Friday, July 24, 2015

David F. Ruccio — This is the end of capitalism?

Response to Paul Mason, The end of capitalism has begun.

I give Mason's argument more credence that Professor Ruccio does, but I agree that technology is not enough.

Nevertheless, technology is highly significant in Marx's analysis, which is based on historical materialism and economic infrastructure as foundational. Feudalism was chiefly agricultural and capitalism was mainly industrial. In fact, in time agriculture itself was mechanized and became agribusiness.

I harbor little doubt that the transition from the Industrial Age to the Information Age will be as transformational as the transition from the Agricultural Age to the Industrial Age. This implies an economic realignment as well.

How that will manifest is remains unclear, since the world is still operating largely in terms of capitalism and industry.

We are witnessing emerging opportunities and challenges and how these are met will determine the next moment in the historical dialectic. What's coming will be different from capitalism but what it will look like is too early to tell.

However, the basics of information suggest that it will be distributed and networked, which implies a new approach to politics, economics and political economy. There is at last the potential for scaling up popular participatory democracy based on an informed electorate.

I suggest this is the takeaway.
As with the end of feudalism 500 years ago, capitalism’s replacement by postcapitalism will be accelerated by external shocks and shaped by the emergence of a new kind of human being. And it has started.
We don't know yet what that new kind of human being will be like, although we can get a sense of it by observing the difference between those who grew up in the analog age and those who have grown up in the digital age. It's a different "head."

Occasional Links & Commentary
This is the end?
David F. Ruccio | Professor of Economics University of Notre Dame Notre Dame


Jonathan Larson said...

Oh good lord! This is why academic economists are usually more than a few forks short of a picnic basket.

1) Industry has NEVER replaced agriculture. If you eat dinner tonight, you are consuming the output of agriculture. Agriculture is as important this week as it was 1000 years ago. Anyone who seriously believes we are in some post-agricultural, post-industrial world is literally beyond insane.

2) Yes agriculture has been reorganized both socially and economically. This is because agriculture embraced science more completely than almost any other human practice. The only exceptions are manufacturing, science, and engineering. And what a shock—MOST of big industrial advances in USA came courtesy of farm kids (Henry Ford? anyone).

Ruccio should walk around South Bend and actually learn the contribution that berg made to the industrial revolution. He might notice that while most of South Bend's manufacturing has left, very few of the ideas and products have been abandoned. Just like we will always need to farm, we will always need to make things.

One wonders how someone can ignore so much reality, but in this case we need only look at his employer. This is a guy who works for an institution that teaches a woman's potential can be ignored and the replacement narrative concerns virgin births. In such an environment, ignoring agriculture and manufacturing is probably pretty damn easy.

Tom Hickey said...

The argument is about work. During the thousands of ages of the Agricultural Age, agriculture employed well over 90% of the work force. Now it's in the single digits, with far larger production required for increased population. The number of agricultural workers required per capita is remarkably low, and much of the human work is done on computers.

The same is in the works with industry with the introduction of automation and robotics, 3-D printers, etc. Humanity is just scratching the surface of IT. AI is just getting off the ground and has a long way to go. Space is the new frontier.

The opportunity in the coming age is for both increased leisure and more distributed leisure, which will be used not just for goofing off as "leisure" might suggest, but to enhance education and culture, basically building a new civilization. Humans are not only social but also creative.

Unless humanity continues to screw up, increasing the probability of its own destruction or at least severe culling, things are going to look as different 500 years from now as they did at the beginning of Age of Science & Technology 500 years ago.

Of course there will still be agriculture and industry. Industry then will be as different from industry now as agriculture now is to agriculture then.

As far as education goes, printed books will be as antiquated as papyrus scrolls, and classrooms will be curiosities of history.

As this happens technologically and is scaled up, attitudes and mindset will change, and organizational and institutional arrangements will adapt to changing conditions.

It will be an organic process, on one hand, but being disruptive of the status quo it will also meet obstacles vested interests put in the path, on the other. But like water flowing downhill it will take the path of least resistance, and if dammed up it will gather force and either overflow the boundaries or break through them.

Attempting to say much now about it will look or happen is futile because the process is experimental rather than a priori. Increased leisure provides opportunity to experiment.

My concern at this point is that humanity may encounter some nasty wars on the way, possibly involving the use of WMD,and almost certainly climate change is going to be a huge factor, possibly for hundreds of years. Hansen's group just announced that polar and sub-polar ice is melting 10X faster than expected and sea level is also rising quickly.

Peter Pan said...

You don't work, you don't eat. Is this so difficult for academics to understand?

No one knows the future, however current trends signal a willingness by property owners to maintain their control at any cost. I'm afraid that many lives will be lost before we reach any semblance of utopia.

Tom Hickey said...

In just relatively years, monarchs and aristocrats were swept into the trashcan of history. These people had held the reins of power for centuries. When a historical moment is over, it is over and the next one begins.

