How Much Is Too Much?

The deepest economic crisis in eighty years prompted a shallow revival of Marxism. During the panicky period between the failure of Lehman Brothers in September 2008 and the official end of the American recession in the summer of 2009, several mainstream journals, displaying a less than sincere mixture of broadmindedness and chagrin, hailed Marx as a neglected seer of capitalist crisis. The trendspotting Foreign Policy led the way, with a cover story on Marx for its Next Big Thing issue, enticing readers with a promise of star treatment: ‘Lights. Camera. Action. Das Kapital. Now.’

Though written by a socialist, Leo Panitch, the piece was typical of the general approach to Marx and Marxism. It bowed at a distance to the prophet of capitalism’s ever ‘more extensive and exhaustive crises’, and restated several basic articles of his thought: capitalism is inherently unstable; political activism is indispensable; and revolution offers the ultimate prize. This can’t have done much more than jog memories of the Communist Manifesto, the only one of Marx’s works cited by Panitch. The Manifesto remains an incandescent pamphlet, but the elements of a Marxian crisis theory, one never fully articulated by Marx himself, lie elsewhere, scattered throughout Theories of Surplus Value, the Grundrisse and above all the posthumous second and third volumes of Capital. Marx’s brilliant and somewhat contradictory comments on the subject bring to mind Cioran’s remark: ‘Works die; fragments, not having lived, can no longer die.’ Such shards sowed one of the most fertile fields in Marxist economics. Over recent decades, the landmarks of Marxian economic thinking include Ernest Mandel’s Late Capitalism (1972), David Harvey’s Limits to Capital (1982), Giovanni Arrighi’s Long 20th Century (1994) and Robert Brenner’s Economics of Global Turbulence (2006), all expressly concerned with the grinding tectonics and punctual quakes of capitalist crisis. Yet little trace of this literature, by Marx or his successors, has surfaced even among the more open-minded practitioners of what might be called the bourgeois theorisation of the current crisis.

The term bourgeois will seem apt enough if we note that a recent and distinguished addition to the long shelf of books on the crisis, Nouriel Roubini’s Crisis Economics, summons as its audience not only ‘financial professionals’, ‘corporate executives’ and ‘students in business, economics and finance’, but also – exhausting the list – ‘ordinary investors’.1 No one, in other words, who is unmotivated by gain. Maybe it’s to be expected, then, that the Marx celebrated by Roubini and his coauthor Stephen Mihm, in a résumé of earlier theorists of crisis, appears as a mere herald of continual disruption rather than as an economist who located at the heart of such crises the existence of bourgeois society as such, or the social cleavage between profit-seekers (financial professionals etc) and wage-earners: the fatal schism, in other words, between capital and labour. Roubini goes no further than to quote the same ringing lines of the Manifesto that appear in Foreign Policy. Here again is the resemblance of capitalism to ‘the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells’. Credited with the alarming but vague insight that ‘Capitalism is crisis,’ Marx then departs the scene.

To date, a revived Keynesianism has formed a left boundary of economic debate in the press at large. Only specialised socialist journals have undertaken to diagnose capitalism’s latest distemper in explicitly or implicitly Marxian terms. As for books on the crisis, until recently the jostling crowd of titles included no Marxist study, the exception to this rule, John Bellamy Foster and Fred Magdoff’s Great Financial Crisis, having been bolted together out of editorials from one of those socialist journals, the American Monthly Review.2 Not until now, with David Harvey’s Enigma of Capital, have we had a book-length example of Marxian crisis theory addressed to the current situation.

Few writers could be better qualified than Harvey to test the continuing validity of a Marxian approach to crisis, a situation he helpfully defines – dictionaries of economics tend to lack any entry for the word – as ‘surplus capital and surplus labour existing side by side with seemingly no way to put them back together’. (This is at once reminiscent of Keynes’s ‘underemployment equilibrium’ and of the news in the daily papers: in the US, corporations are sitting on almost two trillion dollars in cash while unemployment hovers just below 10 per cent.) Harvey, who was born in Kent, is the author of the monumental Limits to Capital – a thoroughgoing critique, synthesis and extension of the several varieties of crisis theory underwritten by Marx’s thought – and has been teaching courses on Marx, mainly in the US, for nearly four decades. His lectures on Volume I of Capital, available online, have become part of the self-education of many young leftists, and now supply the framework for his useful Companion to Marx’s ‘Capital’. (I sat in on his lectures at the City University of New York in the fall of 2007; a good Marxist, Harvey made no effort to find out whether any of us – too many for the available chairs – had registered and paid for the class.)

