Top ten posts of 2016

As has become customary at the end of the calendar year, here are the top ten most popular posts from my blog for this year.  Topping the list was my review post of Anwar Shaikh’s magnum opus, Capitalism: competition, conflict and crises.  The fact that this was the most popular post is a credit to Shaikh’s magisterial book and also to the serious attitude that my blog readers take to Marxist economics.

As I said in the post, Shaikh’s book is a product of 15 years work.  A theory of ‘real competition’ is developed and applied to explain empirical relative prices, profit margins and profit rates, interest rates, bond and stock prices, exchange rates and trade balances.  Demand and supply are both shown to depend on profitability and interact in a way that is neither Say’s Law nor Keynesian, but based on Marx’s theory of value.  A classical theory of inflation is developed and applied to various countries.  A theory of crises is developed and integrated into macrodynamics.

In the post, I concentrated on Shaikh’s view on the causes of crises under capitalism and highlighted that he had a position is similar to my own on the causes of capitalist crises, the nature and existence of depressions, and the role of Kondratiev and profit cycles.  In a later post, however, I raised criticisms of his position on Marx’s theory of value,, particularly his attempt to reconcile Ricardo with Marx on value.  In my view, there is no reconciliation possible between Marx’s value theory and that of Ricardo and Sraffa.  There is also no unification possible between Marx’s law of profitability as the underlying cause of recurrent crises and slumps and the post Keynesian/Kalecki view of a ‘profit-wage share’ economy.  And there is no meeting between Marx’s view of profitability and credit in modern capitalism and those who hold that finance creates value and that ‘financial speculation’ lies at the centre of capitalist crises.  Shaikh stands for Marx on most of these issues but seems want to build a bridge to other side too.

The second most popular post was also a book review – of John Smith’s Imperialism in the 21st century, in many ways ground-breaking in its analysis of modern imperialism.  Smith shows that capital in the North restored much of the fall in its profitability in the 1970s on the back of the exploitation of the South in the 1980s onwards: “surplus-value extracted from these new legions of poorly paid workers helped to dig the capitalism system out of its hole in the 1970s”.

Smith firmly dismisses the idea that is prominent among mainstream and heterodox economics alike that the global financial crisis and the Great Recession were financial in origin. Smith reckons that gross domestic product (GDP) as a measure of value hides the fact that much of the US GDP is not value created by American workers but is captured through multinational exploitation and transfer pricing from profits created from the exploitation of the workers of the South.

Smith argues that the exploitation of the workers of the South is less through an expansion of absolute and relative surplus value and more through driving wages below the value of labour power (super-exploitation).There was a vigorous debate on my blog over whether Smith was right about this as the dominant characteristic of modern imperialism. That debate continues.

Smith’s view of imperialist exploitation is complemented by Tony Norfield’s book showing how the imperialist financial centres capture the value expropriated from the periphery.  My post on Norfield’s also made the top ten. A key part of Norfield’s book is to weave in facts like that about modern imperialism with a Marxist analysis of the role of finance capital.  And Norfield is incisive in illuminating the nature of the modern British economy.  I have described Britain in the past as the world’s largest ‘rentier’ economy.  That’s an old-fashioned French word for an economy based on sucking up ‘rents’ through the monopoly ownership of capital (or land) from the profits of the productive sectors.  Both the sectors exploit labour but the rentier economy relies on its financial and legal monopoly to take a share of the surplus value of productive capitalist sectors appropriated from labour. This gives British capital its important role in modern imperialism, but also its Achilles heel in any global financial crash or in the shock of Brexit.

The third most popular post in 2016 was on whether Marxist economic theory better explains what had happened in the last ten years than Keynesian economics, which remains the dominant thinking among leftist organisations. Leading Keynesian Brad Delong told us Marxist economists at the annual American Economics Association Conference in San Francisco last January that we are like pessimists just ‘waiting for Godot’, when capitalism can be made to work with the ‘concrete economics’ of Keynesian social democracy (the title of DeLong’s new book this year). Well, the last ten years cast doubt on that view and the next few years will see who is right.

In the post I argued that the cause of the Great Recession and the subsequent Long Depression is not the product of a ‘lack of demand’ as such or ‘pro-cyclical’ government spending policies (austerity) but is caused by a collapse of the capitalist sector, in particular, capitalist investment.  And that investment collapsed because profitability in the capitalist sector fell, then the mass of profits fell, leading to investment, employment and incomes to fall, in that order.  Then it’s the change in profits that leads to changes in investment and demand (consumption), not vice versa, as the Keynesians argue.

