18 January 2011

Glossary: Neoliberalism

In writing Permanent Crisis, it is our intention to carry on a theoretically sophisticated conversation, but at the same time to keep that conversation accessible to anyone with an interest in the issues under discussion. A specialized vocabulary is often essential to the first aim, but can be a real obstacle to the second. So as we proceed, we will attempt to incorporate posts that seek to explain some of the terms we commonly use, which will be linked to in relevant posts. These attempts to define our terms shouldn't be taken as the final word on the subject, of course, and hopefully we can bring out differences of interpretation in the comments.

Neoliberalism commonly refers to a set of free market ideas that became the dominant economic philosophy following the crisis of the 1970s. (The "liberalism" in neoliberalism refers to the classical liberalism of the 19th century founded on the thought of John Locke, Adam Smith, and others who advocated a strictly limited government, an unregulated market, and negative political liberties like freedom of speech. It should not be confused with American left liberalism of the 20th century, which it actually repudiates.) Drawing on 20th century critiques of government intervention in the economy by figures like Friedrich von Hayek and Milton Friedman, neoliberalism counseled an end to the welfare state and government regulation, blaming them for social ills ranging from the breakdown of the family to unemployment. Neoliberalism sees market forces as nearly infallible in achieving optimal outcomes, distributing resources in the most efficient manner and allotting income to those who actually create the wealth.

Government policies pursued under neoliberalism included privatization, deregulation, balanced budgets, floating exchange rates, free trade, and the free movement of capital. Corporate power dramatically increased at the expense of both workers and consumers as labor unions in the advanced market economies (especially the United States) were decimated by offshoring of production, corporate taxes and regulations were slashed, and countries competed to attract production by offering the most favorable terms to corporations. Overall, this resulted in lower growth rates and higher rates of unemployment in the advanced market economies of Europe and North America, as well as in Latin America and Africa, compared with those achieved in the 1950s and 1960s. However, it also facilitated rapid if inequitable economic growth in East Asia (especially China) and increasingly in India as well.

A broader use of the term neoliberalism includes the above features, but extends its meaning to cover an entire way of life. Superficially, the cultural and intellectual trends of the last 40 years may seem to have nothing to do with free market dogma, but some would argue that the two are intimately connected - both produced by a new experience of the world under the changed circumstances that followed the crisis of the 1970s. Everything from postmodernism to the revival of Christian fundamentalism, from game theory to evolutionary biology, from a new kind of consumerism centered on entertainment rather than consumer durables, to new forms of resistance like the Black Bloc - all of these can be understood as products of the neoliberal era. This blog will attempt to explore some of these connections.

It remains an open question whether the current crisis signals the end of neoliberalism. Certainly the political response to the crisis looks a lot like an intensification of neoliberal economic policies - perhaps surprising since it was the contradictions of the neoliberal system that gave rise to the crisis. Yet the major crises of capitalism over the last century have all been marked by a doomed attempt to use the familiar tools even after their efficacy had ended: think of Hoover's response to the Depression, or Nixon's resort to wage and price controls. One of our goals in this blog will be to understand why that should be so, and another will be an examination of the new ways of thinking that must necessarily come out of the crisis.

16 January 2011

Creating Shared Value: The annunciation of socially responsible accumulation

Shared value in action

"The capitalist system is under siege," announces the opening lines of the cover story of the Harvard Business Review's latest issue. This initiates the article's rhetoric that evokes the kinds of inspiring and visionary calls for renewed accumulation that have been conspicuously missing throughout this crisis (Porter & Kramer, 4). The authors Michael Porter and Mark Kramer, both based at Harvard, claim that more and more companies are beginning to develop a new form of corporate practice that will "drive the next wave of innovation and productivity growth in the global economy. It will also reshape capitalism and its relationship to society." They call this form "creating shared value" and with major corporations and academics placing this kind of hype around it we on the Left should take it seriously both as an object for critical examination and a potential vector in the changing space of political action.

Creating Shared Value or CSV, from the perspective of Porter and Kramer, who coined the term in a 2006 HBR article, amounts to a radicalization of "Corporate Social Responsibility" or CSR. Essentially they claim that corporations such IBM, Walmart and Nestlé are no longer viewing social concerns as something to be considered outside of profit, as a form of charity, but rather as vital parts of the production of profit itself. Under traditional CSR models a corporation establishes a meager budget to promote recycling or build schools in Africa after a company makes billions by "externalizing" carbon emissions and reaping the benefits of wages lowered by the existence of excluded populations, in the hopes that the good press will boost profits and prevent any more social pressure to ameliorate social ills. CSV, however, means conceptualizing the inclusion of populations and the preservation of ecology as themselves a basis for profit. This is not unrelated to the "cultural capitalism", whose semantic implications Zizek so nicely analyzed in his lecture to the Royal Society for the encouragement of Arts (This link goes to the animated one because it's so charming! Here's the full live version), but instead of being a matter of the "sense" of contemporary capitalism, CSV is framed as a reconfiguration of the political economic structures of accumulation.

