Transcript Powerpoint document

Inaugural Lecture
Helsinki Collegium for
Advanced Studies
Stephen Gill
Jane and Aatos Erkko
Professor in Studies on
Contemporary Society
30 September 2009, University of
Helsinki
The Constitution of Global
Capitalism
1. Capitalism, the market and the
economists; or: the Queen’s question
2. Capitalism as a system of power: Seven
constitutive features of global
capitalism
3. New constitutionalism, the Rule of Law
and global politics
4. Concluding reflections; or: can a
leopard change his spots?
Part I:
Capitalism, the market and the
economists
Or
The Queen’s Question
The Queen of England visits LSE
 Queen
Elizabeth II
visited the
London School
of Economics
in November
2008, to open
its new building
The Queen was shown charts on
the financial and economic crisis
The Queen’s Question
 Queen asked, “If these things were so
large, how come everyone missed
them?” [Daily Telegraph 26 July 2009]
 Prof Luis Garicano replied : “At every
stage, someone was relying on
somebody else and everyone thought
they were doing the right thing.”
 The Queen described it as “awful”.
The British Academy answers the
Queen
 In 2009 British Academy “experts
from business, the City, its
regulators, academia and
government” send an open letter
to reply to the Queen:
 They concluded that it "was
principally a failure of the
collective imagination of many
bright people, both in this
country and internationally, to
understand the risks to the
system as a whole."
And what about the most powerful
US economists?
 Some saw it coming but were ignored or
marginalized.
 E.g. 2005, at a special conference of key policy
makers and economists in honour of Alan
Greenspan’s tenure at USFR, a warning that
the US financial system was taking on
potentially dangerous levels of risk was
dismissed by those present.
 Obama’s economic Czar, Larry Summers
dismissed such warnings as “misguided.”
The conventional wisdom:
IMF Global Financial Stability
Report, April 2006
1. The ‘dispersion of credit risk by banks to a
broader and more diverse set of investors,
rather than warehousing such risk on their
balance sheets, has helped to make the
banking and overall financial system more
resilient’.
2. This has helped to “mitigate and absorb
shocks to the financial system” with the
result that “improved resilience may be seen
in fewer bank failures and more consistent
credit provision”.
PAUL KRUGMAN: How Did
Economists Get It So Wrong?
 “Economists were seduced by the vision of a
perfect, frictionless market system” which
made them “blind to the possibility of
catastrophic failures in a market economy”
 Since 2007 $13 trillion in US wealth lost.
Official unemployment rose by over 6 million
to highest level since 1940. Collapse has huge
negative effects on rest of the world.
 October 2008: Greenspan admits he is in a
state of “shocked disbelief,” because, as he
put it, “the whole intellectual edifice” had
“collapsed.”
“Modern economics”& the future
 Krugman: what do the two schools of
“modern economics” have to offer as
guidance for the future?
1. “Saltwater” economists are neo-Keynesians
at “coastal” universities. e.g. MIT, Harvard,
Princeton. They argue that macroeconomic
intervention and regulation is needed to
correct market instability.
2. “Freshwater” economists’ habitat is inland,
e.g. adjacent to the Great Lakes. They hold
that the market is not the problem; it should
be allowed to operate free of government
intervention.
Notes on a failed paradigm
1. Both schools are part of dominant
neo-liberal paradigm which has
focused relatively unquestioningly on
promoting GDP growth, liberalizing
trade and investment and the
deregulation of labour markets and
the financial sector.
2. This paradigm has served to bolster
consumerism and financial interests,
fuelling the global crisis of
accumulation and the wider organic
crisis.
Notes on a failed paradigm – 2
3. The dominant paradigm is neither
“objective” nor “scientific”. It is built on
abstract assumptions & mathematical
models that do not deal with the real
economy, but a fictitious and hypothetical
one, devoid of social content.
4. These economists still hold positions of
authority and power; presumably teaching
new economists the same failed
paradigm.
Part II: Capitalism as a system of
power
Seven constitutive features of
capitalism
Market system or capitalist system?
1. Galbraith: when economists
substituted the “free market” for
“capitalism” they removed wealth
from their analysis and
substituted “the admirably
impersonal role of market forces”.
2. “It would be hard to think of a
change in terminology more in the
interest of those to whom money
accords power.”
 John Kenneth Galbraith, “Free
Market Fraud” The Progressive,
January 1999.
Global inequality & global power
 December 28, 2006: Financial Times asks how,
without reading Marx’s Capital, could one
possibly explain how the world’s richest 2% of
people now owned more than 50% of the
world's global assets.
 In fact the top 1% owned 40% of total global
assets – 37 million wealthy people.
