05 January 2012

Capital’s global terrain

A dangerous new year, Part 1 of 3

Among commentators, 2011 opened with naive optimism for a strengthening recovery, but developments across the year left that faith in shambles. This was no surprise to those of us writing on this blog. Most mainstream economic analysis is based on an uncritical reading of short-term statistics or transhistorical pseudo-mathematical models that are actually a projection of prevailing economic common sense. Neither approach is adequate when the entire structure of economic thought and practice is in the process of disintegrating.

In contrast, the approach we have been developing situates the ongoing crisis of neoliberalism in a much deeper understanding of capitalism and in the irreducibly historical configurations it assumes in order to sustain accumulation – which condition the operations of the economy and the nature of social life alike. Without access to either the historical or social-cultural dimensions of the economy, policymakers and economists alike still do not grasp the fundamental issue: neoliberalism has collapsed and cannot be revived. A new kind of capitalism would be necessary to revive growth.

This leaves us in a very dangerous position. Since leaders in the US and Europe alike have been busy deepening the crisis rather than pursuing the steps necessary to resolve it, the mainstream neoliberal approach embodied by people like Obama and Merkel faces a precarious future. Any sudden intensification of the crisis could leave it discredited, opening the door to those alternatives that are best organized and capable of presenting the most compelling arguments. Where these forces lead us may not be pleasant at all.

What are the odds of an intensification of crisis in 2012? To understand the dangers, we’ll need to finally begin exploring the global economy as a unitary system, something this blog has thus far left aside.

The global economy is dominated by three main value complexes: Europe, North America (the US, Canada, and industrial northern México), and East Asia (Japan, South Korea, and coastal China including Taiwan and Hong Kong). Each of these occupies roughly one-fourth of the output of the global economy. Because each is deeply implicated in the others, severe problems in any one will have baleful consequences for the others and put the entire global economy at risk.

The significance of these regions is founded in two related features. First, they are by far the most productive parts of the world. All three are technologically advanced powerhouses in agricultural and mineral production, industrial manufacturing, and information services. This allows them to produce far more goods and services, which seem to be the carriers of value, and also allows them to distribute large amounts these goods and services in the form of wages, which makes these the principle global consumer markets.

The second feature is less obvious, but in a capitalist system actually more important. Because they are so productive, these regions can generate much larger surpluses for reinvestment than other areas. In most other parts of the world, production (to the extent it happens at all) is fragmented and small-scale. People are living off the scraps of the industrial world (often quite literally), or they are engaged in petty trade or peddling, or they work in handicrafts or low-yield agriculture. None of this allows capital to be concentrated and reinvested as in the rich world. (There are a handful of exceptions, large corporations in India, Brasil, South Africa, and enclaves like Singapore, which indicate how inadequate spatial conceptualizations ultimately are for grasping capital. One way of saving the metaphor might be interpreting these as peninsular extensions of a tripartite Pangaea of capital.)

Most other parts of the world, then, despite accounting for about two-thirds of global population, are largely insignificant from the standpoint of the expansion of global capital. They are integrated into the world economy and can be damaged by it, but their own individual crises will be largely irrelevant to its health – with one exception. Those countries whose primary significance for the global economy lies in their extractive industries and cash crops – the Persian Gulf oil producers, Russia, Indonesia, Australia, Canada, and parts of Africa and Latin America – could damage the global economy should something significantly reduce the raw materials they are able to supply to manufacturers or dramatically raise their prices. A sharp rise in the price of oil is the most likely such scenario, especially if conflict with Iran or within Saudi Arabia breaks out. But a further inflation of the multiple speculative bubbles in commodities markets that followed the massive no-strings bank bailouts is also possible if the main central banks open the spigots again.

More likely, however, is a collapse of commodity prices following a sharp downturn in any one of the three main global value complexes. And the odds of that happening in 2012 are all too high.

Part 2: Weak points in the global economy
Part 3: Towards the disintegration of the global economy?


  1. I'm no economist, but hasn't there been a sharp downturn in Europe and North America that was accompanied by rising commodity prices? The logic of the expectation that falling demand could cause a collapse in commodity prices, is macro-economics 101, but given what we've seen since 2008, don't we need to be a bit more specific about what would constitute a "sharp downturn," and to explain why we haven't seen that over the past three years?

  2. It's hard to know what exactly has been happening with the commodity markets because they aren't well regulated, but at least part of the rise in prices has been due to speculation that followed the torrent of no-strings money the US and Europe threw at their banks and which had no productive outlets. The other big source of demand has been China, itself driven by a huge real estate bubble there. In the second part of this post I'll try to summarize the possible sources of a new contraction.