Since the publication of The Limits to Capital in the second year of the Reagan administration and at the dawn of what has come to be known as the financialisation of the world economy, the dual movement of Harvey’s career has been to return time and again to Marx as a teacher, and to extend his own ideas into new and more empirical territory. The most substantial of his recent books, Paris, Capital of Modernity (2003), described the city’s forcible modernisation by Baron Haussmann as a solution to structural crisis – ‘The problem in 1851 was to absorb the surpluses of capital and labour power’ – and situated this urban transformation within the renovation of Parisian humanity it induced. Harvey’s other post-millennial volumes, The New Imperialism (also 2003), A Brief History of Neoliberalism (2005) and now The Enigma of Capital, amount to a trilogy of self-popularisation and historical illustration, taking current events as a proving ground for what Harvey has called, referring to The Limits to Capital, ‘a reasonably good approximation to a general theory of capital accumulation in space and time’.

The mention of space is considered. Harvey received his doctorate in geography rather than economics or history – his first, non-Marxist book was taken up with differing representations of space – and the whole thrust of his subsequent work, alert to the unevenness of capitalist development across neighbourhoods, regions and nation-states, has been to give a more variegated spatial texture to the historical materialism he would prefer to call ‘historical-geographical materialism’. In a sense, the emphasis confirms Harvey’s classicism. Marx himself somewhat curiously concluded the first volume of Capital – a book otherwise essentially concerned with local transactions between capital and labour, illustrated mostly from the English experience – with a chapter on the ‘primitive accumulation’ of land and mineral wealth attendant on the European sacking of the Americas. In the same way, Rosa Luxemburg, Marx’s first great legatee in the theory of crisis, insisted in the Accumulation of Capital (1913) that imperial expansion across space must accompany capital accumulation over time. Without the prising open of new markets in the colonies, she argued, metropolitan capitalism would be unable to dispose profitably of its glut of commodities, and crises of overproduction doom the system.

It’s not, however, until the last third of The Limits to Capital that the spatial implications of Harvey’s project loom into view. The book starts as a patient philological reconstruction, from Marx’s stray comments, of a Marxian theory of crisis. The method is fittingly cumulative as, from chapter to chapter, in lucid, mostly unadorned prose, Harvey adds new features to a simple model of the ‘overaccumulation of capital’. And overaccumulation remains in his later work – including The Enigma of Capital – the fount of all crisis. The term may seem paradoxical: what could it mean for capital to overaccumulate, when the entire spirit of the system is, as Marx wrote, ‘accumulation for accumulation’s sake’? How could capitalism acquire too much of what it regards as the sole good thing?

Overaccumulated capital can be defined as capital unable to realise the expected rate of profit. Whether in the form of money, physical plant, commodities for sale or labour power (the latter being, in Marx’s terms, mere ‘variable capital’), it can only be invested, utilised, sold or hired, as the case may be, with reduced profitability or at a loss. Overaccumulation will then be variously reflected in money hoarded or gambled rather than invested; in underused factories or vacant storefronts; in half-finished goods or unsold inventories; and in idle workers, even as the need for all these things goes unmet. In such cases, the most basic of the contradictions Marx discovered in capitalism – between use value and exchange value – reasserts itself. For at times of crisis, it’s not that too much wealth exists to make use of – in fact, ‘too little is produced to decently and humanely satisfy the wants of the great mass’ – but that ‘too many means of labour and necessities of life are produced’ to serve ‘as means for the exploitation of labourers at a certain rate of profit’. A portion of the overaccumulated capital will then be devalued, until what survives can seek a satisfactory profitability again. Thus asset prices plunge, firms go bankrupt, physical inventories languish and wages are reduced, though this devaluation is no more equally divided among the respective social groups (rentiers, industrialists, merchants, labourers) than prosperity was during the good times.