At the beginning of 2016, the world economy was looking pretty weak and there was much talk that a growing debt crisis in China was likely to lead to a major crash there, which would then spread globally.  But in a post that proved popular, I questioned the doom-mongering about China and also the size of the impact that China would have on the major capitalist economies. I argued that the US remains the pivotal economy for a global capitalist crisis, particularly as it dominates in financial and technology sectors.  In 1998, the emerging economies had a major economic and financial crisis but it did not lead to a global slump.  In 2008, the US had a biggest slump in its economic post-war history and it led to the Great Recession.  In my view, this weighting still applies.  That proved right, at least for 2016.

One of the big politico-economic events of 2016 was the referendum vote in Britain to leave the European Union.  My post on the day after Brexit got a lot of hits. I got it wrong, having expected a vote to remain in the EU. I had got two previous predictions right: that Scotland would vote to stay in the UK and that the Conservatives would win the 2015 UK general election, but I did not get a hat trick in 2016,  as former Conservative PM David Cameron’s wild political gamble did not come off.  In the post, I analysed the reasons why there was a vote for Brexit and looked at the possible economic impact. That impact has still to be felt both for the UK and for world trade.

The other major political event of 2016, of course, was the surprise victory of Donald Trump for the US presidency, despite polling more than 2m votes less than his Democratic opponent Hillary Clinton.  In a post directly after the result, I again analysed the reasons for Trump’s victory.  I said that, like the vote of the Brits for Brexit, against all expectations, a sufficient number of voters in America (mainly white, older and in small businesses or working in failing industries in smaller central US states) overcame the vote of the youth, the more educated and better-off in the big cities along the coasts.

But it was not so much a working class vote for Trump because hardly more than 50% or so of eligible voters turned out to vote.  A huge swathe of people never vote in American elections and they constitute a sizeable part of the working class.  The most significant issue (52%) for voters, when asked at the booths, was the state of the US economy, with terrorism next (but well down at 18%) and immigration (the Trump card) even lower.  So Trump won because he claimed he could improve the conditions of those ‘who have been left behind’ by globalisation, failing domestic industries and crushed small businesses.

Stock markets are now riding high on expectations that Trump can boost the US economy.  But in the post, I argued that Trump had been handed a poisoned chalice and the US economy would not recover.  Trump would not be able to deliver and his big business cabinet would do in the opposite of what those ‘left behind’ want.  We shall see in 2017.

One of the features of Brexit and Trump events is that it heralds the end of the great neo-liberal era of globalisation and ‘free trade’.  My post on the end of globalisation made the top ten.  It critiqued the views of Keynes in the 1930s and his modern epigone Brad Delong (again!) in claiming that capitalism has been the most successful mode of production in human history and it would be again. Instead, I argued that capitalism is really past its use-by date.  One indicator is that ‘globalisation’ (the spread of capitalism’s tentacles across the world) has ground to a halt.  And growth in the productivity of labour, the measure of future ‘progress’, has also more or less ceased in the major economies.

More short term, a key question for me and it seems my readers, was whether the world economy is heading for another slump.  In a post written early in the year, Can we avoid the coming recession?, I presented the facts as I saw them and offered a cautious forecast that a new economic recession was “due and will take place in the next one to three years at most.” I said that maybe there won’t be one in 2016 (as it has proved)… “But the factors for a new recession are increasingly in place: falling profitability and profits in the major economies and a rising debt burden for corporations in both mature and emerging economies.”

And finally there is my post on how unequal the world is, according to annual study by Credit Suisse, which makes the top ten every year.  This year was no exception, with the finding that the top 1% of the adult wealth holders in the world own 51% of all global personal wealth, while the bottom half of adults own only 1%.  Indeed, the top 10% of adults own 89% of all the world’s personal wealth!  This is a record.

In the past 12 months, global wealth has risen by 1.4% and so it has barely kept pace with population growth. As a result, in 2016, the mean average wealth per adult was unchanged for the first time since 2008, at approximately $52,800.  This mean average tells you that the vast majority of the world’s adults have way less wealth than that.  On average, wealth did not rise, while inequality between rich and poor rose again.

That’s the message of 2016 from my posts: continued depression for the majority and more for the tiny elite.

