Panitch and Gindin’s theses on the crisis

Leo Panitch and Sam Gindin, who I have an awful lot of respect for, have just put out a little essay: “From global finance to the nationalisation of the banks: eight theses on the economic crisis”. Quite a few wildly different schools of thought on the crisis have emerged in radical circles, so breaking the argument down into eight discrete points is really helpful for focusing debate. In particular, this will attract flak from certain circles: “Even though the spheres of capitalist finance and production are obviously intertwined (in significant ways today more than ever before), the origins of today’s US-based financial crisis are not rooted in a profitability crisis in the sphere of production, as was the case with the crisis of the 1970s, nor in the global trade imbalances that have emerged since.”

As it happens I’m pretty much behind the Panitch and Gindin school. I’ll post the points here as a spark for discussion, but go check out the whole document.

1. The current economic crisis has to be understood in terms of the historical dynamics and contradictions of capitalist finance in the second half of the 20th century.

2. The spatial expansion and social deepening of capitalism in the last quarter century could not have occurred without innovations in finance.

3. The competitive volatility of global finance produced a series of financial crises whose containment required repeated state intervention.

4. Both finance’s central role in the making of global capitalism and the American state’s role in sustaining it produced the bubble that emerged inside the US housing sector.

5. The inevitable bursting of the housing bubble had such a profound impact because of its centrality to sustaining both US consumer demand and global financial markets.

6. The crisis reinforced the centrality of the American state in the global capitalist economy while multiplying the difficulties entailed in managing it.

7. The scale of the crisis today is such that nationalization of the financial system cannot be kept off the political agenda.

8. The call for nationalization of the banks provides an opening for advancing broader strategies that begin to take up the need for systemic alternatives to capitalism.

Published in: on 26 February, 2009 at 2:01 pm  Comments (5)  

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  1. Hi Mike. Really glad you’re blogging again. (I’ve been reading for a while but don’t think I’ve ever commented here before…)

    I’m interested in thesis 6 – the idea that the crisis has reinforced the centrality of the American state in the global capitalist economy. I take it that this is one of the points you refer to way you say that Panitch and Gindin (and you?) differ from various other analyses of the crisis that have been put forward in the radical (or indeed more mainstream) space? This thesis would contrast with, say, Harvey’s view:

    “Economic hegemony seems to be moving towards some constellation of powers in East Asia and if crises, as we earlier argued, are moments of radical reconfigurations in capitalist development, then the fact that the United States is having to deficit finance its way out of its financial difficulties on such a huge scale and that the deficits are largely being covered by those countries with saved surpluses – Japan, China, South Korea, Taiwan and the Gulf states – suggests this may be the moment for such a shift to be consolidated.”

    Whereas Panitch and Gindin write:

    The rise of the US dollar in currency markets and the enormous demand for US Treasury bonds as the crisis unfolded reflected the extent to which the world remained on the dollar standard and the American state continued to be regarded as the ultimate guarantor of value. Treasury bonds are in demand because they remain the most stable store of value in a highly volatile capitalist world: illusions that foreign states were previously doing the US a favour by buying Treasury securities may finally be dispelled by this crisis.

    I take it that Panitch and Gindin think that a shift away from the dollar standard isn’t on the cards in the short or medium term. (Presumably they don’t give much weight to the prospect of a serious fall in the dollar?) I don’t know if this is one of the points on which you agree with P&G – if it is, I’d be interested to hear a fleshing out of the reasoning. I find the idea that US economic hegemony has been weakened by the crisis intuitively plausible – but I don’t have the background or knowledge to work through this stuff myself…

    No worries if this is a distracting question and you don’t have time! Greatly enjoy the blog, in any case.


  2. Hey Duncan,

    Likewise with you and your blog! Have been reading from inception to your hiatus last year… I see you’re up and running at a new site, will catch up! And you’re getting into this ‘speculative realism’ stuff I’ve been hearing so much about…

    To be honest I’m not too sure where I stand with the geopolitical aspects of the crisis. I think there are a lot of mediating factors between ‘the macroeconomic’ and ‘the geopolitical’, and anyway I’m more confident talking about the former than the latter. I have an aversion to those parts of the IPE discipline that in my view over-emphasises the impact of state geopolitical strategies on the economic sphere.

    In my view Panitch et al (including Gindin and the broader school coalesced around them) approach the question in the right way. They have a kind of Poulantzian view of states in which state and economy are interpenetrating systems rather than external to one another. And at a world level, they portray hegemony in similar terms as the interpenetration of states with one another, so that they are not entirely external to one another but part of a bigger system, which is articulated with the economic system, whose geography is more naturally global in scope. So the geopolitical hegemony of the United States appears as a reshaping of other states in a rational way, which has general benefits for capital and states worldwide even if the US state and various groups within the United States benefit more than many others.