On Harvey’s account, standard in this respect, the risk of overaccumulation is intrinsic to the capitalist pursuit of ‘surplus value’. The temptation is to say that surplus value is merely Marx’s name for profit, but this would be to assume success where there is only speculation: surplus value (in commodities) can be realised as a profit (in money) only in the event of a sale, and this is the rub. A capitalist, in order to produce, must purchase both means of production (Marx’s ‘constant capital’) and wage-labour (or ‘variable capital’). After this outlay – C+V in Marx’s formulation – the capitalist naturally hopes to possess a commodity capable of being sold for more than was spent on its production. The difference between cost of production and price at sale permits the realisation of surplus value. The production of any commodity, as well as the ‘expanded reproduction’ of the system itself, can thus be described by the further formula C+V+S: to a quantity of constant capital, or means of production, has been added a quantity of variable capital, or labour power, with a bonus of surplus value contained in the finished commodity.

The trouble is already there to see. Imagine an economy consisting of a single firm which has bought means of production and labour power for a total of $100, in order to produce a mass of commodities it intends to sell for $110, i.e. at a profit of 10 per cent. The problem is that the firm’s suppliers of constant and variable capital are also its only potential customers. Even if the would-be buyers pool their funds, they have only their $100 to spend, and no more. Production of the total supply of commodities exceeds the monetarily effective demand in the system. As Harvey explains in The Limits to Capital, effective demand ‘is at any one point equal to C+V, whereas the value of the total output is C+V+S. Under conditions of equilibrium, this still leaves us with the problem of where the demand for S, the surplus value produced but not yet realised through exchange, comes from.’ An extra $10 in value must be found somewhere, to be exchanged with the firm if it is to realise its desired profit.

In this stylised scheme, with the entire capitalist economy figured as a single firm, the supplementary value can be produced only by the same firm and only in the future. The full cash value of today’s product can therefore be realised only with the assistance of money advanced against commodity values yet to be produced. ‘The surplus value created at one point requires the creation of surplus value at another point,’ as Marx put it in the Grundrisse. How are these points, separated in space and time, to be linked? In a word, through the credit system, which involves ‘the creation of what Marx calls “fictitious capital” – money that is thrown into circulation as capital without any material basis in commodities or productive activity’. Money values backed by tomorrow’s as yet unproduced goods and services, to be exchanged against those already produced today: this is credit or bank money, an anticipation of future value without which the creation of present value stalls. Realisation (or the transformation of surplus value into its money equivalent, as profit) thus depends on the ‘fictitious’.

Harvey is not adding to Marx here: his achievement is to piece a heap of fragments into a coherent mosaic. And for his reconstructed Marx, the end of capitalism – or at least its latest stage, of globally integrated finance – lies in its beginning. What is sometimes called the system’s GOD imperative, for Grow Or Die, entails from the outset the development of finance as the earnest of future production. Finance and production, production and finance, can then chase each other’s tail until together they have covered the entire world (or exhausted the tolerance of the working class). Marx proposed that ‘the tendency to create the world market is directly given in the concept of capital itself,’ and Harvey glosses the idea: ‘The necessary geographical expansion of capitalism is … to be interpreted as capital in search for surplus value. The penetration of capitalist relations into all sectors of the economy, the mobilisation of various “latent” sources of labour power (women and children, for example), have a similar basis.’ Hence both the involution and the imperialism of capital, commodifying the most intimate of formerly uncommodified practices (education, food preparation, courtship) as well as sweeping formerly non-capitalist regions (China and Eastern Europe) into the global market.

Marxist economic writing at its best praises the system it comes to bury in more dazzling terms than more apologetic accounts ever achieve, and Harvey’s sardonic paean to ‘the immense potential power that resides within the credit system’ finds him at his most eloquent. For if it at first appeared from a logical point of view that capitalism must immediately founder in a crisis of overproduction and underconsumption it now appears that this problem enjoys a solution. Consider, Harvey suggests, ‘the relation between production and consumption’:

A proper allocation of credit can ensure a quantitative balance between them. The gap between purchases and sales … can be bridged, and production can be harmonised with consumption to ensure balanced accumulation. Any increase in the flow of credit to housing construction, for example, is of little avail today without a parallel increase in the flow of mortgage finance to facilitate housing purchases. Credit can be used to accelerate production and consumption simultaneously.

In the aftermath of the greatest housing bust in history, from Phoenix to Dublin to Dubai, that should sound an ominous note. Harvey goes on: ‘All links in the realisation process bar one can be brought under the control of the credit system. The single exception is of the greatest importance.’ Credit can co-ordinate the flow of economic value, but can’t create it ex nihilo: ‘There is no substitute for the actual transformation of nature through the concrete production of use values.’

