After an engaging half-hour interview with India's
pre-eminent Marxist economist during a conference at New York University, I
told a friend about my one-on-one time with Prabhat Patnaik.
Indeed, we hear about India mostly as a rising economic power that is challenging the United States. While there certainly are no shortages of capitalists, there are still lots of Marxists in India, as well as communist parties that have won state elections. Patnaik represents the best thinking and practice of those left traditions -- both the academic Marxism that provides a framework for critique of economics, and the political Marxism that proposes public policies -- which is why I was so excited to talk with him about lessons to be learned from the current economic crisis.
In the interview, conducted during a break in the NYU Institute for Public Knowledge's "Futures of Finance" conference, http://rethinkingcapitalism.ucsc.edu/ I asked Patnaik two main questions: First, is there a "golden age" of capitalism to which we can return? Second, can we ever expect ethical practices from the financial sector of the global capitalist economy? Before explaining why his answer to both questions is "no," some background.
Prabhat Patnaik started his academic career in the UK, earning his doctoral degree at Oxford University and then teaching at the University of Cambridge. He returned to India in 1974 to teach at Jawaharlal Nehru University in New Delhi until his retirement in 2010. He's the author of several influential books, including The Value of Money, published in 2008. Patnaik-the-politician served as Vice-Chairman of the Planning Board of the state of Kerala from 2006-2011 and is a member of the Communist Party of India (Marxist). He regularly writes on economic issues in the Party's journal and addresses trade union meetings.
In the United States, where people believe Marxism was
buried under the rubble of the Berlin Wall and communism can only mean
Soviet-style totalitarianism, his political affiliations would guarantee a life
on the margins. But India's political spectrum is considerably wider, and left
ideas have a place in the national political discourse there. On the world
stage, Patnaik brings an unusual perspective: An experienced economist with a
history of political organizing; an Indian who is engaged in the political
debates of the West; a leftist who is not afraid to critique the weaknesses of
the left tradition.
The quixotic quest for a "golden age"
Ever since the financial meltdown of 2008, there's been more and more nostalgia in the United States -- especially among liberals -- for the immediate post-WWII period, the so-called "golden age" of capitalism during which profits and wages rose, and unemployment was low. This was the achievement of Keynesianism, the philosophy that unwanted market outcomes can be corrected through monetary and fiscal policy designed to stabilize an otherwise unstable business cycle. Primarily through "military Keynesianism" -- massive spending on wars and a permanent warfare state -- the U.S. government helped stimulate the economy when it went into inevitable periods of stagnation. That worked until about the mid-1970s, when growth started to slow.
Whether or not that system was good for everyone (lots of people in the Third World, for example, were not particularly happy with it), the question remains: Can we go back to that strategy? Patnaik says that golden age was necessarily short-lived, as the pressure for global investment pushed nations to give up the ability to impose controls on capital. This globalization of finance made national Keynesian policies less relevant. At about the same time, steep increases in the price of petroleum generated even more capital in the oil states, which went looking for investment opportunities around the world.
Globalization -- this concentration of capital moving freely around the world -- meant that no single nation-state could go up against international finance. And with the global flow of goods, the large "reserve army of labor" (the unemployed and under-employed) in places like China and India meant that workers in the advanced industrial countries had less leverage. So, productivity continued to rise, but wages stagnated. Patnaik said it's important to see the contemporary crisis in that historical context.
"The collapse of the housing bubble in the United States is certainly part of the problem but not the root cause of the problem today," he said. "The immediate crisis it touched off helps make the underlying problem visible."
If this financialization of the global economy, which has put so much power in so few hands, is at the heart of the problem, the question is clear: In the absence of a global state, who is going to control international finance capital?
If capital is going to be concentrated, can we at least make it behave?
If the power of finance capital can't be diminished, is there a way to at least make it follow some sane rules to prevent the worst from happening again? Short answer: No.
"It's important to understand that capitalism is a spontaneous system, not something that is always necessarily planned or controlled," Patnaik said. Because the reward for ignoring, evading, or getting around rules is so powerful, the attempts to make capitalism follow ethical norms are bound to fail.
"Keynesianism worked in a specific time and place, but capitalism escaped Keynesianism," he said. New rules will suffer a similar fate, absent a force as strong as international finance capital to enforce the rules.