Commentary on Political Economy

Friday 30 September 2011

Interpreting Bourgeois Economics – Bernanke and the Washington Consensus

Perhaps the most important task that we have set ourselves on this site is to assist the friends who visit us to interpret bourgeois economics which, far from being a ‘science’ is indeed a ‘strategy’ (some would call it an ‘ideology’, but that term is too ‘ideological’ for our liking) of capitalist domination and command over living labour. We have set ourselves a grand and challenging goal – one that we feel extremely well-equipped to achieve: to present the most radical critique of capitalism through a thorough analysis of its historical and philosophical origins and development. On this site, friends will find dispersed over several interventions important analytical departure points from which they can initiate such a critique for themselves. A more thorough, though not yet ‘systematic’, outline of our theses will be found in our book on Nietzsche – which should be available before the end of the year (it is now nearly completed).
So let us continue the performance of our task with a brief look at Ben Bernanke’s latest speech on “the Washington Consensus” about the stages of capitalist development as agreed by the global capitalist institutions (IMF and World Bank) in Washington, to see what this tells us about the self-understanding of the hated bourgeoisie – this pernicious band of rotten and craven vermin that now threatens the very future of our world.
the Chairman of the US Federal Reserve, Ben Bernanke, addresses what he calls “the powerful long-term trends shaping the global economy”. It may well be instructive for us to decipher his intervention closely given that Bernanke represents perhaps the most incisive and authoritative viewpoint of capitalist economic strategy in both officialdom as well as in academic circles.
Bernanke’s aim is made explicit by the title of his speech: - “Lessons from Emerging Market Economies on the Sources of Sustained Growth”. Is it possible to derive “lessons” from “emerging market economies” about some generic “sources of sustained growth”?
Notice first of all how Bernanke fails to define “growth”, taking this to be the orthodox definition and measurement of “economic growth” as defined by orthodox bourgeois economics. There is only one type of “economic growth” for Bernanke – the one defined by orthodox bourgeois economic theory in terms of GDP. There may be “emerging market economies”, but these are only “emerging” along what Bernanke presumes is an established model and pattern of “economic growth” set out already for the rest of the world by the leading and oldest (“developed” as against “emerging”) “market economies” – by which Bernanke means “capitalist” economies.
For we know that these economies are “capitalist”, but we deny that they have anything to do with “markets” because (as we have argued on this site) “the market” has no legitimate historical or analytical foundation in the development of capitalist economies. In a capitalist economy, “the market” means only that the living activity of workers is separated or alienated from the means of production (tools and raw materials) so that this “living activity” becomes pure “labour power or labour force” incapable of pro-ducing or “creating” anything without the will and consent of the “owner” of the means of production – the capitalist! In other words, a “market” economy entails merely the domination by dead objectified labour (in the shape of tools and raw materials owned by the capitalist) over the living labour of workers!
Thus, what Bernanke is assuming or presuming is that there is only one type of “economy” or human social production, and that is “the (capitalist) market economy”: one model of “growth”, one type of social advancement and progress that is set by the capitalist world for the rest of the globe and pro-jected into the indefinite future!
But careful! What Bernanke is seeking to do here is made clear from his title: he is seeking “to draw lessons” from these “emerging market economies” about how to achieve “sustained growth” in all capitalist economies, whether “advanced” or “emerging”! Clearly then, Bernanke is saying that it may now be time for the “emerging” capitalist countries to teach or show the way to the “advanced” or ageing capitalist countries of the West about how to find the path to “sustained economic growth” from which they have most certainly “strayed” in recent times. It is now the child who teaches the parent how to walk and talk; it is the “developed” capitalist world that needs to learn from the “emerging” capitalist countries the exact pattern and mode of behaviour to return quickly to the now-lost “path to sustained economic growth”.  This is somewhat bemusing, because one would have thought that it is always the “developed” or “advanced” country that should show to the “emerging” or “underdeveloped” world the so-called “path” to the so-called “sustained” economic growth. But no – for Bernanke it may well be time to look in the opposite direction, to invert or reverse the course of history and see if the “younger”, “fresher” capitalist bourgeoisies can teach the “older”, sclerotic and rigid ones of the West a trick or two about  “development”, about pointing the way forward.
When we peer more closely into Bernanke’s categorisation of the Washington Consensus, we see that the fundamental components or ingredients of  this Consensus are really nothing more than a summary description of the basic “institutional” features of Western capitalism. Bernanke does not intend to question the fundamental premises of capitalist industry and society but rather limits himself to recapitulating the most essential institutional features of  capitalism:
Williamson's original list of recommendations can usefully be divided into three categories: first, steps to increase macroeconomic stability, such as reducing fiscal deficits (which had caused high inflation in many countries), broadening the tax base, and reallocating government resources to build human and physical capital; second, actions to increase the role of markets in the economy, such as privatization of public assets, appropriate deregulation, and the liberalization of trade, interest rates, and capital flows; and third, efforts to strengthen institutions that promote investment, business formation, and growth, particularly by enhancing property rights and the rule of law.