In the case of real estate, it might happen – as it has – that more building and selling of houses has been financed than can actually be paid for with income deriving, in the last instance, from production. So the credit system that had seemed to insure against one kind of overaccumulation (of commodity capital) by advancing money against future production, now seems to have fostered another kind of overaccumulation (of fictitious capital) by promising more production than has occurred. More housing has been created than builders can sell at a profit; more mortgage debt has been issued than can be repaid, through wage income, to ensure the lenders’ profit; homeowners who took out loans against the rising value of their property find that prices are instead plummeting; and with the collapse of the housing sector more money capital now lies in the hands of its owners than they can see a way to invest profitably.

‘The onset of a crisis is usually triggered by a spectacular failure which shakes confidence in fictitious forms of capital,’ Harvey writes, and everyone knows what happens next. The flow of credit, at one moment lavished to all comers on the flimsiest pretext of repayment, at the next more or less dries up. In the resulting conditions of uncertainty, those without ready cash, forced to cough it up anyway, can be pushed into fire-sales of their assets, while those who do have cash prefer to save rather than spend it, so that the economy as a whole sinks toward stagnation. So far, so familiar. But what explains the special liability of capitalism to crises of disappointed speculation? And why should real estate so often be their privileged object?

‘Such speculative fevers are not necessarily to be interpreted as direct manifestations of disequilibrium in production,’ Harvey says: ‘They can and do occur on their own account.’ Yet ‘overaccumulation creates conditions ripe for such speculative fevers so that a concatenation of the latter almost invariably signals the existence of the former.’ If capital has been overaccumulated, this means by definition that it can’t easily find a profitable outlet in increased production. The resulting temptation, Harvey suggests, with his emphasis on finance, will be for capital to sidestep production altogether and attempt to increase itself through the multiplication of paper (or digital) assets alone. The question that goes all but unasked in the more respectable literature on the crisis, is why the opportunities for profitable investment looked so scarce in the first place.

If capitalist crises are crises of profitability, Marxian theory ascribes diminished opportunities for profit to one of three underlying conditions. First, a profit squeeze may be induced by the excessive wage bill of the working class, so that capitalists lack enough income to invest in new production on a scale compatible with growth. This line of thought takes inspiration from Marx’s remark that wages are never higher than on the eve of a crash, and enjoyed a heyday of plausibility in the early 1970s, a bygone era of labour militancy, near full employment and high inflation, allegedly spurred by the so-called wage-price spiral. Robert Brenner disputes, however, that a profit squeeze imposed by labour truly afflicted the early 1970s, and doubts whether, given the superior mobility of capital over labour, such a profit squeeze could ever take hold over the long run; capital would simply relocate to more docile markets. At any rate, what Brenner calls the Full Employment Profit Squeeze thesis hardly appears to caption the current picture of high unemployment and stagnant real wages across the developed world.

A second condition is the tendency of the rate of profit to fall as a result of the ‘rising organic composition of capital’, or in other words the penchant, given increased technological and organisational efficiency, for using relatively less labour than capital in production. Since profitability reflects the ‘rate of exploitation’ – or the ratio of the surplus value produced by the worker to the wages he receives – using less labour relative to capital diminishes profitability, unless capital goods become cheaper or exploitation is ramped up. This problem too can be solved, at least in principle: the capital/ labour ratio can simply be rejigged by deploying more labour relative to capital. Indeed, something like this has occurred on the grandest scale in recent decades, through the rough doubling of the amount of labour available to capital with the proletarianisation of huge populations in Eastern Europe and Asia. The effect, on one estimate, has been to reduce the global capital/labour ratio by 55-60 per cent.

Finally, and most plausibly today, theories of ‘underconsumption’ argue that capitalism lends itself to crisis because, by resisting wage growth, it deprives itself of the market, expanded by wage growth, it would need in order profitably to employ its swelling quantities of capital. Marx, in Volume II of Capital, is to the point: ‘Contradiction in the capitalist mode of production: the labourers as buyers of commodities are important for the market. But as sellers of their own commodity – labour power – capitalist society tends to keep them down to the minimum price.’ Of course ‘a sufficient prodigality of the capitalist class’, as Marx called it, could in principle maintain effective demand at a level consistent with the steady expansion of the system, by substituting luxury consumption for the satisfaction of the population at large.3 But this solution was never likely, for as Keynes observed, ‘when our income increases our consumption increases also, but not by so much. The key to our practical problem is to be found in this psychological law.’ The worldwide defeat of labour since the 1980s, leading the wage share of GDP to fall throughout the capitalist core, along with the persistent inability of the higher reaches of the capitalist class, in spite of their best efforts, to attain a level of expenditure proportionate to their wealth, makes an underconsumptionist analysis of the current crisis an appealing one, and suggests a possible convergence of Keynesian and Marxian views.

