A Crucial Book

In late 2007, over twenty years of global economic growth came to a screeching halt. A financial panic began in the sub-prime mortgage market, leading to the bankruptcy (Goldman Sachs) and near bankruptcy (AIG, GM) of major financial and industrial cor-porations. While capitalist state bailouts for corporations deemed “too large to fail” stemmed the tide of economic collapse, millions of workers in both the global North and South faced attacks on their jobs, wages, working conditions and, for many, their housing. Unemployment, which had fallen to a “mere” five or six percent in the advanced capitalist countries in the 1990s and early 2000s, quickly spiked. Underemployment also rose rapidly.

Despite the hopes of many liberals and social democrats, the state bail-outs of failing capitalists did not produce a “return of the state.” Capitalist states reverted to neo-liberalism, attacking social services and public sector workers in the name of “balanced budgets” and “deficit reduction.” While corporate profits have begun to rise, there has been no new wave of investment and hiring. Unemployment remains at its highest levels since the Great Depression of the 1930s, and real wages continue to decline.

David McNally’s Global Slump offers a Marxian analysis of the current crisis that is neither an academic tract or, as he puts it “The Crisis for Dummies” (11). This book is both useful for people familiar with Marxian economics and accessible for those new to theoretical discussions. McNally locates the deep roots of the crisis in the most basic dynamics of capitalism — what he describes as its “manic depressive” tendencies — to better arm the labour and social movements’ resistance to the capitalist onslaught in the workplace and our communities.

After a lucid summary of the course of the global slump of 2007-2008, McNally presents an explanation of the “neo-liberal boom” of the past twenty-five years. Unlike most radical economists (including Robert Brenner, Alex Callinicos, Chris Harman and David Harvey), who equate prolonged capitalist prosperity with the exceptional “golden years” of the 1940s, 1950s and 1960s, McNally argues that the global slump of the late 1960s and early 1970s ended with the global recession of 1980-1982. Three processes laid the foundation for the restoration of profitability and accumulation. First was a sharp increase in the rate of exploitation — the relationship of profits and wages. While neo-liberal attacks on social services deprived workers of most alternatives to working under whatever conditions capital dictated, the reorganization of work along the lines of lean production — fragmentation of tasks, speed-up, outsourcing, the use of part-time and temporary workers, etc. — increased output while real wages deteriorated. Second was the destruction of inefficient capitals through massive waves of bankruptcies and mergers and acquisitions. Finally, the 1980s and 1990s saw a massive spatial expansion of the world economy — so-called globalization — as transnational corporations moved their most labour-intensive operations to low-wage regions in the global South.

McNally locates the origins of all global slumps, including the current one, in falling profits and the over-accumulation of capital. Following Marx, he analyzes how the same mechanisms that propel long waves of expansion — capitalist competition and investment — necessarily lead to long waves of stagnation. As capitalists attempt to improve their position in the unplanned, anarchic process of competition, they introduce new labour-saving machinery and technology to cuts costs and prices. While allowing individual capitalists to increase their market share, mechanization displaces living, human labour — the source of profits. The result is a falling rate of profit — less profit compared with growing capital investment. As production becomes increasingly capital-intensive, the economy reaches a point of over-accumulation, where masses of capital no longer yield adequate profits to continue the process of investment and growth. While over-accumulation initiates long periods of stagnation, capitalism has “built-in” mechanisms of recovery. The “creative destruction” of crises — massive bankruptcies that reduce over-accumulation, the reorganization of work and production that increases exploitation, and the spatial expansion of the world-economy — restore profitability and lay the basis for a new wave of capitalist expansion, at the cost of working-class communities and living standards. Put simply, capitalist solutions to economic crises must come at the expense of working people globally.

McNally’s analysis of the “neo-liberal boom” allows him to offer more grounded explanations of two phenomena that have captured the attention of radical economists in the past thirty years: the growth of the financial sector and the spread of capitalist production in the global South through “accumulation by dispossession.” David Harvey is perhaps the best known left-wing analyst of financialization and the spatial expansion of capitalism. He has argued that the uninterrupted stagnation of capitalist production in the global North since the late 1960s compelled capitalists to seek alternative sources of profits. On the one hand, capital was unable to find profitable outlets in the production of goods and services, and has flowed into speculative investment in financial instruments and real estate. On the other, “accumulation by dispossession” in the global South — the expulsion of millions of peasants from the land to become low wage workers, privatization of state owned industries and services, etc. — has been, according to Harvey, the only source of steady growth as most productive investment shifted from the global North to the South.

According to Global Slump, the roots of financialization are found not in speculation, but in the reorganization of production. The end of the “Bretton Woods” regime of monetary regulation (in which other currencies were pegged to the value of the US dollar, which was convertible to gold) opened a period of exchange rate instability that created problems for transnational corporations’ increasing their investments in the global South in the 1980s and 1990s. Transnationals, headquartered in the global North, feared that exchange rate fluctuations could reduce their profits earned abroad. The development of exchange-rate derivatives was an attempt to stabilize exchange-rates and guarantee the repatriation of all the transnationals’ profits. While the 1990s and 2000s saw a massive expansion of financial instruments, as the extension of consumer credit and “sub-prime” mortgages maintained working-class consumption in a period of falling real wages, the roots of “financialization” are found in the restructuring of production.