Three aspects of CSV seem particularly significant:

Exploding the Value Chain
The value chain is the sequence of practices and institutions that produce value along the path of production. Porter and Kramer argue that rather than conceiving of this as a process of internalizing benefits and externalizing costs, many companies are beginning look at the value chain as a set of mutual relationships between firms, government and social actors inside and outside of the firm.

They write that, "The concept of shared value resets the boundaries of capitalism. By better connecting companies' success with societal improvement, it opens up many ways to serve new needs, gain efficiency, create differentiation, and expand markets" (Porter & Kramer, 7). Essentially the argument goes that if companies prioritize social benefit, it will drive innovations in efficiency, productivity and product development because social ills are often caused by inefficiencies, and social needs can lead to new products to fill those needs. Beyond this, helping communities related to a company thrive will provide stable labor and consumer markets. Thus "value," in this view, must be thought of as proper to the entire ecology of actors involved. One firm or social group must make value through helping others do the same, hence shared value.

This amounts to a totalization of an economistic conception of value, as a margin of utility, in both economic and social calculations. In both corporate and social contexts, problems must be tackled according to cost benefit analyses. This seems only natural after forty years of neoliberal prioritization of circulation and exchange value, where the concept "value" is reduced even to the point of merely being a matter of distribution of information and the eradication of "value" from certain "Marxist" discourses. To this extent CSV's emphasis on value smells of a dangerous extension of this tendency to further render inaccessible a conception of value as related to time and labor that, as Postone argues, point to some of capitalism's most emancipating potential. 

Relocalizing capitalism: Attention to "the cluster"
Continuing with this idea that firms must attend to the needs of those around them, Porter and Kramer emphasize the need for healthy "clusters" around corporate activity. Clusters are "geographic concentrations of firms, related businesses, suppliers, service providers, and logistical infrastructure" (Porter & Kramer, 12), Silicon Valley being a prime example. Under a shared value framework companies promote the sustainable growth and efficiency of these clusters. For example, Yara, a major fertilizer company, realized that a lack of infrastructure prevented farmers in Africa from buying their fertilizer. To fix this they invested $60 million to improve roads and ports that hopefully will create "agricultural growth corridors." The intention is to create the specific and localized dynamics that support capital accumulation.

Here we begin to see some rather novel aspects of economic life that creates shared value. Multi-nationals no longer act as homogenizing forces, destroying indigenous life and cultural diversity, but actively promoting and guiding its development in way that makes life better for those communities and serves capital. This amounts to radically flexible accumulation that can have a higher return on investment by paying close attention to local diversity. This rests on the belief that local knowledge is best suited to tackle local problems, and in the vision of micro markets served by production that can make profit off of extremely short runs of products. Creating shared value is then a possible recuperation of the multicultural revolt witnessed under neoliberalism. The Zapatismo call for "a world where many worlds are possible" may indeed be on the horizon, though with the slight modification of "a system of production and markets where many systems of production and markets are possible." (And I do very much intend to parallel "systems of production and markets" with "worlds") 

Efficiently promoting efficiency
What is most at stake for Porter and Kramer is achieving new heights of efficiency and productivity. Walmart offers a good example. Walmart is "increasingly sourcing produce for its food sections from local farms near its warehouses. It has discovered that the savings on transportation costs and the ability to restock in smaller quantities more than offset the lower prices of industrial farms farther away" (Porter & Kramer 11). The minimizing of environmental and social impact can thus be solved through gains in efficiency.

What kind of efficiency are they promoting? It appears not to be a trivial example a raising the organic composition of capital (the reduction of socially necessary labor time at the point of production through the increase in "dead labor" in the form of machines). Here Walmart might end up employing more people to do more labor-intensive work (small-scale farming is incredibly more time consuming than industrial farm production), while still increasing the cost-to-value-added ratio in their balance sheets. How can we integrate this impulse into a larger political economic theory?

One important thing to note about this emphasis is that it does seem to be a re-emphasis on production. Whereas above I discussed the deepening priority of circulation in consciousness, there may be a real, material re-emphasis on production under shared value. We can't forget that transportation for Marx is still within the sphere of production. With more people working harder, and having a closer relationship to social production we may see a renewed relevance for certain neglected aspects of Marx and social movements with new perspectives on what another world might look like.
The global capitalist elite making important decisions about CSV

General Reflections, or, wild unfounded speculation
Porter and Kramer merely intend to name this new framework and give a call for more rigorous theorizing of it. It is unclear what CSV's potential is for gaining market share, or for capturing the imagination of political elites. In fact it is not even clear what metrics would be appropriate to determine if CSV is becoming the hegemonic regime of accumulation. In an era of crisis and presumably transition however, it is important to keep eyes on the horizon as new possible terrains come into view.