    So the specific issue of the role of the dollar, the latest stage in the evolution of world money. It’s a key moment of articulation between the economic and state systems, and specifically between the US state and the world economic system. Even though US currency is a creature of the US state, it’s not controlled by that state and hasn’t been at least since dollar holdings started accumulating worldwide with the birth of the Euromarkets in the 1960s. There’s a huge ‘overhang’ of US dollars around the world that has nothing (immediate) to do with the US economy; it plays other roles in the world economy. The demand for those dollars the US state has no control over, and even on the supply side, though it ‘prints the money’, it does not control the means by which banks etc can create near-dollars, dollar-denominated instruments, etc.

    So Panitch and Gindin’s point here is that the many holders of dollars around the world hold it for its function as world money. For example, such money plays an especially important role for the central banks of countries whose currencies are pegged, such as China, because they continually need to buy and sell their currency to maintain the exchange rate, and keep a large enough reserve so that speculators do not challenge their capacity to continue doing that. No other state has an interest in deliberately challenging the role of the dollar in this function, because they are entirely integrated into the system in which it is a function. If the dollar collapsed it would be a disaster especially for those states with enormous reserves denominated in dollars. There is no other currency which even comes remotely close to the dollar as a candidate for world money.

    Harvey’s mistake is to buy into this discourse that surpluses and deficits emerge because one country is lending to another country. ‘Lending’ carries connotations that the lender is graciously doing a favour to the borrower. In fact, it’s a market transaction in which both sides see benefit. The way in which the surplus countries fund the US deficit is by purchasing securities on the open market, securities they want to hold for their own reasons.

    A dollar crisis is a real possibility, even though there is no sign of strain in the market for dollars or US government securities as yet. But there have been historical occasions in which the US state has been disciplined by such crises into particular actions to maintain the world-systemic role of the dollar: e.g. in 1978. This highlights that power is not something above the system, but requires the power-holder to use it for systemic maintenance. The hegemon too is dominated by the economic system. The dollar has fallen and risen substantially several times since the break-up of Bretton Woods, and a low dollar does not necessarily undercut American power – in fact a low dollar has often presaged a revival of American manufacturing due to the increased competitiveness. Note in recent years all the angst about China keeping the yuan ‘too high’ – plenty of Americans would love to see a substantial decline in the dollar.

    This is a totally separate question from the broader issue of emergent economic powers in Asia, etc. I certainly wouldn’t deny that in the long run American power will decline for the classic reasons, and in fact has been in decline – though not steadily – in many ways since WWII.

    Incidentally, Panitch has just come out with a book co-edited with Martijn Konings, called ‘American Empire and the Political Economy of Global Finance’, which no doubt elaborates on this. It’s on order at my uni library, haven’t read it yet. A summary article appears in the last issue of Historical Materialism though.

  3. Thanks Mike! This is really helpful and clarifying. 🙂 On this: “‘Lending’ carries connotations that the lender is graciously doing a favour to the borrower. In fact, it’s a market transaction in which both sides see benefit.” I’d (perhaps wrongly) heard Harvey to be saying something like: the power relations in play dictate what kind of mutually-beneficial transactions will take place; so the international flow of lending and borrowing in part keys us into, and in part contributes to, shifts in geopolitical power? But as always, I’ve got loads more reading and thinking to do. I totally take your point that we shouldn’t regard currencies as avatars or something of the states they’re associated with, etc… A lot more I need to process…

    (Also – thanks for your kind words about the blog. 🙂 W/r/t speculative realism – I was more trying to get a critique of it up and running than getting into it exactly :-P. It strikes as at best a problematic development… I’ve been a bit shocked and distressed by how quickly and dramatically it’s taken over the online theory space. For reasons of time- and blood pressure-management, however, I’m swearing off the specreals for the moment… :-P)

    Anyway, thanks again for such a thoughtful response… Best…

  4. “Harvey’s mistake is to buy into this discourse that surpluses and deficits emerge because one country is lending to another country. ‘Lending’ carries connotations that the lender is graciously doing a favour to the borrower. In fact, it’s a market transaction in which both sides see benefit. The way in which the surplus countries fund the US deficit is by purchasing securities on the open market, securities they want to hold for their own reasons.”

    Am I wrong in thinking the deficits in one country that are funded by another country inevitably end up in transferring wealth to the creditor nation? It seems like this would turn on Ricardo’s account of trade between nations always coming to an equilibirium–the deficit will always balance out in the long run as; but Anwar Shaikh seems to maintain that Ricardo’s theory of trade is fundamentally flawed, and that debtor nations who are funded by others end up in a vicious circle. The status of the USD as world-currency might add another element to this problem, but it doesn’t change the fact that the massive trade deficits of the US have to be dealt with or the economic consequences will be rather dire.

    This is a bit unclear, but I’ll see if I can scrounge up my notes on this and put something more coherent together.

  5. […] at home In their ‘theses on the crisis’, which I posted a month ago, Panitch and Gindin present the ascension of bank nationalisation onto the political agenda as an […]

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