[Marxism] Gindin-Brenner debate

[Robert Brenner]

Dear Louis,

Thanks for your note. 

When I first read your comments, having virtually no memory of this article
--senility fast overtaking me--I thought, well, you may very well have a
point, indeed more than one point.   

I would have been a bit embarrassed, but not really surprised, if I had used
the term crisis carelessly at that moment and even, unintentionally, left
myself open for a catastrophist interpretation.  In early October 1998,
roughly the time I was writing this piece--the financial economy was
freezing up, and the international financial system seemed on the verge of
collapse.  For a good inside view of the scene at the time, and how it
appeared and felt, see the opening pages of the book The Fed by the leading
financial journalist Martin Meyer. Describing the subjectivity of the
several thousands of bankers and central bankers and financiers and finance
ministers who had just descended on Washington for a meeting of the World
Bank and IMF, Meyer writes "It turned out to be an experience they will
never forget as long as they live, a weekend of pure terror, as though an
asteroid were descending on earth."  Meyer does not hesitate to go on to use
the term crisis (and panic) to characterize the economic situation in
general, and the financial meltdown in particular.  
So--I thought to myself --writing pretty soon after this moment--after the
NY Fed had been obliged to bail out that hedge fund and Greenspan to cut
interest rates outside the regular meetings of the Fed--I could easily have
used the word crisis misleadingly and without sufficient thought.

(I guess I should add that, as someone who identifies himself first and
foremost as from the political far left and who was here writing in ATC for
a left political audience at a time of profound difficulty for the system, I
would not have been surprised if I had not shown sufficient "restraint", and
let politics override science. :--)) 

I should say, more generally, that, the terminology of economic analysts,
both Marxist and non-Marxist, on this stuff is not at all agreed upon or
very precise.  There's some latitude--and differences--in how crisis, panic,
even recession should be used.  Unfortunately, it's far from rocket science.
So, that's another reason I might have used the term unhelpfully.

In any case, on reading your notes, I was preparing myself for a mea culpa.
But, when I actually went to the link that you kindly provided and read the
text, I found, to my surprise, that there is very little of it that I would
disavow (unless, of course, if I had the opportunity to rewrite it "for
then," using what we now know ensued in the short and long run).  It's a
pretty fair statement of my view of things at the time.  I hope I have
learned a lot since then, but my current view would be a development on
what's written there.

I won't bore you with an explication of the article, but I'd make four main
points in response to your notes. .

1. I do use the term crisis, quite liberally, to characterize what was
happening at the moment with respect to what might be, very loosely, called
the economic peripheries--Russia, Brazil/Latin America, and above all East
Asia (which was, of course, by this time, hardly a periphery in the sense of
underdevelopment.)  For these regions, there was truly profound economic
crisis in any sense of the word you would want to use, with quite disastrous
consequences for the populations and their standards of living and indeed
for the ongoing functioning of those economies.  There was deep, and
deepening, crisis of these regions, and, especially because of the financial
reverberations, it looked like this might envelope the advanced capitalist
economies.  So, I would stand by my use of the term crisis, multiple times,
in reference to this stuff: everybody, Marxists and non-Marxists, used it in
this way, and in retrospect quite correctly...although, of course, the
underlying analyses of these crises, especially of the East Asian crisis,
differed among themselves (in this text, I think I express my view that the
analysis of much of the left--that the crisis was merely a financial one
resulting from the opening of capital markets--was insufficient...but that's
another story). .

2. As you will see, I do not use the term crisis to describe what was yet
happening in the US and the Advanced Capitalist Economies more generally,
thus in the world economy as a whole.  What I tried to say was that the
deepening crisis of much of the world outside the advanced capitalist world
did pose a serious threat to the US, Europe, and Japan, and thus the global
system, especially because their underlying performance had been weak over
the longer term, and ever weaker.  I offered my account of the long downturn
to explain this long term weakness and vulnerability.  

3. I argued that, against the background of long term and declining growth
systemwide, that the US--and thus the world economy that was so dependent
upon it--was at that time facing especially serious difficulties.  This was
because the partial, but important, rise in the rate of profit, especially
the manufacturing rate of profit, that had taken place in the US between the
early 1980s and 1995/7 was in the process of reversal.  The reason for this
was  that the forces that had driven this rise--especially increasing export
competitiveness made possible by the low dollar, as well as the repression
of real wage growth for a decade--were dissipating.   With profitability
declining, how was the US going to continue to expand and drive the world
economy?

4. I concluded on, in retrospect, a too pessimistic note--the quote you
adduce--because I could not really see, against that background of weak
"fundamentals," plus the apparent exhaustion of the economic policy tool
box, what was going to push the US forward.  The Clinton administration had
rejected Keynesianism in the standard sense and turned decisively to
neoliberalism, "the free market."   Its manufacturing sector faced a rising
currency, plus global over-capacity more generally, exacerbated by the East
Asian crisis.  How was it going to go forward?  

What I didn't see then--the source of my misplaced short-term pessimism--
was the huge, if temporally limited, capacity of the wealth effect of rising
asset prices to provide the demand needed to underpin continuing economic
expansion.  The economy's underlying problem was insufficient growth of
aggregate demand, reflecting reduced profitability.  But, I didn't yet see
the shift that had taken place in the Fed's policy to stimulating the
economy, pushing up demand, by way of the stoking of asset price bubbles--
first in equities, then in housing.  This is what came to substitute for
Keynesian demand management--what I would call bubblenomics or asset price
Keynesianism.  It is this regime of bubblenomics that has underpinned the
evolution of the global economy between 1995 and the present.