 The bottom 50% (approx 3.3 billion people)
collectively owned less than 1% of total wealth
 The World Distribution of Household Wealth,
by James B. Davies et al (UNU-WIDER
December 2006)
Where the wealthiest live, 2000
Distribution of world GDP 1990
 UN Human
Development
Report 1992
 Richest 20%
had 82.7% of
world income;
poorest 20%
had 1.4%
Seven constitutive features of
global capitalism: 1-3
1. Restoration of political power of capital and
the plutocracy -- reminiscent of the 1920s;
extreme inequality of income, wealth & life
chances is obverse of wealth of plutocracy.
2. Disciplinary neo-liberalism extends power of
capital and market discipline in social life;
extension of markets is accompanied by
rising exploitation of labour and nature;
3. Acceleration in dispossession of producers
of their means to subsistence – enlarges the
size of the global proletariat “free” to sell its
labour to capital.
Seven constitutive features of
global capitalism: 4-5
4. New constitutionalism locks in private
property rights & subordination of the
state to capital
5. Privatization of profits and socialization
of the risks for corporations & the
strong (e.g. bail outs). Increased
privatization of risk for the weak (small
firms, workers), especially as social
provisions for social reproduction are
cut.
Seven constitutive features of
global capitalism: 6-7
6. Capitalism is prone to two kinds of recurrent,
systemic crises of accumulation: (1) cycles
of overproduction/ under consumption & (2)
financial crises caused by cycles of credit
expansion and contraction -- especially in
liberalized financial sectors.
7. Crises of accumulation are part of a wider
“organic crisis. If 1- 6 continue it will deepen
the “global organic crisis” in the foreseeable
future.
Part III:
New Constitutionalism, the liberal
Rule of Law and global politics
Three dimensions of new
constitutionalism
1. Measures to reconfigure state apparatuses via laws, treaties, constitutional &
institutional measures e.g. WTO, NAFTA,
bilateral measures; Maastricht.
2. Measures to construct and extend liberal
capitalist markets and the commodity form –
into new territories & new market sectors;
exploit new sources of labour supply; new
types of property rights, e.g. patents and
intellectual property rights over life-forms
3. Measures for dealing with crises and political
challenges to disciplinary neo-liberalism.
The global crisis & rising hunger
 “Almost unnoticed behind the economic
crisis, a combination of lower growth, rising
unemployment and falling remittances
together with persistently high food prices has
pushed the number of chronically hungry
above 1bn for the first time”. Financial Times
April 6 2009.
 In fact we live in a world where half the world’s
population suffers from malnutrition – 25% are
over-fed, many of whom over-weight and
obese, with 25% underfed or starving.
Global food prices increasingly
determined by capitalist market forces
1.
2.
a)
b)
US production of subsidized grain
export floods the world market in the
1990s & wipes out many small Third
world producers – e.g. Mexico after
NAFTA (1994) 1.17 million Mexicans
are displaced from agriculture
following trade liberalization.
A “perfect storm”? No -- recent price
spike is mainly caused by man-made
factors including:
Shift of US grain production to biofuels creates supply shortages.
Global futures trading e.g. in
Chicago & New York markets, linked
to speculation & rising food prices
Global prices & food sovereignty
1.
2.
3.
4.
2005-8, food prices rise 83%; are still 60% higher
than in 2006. 37 nations experience intense food
crises 2008; world-wide riots break out.
Via Campesina, Landless Workers’ Movement in
Brazil (MST) & other grassroots peoples’
organizations continue to press for food
sovereignty & organic production.
April 2009, 58 Third World governments agree to
redirect agriculture to support small scale farmers,
women, local knowledge; counter global warming.
Food security/food sovereignty issue helps cause
breakdown of Doha talks extending the WTO; G20
offers $20 billion to help agricultural productivity.
Part IV:
Concluding reflections:
or, can a leopard
change his spots?
Il Gattopardo (The Leopard)
President Obama represents
the possibility to restore the
credibility of US ruling class
power by making minimum
necessary concessions and
changes in policy.
Lampedusa’s novel, 1958: As
Garibaldi’s revolutionaries
invaded Sicily in 1860, the
aristocrat Prince Tancredi
observed:
“Unless we take a hand now,
they will force a republic on
us. If we want things to stay
as they are, things will have to
change”
Towards an alternative paradigm of
progress?
1. We need a new debate on democratically
planned solutions, tax regimes & ownership so
as to create just & sustainable societies.
2. E.g. debate a new & democratic global
constitutionalism to guarantee three sets of
substantive freedoms, rights and conditions:
a. human rights (including freedom of conscience;
of expression; of association);
b. human security (freedom from violence,
discrimination and intolerance; rights to food,
clean water and the means of livelihood)
c. human development (rights to: non-alienating
work, education, leisure, sports, art & music).