The 15th Forum of the World Association for Political Economy (WAPE) took place on 18-19 December. It was held physically at the Shanghai International Studies University, China; but was complemented by virtual panels with a large number of Marxist economists from outside China participating. There were around 200 papers presented on a range of subjects: political economy, world capitalism, imperialism, China etc.
WAPE is an increasingly important forum for discussion among Marxist economics academics. To quote its website, WAPE “presents the opportunity for Marxist economists to reach out to each other, across the divide of language and geography around the dynamics of Political Economy. The aim is to unite Marxist economists of the world to work together, to facilitate this exchange of knowledge, new thought and research and to develop Marxist political economy and strengthen the influence of Marxist Political Economy in the world across all languages and cultural boundaries.”
In effect, WAPE is a Chinese-run academic economics organisation, aiming to link up with Marxist economists globally. It aims to promote the success of the Chinese development model as these academics see it. Even though that might seem like bias, the WAPE forums and journals still provide an important outlet to discuss all the developments in the world capitalist economy from a Marxist perspective.
The 15th Forum delivered a myriad of papers and speeches. In this short review, I cannot possibly cover all the sessions. But you can see the full program here. I shall only refer to the sessions that interested me or in which I participated.
But let me start with Guglielmo Carchedi. At the 15th Forum, Italian Marxist economist Carchedi received a special award for his longstanding contributions to Marxist political economy. As readers of this blog know, in the last decade Carchedi and I have collaborated on a number of projects, including papers and books, because of our close agreement on Marxist political economy and its application to the issues of the day. So it was especially pleasing to see Guglielmo receive this award from his fellow Marxist economists.
Carchedi has made pioneering and profound contributions to Marxian value theory, the theory of crises under capitalism; and to a modern theory of classes; as well as more recently to Marxian dialectics and the nature of knowledge and mental labour in 21st century capitalism. Some of his key works are: The logic of prices as values (1984) http://digamo.free.fr/carchedi84.pdf; Frontiers of Political Economy (1991) http://digamo.free.fr/carchedi91.pdf; and Behind the Crisis (2011). And here is his acceptance speech at WAPE.
There were some interesting plenary sessions that took place physically in Shanghai on the state of Marxist economics in 21st century, lessons from the Soviet Union and China and on comparisons with India. But I shall concentrate on some panel sessions in this review. Panel 3 was on the Political Economy of COVID. Jose Lujano Lopez from UNAM, Mexico presented a paper on Profits without Prosperity in Fifth Kondratiev and Social Collapse by Covid-19. Lujano started from the premiss that there are long waves of prosperity and depression in capitalist economies, following the theory of Russian economist, Kondratiev. These long waves from low to high and back to low, last about 50 years or so. Lopez reckons that the major capitalist economies are in the fifth Kondratiev wave since the capitalist mode of production became dominant. This fifth wave began in the 1980s and reached its apex in growth in production and investment by the Great Recession of 2008 and is now in its down phase to date, which presumably would come to an end around mid-2030s, if the fifth K-wave were to follow previous ones.
Whether K-waves or cycles exist and can be supported empirically is much disputed. I won’t go into all the arguments for and against here (see my book, The Long Depression, Chapter 12, for more detail). Suffice it to say that I think there is much to support the existence of long cycles of prosperity and depression in capitalist accumulation. Most of those supporting this concept look to cycles or clusters of innovation in technology; or cycles in commodity prices or production. In my view, this leaves out the underlying cycles in profitability in capitalist economies, caused by the balance between the tendency of the rate of profit to fall and the countertendencies to that.
Lajuno Lopez also offers a different cause of the fifth K-wave. He reckons that the downphase of the cycle occurs when there is a ‘technological exhaustion’ of innovations, but in the current 5K, the key factor is the relative decline and weakness of US capitalism in expanding the productive forces. Only China apparently can replace the US in expanding technology in the 21st century. So the end of the fifth K-cycle and a new upwave globally depends on whether China will achieve global economic hegemony.
I am not convinced that this transition of hegemony is the factor that will decide the end of the fifth K-wave – for two reasons; 1) it ignores the movement of the profitability of global capital; and 2) I cannot see China being able to replace the US as the hegemonic power – certainly not without intense conflict.
In another presentation, Greek Marxist economist, Lefteris Tsoulfidis presented a much more compelling explanation of long waves or cycles in modern capitalism. In The Long Recession and Economic Consequences of the COVID-19 Pandemic written with Persefone Tsaliki, Tsoulfidis argues that it is the rate of profit in combination with the movement of the real net profits that determines “the phase-change of a capitalist economy in its long cyclical pattern”. Tsoulfidis and Tsaliki reckon that the US and the world economy have experienced two such long K-cycles since 1945. The pandemic COVID-19 just deepened the downphase of the latest cycle which had already been underway since 2007. Although, growth rates in the first post-pandemic years are expected to be high, soon after economies will find themselves back to their old recessionary growth paths. They conclude that “the onset of a new long cycle requires the restoration of profitability, which can be sustained only through the introduction of ‘disruptive’ innovations backed by suitable institutional arrangements.”