A word jumps to mind while considering all this, ecology. Conceptualizing the economy as a complex network of mutual relations sharing resources and promoting common flourishing sounds strikingly like discussions of the impacts of ocean acidification on intertidal kelp populations. If Chicago School economists all have penis envy for physics, perhaps the next generation of economic thinkers will do the same for ecology and dynamical systems theory. If I might coin a term extremely prematurely, we may be in for an era of "ecological accumulation."

The task however is not merely to coin terms or speculate on possible forms of economic life, but to outline what a Left position might be in relation to this possible future. Personally, if this becomes the dominant economic model for how we get out of the crisis, I'd be pretty darn pleased. It certainly would lead to a lot of social good being done. It is not an overcoming of capitalism and would certainly produce its share of limits and ills, but as with any regime it opens and closes certain doors to that overcoming. My provisional call for a program might then be to interrogate, both practically and theoretically, just what those doors are. I think we should also very seriously consider, in the absence of a vital revolutionary Left and an increasingly terrifying alternative, whether the Left response to this crisis should be to align with these folks. This does not have to be a defeatist position. Our goal then would be to do this in such a way as to lay the foundations for a movement that is adequate to the next phase, and has real historical potential. 

Kramer, Mark R. and Michael E. Porter. "Creating Share Value: How to reinvent capitalism -- and unleash a wave of innovation and growth," Harvard Business Review Jan-Feb 2011.

14 January 2011

The REAL Jobs Crisis

I really like The New Yorker. I’ve been reading it for almost two decades. I like its style, the depth of its reporting, that in a desert of irrational fear-mongering, it is an oasis of well-informed, reasoned discourse. But they don’t quite get capitalism.

Most recently, an article by James Surowiecki demonstrates how this bastion of the liberal intelligentsia doesn’t have the critical perspective we really need to comprehend the present. Surowiecki’s article, “The Jobs Crisis,” (Jan. 3, 2011) discusses two views on the current phenomenon of long-term unemployment. The first view, he says, is that unemployment is cyclical. “At times when everyone is cautious about spending, companies are slow to expand capacity and take on more workers,” he explains. The second view argues that unemployment is structural. “Jobs that existed before the recession are gone for good, and the people who held those jobs don’t have the skills needed to work in other fields,” Surowiecki summarizes. The remainder of the article assesses that at stake in this seemingly “academic” argument is the policy direction of the U.S. government.

All this is correct, but Surowiecki overlooks the real structural reason for unemployment: capitalism itself. To the extent that the point of capitalism is to create surplus value, that is, to create more value from labor power than the value of that labor power, it always seeks to minimize either the value of labor power (that is, the cost of its reproduction), or the amount of labor needed for the production of any given amount of surplus value.

The stagnating standard of living and relative decline in wages since the 1970s signals that capital has pushed as low as possible the cost of the reproduction of labor. At this point, to continue to increase the rate of surplus value, it needs to shed labor. This is possible through increases in productivity. Now, this isn’t to say that the most recent spate of unemployment wasn’t most immediately the result of changes in demand, but to point out that capital doesn’t need labor to reproduce itself. This is all the more evident given that in the past twelve months profits have recovered, productivity has risen, and the job market has not.

Now, defenders of capitalism will say that when jobs are lost in one area because of increased productivity (technology), they are created in new ones. To some extent this may be true. If the widget maker sheds employees because a new thingamachine takes their place, there could now be jobs with the thingamachine maker. This is the assumption behind the structural interpretation presented by Surowiecki. Once people “retool” as thingamachine workers, unemployment will decrease.

There are two problems here. One is quantitative. We cannot assume that the same number of employees that lose jobs as widget makers will regain them as thingamachine makers. And while such numbers may not be significant at the level of an individual firm, capitalism is a social system, and at the socially general level this tendency produces “the industrial reserve army,” one effect of which is to suppress the value of labor power.

The other problem with such a defense is that it assumes that capital will flow to productive industries, that is, to those that create employment. Yet, recent history has shown that capital can readily find reproductive opportunities in realms that do little to create employment. So the problem is indeed structural. Individuals need jobs to reproduce their existence, that is to feed themselves, house themselves, etc. That is, individuals need capitalism, but capitalism does not need them.

By ignoring this deeper structural problem, even well-intended assessments like those provided by Surowiecki focus on only the most immediate level of appearances and thus continue to turn us in the same circle, when really we need to be working to identify the possible route by which to escape.