Marxists tend to battle each other, often in the heroic footnotes native to the tradition, over the merits or defects of these differing explanations of crisis. Harvey’s own approach is catholic, all-encompassing. For him, the various strands of crisis theory represent, but don’t exhaust, possible departures from a path of balanced growth in finance and production. What unites the strands is the fundamental antagonism between capital and labour, with their opposing pursuits of profits and wages. If there exists a theoretical possibility of attaining an ideal proportion, from the standpoint of balanced growth, between the amount of total social income to be reinvested in production and the amount to be spent on consumption, and if at the same time the credit system could serve to maintain this ratio of profits to wages in perpetuity, the antagonistic nature of class society nevertheless prevents such a balance from being struck except occasionally and by accident, to be immediately upset by any advantage gained by labour or more likely by capital.

So, as The Limits to Capital implies without quite stating, the special allure and danger of an elaborate credit system lie in its relationship to class society. If more capital has been accumulated than can be realised as a profit through exchange, owing perhaps to ‘the poverty and restricted consumption of the masses’ that Marx at one point declared ‘the ultimate reason for all real crises’, this condition can be temporarily concealed, and its consequences postponed, by the confection of fictitious values in excess of any real values on the verge of production. In this way, growth and profitability in the financial system can substitute for the impaired growth and profitability of the class-ridden system of actual production. By adding over-financialisation, as it were, to his model of overaccumulation, Harvey means to show how an initial contradiction between production and realisation later ‘becomes, via the agency of the credit system, an outright antagonism’ between the financial system of fictitious values and its monetary base, founded on commodity values. This antagonism then ‘forms the rock on which accumulation ultimately founders’. In social terms, this will take the form of a contest between creditors and debtors over who is to suffer more devaluation.

The real originality of The Limits to Capital, however, is to add a new geographical dimension to crisis formation. Harvey goes about this via a theory of rent. One effect of the approach is to suggest why property speculation – with its value ultimately tied up in potential rental income – should be such a familiar capitalist perversion (in the psychoanalytic sense of overinvestment in one kind of object). Another is to convert an apparent embarrassment for Marxian theory into a show of strength. The would-be embarrassment lies in the evident difficulty of reconciling a labour theory of value with the price of unimproved land, given that land is obviously not a product of human labour. Harvey’s bold and ingenious solution is to propose that, under capitalism, ground rent – or the proportion of property value attributable to mere location, rather than to anything built or cultivated on the land – becomes a ‘pure financial asset’. Ground rent, in other words, is a form of fictitious capital, or value created in anticipation of future commodity production: ‘Like all such forms of fictitious capital, what is traded is a claim on future revenues, which means a claim on future profits from the use of the land or, more directly, a claim on future labour.’

From the need to realise ground rent stems capitalism’s whole geography of anxious anticipation. Capital overaccumulated in one place can flow to another which appears to boast better ultimate prospects of profit. Rising land values will shunt capital to new locations, at the same time that the resulting increase in rental costs compels a matching expansion of production, with its accompanying physical and social infrastructure. The relationship between credit and commodities is in this way translated into spatial terms as an uneasy rapport between one kind of capital, highly mobile or liquid, and another kind – ‘fixed capital embedded in the land’ – defined by its inertness. Here, in the latent conflict between migratory finance capital and helplessly stationary complexes of fixed capital, including not only factories and office buildings but roads, houses, schools and so on, Harvey has found a contradiction of capitalism overlooked by Marx and his heirs.

The contradiction may look at first like a brilliant solution to the problem of overaccumulation. Overaccumulated capital, whether originating as income from production or as the bank overdrafts that unleash fictitious values, can postpone any immediate crisis of profitability by being drawn off into long-term infrastructural projects, in an operation Harvey calls a ‘spatio-temporal fix’. Examples on a grand scale would be the British boom in railway construction of the 1820s, the Second Empire modernisation of Paris, the suburbanisation of the US after World War Two, and the recent international pullulation of commercial and residential towers. In each case, a vast quantity of capital, faced with the question of profitability, could as it were postpone the answer to a remote date, since investments in infrastructure promise such delayed returns. Meanwhile, transformed spatial arrangements swap old trades for new ones – Harvey notes that Haussmann’s Paris witnessed the extinction of the water-carrier and the advent of the electrician – or rejuvenate existing industries, like the postwar car manufacturers in the US.