 

4 Responses to “Top ten posts of 2016”

  1. Jiulio Says:

    One thing that i´ve perceived is that these bourgeois economists generally don´t care about the private debt, They always talk about public debt but never look to the private debt in the wolrd.
    The North American private debt is 29,000,000,000,000
    The Northern Europe and West Europe private debt is about 16,000,000,000,000, the japanese is about 12,000,000,000,000, the chinese is about 27,000,000,000,000, and the UK and Australia about US$ 8,000,000,000,000. How the world will deal with it? More deficit spending and printing moe money?
    And if you look to the market cap of the non-financial companies in these regions, will see that de private debt generally is the double of the market cap of companies. The North American companies have a market cap of US$ 16,900,000,000,000; Northern Europe and West Europe about US$ 6,100,000,000,000; Japan about US$ 3,500,000,000,000 (three times less than the private debt), chinese non-financial companies have a market cap of US$ 2,500,000,000,000 (ten times less than the private debt), UK and Australia US$ 1,850,000,000,000 (four times less than the private debt), the companies in Southern and East Europe have a market cap of US$ 1,100,034,000,000, much less than the private debt in one of the southern Europe countries, Spain (2,5 trillion dollars). How the keynesians will deal with this??

  2. sartesian Says:

    “I said that, like the vote of the Brits for Brexit, against all expectations, a sufficient number of voters in America (mainly white, older and in small businesses or working in failing industries in smaller central US states) overcame the vote of the youth, the more educated and better-off in the big cities along the coasts.

    But it was not so much a working class vote for Trump because hardly more than 50% or so of eligible voters turned out to vote. A huge swathe of people never vote in American elections and they constitute a sizeable part of the working class. The most significant issue (52%) for voters, when asked at the booths, was the state of the US economy, with terrorism next (but well down at 18%) and immigration (the Trump card) even lower. So Trump won because he claimed he could improve the conditions of those ‘who have been left behind’ by globalisation, failing domestic industries and crushed small businesses.”

    That’s not why it wasn’t a “working class vote for Trump.” You can’t have a “working class vote” for a candidate when a section, informed by color and gender, votes for the candidate. The fact that out of work or in work white coal industrial workers voted for Trump doesn’t make it a vote of the working class, no more than voting for tax breaks to corporations, or repeal of environmental regulations is a working class vote… unless you hold to the view that working class whites constitute the whole class.

    Given the declining numbers of workers in US manufacturing, and the “over-representation” of women workers, and workers of color, and immigrant workers, in lower-paying industries, I would think that we would be intelligent enough to NOT identify white males as THE working class, that we would reject the notion that those voting for Trump were making some sort of class-based protest . There isn’t a single coal mine, a single job in the mines lost due to undocument immigrants, cheaper imports of coal, or OSHA or MSHA requirements. The jobs have been lost because of automation and because natural gas production has expanded so greatly.

    To even talk about “a sufficient number of voters… overcoming the vote of youth, more educated and better off in the big cities along the costs” without identifying voter suppression, disenfranchisement, on scales both petty and grand is fairly mind-boggling. After 21 states adopted voter suppression laws? After the USSC nullified critical sections of the voting rights act?

    To say that the most significant issue for voters was the state of the economy, is not to say that the most significant issue for Trump voters was the economy, nor does that provide any indication as to what those 52% found significant about the economy.

    The other part of the myth says that the election of Trump is a disruption, a rejection of the status quo…when in fact the election is equally part of a continuum, from Nixon to Reagan to Bush to Trump– the same coding for racism, the same inversion of language, the same lies serving the same class are at work. Yes, it’s more vicious, more threatening, but that just shows that the “status quo” is never just the status quo. And…….it also shows that one should never underestimate the mean-spiritedness, the pettiness of the US electorate.

  3. Jiulio Says:

    “I questioned the doom-mongering about China and also the size of the impact that China would have on the major capitalist economies”

    I think that you forgot the manufacturing value added. China has 19% of world population and adds 21% of manufacturing value in the world. This was not the case in 1998. USA has 4,5% of wolrd population and adds 17% of manufacturing value in the world. Japan has 1,7% of world population and adds 10% of manufacturing value in the world. Germany has 1,1% of wolrd population and adds 8% of manufacturing value. These are the countries that count to a system based in the production of goods.
    All other countries add below 3% of world manufacturing value. Britain adds just 1,8% with 0,9% of world population. France has 1% of world population and adds 2%. These two countries have survived just because of financerization. Brazil has 2,7% of wolrd population and, after de depression, starts add 2,2%. Italy is in a little better condition than these others

  4. Wal Buchenberg Says:

    Michael,
    Thank you for your meritorious work in this blog.

    Numbers are important to you and me. Please tell us in absolute numbers, what means “Top ten posts”.

    My best wishes
    Wal

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