The main argument of Tsoulfidis and Tsaliki is that “long cycles are induced by the long-run movement in the profit rate and the mass of real net profits.” In some ways, their conclusion is similar to that of Lopez, but for different reasons: “The economy since 2007 is in the downturn phase of the fifth long cycle. Our projection based on real corporate net profits of the US economy is that the stagnation will continue after the pandemic, despite the expected rising profitability, which cannot last for long unless major ground-breaking innovations signify the onset of the sixth long cycle.” I agree with the two Ts that: “the economic fundamentals in the post-pandemic years remain the same. It will, therefore, be no surprise for the economies on average to return to their post-2007 anemic growth rates. The moderate increase in the rate of profit and the real net profits are not enough to encourage net investment and initiate the onset of the sixth long cycle.”
The key role of the profitability of capital was also emphasised in panel 8 on Capitalist Accumulation and the Financialisation Hypothesis: a Critical Review, in which I participated with a paper. The whole session is recorded here.
Stavros Mavroudeas and Turan Subasat presented a joint paper,https://thenextrecession.files.wordpress.com/2021/12/subasat-mavroudeas-.pdf, in which Mavroudeas provided a compelling theoretical critique of ‘financialisation’. The FH claims that capitalism has morphed into a new stage where the financial sector dominates the value-productive sector of capitalist economies and crises are now the result of financial instability and not the insufficiency of profits. Mavroudeas and Subasat reckon that “the FH overrates the importance of novel financial instruments, misunderstands their function and, thus, fails to situate the role of finance in the capitalist system. Especially, it erroneously divorces finance from and superimposes it on productive capital. Moreover, the crucial empirical claims of the FH do not stand up to scrutiny.”
In the second half of their presentation, Subasat demolished the myths of the financialization theory. Supporters of FH have claimed that two-thirds of the few hundred largest multinational companies are financial. Instead, when analysed, only 10-20% could be considered financial.
It is claimed that financial assets have accelerated threefold over GDP in the past 30 years. But Subasat shows that the financial sector share increased in only 20 countries and decreased in 21 countries (indicating de-financialization). And even the fastest financialising countries are rose only 4% relative to output. The super financial economies like the US rose only 1.19% increase and the UK only had a 0.83% increase while Portugal, Greece and Spain experienced de-financialization.
Finally, it is argued that financialisation of companies led to a decline in manufacturing and productive investment. Subasat showed that the share of financial income in non-financial companies, which had started to increase in the 1990s, had decreased since 2005. Moreover, the share of financial services in total services declined in 27 (65.9%) countries and increased in 14 (34.1%) countries over the past 30 years. This implies that service sectors other than financial services contributed more to de-industrialization in these countries. And there was no significant statistical relationship between financial liberalization and financialization level, neither in terms of level nor change
Figure 6: Change in the share of the financial sector in GDP % over last 30 years
This paper was a devastating critique of the financialization story for capitalism. And that critique was supplemented by my own paper on whether the Great Recession was caused by financial instability or by an underlying downturn in the profitability of productive capital. I argued in my presentation that the empirical evidence for the latter was overwhelming. Indeed, in every recession in the US since 1945, there has been a fall in the profits of the productive sectors of the economy alongside any fall in financial profits and no recessions when only financial profits fell.
As Carchedi has pointed out, “the first 30 years of post WW2 US capitalist development were free from financial crises. Only when profitability in the productive sector fell in the 1970s, was there a migration of capital to the financial unproductive sphere that during the neo-liberal period delivered more financial crises. The deterioration of the productive sector in the pre-crisis years is thus the common cause of both financial and non-financial crises… it follows that the productive sector determines the financial sector, contrary to the financialisation thesis.”
The other papers in this session by Professor Murray Smith and Josh Watterton (unfortunately not able to participate) and Ricardo Gomes from UNAM, Mexico reached similar conlcusions. As Smith and Watteron sum it up: “All genuinely ‘new’ phenomena highlighted by proponents of the ‘financialization hypothesis’ can be accounted for within the Marxian framework. The financialization hypothesis, on the other hand, is both empirically and theoretically weak in its explanatory power. Its main purpose is to leave open the possibility of overcoming the malaise of world capitalism through some combination of ‘re-regulation’ of finance, monetary reform, and/or redistribution of a mass of ‘new value’ that, from our perspective, appears to be diminishing relative to the total value of (real) capital investment and overall systemic costs.”