Inevitably, the risk is that a given territory, as a complex of fixed capital, comes to prosper thanks to a stream of finance that one day flows elsewhere. A devaluation of the abandoned land along with its ‘overaccumulated’ workers, industries and infrastructure will ensue. This harsh sequel to the spatial fix Harvey calls a ‘switching crisis’, and in something like the climax of The Limits to Capital, he writes:

The more the forces of geographical inertia prevail, the deeper will the aggregate crises of capitalism become and the more savage will switching crises have to be to restore the disturbed equilibrium. Local alliances will have to be dramatically reorganised (the rise of Fascism being the most horrible example), technological mixes suddenly altered (incurring massive devaluation of old plant), physical and social infrastructures totally reconstituted (often through a crisis in state expenditures) and the space economy of capitalist production, distribution and consumption totally transformed. The cost of devaluation to both individual capitalists and labourers becomes substantial. Capitalism reaps the savage harvest of its own internal contradictions.

In The Enigma of Capital Harvey observes these contradictions sharpening over time, as finance capital becomes ever more mobile while beds of infrastructure grow increasingly Procrustean: ‘The disjunction of the quest for hypermobility and an increasingly sclerotic built environment (think of the huge amount of fixed capital embedded in Tokyo or New York City) becomes ever more dramatic.’

So what then are the ‘limits to capital’? Harvey’s answer, disappointing as it is honest, is that a system bent on overaccumulation will not collapse of its own top-heaviness. Should the world market fail to generate the ever increasing surpluses that form its only rationale, it can always enlarge its borders and appropriate new wealth through what Marx called primitive accumulation and what Harvey proposes to call ‘accumulation by dispossession’, given that the process hardly ceased when the English peasantry was cleared off the land or the Inca Empire looted for its silver. The incorporation into the capitalist domain of non-capitalist territories and populations, the privatisation of public or commonly owned assets, including land, and so on, down to the commodification of indigenous art-forms and the patenting of seeds, offer instances of the accumulation by dispossession that has accompanied capitalism since its inception. This field for gain would be exhausted only with universal commodification, when ‘every person in every nook and cranny of the world is caught within the orbit of capital.’ Even then, the continuous ‘restructuring of the space economy of capitalism on a global scale still holds out the prospect for a restoration of equilibrium through a reorganisation of the regional parts’. Spatial fixes and switching crises might succeed one another endlessly, in great floods and droughts of capital. Devaluation, being ‘always on a particular route or at a particular place’, might serially scourge the earth even as capital in general, loyal to no country, remained free to pursue its own advantage.

The real test of Harvey’s 1982 theory of crisis is how well it serves in the face of the thing itself. The Enigma of Capital can be read as an effort to meet the challenge. Naturally, its success or failure depends on whether it can offer a more comprehensive and persuasive account than rival theories. On the score of comprehensiveness there can be little doubt that Harvey’s work and that of other Marxists goes beyond the alternatives. ‘The idea that the crisis had systemic origins is scarcely mooted in the mainstream media,’ Harvey writes, and that might be extended to include even the trenchant work of the neo-Keynesians. The crisis, after all, is that of a capitalist system, and no account of it, however searching, can be truly systematic if it neglects to consider property relations: that is, the preponderant ownership of capital by one class, and of little or nothing but its labour power by another.

Paul Krugman, discussing Roubini’s book in the New York Review of Books, agreed with him that what Ben Bernanke called the ‘global savings glut’ lay at the heart of the crisis, behind the proximate follies of deregulation, mortgage-securitisation, excessive leverage and so on. Originating in the current account surpluses of net-exporting countries such as Germany, Japan and China, this great tide of money flooded markets in the US and Western Europe, and floated property and asset values unsustainably. Why was so much capital so badly misallocated? In the LRB of 22 April 2010, Joseph Stiglitz observed that the savings glut ‘could equally well be described as an “investment dearth”’, reflecting a scarcity of attractive investment opportunities. Stiglitz suggests that global warming mitigation or poverty reduction offers new ‘opportunities for investments with high social returns’.

