On February 20, 2004, Ben Bernanke, then a member of the Board of Governors of the Federal Reserve System, delivered a speech, entitled “The Great Moderation,” to the Eastern Economic Association. His topic was whether the reduction in the amplitude of cyclical fluctuations that had marked the U.S. economy since the middle of the 1980s would continue. While somewhat hedging his bets, Bernanke indicated that he was optimistic it would:

“I have argued today,” Bernanke concluded, “that improved monetary policy has likely made an important contribution not only to the reduced volatility of inflation (which is not particularly controversial) but to the reduced volatility of output as well. … This conclusion on my part makes me optimistic for the future, because I am confident that monetary policymakers will not forget the lessons of the 1970s.”

As everybody now knows, Bernanke would get the answer to the question of whether the “Great Moderation” with its relatively mild recessions would continue in the face of the Federal Reserve System’s “improved monetary policy” in a little less than five years. By then, Bernanke had risen to the chairmanship of the Board of Governors. Everybody now knows the answer that Bernanke got, and it was not the answer that he—and, of course, the many hundreds of millions of victims of the crisis worldwide as well—was hoping for. But it is the answer we must all live with, however unpleasant.

In the light of the universal economic meltdown that swept the globe in the fall of 2008, the subject of the periodic economic crises that are part and parcel of the capitalist system has once again become a central concern of virtually everybody who lives on this planet. It is this question that this blog intends to explore from a Marxist perspective. Unlike the various schools of “orthodox” or “bourgeois” economics, Marx put the periodic economic crises that have marked the capitalist mode of production since the end of the first quarter of the 19th century at the very center of his analysis of capitalist society and its ultimate fate.

Origins of this blog

This blog is not a rush reaction to the current global economic crisis, though I will admit that the timetable for opening the blog has been rather rudely speeded up by the current crisis. On the contrary. The origins of the blog are rooted in prosperity, not crisis. This needs some explanation.

The roots of this blog go back decades, long before there were blogs or indeed the Internet in anything like its current form. I am a member of the so-called “baby boom” generation, itself a product of an earlier economic crisis, the Great Depression, and World War II, which in large measure grew out of the Depression. In an almost literal sense, members of my generation are the children of the Depression.

Growing up in the 1960s, I like many others of my generation was radicalized by the vast protest movement against the war in Vietnam, as well as the Black Liberation movement that was making a transition from the Civil Rights movement against legal Jim Crow segregation in the U.S. South to the Black Power movement. I took part—though not in a leadership role—in many of the demonstrations against the war in Vietnam and licked up my share of envelopes for mailings—e-mails were far in the future. My only regrets are that I didn’t wear out more shoe leather and lick more envelopes and postage stamps! And in the end, the people of Vietnam were victorious!

In the course of this activity, I became a socialist and gradually a Marxist. But I was bothered by one thing. The U.S. and world capitalist economies were passing through a powerful boom in the 1960s of a scope that has not been seen since in the imperialist countries of the United States, Western Europe and Japan. Indeed, a whole generation has now grown up that has never experienced the kind of economic prosperity that reigned in the sixties of the last century.

Early questions

The economic experts and textbooks of the day explained that capitalist governments had, with the help of the work of the British economist John Maynard Keynes, largely figured out how to control the business cycle, eliminating or a least greatly moderating periodic economic crises that had led to the Great Depression. If the government could keep the capitalist prosperity going through timely interventions, how could a revolutionary situation ever develop in rich countries such as the United States?

Unlike some other young radicals, I didn’t think the revolution was “just around the corner.” It was clear to me even then that the U.S. working class, as a class, was far from being in a revolutionary mood, notwithstanding the widespread spirit of rebellion that was certainly affecting considerable portions of the working class, especially but not only its African American component. But the U.S. working class—and this was true more or less of the working class of other imperialist countries, was far from being in a revolutionary mood, notwithstanding the events of May-June 1968 in France. It was very far from being on the verge of moving to overturn the capitalist system. And without a class-conscious working-class movement determined to overthrow capitalism, how could a socialist revolution ever occur? Would “Keynesian”-supported capitalist prosperity forever bar the door to a working-class radicalization and socialist revolution where the material conditions were otherwise most favorable for socialism?