And that is the important political conclusion. The financialisation story suggests that it is possible to end crises under capitalism by controlling or regulating finance without touching the multinationals in the productive sectors ie regulate not replace.
As WAPE is based in China, there were also many sessions on the nature of the Chinese economy and its development. And at WAPE we often get the strongest supporters of the Chinese development model, ie those who argue that China is a socialist economy and moreover, give or take, it is on the road towards ‘full socialism’. These ‘stages towards socialism’ were again spelt out at WAPE by Professor Cheng Enfu, who is the Chair of WAPE. In his presentation, Cheng identified three stages towards socialism.
The first stage, according to Cheng, is a period of ‘socialist construction’, as after the 1949 revolution until now, where the industrialisation and urbanisation of a peasant economy takes place, leading to the eradication of poverty and rising living standards. This takes place in a ‘socialist market economy’, where capitalist sector may be large but is still dominated by the state sector. According to Cheng, China is now entering the second or intermediate stage towards full socialism, where there will be multiple forms of ownership of the means of production, apparently as Stalin described them. Finally, in the advanced stage, there will be public ownership of the entire society with distribution of what is produced according to the labour hours exerted only for items in short supply.
Cheng’s view is followed by other Chinese-based scholars like Roland Boer, Professor at the School of Marxism, Dalian University of Technology, China. In Boer’s book, entitled Socialism with Chinese Characteristics: a guide to foreigners, he seeks to convince ‘Western Marxists’ that their ‘significant ignorance’ leads to ‘misconceptions and mistakes by those outside China’, mainly because they do not read Chinese. If they did so, says Boer, they would realise that China is clearly moving towards socialism. At WAPE, there were also those who reckon that China is socialist, but has developed a unique new model of socialism ie one with ‘Chinese characteristics’ , ie a new socio-economic formation of ‘market socialism’. The main components of this new formation have been developed by Deng Xiaoping all the way to Xi Jinping.
Now readers of my blog and other works know that I do not consider China is a capitalist economy, let alone imperialist, and such a view makes me a minority among ‘Western Marxists’. On the other hand, I do not think China is on the steady road towards socialism in its own special way as Cheng, Boer and Xi argue.
First, what is socialism or communism? It is a social organism where there is equality, or to be more exact, where everybody contributes as best they can to the ‘common prosperity’ and after deductions for all the social consumption as decided democratically by the commune, individuals get what each needs from social production. There are no markets for exchange of commodities. There are no billionaires; no inequalities of income and wealth in whatever form; there is an end of class struggle based on control of the means of production and an end to any state machinery to control the majority. None of these ‘characteristics’ of socialism/communism exist in China or anywhere. The question is whether China is on a steady transition towards socialism/communism.
For me, the concept of ‘market socialism’, pronounced by some in support of the Chinese socialist model is a contradiction in terms. This concept was never promoted by Marx. On the contrary, Marx strongly criticised such concepts when they came from Proudhon in his time and from the social democracy in Germany. In a state where capitalists and imperialism are no longer in control of the state, but which starts as a poor peasant economy, as China did, there will be a mix of state and market sectors. But while this mix may be necessary to develop the economy initially, there are still huge contradictory forces between planning and the market that must be resolved eventually with the removal of the market, as Cheng portends.
And here is the issue. In my view, far from moving towards the ‘withering away’ of class antagonisms, inequalities and the state, China is, if anything, moving in the other direction. China freed itself from imperialism and capitalism, but had a long way to go in what Preobrahensky called ‘primitive socialist accumulation’ , where there would be continual tension between social planning and a large capitalist sector at home and imperialism abroad.
But for me, China cannot go forward towards a socialist society (Cheng’s ‘advanced stage’) without democratic workers organisations controlling the state and making decisions on the economy and social need; not leaving all to the elite of the Communist party. Also China cannot move towards socialism unless there are socialist governments established in the major imperialist states surrounding China. Only then can technology, resources and human labour be employed for the world as a whole and not for elites in national states. None of these contradictions are mentioned by Cheng and other academic supporters of the Chinese road to socialism.
One key to the transition to socialism is the expansion of democratic planning for social needs. And there were many sessions at WAPE on how planning under socialism could be achieved. In several different sessions, we heard from Pat Devine, Al Campbell, David Kotz and Robin Hahnel on models of democratic socialist planning. Pat Devine summarises many of these here.
This post is long enough already and so it is not possible to deal in detail with the many other sessions at WAPE. But the 15th Forum demonstrated that WAPE has become an essential source of debate and discussion for Marxist economists globally on all the key issues of 21st century capitalism.