of crisis, the irrationality of capitalism becomes plain to see" (Location 3246). It is here that he asks if capitalism can, or even should, survive, and if so, what needs to change and who should initiate that change. The increasing political unrest around the world would be too costly and dangerous for the capitalist class to fight with armies and violence - but because it is unlikely elites would be willing to change (the thrill of the profits game is so tightly woven to their way of life) it is more likely that they will use their current political power to keep the masses under control. These capitalist elites will push for the status quo option, continue to exert their power over the government to keep trade unregulated, thus ensuring that any change would bring little or no negative affect on their profit-seeking abilities. And what of those that have been so drained of wealth during the last thirty years of neoliberal policy? The lack of any clear leadership or vision will surely diminish their ability to push for change that ensures some kind of fairness and equality.
In summation, Harvey's analysis of the current economic crisis is well written and easily understood, and his explanation of capitalism is helpful to those less knowledgeable of the subject. His use of Marxist theory serves to challenge readers to look at the current crisis from a different angle, and helps to show the reader how thirty-plus years of neoliberalism has changed our mental conception of the world - from one that placed value on the hard work of laborers to one that places the value of money above that of the individual. But the use of Marxist theory could possibly scare away those individuals who might benefit most from the information Harvey wants to share - working and middle class citizens raised during the era of the `communist menace'- those hard-working citizens whose mental conception of the world includes a strong aversion to all things Marxist due to thirty plus years of neoliberal propaganda.
Harvey leaves the reader with no real solution, but instead leaves the reader thinking about the possibilities for change. That leaves us with what looks to be a long and difficult debate - should we retain capitalism as our economic driving force? Should the masses dispossess the wealth the capitalist elites have worked so long to accumulate? Harvey writes of the "moral hazard" prevalent in modern capitalism as a major factor in the current economic crisis - the same factor that was taken into account after the U.S. stock market crash of 1929 - the same factor that brought the systems of socialism and communism into fruition at the end of the robber-baron era. But those systems proved weaker than capitalism and according to Harvey should not be re-visited. So where do we go?
Based on my interpretation of Harvey's Enigma of Capital: And the Crises of Capitalism, the ugly head we have seen over the last few years wears the mask of this "moral hazard". The desire of capitalist elites to achieve greater wealth no matter what the cost to society, be it people's homes or jobs, people's present or future ability to provide for their needs, this desire has played the major role in the creation of this crisis. To bring real change will require a major change in society's mental conception of the world, something the ugly head is already beginning to bring, and once that change happens can we begin the debate as to which direction will lead us to prosperity. Only then then will we be able to remove the mask and see the true face of capitalism, not just the enigma.