Determined to explore this vital question, I became increasingly interested, and at times, I must admit, even obsessed, with economics, especially the question of the capitalist economy’s periodic crises. Was it really true that the capitalists governments could even out the business cycle and keep the economy in a state of “permanent quasi-boom” such as Keynes thought it could and advocated in his famous “General Theory.” And if not, why not?

Early studies

These were the years when “everybody was a Keynesian,” and even Marxists had come to respect Keynes and his work. I read the works of the major Marxist economists of the day, such as Paul Sweezy and Paul Baran’s “Monopoly Capital” and Ernest Mandel’s two-volume “Marxist Economic Theory,” as well as the writings of Victor Perlo and many others.

Still dissatisfied, I began to read Marx himself, and even plowed through the three volumes of “Capital.” I then read some of the classics of bourgeois political economy, such as Adam Smith’s “Wealth of Nations” and David Ricardo’s “Principles of Political Economy and Taxation,” which had so influenced Marx.

During the decade of the 1970s, I spent many hours at the 40th Street Library in New York City—one of the great libraries of the world—reading many works by economists of all types, ranging from Marxist revolutionaries to what today would be called neoliberal reactionaries. While I was interested in all aspects of the capitalist economy—crises cannot be studied in a vacuum—the question of the periodic economic crises and the ultimate fate of the capitalist economy and modern society was never far from my mind.

As the 1960s gave way to the 1970s, the capitalist world economy was entering into a period of growing instability and crises, marked especially by what was dubbed “stagflation.” The U.S. and world economies passed through two major crises, the world recession of 1974-75 and the crisis of 1979-82, as well as the lesser recession of 1969-70. Unlike the case with pre-World War II economic crises, these crises were accompanied by continuing inflation as opposed to falling prices—deflation. Each of these crises began with soaring inflation and ended with slumping industrial production and mass layoffs. As production turned sharply downward, inflation did ease somewhat, but it did not stop.

Crisis of Keynesianism

This brought Keynesian economics, which had dominated official economics for a generation, to a crisis. Keynesians believed that you could have recession and mass unemployment or inflation but not both at the same time. On the right, the influence of the anti-Keynesian University of Chicago professor Milton Friedman was growing. Unlike the Keynesians, he had an explanation for the coexistence of high inflation and mass unemployment.

In these postings, I will examine from a Marxists perspective the economics of Keynes and Friedman, who are considered the two most influential bourgeois economists of the last century.

The second of the back-to-back economic crises of 1974-75 and 1979-82 led to the collapse of much of basic industry in the United States and Britain. Unlike the case with even the Great Depression, most of the factories in the industrial districts that were closed down as a result of the crisis never reopened, giving birth to the “rust belt.”

The growing economic crises of the decade of the 1970s led to expectations in the small and divided but increasingly hopeful U.S. socialist movement that it was about to enter into a period of massive growth as the workers responded to the growing hardships. The U.S. socialist movement, though still very small, had experienced a period  of growth coming out of the Civil Rights movement, the sixties rebellions, and the anti-war movement. Wouldn’t the new era of worsening economic crises give it a further boost by removing what had often been viewed as the main obstacle to its growth—America’s capitalist prosperity?

In the United States, the Depression of the 1930s had led to the growth of the workers’ movement, not only the trade unions but the political parties. Though the U.S. Communist Party and the other working-class parties had remained relatively small, they were still much larger than has been the case since. It had also, however, led to the triumph of fascism and other forms of right-wing dictatorship in Germany, Spain and other European countries, indicating that economic crises can push politics to the right as well as to the left.

It was in this period that I met my friend and collaborator Jon Britton. With his help and encouragement, I began to write articles for the socialist press, though under a different name. Our study of the “stagflation” of the 1970s opened up new areas of inquiry that had largely been missed by the Marxist economists of the time.

Period of reaction

Unfortunately, the crises of those years did not create the hoped-for radicalization of the working class. Instead, due in part to the corruption and degeneration of the working-class leadership during the prolonged period of prosperity that had preceded the 1970s crisis, it opened up a decades-long era of retreat for the working class. Instead of pushing politics to the left, or at least leading to an increased polarization between right and left, politics swung far to the right, not only in the United States and the other rich imperialist powers but in virtually all countries of the world.