We should do away with the absolutely specious notion that everybody has to earn a living. It is a fact today that one in ten thousand of us can make a technological breakthrough capable of supporting all the rest. The youth of today are absolutely right in recognizing this nonsense of earning a living. We keep inventing jobs because of this false idea that everybody has to be employed at some kind of drudgery because, according to Malthusian Darwinian theory he must justify his right to exist. So we have inspectors of inspectors and people making instruments for inspectors to inspect inspectors. The true business of people should be to go back to school and think about whatever it was they were thinking about before somebody came along and told them they had to earn a living.”

— Bucky Fuller

Peter Pan said...

The trash gets recycled. Today's monarchs and aristocrats go by other names. I agree with Bucky, but this will not happen in our lifetimes. The scarcity mindset is too strong.

Matt Franko said...

If Marx developed Capitalism under the metals (conditional) back in the 1800s then logically since 1971 we cant be operating his Capitalism....

NeilW said...

"The opportunity in the coming age is for both increased leisure and more distributed leisure,"

The opportunity is for a different kind of work. Leisure has to be serviced and those doing the servicing will start to resent your leisure (because they are working).

However if it is all just called work then workers are just servicing other workers at work. We already have thousands of things that are done in the name of work that are largely pointless. Most of advertising, nearly all of finance, anything to do with sucking up to the rich because they have money.

So you just change that into other activities that people do and earn money from doing it by making sure the rich are no longer the initial arbiters of what is work and what is not.

Matt Franko said...

"anything to do with sucking up to the rich because they have money. "

LOL! a HUGE industry Neil!

Tom Hickey said...

If Marx developed Capitalism under the metals (conditional) back in the 1800s then logically since 1971 we cant be operating his Capitalism....

Right. As a historical materialist and dialectician, Marx was a dynamic thinker rather than a static one. The suggestion that he was discovering eternal timeless laws would have amused him because that was the type of thinking he was opposed to. I don't think that Marx would either be saying the same thing if he were writing today or be among his dogmatic followers. He thought he discovered the "laws" of capitalism that applied at that point in history but acknowledge that all historical processes contain the seeds of their own transformation into the next iteration.

Historical epochs and the economic infrastructure that characterizes them come to be, develop to maturity, age, and die, being replaced by the next iteration, which they spawn themselves. And just like all growing children the next historical moment rebels against it progenitors to asset its own characteristics.

According to Marxist analysis, capitalism has come to maturity and it now getting long in the tooth. Neoliberalism is late stage capitalism, which in fact Marx did predict in his works. The first objective was to get rid of the control of the existing state over the economy in order to introduce laissez-faire competition. The land lords would be replaced, for example. Marx viewed capitalism as a step forward historically, since technology would bring more material prosperity even while creating a growing proletariat of workers who were removed from the land and the sustenance it provided. This absolute dependence on wage-labor would be the Achilles heel of capitalism.

Capitalists would not share the increased productivity with workers and eventually they would not only break the control of the then existing feudally organized states but eventually capture them and control them themselves. Then they would privatize public resources and public goods and the economies of scale would lead to no longer competitive capitalism but monopoly capitalism controlled by the ownership class and used for the extraction of rents. Wages would be suppressed for maximum profit. When capitalism was eventually globalized, the workers of the world would wake up the fact they were getting the short end of the stick and throw out the oppressors. Capitalism would be globalized because it depends on an imperialistic system of colonization to get resources and markets to grow.

See Marx's Grundrisse

So I think would probably say that things are running about schedule and that the present moment has a way to go yet before it implodes on itself.


Tom Hickey said...


Marx freely admitted that capitalism was an advance historically. He held a 19th century Western view of history and progress. Workers would be potentially better off in the future under capitalism owing to technology than they were at the end of feudal times and tilling the land for landowners. But they would be worse off in reality since they would be dependent for subsistence on wage labor, forced to rent at what owners of the means of production offered unless they could organize for bargaining power, which powerful owners would oppose. Hence, workers would be even less free than the serfs and tenant farmers of yore that were forced en masse into the burgeoning factories of the developing stage of capitalism. Marx did not envision owners of the means of production (technology) cutting workers in on productivity increases unless they were forced to do so, anymore than the land owners cut in the serfs much above subsistence.

See Paul Sweezy and Paul A. Baran, Monopoly Capital, which attempted to bring Marxism up to date on this development of economic infrastructure.

Marx envisioned a time when workers would be freed from "work." He believed that humans both value freedom and are essentially creative. "Work" is an artificial construct imposed on that nature by those few are actually free from work due to the rent they are able to extract from workers, owing to power relationships that are class-dependent,. Primitive peoples did not "work" even though they exerted a great deal of effort to obtain subsistence. "Work" arose after the advent of surpluses as a factor in production and distribution.

So the objective is get beyond "work," first as wage-labor, and then as a mindset involving something that one is forced to do rather than enjoy leisure, that is, freedom to be creative and to express one's nature as human. Of course, Marx realized that the day-to-day needs of humans must be met, but he did not think "work" was the only way or optimal way to accomplish this. Neither did Bucky, who was no Marxist.

Ryan Harris said...

It is too early to imagine a world where people can be freed from the shackles of hard work. Our collective production isn't high enough until the majority of the population is above poverty levels.