The neo-Keynesians’ ‘savings glut’ can readily be seen as a case of what a more radical tradition calls overaccumulated capital. But it is the broader and more systematic Marxist perspective that ultimately and properly contains Keynesianism within it, and a crude Marxist catechism may be in order. Where does an excess of savings come from? From unpaid labour – for example, that of Chinese or German workers. And why would such funds inflate asset bubbles rather than create useful investment? Because capital pursues not ‘high social returns’, but high private returns. And why should these have proved difficult to achieve, except by financial shell-games? Keynesians complain of an insufficiency of aggregate demand, restraining investment. The Marxist will simply add that this bespeaks inadequate wages, in the index of a class struggle going the way of owners rather than workers.

In The Enigma of Capital, Harvey coincides with other Marxists in locating the origins of the present crisis in the troubles of the 1970s, when the so-called Golden Age of capitalism following the Second World War – blessed with high rates of profitability, productivity, wage growth and expansion of output – gave way to what Brenner named ‘the long downturn’ after 1973. Brenner argued in The Economics of Global Turbulence that this long downturn, with deeper recessions and weaker expansions across every business cycle, reflects chronic overcapacity – another variety of overaccumulation – in international manufacturing, a condition brought about by the maturation of Japanese and German industry by the end of the 1960s, and later compounded by the industrialisation of East Asia. As competition to supply export markets increased faster than those markets expanded, the price of international tradeables naturally fell, reducing both the profits of manufacturers and the wages paid to workers. Such impaired profitability moreover discouraged further investment in production, so that finance capital turned increasingly to speculation in asset values. Yet this view, however formidably presented, doesn’t appear to have won general assent. Harvey, content to follow Brenner elsewhere, inclines towards a more conventional profit-squeeze explanation of the crisis of the early 1970s.

About the sequel to that crisis there is less dispute. Whether or not high wages had undermined profitability, a subsequent effort to curb wages, carried out at gunpoint in the Southern Cone in the mid-1970s, and achieved by ballot under Thatcher and Reagan before spreading to other wealthy countries, eventually resulted in a systemic shortage of demand. In this way, capital’s victory over labour set the stage for a later reversal. In The Enigma of Capital, Harvey charts the dialectical switch in the blunt style he now favours:

Labour availability is no problem now for capital, and it has not been for the last 25 years. But disempowered labour means low wages, and impoverished workers do not constitute a vibrant market. Persistent wage repression therefore poses the problem of lack of demand for the expanding output of capitalist corporations. One barrier to capital accumulation – the labour question – is overcome at the expense of creating another – lack of a market. So how could this second barrier be circumvented?

The lack of demand was of course appeased by recourse to fictitious capital: ‘The gap between what labour was earning and what it could spend was covered by the rise of the credit card industry and increasing indebtedness.’ It was not only consumers who indentured themselves. As Bellamy Foster and Magdoff point out in The Great Financial Crisis, total US debt, owed by government, corporations and individuals, equalled approximately 125% of American GDP during the 1970s. By the mid-1980s the proportion had increased to two to one, and by 2005 stood at almost three and a half to one. Much of the cheap credit, originating in East Asia and flowing through the Federal Reserve, came to promote a property bubble of historic dimensions. ‘The demand problem,’ Harvey writes, ‘was temporarily bridged with respect to housing by debt-financing the developers as well as the buyers. The financial institutions collectively controlled both the supply of, and demand for, housing!’

It can’t be said that Harvey comes late to recognising the housing bubble’s absurdity. In The New Imperialism, from 2003, he recapitulated his theory of the spatial fix, and warned that while some spatial fixes ultimately relieve crises through the elaboration of new physical and social infrastructure, others merely postpone them. After listing several of the more spectacular property-market collapses of the long downturn (worldwide in 1973-75; Japanese in 1990; Thai and Indonesian in 1997), Harvey added that

the most important prop to the US and British economies after the onset of general recession in all other sectors from mid-2001 onwards was the continued speculative vigour in the property and housing markets and construction. In a curious backwash effect, we find that some 20 per cent of GDP growth in the United States in 2002 was attributable to consumers refinancing their mortgage debt on the inflated values of their housing and using the extra money they gained for immediate consumption (in effect, mopping up overaccumulating capital in the primary circuit). British consumers borrowed $19 billion in the third quarter of 2002 alone against the value of their mortgages to finance consumption. What happens if and when this property bubble bursts is a matter for serious concern.

