Gerry Epstein comments on Nouriel Roubini's blog that "Marx was right" - August 19, 2011
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Gerald Epstein is codirector of the Political Economy Research Institute (PERI) and Professor of Economics. He received his Ph.D. in economics from Princeton University. He has published widely on a variety of progressive economic policy issues, especially in the areas of central banking and international finance, and is the editor or co-editor of six volumes.
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Washington. The last couple of days, a lot of people that follow economics and the blogs have been talking about a piece by Nouriel Roubini. He runs a research think tank in New York and also teaches at NYU, and he's one of the people generally acknowledged to have predicted the 2008 crash. He's certainly been acknowledged also as someone who generally believes in markets and capitalism. Well, here's what he wrote just a few days ago:~~~"So Karl Marx, it seems, was partly right in arguing that globalization, financial intermediation run amok, and redistribution of income and wealth from labor to capital could lead capitalism to self-destruct (though his view that socialism would be better has proven wrong). Firms are cutting jobs because there is not enough final demand. But cutting jobs reduces labor income, increases inequality and reduces final demand."Recent popular demonstrations, from the Middle East to Israel to the UK, and rising popular anger in China--and soon enough in other advanced economies and emerging markets--are all driven by the same issues and tensions: growing inequality, poverty, unemployment, and hopelessness. Even the worldâs middle classes are feeling the squeeze of falling incomes and opportunities."~~~JAY: The title of that blog is "Is Capitalism Doomed?" Now joining us to talk about this blog and the state of the global economy is Gerry Epstein. He's codirector of the PERI institute in Amherst, Massachusetts. Thanks for joining us.GERRY EPSTEIN, CODIRECTOR, POLITICAL ECONOMY RESEARCH INSTITUTE: Thanks for having me, Paul.JAY: So what do you think? Is capitalism going to destroy itself, which is part of what Roubini says?EPSTEIN: Well, things aren't looking too great. I agree with Roubini on that. Of course, he used Marx's name for shock value and to get attention, and it's worked. Marx, of course, wasn't the only one who made these--has made these kinds of arguments. He threw in some Keynes and /k@.'lVt.ski/ as well. But there's no doubt about it. The global economy is in very serious problems, is having very serious problems now, and some of the ones Roubini pointed out. There has been this huge shift of power and wealth away from the working class and the middle class in many parts of the world, and this, along with the financial shenanigans and financial crisis, has led to a very serious aggregate demand problem. No--there's no set of institutions or agents in the United States and in Europe and in other economies that has the ability and the interest in spending money, spending income to revive the economy. And the only possible groups that could do this at this point are governments and central banks. And the right-wing forces in Europe and here in the United States are doing their best to make sure that the government and the central banks cannot bring the global economy out of this stagnation and out of this crisis. So things are looking pretty bad.JAY: I mean, it's not just the right-wing, except I'm not sure how you define right-wing, 'cause right now, you know, if you divide the elite between the liberal neoliberals and the conservatives, or the right/left of--what I would say, the right/left of the elite, they're all on the austerity train. It's a very few voices, elite voices, that are talking about stimulus and jobs--I shouldn't say none, 'cause in the financial pages you do see even some investment fund managers saying it needs to be done, but they seem to be very lonely voices.EPSTEIN: Well, they're pretty lonely voices, and I think that's--it's good that people like Roubini are coming out and making the argument for--to get rid of the austerity push that's coming from so many quarters. The fact of the matter is, though, with Europe unable and unwilling to play an expansionary role, with Obama caving in to the Wall Street forces and the right-wing forces here in the United States, with Japan continuing to be mired in financial and economic and political problems--China's even cutting back on its demand policies and its economic growth--it doesn't seem like there's any place in the world economy that is willing to play an expansionary role. Of course, there are plenty of places, including the United States, the Europeans, that could be playing their role, but they're refusing to do that.JAY: I mean, when--you know, Roubini quotes Marx, but he doesn't really fully quote Marx, because Marx didn't make--his main point wasn't inequality and distribution of income. If I understand it correctly, it was more that this is the outgrowth of when you have, you know, a tiny percentile actually owning the commanding heights of the economy. It's about who owns the stuff, and then the rest falls out of that. And very few people want to talk about that whole issue of ownership, because out of, you know, concentration of ownership, we've all seen what has happened in terms of financial regulation: the political power that derives from such ownership makes any kind of policy, even rational policy that kind of mitigates what's happening in terms of the crisis, it makes even that impossible.EPSTEIN: That's right. You know, the top 1 percent in the United States has gotten most of the gains of the economic growth in the last 30 years, and they've gotten, accumulated more and more political power as well. And Marx said that when you had a system that's run by a very small group of capitalists and that's impoverishing the rest of the economy, the economy is ripe for a revolution. Unfortunately, what we're seeing in this country is that it's the right-wing populace that are taking political advantage of this, partly funded by Koch brothers and other fabulously wealthy business people, supported by most of the media. So rather than the workers and the middle class organizing on a progressive or left program, as Marx thought would happen, to overthrow the system, what we're finding is that it's the right-wing that's mobilized. Of course, Roubini said that socialism isn't an alternative, because it was proven to be wrong. And that's certainly not the case. We didn't have widespread socialism in wealthy countries like the United States. But even if it were true, as Eric Hobsbawm has written time and time again, it was the threat of socialism and the threat of communism as a viable alternative that forced capitalism to reform, that forced capitalism to redistribute income and wealth.JAY: In other words, the New Deal, you're talking about, and European programs like it.EPSTEIN: And not only in the New Deal. It was a result of the Cold War and the threat of the Soviet Union. And this is probably the first time in the history of capitalism where there hasn't been a strong viable threat from the left in the major capitalist countries--though, of course, left-wing parties have gained important power in some developing countries in Latin America and elsewhere. But I think the real challenge facing us is how we can mobilize the middle class and the working class from a progressive direction to really challenge this system as Marx thought would happen.JAY: So let me ask again: how dangerous a moment do you think we are in? Like, if you listen to Roubini, it sounds like we're on the precipice of another 1930s.EPSTEIN: I think it's a very dangerous moment, because I think we're in a moment where the forces of austerity have gained the upper hand, and as in the 1930s that's exactly what happened: the forces of austerity gained the upper hand in Europe; they gained the upper hand by 1937 also in the United States. And in that situation, with the debt overhang facing the private and the public financial markets, there's no source of expansionary pressure in the global economy; and in that situation, it leads to political disintegration, economic disintegration. So I think the danger is very real. And unless there are some leaders, or if they're pushed from the bottom, as I've suggested before, to take an expansionary stand, redistribute income and wealth to those at the bottom and in the middle, I think that we're in for at least very significant stagnation, if not a very serious economic crisis.JAY: Thanks for joining us, Gerry.EPSTEIN: Thank you.JAY: Thank you for joining us on The Real News Network.
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