The effect on the workers’ movement throughout the world was devastating. As the 1970s turned into the 1980s, we saw the rise of leaders like Margaret Thatcher, Ronald Reagan and Deng Xiaoping, who were soon joined by Mikhail Gorbachev followed by Boris Yeltsin at the end of the decade. Though these leaders varied greatly among themselves, as did the societies that produced them, they had one thing in common. Thatcher and Reagan sang the praises of the “free market” and private property, and increasingly they were seconded by Deng, Gorbachev and Yeltsin.

This was not so surprising in conservative imperialist countries like the United States and Britain, but it was absolutely shocking in what had been revolutionary China and the Soviet Union. Everywhere, privatization was the order of the day, and the planned economies of the Soviet Union and Eastern Europe were completely dismantled, giving way to widespread capitalist chaos and the impoverishment of the great majority of the population, combined with the vast enrichment of a small capitalist minority. Everywhere, the rights and living standards of the workers came under attack. The resistance of the workers, though not completely absent, was scattered, confused, ineffective and largely leaderless.

Here in the United States, the ruling class and its economists could not contain their glee. Marx was finished once and for all! Socialism, whether the term referred to the planned economies of the former Soviet Union and its Eastern European allies, Tito’s Yugoslavia, China under Mao Zedong, or simply the “welfare states” of Western Europe, or even the reforms of the New Deal, was declared to be finished. Milton Friedman, the “neoliberal” economics professor, began to eclipse John Maynard Keynes as the leading economist of the ruling class. Capitalist ideologues increasingly assigned Keynes to the scrap heap along with Karl Marx.

This was not a good time to be a socialist, and indeed many socialists of the younger generation who had been minted during the rebellious sixties, and even some of the older generation, gave up the struggle, convinced that Marxism and socialism had finally proven unworkable in life. The argument was that capitalism may not be pretty, and it may not be moral or just, but through its use of the meanest human emotions, the desire for self-enrichment at the expense of others, it is the only system that delivers the goods.

To make matters worse for the increasingly besieged critics of capitalism, the world capitalist economy during the 1980s entered into a period of increased stability, which, as already indicated, bourgeois economists later dubbed “the Great Moderation.” True, growth rates did not reach the levels—in most countries—of the “great boom” that followed the Great Depression and World War II and rates of unemployment remained at generally higher levels than those that prevailed before the 1970s stagflation crisis. But though cyclical recessions continued to occur, they were milder than they had been in the 1970s and early 1980s.

In addition, inflation rates fell, though the upward march of prices never completely stopped, and the capitalist monetary systems became more stable. The economists of capitalist reaction, now increasingly dominated by the theories of Milton Friedman, claimed that though the business cycle continued, its ups and downs had definitely been leveled out, mostly through the greatly improved monetary policies of the central banks inspired by the work of Milton Friedman. Even many of the increasingly few remaining Marxists were accepting the prospect that severe economic crises were unlikely in the future. The governments, and especially the central banks such as the U.S. Federal Reserve System, it was claimed had finally learned how to control the business cycle, if not quite make it disappear.

‘The Project’

Back in the 1970s, Jon and I had conceived what we dubbed “The Project.” Tired of the need to popularize when writing for the socialist press, we decided that I would, with Jon’s assistance, criticisms and editing, write down a book-length manuscript of our joint ideas on crises. Originally, I had hoped that with the growth of the movement, it might be published by a socialist publishing house in some form. But as the reactionary trend of world politics became increasingly clear, and the socialist organizations became smaller, more isolated and more impoverished financially, this prospect receded. The beginning of the “Great Moderation” in the 1980s made publication of “The Project” even less likely.

Still, during the early years of the “Great Moderation,” and against the background of growing worldwide reaction, we relocated to the West Coast, and I started to write up the “The Project.” But the times were not ripe. Today, I also realize that our ideas were still unripe. They were leading in the right direction, but they weren’t there yet. Today I am glad that my first attempt at “The Project” never saw the light of day.