McNally also recasts Harvey’s discussion of “accumulation by dispossession” in a more classical Marxist framework of the geographic expansion of capitalist production and primitive accumulation. The extension of global boundaries of capitalist trade and production, in particular increased labour-intensive investments in regions with large surplus populations and low wages, has been a counter-tendency to falling profit rates since the late nineteenth century. Claims of a wholesale relocation of manufacturing to the global South are without empirical basis: the vast majority of capitalist accumulation remains in the global North. However, the growth of labour-intensive industries (such as textiles, clothing, footwear and electronics) and operations (such as auto parts) in Africa, Asia and Latin America fueled the “neo-liberal boom.” Neo-liberal state policies in the global South have deepened primitive accumulation — the separation of peasants from the land and the transformation of land and tools into capital — creating new arenas for investment and masses of cheap labour for transnational corporations. As agriculture in the South has become subject to market-discipline, millions of peas-ants lost their land, and those that survive are forced to cultivate non-food crops to survive. The result has been a massive migration of workers to the global North and rising food prices globally.

As the capitalist world economy temporarily stabilized in the past two years, capitalist classes and governments around the world have launched vicious austerity drives. While corporations received huge bailouts, working people — especially in the public sector — have experienced new attacks on wages and working conditions along with big cuts to social services in a period of rising unemployment and poverty. McNally’s analysis of the austerity drive as a means of disciplining workers is perhaps one of the most insightful in the book. While many on the left see the dismantling of social services as primarily a means of transferring income from labour to capital, McNally highlights austerity’s role in forcing workers to accept, without question, the terms of work dictated by capital. His insights into the racial and gender dynamics of austerity are a powerful reminder of the need to explicitly address sexism and racism in building working-class resistance to the crisis.

McNally ends with a sweeping survey of the popular and working-class resistance the capitalist austerity drive has engendered. He moves effortlessly between discussions of the fight-back in Oaxaca, Mexico, Guadeloupe and Martinique in the global South to the factory occupations and “boss-nappings” in the US, Britain and France; from the public sector strikes in France and Greece to the massive immigrant rights mobilizations in the US in 2006. McNally highlights the capacity of working people, including those in the global North, to organize and struggle, usually independently of and often in opposition to the official leaders of their unions, parties and communities. However, he is not a simple cheerleader. He recognizes that few of the current struggles have had the breadth, power and radicalism to reverse the capitalist offensive, no less pose the possibility of an alternative to global capitalism.

McNally is especially conscious of the generally low level of resistance in the US and the Canadian state, the result of the weakening of “infrastructures of resistance” — working-class institutions in workplaces (unions and activist networks) and communities (including tenant organizations, political parties and working-class public spaces) that had provided working-class activists with the means of organizing day-to-day resistance to the rule of capital. The capitalist restructuring of production — in particular the geographic movement of manufacturing within the global North and the spread of lean production — have made the rebuilding of these “infrastructures” independently of the bureaucratized official leaders of the workers’ movement and social movements a central task of a new anti-capitalist left.

Global Slump is a crucial book for any activist or organizer attempting to build resistance to the current capitalist crisis. It arms us with a theoretical analysis that understands why capitalist crisis is inevitable and why any pro-working class solution must challenge the power of capital. However, there are several points that need greater discussion, debate and clarification. McNally fails to identify the mechanisms that turn increasing capitalization of production and falling profits — features of a period of capitalist expansion — into a situation of over-accumulation. Such clarity is important in countering the claims of some on the left about permanent capitalist stagnation. There is also inadequate discussion in Global Slump of the role of the wave of mergers and acquisitions during the 1980s in creating a controlled destruction of inefficient capitals. The creation of high-risk “junk” bonds and other instruments to finance this restructuring of production was another source of the growth of the financial sector over the past three decades.

Politically, McNally’s explanation of the weakening of the “infrastructures of resistance” relies too much on the restructuring of capitalist industry since 1980. The geographic relocation and reorganization of industry is a permanent feature of capitalism. Despite this, activist “militant minorities” were able to persist, passing on traditions of radical politics and organizing to new generations of workers until the mid-20th century. The role of bureaucratic business unionism and the adaptation of much of the independent left to “progressive” trade union and political leaders in the destruction of that “militant minority” need more emphasis. Finally, McNally does not sufficiently analyze the rise of right-wing political movements in response to the capitalist crisis. While he mentions the growth of anti-immigrant politics in Northern Europe, McNally does not discuss the sharp turn to the right in mainstream politics in the US. In a period when much of the left is calling for “unity” with liberals and the official leaders of the labour and social movements to “fight the right,” it is crucial that activists are armed with an understanding that such “unity” will only weaken working-class resistance to the crisis and fuel the growth of the right.

Charlie Post teaches sociology in New York, is active in the faculty union at the City University of New York and is a member of the US socialist organization Solidarity.