Not only Americans and Britons but the Irish, Spanish and Emiratis live today among the ruins of a broken spatial fix.

What, if any, switching crisis does this presage? To keep things simple, imagine the world economy of recent years as consisting of two capitalist countries – represented by the US and China – in both of which the working class, employed or unemployed, received too little of the total product for capital not to overaccumulate and risk massive devaluation. Chinese workers, deprived by wage repression and social insecurity (such as lack of health insurance) of the opportunity to consume much of their own output, saw the wealth accumulated through their labour go, in the form of their own savings and the income of their bosses, towards the construction of new productive capacity in their own country and a property boom in the other country. Both the new factories at home, turning out exports for the US, and the deliriously appreciating houses abroad rested on the premise of continuously rising American incomes. But among Americans, wage growth had ceased and household incomes could no longer be supplemented by the mass entry of women into the workforce, something already accomplished. The issuance and securitisation of debt alone could substitute for present income. But in the end so much fictitious capital could not be redeemed. Whatever the destination of future Chinese savings gluts, they can no longer sponsor American consumption in the same way.

In his final book, Adam Smith in Beijing (2007), the late Giovanni Arrighi expanded on Harvey’s concepts of the spatial fix and the switching crisis to survey half a millennium of capitalist development and to peer into a new, probably Chinese century. In Arrighi’s scheme of capitalist history, there had been four ‘systemic cycles of accumulation’, each lasting roughly a century and each organised on a larger scale than the one before, with a new polity at the centre: a Genoese-Iberian cycle; a Dutch cycle; a British cycle; and an American one. A systemic cycle’s first phase, of material expansion, came to an end when the central power had accumulated more capital than established trade and production could absorb. This was followed by a second, financial phase of expansion in which capital overaccumulated at the centre of the system promoted a new nucleus of growth. Ultimately the rising centre came to finance the expenditures, often on war, that the old and now declining centre could no longer cover out of its mere income.

It fits Arrighi’s scheme that the US, having (along with the Chinese diaspora) once led international capital onto the Asian mainland, had now become dependent on Chinese credit. For him, this announced the greatest switching crisis of all time, as China prepared to assume the hegemonic role being reluctantly relinquished by the US, and to inaugurate a new cycle of accumulation. Such a succession might ideally yield a new commonwealth of civilisations, in which capitalism as we know it gave way to what Arrighi somewhat hazily envisaged as a non-capitalist market economy recuperating old Chinese traditions of self-centred development. One condition of this happy scenario was that the US abandon its armed imperialism and China remain committed to its ‘peaceful rise’; another, that the Chinese pioneer a green mode of growth distinct from ‘the Western, capital intensive, energy consuming path’. Otherwise inter-imperial war, the ultimate means of competitive devaluation in The Limits to Capital, loomed once more.

In the recently published Ecological Rift: Capitalism’s War on the Earth, John Bellamy Foster and his Marxist co-authors refer to the identification by a group of scientists, including the leading American climatologist James Hansen, of nine ‘planetary boundaries’ that civilisation transgresses at its peril.4 Already three – concentrations of carbon in the atmosphere, loss of nitrogen from the soil and the extinction of other species – have been exceeded. These are impediments to endless capital accumulation that future crisis theories will have to reckon with. Harvey’s intuition of the ultimate demise of capitalism has also taken on an ecological colouring. ‘Compound growth for ever’ – historically, for capitalism at about 3 per cent a year – ‘is not possible,’ he declares in The Enigma of Capital, without much elaboration. The classical economists long ago foresaw that an economy defined by constant expansion would one day give way to what John Stuart Mill called the ‘stationary state’. The idea has gained a new currency in Marxist writing of recent years, and in its contemporary version tends to locate the limits to growth in the depletion of natural resources or in the exhaustion of productivity gains as the share of manufacturing in the world economy shrinks and that of services expands. Of course, peak oil or soil exhaustion might easily coincide with faltering productivity. Harvey doesn’t spell out why growth must have a stop, and the outlines of an ecologically stable and politically democratic future socialism remain as blurry in his later work as they do almost everywhere else. At the moment Marxism seems better prepared to interpret the world than to change it. But the first achievement is at least due wider recognition, which with the next crisis, or subsequent spasm of the present one, it may begin to receive.