These are categories that mirror closely the orthodox description of capitalist institutions. As such, they do not add much at all to what is the normal bourgeois understanding of “what makes capitalism tick”. Therefore they do not help us identify what exactly Bernanke thinks are the “lessons” to be learned from the recent high rates of growth of “emerging market economies”, except for one thing. If you look at the common denominator in all the elements that Bernanke enumerates in this section as leading to successful growth and integration in the capitalist global economy, you will find it in one thing and one thing only – what Paul Krugman has characterised as “the mobilisation of resources”. This is also in line with what we have described on this site as “absolute exploitation”.
Quite simply, what successful emerging capitalist bourgeoisies do is simply accelerate and intensify the adoption of existing capitalist institutions and technologies from the “developed” capitalist countries! In other words, there is really no secret recipe or element of “innovation” at all (!) in the “success” of emerging “market economies”: there is merely “more” – in fact, much more! – of the same: more workers through the expropriation of peasants from their lands and their agglomeration in urban industrial centres; more workers through the exasperation of fertility rates and population growth to free up industrial proletariats; more and faster disintegration of social and moral values so as “to free” human beings as “workers” on the “labor market”; more environmental degradation for easy access to “resources” that make up industrial production. In short: the lesson is “more of the same”! More exploitation of human and environmental resources for faster integration in the global capitalist economy! That this is the major “lesson and implication” that Bernanke draws from his short review of the Washington Consensus he himself makes blindingly obvious and unequivocally explicit in the appropriately-named paragraph of his speech:
What implications can we draw for longer-term prospects for growth in the emerging market economies? Notwithstanding the recent impressive growth, output per person in the emerging market economies generally remains much lower than in the advanced economies. This fact suggests that the emerging market economies should be able to maintain relatively high growth rates for some years to come, as they continue to catch up to the advanced economies. But over time, as the emerging market countries become wealthier and technologically more sophisticated, they will gradually lose the advantages of starting from behind. Even with continued strong policies, their growth will slow as returns to capital investments diminish and the most profitable opportunities are exploited.
Clearly, the “implication” of Bernanke’s analysis is that what drives “growth” in emerging… “market economies” is purely and simply the fact that “investments” in those countries are initially more profitable than (capitalist) “investments” in the “advanced capitalist economies”! And that greater profitability of emerging countries is driven far and away by “lower wage costs” and the simple “transfer” of “technology” from the advanced capitalist countries by Western bourgeoisies eager to lower wage costs at home!
So, in conclusion, what can possibly be the “lessons and implications” for the “advanced” capitalist countries as against the “emerging” ones? The first one is that “emerging” countries have to stop suppressing domestic demand and run trade surpluses because – as the gentleman he is – Bernanke cannot approve of the “absolute exploitation” of the workers of “emerging economies” by their dictatorial bourgeoisies. Here is Bernanke:
Many emerging markets also will be challenged by their reliance on trade to drive growth. As I have discussed, international trade has many benefits. However, generating trade surpluses by suppressing domestic demand defeats the ultimate purpose of economic growth--improving the lot of the country's own citizens. Large and persistent imbalances in trade are also inconsistent, in the long run, with global economic and financial stability.
Yet in Bernanke’s view this does not entirely exonerate the “advanced” capitalist countries from honouring their part of the capitalist deal – that is to say, from seeking to counter-balance the expansion of consumption in the emerging countries with their own compensating “suppression of domestic demand” by adopting – precisely! – part of those measures of “absolute exploitation” that the “emerging market economies” have copied (literally!) from the capitalist West in order to exploit their own workers! Here is Bernanke once more:
Of course, the advanced economies, like the United States, need to do their part as well in reducing global imbalances, as I have noted on numerous occasions before….
Indeed, advanced economies like the United States would do well to re-learn some of the lessons from the experiences of the emerging market economies, such as the importance of disciplined fiscal policies, the benefits of open trade, the need to encourage private capital formation while undertaking necessary public investments, the high returns to education and to promoting technological advances, and the importance of a regulatory framework that encourages entrepreneurship and innovation while maintaining financial stability. As the advanced economies look for ways of enhancing longer-term growth, a re-reading of Williamson's original Washington Consensus, combined with close attention to the experiences of successful emerging market economies, could pay significant dividends.
“Pay significant dividends”! Exactly right! “Dividends” are what matters here. And the fact of the matter, the crux of the biscuit is that what drove Western capitalists originally to invest in “emerging economies” was the declining “profitability” in the West and the better opportunities in the “underdeveloped world”. But what we find now is that those “investment opportunities” have declined precipitously in recent years – and, separately, the “profits” made by some of the bourgeoisies on the “emerging countries”, China especially, have been used by their rising bourgeoisies to arm themselves to the point where they now pose a clear and imminent threat to the Western bourgeoisies themselves! Ecce Arcanum imperii! This is the secret of the capitalist empire! The question for us to confront now is “why” profitability has declined the world over and what this means for the future of capitalism.

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