While the 1980s proved to be a completely counterrevolutionary decade in politics, a revolution was beginning in another field, the fields of electronics, computing and communications, which we were able to watch closely from our new location on the West Coast. This technological revolution climaxed with the rise of the World Wide Web, the graphical Internet, beginning in 1993.

A whole new medium of publication and communications was opening up, creating the possibility of publishing “on-line,” undreamed of when “The Project” was first conceived. Slowly the worst of the worldwide reaction began to relent. The so-called “anti-globlization” movement arose,  with its defiant if unsure slogan “a better world is possible.” This was a challenge to “there is no alternative,” the “TINA” slogan of the champions of what was at first called “monetarism,” the popular name for Milton Friedman’s theories, which then  for reasons we will be exploring in these postings became known as “neoliberalism.”

However, the contested “election” of George W. Bush as U.S. president in 2000, followed by the events of 9/11, led to widespread fears of a new witch hunt that could last for decades. In the days following the 9/11 attacks, the “anti-globalization” movement came to an apparent halt. Bush and his far-right supporters were in their element, launching  a so-called global war against “terrorism,” undermining civil liberties with the so-called “Patriot Act” and other measures, and spreading fear of Arabs and Muslims.

But the mass reaction against the impending unprovoked U.S. invasion of Iraq in March 2003, both in the United States and abroad, soon made clear that it would not be so easy for the ruling class to conduct a new witch hunt, this time against Muslims, Arabs, so-called “terrorists” and their sympathizers. President George W. Bush saw his poll numbers decline from the astronomical heights they reached in the days after 9/11 to the point where he is leaving office as one of the most hated and reviled presidents in U.S. history.

Work on ‘The Project’ resumes

About four years ago, in the light of these developments, along with the fact that we weren’t getting any younger—the laws of biology will not permit us to wait for another 20 years—Jon and I decided that it was time to resume work on “The Project.” In the light of the development of our ideas arrived at in oral discussions over the years, we saw indications that the “Great Moderation” was approaching its end and that a new era of much sharper capitalist economic crises was coming, though there was no way of knowing in advance the exact speed and timing of it. The arrival of the current crisis, therefore, was not completely out of line with our expectations.

The essays posted on this blog will center on the branch of Marxist theory called crisis theory. Crises in this context do not refer to all the types of crises that affect capitalist society but rather the periodic economic crises that mark the downturns of the capitalist business cycle. The essays will spotlight these periodic crises that have, with varying degrees of intensity, affected the capitalist world market since 1825, and the contradictions of the capitalist mode of production that make them inevitable.

A note on terminology

One final note on terminology. For purposes of this blog, I define as a Marxist any person who so describes her or himself, or is generally considered to be a Marxist. There are many groups of people who consider themselves to be Marxists but consider other groups of people who consider themselves to be Marxists not to be Marxists at all! During my 40 years in the “movement,” I have certainly experienced much of this type of thing and have engaged in it myself.

On the basis of my long experience, I don’t believe that all self-described Marxists can get together in one big political party despite vast differences on such questions as the nature and fate of the Russian Revolution, the Chinese Revolution and the Cuban Revolution; completely counterposed views on popular fronts, united fronts, the theory of “permanent revolution” versus the possibility or necessity of achieving “socialism in one country”; the possibility or desirability of the “democratic dictatorship of the proletariat and peasantry”; the chances of peaceful democratic transitions to socialism versus the inevitably of violence and civil war in the struggle for socialism; and the many other lesser differences that exist among people who consider themselves to be in one sense or another followers of Karl Marx.

However, if we get into a discussion of who among the writers we will be examining, some obscure and some very famous—or to some infamous—were really Marxists and who were traitors or imposters, there will be no end to it! So for purposes solely of this blog, all people  who considered themselves to be Marxists, or are widely considered to have been Marxists, will be defined as Marxists. I will examine their economic ideas on their merits, and their views and contributions to crisis theory and related areas such as long cycles, or long waves, and breakdown theories, regardless of my own opinions or those of others about their general role in the workers’ struggle for liberation, and whether or not they were in fact “real Marxists.”

Sam Williams

January 5, 2009