As development proceeds through Africa and South West Asia, the size of the development is much larger than we saw in China in terms of population and land mass, from Bangladesh to Lagos: 3 billion people and a landmass more than twice the size of China, US and Europe combined are rapidly industrializing, right now. It is well under way, but they will have to become the largest economies on earth and it will take a couple more decades of compounding their rates of growth before the world can relax and sit back and rest on their laurels.

All this industrialization means we are getting closer to having most of the world participating but much hard graft remains to make the impact of all the development less destructive too. Because of the size of land area and huge population, this is no small task, we can't declare success, yet. China was disruptive as they grew rapidly, imagine what will happen as the center of the world economy shifts to Africa and South West Asia. Labor markets haven't even seen the worst of disruptions yet.
At even middle income level, the region will be by far the largest economy on Earth, at least double the size of China or US.

It would be vulgar to have entire populations of people being paid to NOT work while others did not even have basic human needs met.

Tom Hickey said...

I should clarify that Marx's theory of money is tied up in his analysis of capitalism based on the classical labor theory of value as he developed and which he regarded as the basis of capitalism.

What Marx's theory of value and of money may have been are in dispute, first, because an author can be interpreted in different ways from different points of view, and if he has not made his own standpoint completely rock solid, then different points of views in approaching the text are plausible on the evidence. Different commentators take different viewpoints citing the texts.

Secondly, Marx changed his position as his analysis indicated, and he was constantly revising his work, which he never completed himself. That was left to Engels, who was his close collaborator and sounding board. Pinning down Marx's position, that is, the interpretation of his work that he himself held, or his final position, is likely impossible to do with precision.

However, it's clear from Marx's most famous work on money that he regarded money fetishism as being endemic to a monetary economy, which capitalism necessarily is in his view an, which conveniently fits into his labor value theory.

Marx was also familiar with credit systems and credit money, but he believed that gold fetishism would always be lurking behind money fetishism in credit money under capitalism. He seems to have been right about that, too.

For example, Greenspan admitted that he ran the monetary system based on the gold standard even though it was no longer in effect. He was not alone in that thinking even by those who knew better. There is definitely a lot of gold fetishism in capitalism even among those who know that the world is now on a credit system.

Here is a link to Marx's The Power of Money from Economic and Philosophic Manuscripts of 1844.

IN MMT terms, Marx thought that credit money is anchored in real resources, which necessarily fall as products (commodities) under the LTV. He explains how gold was finally settled on as the commodity anchor, not only owing to gold fetishism but also the suitability of gold as a money token. But the actual anchor in value is still based on the LTV using gold as commodity token for the physical numeraire that goes proxy for the socially based embedded labor on which his socioeconomic theory is based.

What is actually being exchanged is corresponding amounts of socially based embedded labor from which capitalists (owners) skim rent as free labor to them at the expense of the individual workers that contribute their labor to socially based labor value.

It's likely not by coincidence that the MMT JG takes an hour of unskilled labor as the anchor of "real" value. It's a recognition that the real value of money in the economy relates to labor and not to a fetish for shiny metals.

Tom Hickey said...

Good points, Ryan. There are several issues as I see it.

First, capitalism has not yet crested. The industrial revolution, including the mechanization of agriculture, has not permeated the global raising everyone's living standard to approximately the same level. There is still a lot of work to be done and as long as cheap effective labor is substitutable for capital, it won't be economically efficient to replace it with technology unless other factors supervene. So this is likely to be a gradual process in developing areas.

Secondly, the process of industrialization is energy-dependent and cleaner energy sources and fuels must be developed for global industrialization to go ahead quickly without fouling the nest.

Thirdly, owing to historical and distributional differences the pace of change has been different in different countries and regions and that is already leading to disruption.

Finally, there is an issue of oversupply and lack of demand. Conventional economists and policymakers don't seem to get this, even though heterodox analysis shows that it is really a pseudo-problem resulting from faulty analysis based on erroneous assumption leading to inadequate policy.

This is why concerted action is vitally needed globally to make this happen as smoothly and seamless as possible. Otherwise there will be conflicts and disasters.

Tom Hickey said...

How does this relate to the points that Mason and Ruccio make in the links in the post?

I think it is premature to see the end of capitalism as just around the corner. However, as Hegel observed in his dialectical analysis, historical moments are serial but also converge on becoming simultaneous as one moment culminates and the other readies to begin.

So we can see outlines of the new forming as we simultaneously view the cresting of the old wave. The old wave looks most powerful as it crests and breaks and in the excitement, the rising the new wave swelling up behind is missed unless one is looking for it.

In addition, the burgeoning moment is processing in the background by making experiments and testing options and alternatives. That's already happening as Mason relates, along with many others.

For example, there is little doubt that the coming age will be dominated by information just as the previous one has been by machines. The industrial age has been characterized by mechanistic thinking. The information age will be dominated by information theory. What this means is that mechanistic conceptual models will be replaced by models based on information and information transfer instead of wheels, levers and gears.

Some of the big technological advances are being made in biology. Biological models are also coming into prominence — organic thinking rather than mechanistic and complex adaptive systems and emergence, characteristic of evolutionary theory, are challenging static modeling. Functionalism is gaining on structuralism.