Still, management of the economy by bubbles is a very limited policy
instrument.  There was no recession in 1998, but there was a very sharp loss
of momentum for the economy in 2000-2001 when the wealth effect of rising
equity prices was reversed, when the stock market crashed.  And this did
issue in the recession that I had thought was coming in 1998.
That recession looked to many people at the time as if it was going to be
very serious, but it was, in fact, rendered very limited by Greenspan's turn
to a new bubble--the housing bubble.  I can't say that I saw that coming at
the time, in 2000-2001, either.  But, that bubble, too, obviously had to
have a very brief half-life...and, it has.
It is, in my view,  the crisis of bubblenomics, as expressed in the collapse
of the housing bubble and ensuing housing crisis and the related sub-prime
cum banking crisis, that is the immediate source of the severe problems of
the US economy today. (I don't thank anyone would dispute the use of the
term crisis in the foregoing respects),   

As you may have noticed, there was a fair amount in my talk at the Brecht
forum that continues this line of analysis.  But, whatever the strength or
weakness of this analysis, I don't see it as crisis mongering or
catastrophist.  It is, rather--as I insisted in my note to Doug that I sent
you--above all an attempt to grasp the long term underlying lack of
dynamism, indeed declining dynamism, that has plagued the US and advanced
capitalist economies more generally...and to use the understanding of that
declining dynamism to frame and grasp medium term and short term
developments, as well as government policy responses. 
   
 
All best wishes,
Robert


---Original Message-----
From: Louis Proyect [mailto:lnp3 at panix.com] 
Sent: Friday, January 04, 2008 6:28 AM
To: Activists and scholars in Marxist tradition
Cc: Doug Henwood; rbrenner at ucla.edu
Subject: Re: [Marxism] Gindin-Brenner debate

Robert, you wrote:

"In fact, the debate at the Brecht forum, for which you have the video, 
is about the question of the dynamism of the US economy, not about 
whether we are today entering an economic crisis, as will be evident to 
anyone who follows the video."

You also wrote:

"I argued at the Brecht forum, as I have for a long time, that the US 
economy has experienced declining economic dynamism since 1973, 
expressed in deteriorating economic performance in terms of virtually 
all of the main macro-indicators, decade by decade, business cycle by 
business cycle. The only exception, I argue, is the second half of the 
1990s, when the US economy expanded rapidly, in part as a result of the 
partial but abortive recovery of profitability that took place between 
early 1980s and 1995 or so and especially as a result of the wealth 
effect of the 'New Economy' equity price bubble of the years 1995-2000."

But it is you who are really responsible for joining the words "Robert 
Brenner" and "crisis" at the hip. In the November/December 1998 copy of 
Against the Current, you wrote an article titled "The Looming Crisis of 
World Capitalism". (http://www.solidarity-us.org/node/871). It was not 
titled "The Declining Economic Dynamism of the US Economy". Indeed, the 
word "crisis" appears 27 times in your article.

You refer to a crisis in this article that might "spell disaster for the 
world economy", you point to lower wage growth than during the Great 
Depression, and compare IMF behavior to Herbert Hoover's response to the 
1929 crash. This would lead an innocent reader to believe that doom was 
imminent. Perhaps there is a semantic distinction that might let you off 
the hook here. The article concludes by stating that "it is difficult to 
see where the forces will be found to counter severe recession." So 
maybe there is some kind of difference between a "severe recession" and 
a depression. I am no expert in the niceties of economic terminology so 
I am not qualified to answer this.

-----Original Message-----
From: Louis Proyect [mailto:lnp3 at panix.com] 
Sent: Friday, January 04, 2008 6:28 AM
To: Activists and scholars in Marxist tradition
Cc: Doug Henwood; rbrenner at ucla.edu
Subject: Re: [Marxism] Gindin-Brenner debate

Robert, you wrote:

"In fact, the debate at the Brecht forum, for which you have the video, 
is about the question of the dynamism of the US economy, not about 
whether we are today entering an economic crisis, as will be evident to 
anyone who follows the video."

You also wrote:

"I argued at the Brecht forum, as I have for a long time, that the US 
economy has experienced declining economic dynamism since 1973, 
expressed in deteriorating economic performance in terms of virtually 
all of the main macro-indicators, decade by decade, business cycle by 
business cycle. The only exception, I argue, is the second half of the 
1990s, when the US economy expanded rapidly, in part as a result of the 
partial but abortive recovery of profitability that took place between 
early 1980s and 1995 or so and especially as a result of the wealth 
effect of the 'New Economy' equity price bubble of the years 1995-2000."

But it is you who are really responsible for joining the words "Robert 
Brenner" and "crisis" at the hip. In the November/December 1998 copy of 
Against the Current, you wrote an article titled "The Looming Crisis of 
World Capitalism". (http://www.solidarity-us.org/node/871). It was not 
titled "The Declining Economic Dynamism of the US Economy". Indeed, the 
word "crisis" appears 27 times in your article.

You refer to a crisis in this article that might "spell disaster for the 
world economy", you point to lower wage growth than during the Great 
Depression, and compare IMF behavior to Herbert Hoover's response to the 
1929 crash. This would lead an innocent reader to believe that doom was 
imminent. Perhaps there is a semantic distinction that might let you off 
the hook here. The article concludes by stating that "it is difficult to 
see where the forces will be found to counter severe recession." So 
maybe there is some kind of difference between a "severe recession" and 
a depression. I am no expert in the niceties of economic terminology so 
I am not qualified to answer this.