Giovanni Arrighi’s The Long Twentieth Century

I am about 2/3rds of the way through The Long Twentieth Century, which has been a slog, but also worth the effort.  I will get back to the “life” stuff in subsequent posts, but want to pick up on three points from Arrighi today.

One: Arrighi is a fairly orthodox Marxist in that he firmly believes that economics drives history and, in particular, offers the explanatory causes for all armed conflicts.  Even more fundamentally, he believes that the exigencies of profit are the main drivers of all economic activity.  There is a logic to how and where profit can be made, as well as cycles that move capital from seeking profit through trade to seeking it through financial transactions.  Individual actors in capitalism have few, if any, options.  They must do what profit demands in any particular situation.  The iron laws of capitalism rule.

Interestingly, however, Arrighi recognizes that no profit could even be made if all actors only pursued profit.  Thus, he must posit that some people are otherwise motivated.  If everyone were motivated by profit, trade would come to a standstill because no one would make trades unless able to make a profit—and profit, finally, is a zero-sum game.  It is zero-sum because, unlike the fantasized barter exchange that is equally advantageous because I need eggs and your need clothes, the introduction of money translates all exchanges into the same currency.  I only make a profit if the eggs I exchange for clothes are worth less in monetary terms than the sum you give me, part of which I expend on clothes, the rest of which I pocket as profit. (Kiernan had a friend once who refused to sell any properties in Monopoly because his older sister had so consistently taken advantage of him in the past.  The result was an endless game, because no one could ever go bankrupt if not monopolies ever got formed.  That might prove a functioning economy, but it certainly isn’t a capitalist one.)

So what motivates people besides profit?  Arrighi answer (which, unfortunately, he doesn’t develop at all) is “power and prestige.”  War provides a consistent boon for those seeking profit—and most wars, he seems to think, are actually motivated by the need to protect or to expand sources of profit.  But he does seem to admit that aggrandizement, the quest for power and status apart from profit, can also motivate conflict, competition, and war.  And the profit seekers are more than glad to, in Country Joe’s words, “supply the army with the tools of the trade.”  War is not only a great consumer of merchandise (manufactured goods) but also a major source of debt (i.e. of profits for financial capital).  The potlatch that is war serves profit precisely because it does not seek profit itself, representing a different desire instead, one that cold-eyed profit seekers can exploit.

There are, of course, other ways to seek status besides war—and that leads us to topic number two.

Two: We are familiar with “crises of overproduction,” the paradoxical creation of poverty during economic downturns where the problem is not a scarcity of goods, but a surfeit of them.  Less often noted is the problem of a surfeit of capital, a crisis of “over-accumulation.”  Arrighi is particularly good on this species of crisis, one that seems particularly acute in our day and age.  For starters, the two types of crises can be (although they need not be) related. When markets are saturated, when there is not sufficient demand to meet supply and hence production is slowed because there is too much stuff around and no place to sell it, then capital might also begin to accumulate for lack of any place to invest it.  You can’t put the capital to work because there is no need for increased production.

In this situation, capital will move from production to financial markets.  Arrighi, in fact, believes that this movement from relying on commodities for profits to relying on selling money to make profits is the grand cycle of capitalism, with the movement to finance capital in the world’s dominant economy—first the Italian city-states, then the Dutch, then the British, then the US—marking the moment of transition from one site of dominance to the next.  The newcomer begins by taking over production from its predecessor until it, too, exhausts the profit capacities of production and moves into finance.  In this vision, the US, having moved from production to finance somewhere in the 1970s is in decline, with Asia bidding to become the next hegemonic capitalist site.

One possibility, then, is for capital to move from the former hegemonic site of production (the US) to the new one (China).  But, for fairly obvious reasons, capital is not entirely mobile.  For one thing, nationalist sentiments weigh against allowing the importation of too much “foreign capital.”  There are also risk factors: the worry that foreign lands might not be stable.  And there are transaction costs of moving into a different legal/banking regime and working in a different currency.

For various reasons, then, some (at least) excess capital will desire to stay home.  And that leads to bubbles and to creative “financial instruments” and to Ponzi schemes and other forms of fraud.  The bubbles, I would argue, are always often tied to status.  The inflated value of the “bubbled thing” (if I can invent a term) relies not simply on its supposed ability to be cashed in for a certain sum, but also for the prestige of owning such an expensive, highly valued commodity.  Currently, real estate and art works clearly play this role.  They are great places to park excess money, because they can be rationalized as investments, not just frivolous spending.  But owning a New York apartment or a painting by Monet is also conspicuous consumption.  More bang for the buck: prestige plus a profit to be made.

Another factor drives bubbles, I think.  The search for safety.  That seems paradoxical since bubbles contain enormous risks—if we believe that value must, in the final instance, be tied back to something “real.”  A very different dynamic is at work, I think.  The world is a dangerous, unstable place—and seems more dangerous every day.  (That fear of its dangerousness is, most likely, pretty constant across time.  There are always ample reasons for fear.)  The money being parked in New York and London and Vancouver real estate and in paintings by the masters is money being siphoned out of risky environments and salted away in places perceived as safe.  The American who buys a high-end New York apartment can’t find a better place to invest his excess capital.  The Chinese citizen who does the same is squirreling away his excess capital in a safe place.  Both acquire the prestige of having a place in New York.

The quest for status does lend itself to expenditures that are pretty much complete financial losses: high-end clothes and accessories, fancy vacations.  There is money to be made in the luxury trades and never more so than in times of slack production and excess capital.  Education is a funny hybrid in such times.  It is clearly a prestige item—the fancy prep schools, the elite colleges—but can also be rationalized as an investment.  It is hard to know if the return on investment (given the differential in initial outlay) for going to Harvard exceeds that of going to Grand Rapid State—mostly because the place from which the respective students start is so vastly different that the assessment of eventual outcomes (in terms of income or of other measures of economic well-being) cannot isolate the specific contribution of the degree.  But people love to spend money on things they think can also be justified as “investments.”  One need only look at the immense sums American parents are spending on sports training/competition for their children, justified as possibly leading to that child getting a scholarship to college.

In sum, profit depends on their being other powerful motives that overrule profit for some people.  As Marx put it on the more basic level of the material needs for subsistence, capitalism is in the business of turning your needs into weaknesses that it can exploit. The whole thing doesn’t work if there aren’t some people who do not pursue profit relentlessly and to the exclusion of all else.

Three: Arrighi argues that a major innovation of the American century, the time of its economic hegemony which encompasses the “long twentieth century” of his title, is the modern corporation.  In particular, the modern corporation—think Ford, Exxon, Kodak, Ma Bell—combined mass production with mass marketing.  These companies used the fact of being first in producing some product to gain massive market share by aggressively organizing its distribution and advertising operations.  Newcomers (i.e. potential competitors), Arrighi argues, did not face overwhelming technical obstacles to produce products with the same efficiency as the first-comers.  What the newcomers lacked was a way to crack into the market in sufficient volume to underwrite the capital costs of mass production.  Organizing the market in ways that orient it toward one’s firm is equally as necessary as establishing an efficient mode of production.  Where the two do not co-exist, the firm will not thrive.

On the one hand, this assertion still seems true.  Apple and Google and Amazon are prime examples.  They were, in some ways, technical innovators, although there were certainly personal computer makers in the 1980s who were Apple’s equals, and Amazon never did anything all that innovative technically.  In Arrighi’s words, “the transnational corporations that emerged in the late nineteenth and early twentieth centuries . . . were strictly business organizations [i.e.  were not state/business hybrids like the East India Company and South Africa Company of the British hegemonic period] specialized functionally in a particular line of business across multiple territories and jurisdictions” (250-51).  They integrated “the process of mass production with those of mass distribution within a single organization” (248).

It occurs to me that a similar “crowding out” operates in politics.  The difficulties of forming a “third part” or a new lobbying firm or a new social movement are enhanced by the presence of highly organized players already on the field.  Thus, for example, there is no strong anti-NRA group.  MADD (Mothers Against Drunk Driving) might be a counter-example—and provide a model for those in favor of gun control to follow.  Of course, there was hardly a strong lobby for drunk driving, the way that the NRA is a strong lobby against gun control.  In any case, the advantages of being there first are only secured by also being organized.  An organized player in the field only attracts more resources by virtue of their power and visibility.  And, for that reason, I think (as has been a theme of so many of my musings) that the anarchist love of leaderless, horizontal, non-organized action so prevalent in many radical circles today is a losing strategy.  Organization (money, boots on the ground, a well-articulated set of objectives, and a coherent strategy for advancing toward those objectives, a strategy followed consistently by the organization’s members) will defeat an amorphous protest group every time.

And yet, on the other hand, the whole point of Boltanksi and Chiapello’s The New Spirit of Capitalism is that the monster corporations of the middle twentieth century are dinosaurs, too cumbersome to respond quickly and adroitly to rapidly changing conditions on the ground.  IBM is just one poster child (GM and GE are others) for the supposed liabilities of the big firm.  Paired down, focused firms like Toyota, Southwest Airlines, and Dell computers can take on the big boys—and win—because they can keep costs down and quality high.  It is hardly that these successful new firms are unorganized.  But the organization is highly decentralized; responsibility for different aspects of the operation are widely dispersed—including, in many cases, to other firms who, by way of contract, provide key support services or even key component parts.  Such “outsourcing,” whether overseas or domestic, drives down costs, even as it increases accountability.

In politics, then, aspirant newcomers might want to consider how to play the disadvantages of size against the established players, the existing parties.  I must admit I am not sure how that would work.  For all the supposed “down-sizing” of the big dinosaurs in order to become leaner (and definitely meaner), it is not as if market share has changed all that drastically.  Coke and Pepsi still dominate the soft drink business; the big breweries buy up craft breweries almost as quickly as Apple and Google buy out any possible competitors.  I guess I would say that today’s firms are less uptight than the GM of 1950 about the need to do everything in-house, the need to be the employer of record of everyone whose work was needed to make the company function.  But today’s firms are even more obsessed with controlling the market.  Hence the endless customer satisfaction research.

Enough for now.  The big question still looms—as it always does for me.  What causes (there were obviously several) explain the “return of ruthless capitalism.”  Why were labor costs and profit levels that were deemed satisfactory in 1960 were no longer acceptable to capitalists in 1980?

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