[This thread was occasioned by a posting
by L. Proyect]
I suppose one can choose to believe or not believe in the rise and
fall, the rhythms, so to speak, of the world-economic system. But we
should distinguish between people's beliefs about things, on the one hand,
and structural, actual, and empirical realities on the other. Long waves
and their nested business cycles are constellations of empirical phenomena
generated by the structure and actualities of capitalist accumulation. As
such, these empirical phenomena are in need of theoretical explanation.
Marx, to my mind, provides the best explanatory model for understanding
these phenomena. Other people present different models. But the movements
themselves are a matter of fact. Therefore, long waves, like business
cycles, are not in the same ontological class as astrology, or even a step
above astrology, since long waves deal with observable empirical
phenomena, whereas astrology does not. The distinction is qualitative.
On the subject of Camejo considering this entirely new element, namely
the amount of labor time that qualifies an individual for a position, I
hope that this statement was made by either Camejo or his interpreters in
a moment of sarcasm, because Camejo is nowhere near the first person who
has considered such matters.
One of the things that remains unresolved is whether the present phase
is a business-cyclical upturn amid the B-phase of the post-world war two
long-wave, or whether the world-economy has embarked upon the A-phase of a
new long-wave. This determination is more problematic given that the break
after the 1967-73 period appears to be, at some levels, a qualitative
transformation, one marked by the emergence of the global economy, where
the capitalist world-economy loses its hyphen. This is not only a
theoretical matter, but important for thinking about the organization of
the left. If it is the former, then the time to organize is short, since
the business cycle, hype aside, is sure too give out soon. And certainly
the downfall will be dramatic. If it is the latter, then there is
considerable time to organize, since capitalism will be in no danger of
collapse for at least another 40-50 years; and the structure of the world
will be considerably different from what we know today, and so organizing
the left, as well.
The possibility exists that we are in the midst of a composite wave
structure that encompasses both phases described by Andy. The basic
structure of industrial capitalism, as observed by Marx at the turn of the
19th century, was based on the exploitation of labor by capital. There are
clear signs that this phase is coming to an end, perhaps not imminent, but
certainly within the next 2 or 3 decades, quite possibly sooner. It is
also clear that a new wave is beginning in which production is less
dependent on physical labor, but on automation and intelligent machines
and information. In this new regime, knowledge become the new capital and
it exploits not workers, but the uninformed. Internet companies are built
by penniless intellectuals who through their intelligence and education,
wield enormous financial power over financial capital.
This is a field where P/E ratios are routinely infinite, where market
capitalization of several hundred millions dollars can be created less
than three years after inception at IPOs based on negative cash flow.
Often, these companies, in their home garage phase, are organized as
socialist collectives. Two buddies started with an idea, ten other
associates join them for intellectual sweat equity, the list grows to 50
and bang, IPO three years later, with 50 multi-millionaires created. This
is a huge window of opportunity for socialism. Americans tend to forget
that there is a great tradition of mutual companies, cooperatives and
collectives in American economic history.
Many major insurance companies are still mutuals and savings and loans
and credit unions have socialist characteristics. The reorganization of
Wall Street into a socialist regime require only a few alterations.
User-owned cooperatives operate today in the energy sector and likely to
expand into the communication sector. The list of American institutions in
history that contain the term "people's" in its names is long
and only de-emphasized in the post WWII anti-Communist period. True
dialectic materialism would call for a strategy to synthesize capitalism
and technology into a new socialism in which the contradiction between
capital and labor will become passť because both are becoming
Henry C.K. Liu
Thanks for this very interesting post and the discussion it provoked. I
wanted to write some things in reaction to what you and other have said,
and please don't be offended if I (at least formally) address to you some
points in response to other posters.
It was not just Peter Camejo who was sent by the SWP to be a full-time
reporter in Nicaragua and came to the conclusion, based on what they went
through there, that there were serious problems with the SWP.
This was also true of Matilde Zimmermann, Arnie Weissberg, Mike
Baumann, Jane Harris, Fred Murphy, Ellen Kratka and me. I've been told --
I'm not ssure how reliably -- that the revolution had a similar impact on
Larry Seigle. Cindy Jaquith was, I've heard, immune.
Of that collection of people, only Mike (and perhaps his companion,
Jane) were able to stay in the party much after returning. Mike had (and I
guess has, last I heard he was still in the SWP) an unshakable conviction
that the real class struggle would correct the party's mistakes.
In essence, the political role of the SWP's coverage of Nicaragua was
to drum up this mindless cheerleading for the unstoppable advances of the
revolution. Little was allowed in the Militant that pointed to the real
enormous politial challenges the Sandinistas faced in confronting the U.S.
sponsored war, as it took its toll on the country. The real dimension of
the war wasn't reported, nor was the reality ever recognized that the
contras were not just a mercenary force, but that a sector of it was
deeply rooted in the countryside.
The reason for this Pollyana approach was that constant hyping of the
"three giants" of the Caribbean and especially Nicaragua was
used to divert attention from the not entirely stellar success of the
SWP's tactics and policies at home. I believe it was a diversion from
taking a serious look at where we'd been, where we were, and how we got
there. Certainly by the early 1980s there was sufficient evidence to show
that the fundamental political premises of the turn to industry were
I'm sure other people would express differently the basic perception
I'm trying to convey, the increasing unreality of life within the SWP as
it hardened into a sect/cult, but that wasn't the main point I wanted to
make. The point is that Peter's political evolution was similar to that of
a whole layer of "cadres" as they became familiar with the
reality of the Nicaraguan revolution. And, of course, this went way beyond
the privileged handful who got to live in Nicaragua for a few months or
more, although it is striking that those of us who did go mostly came back
terminally ill, from the SWPs point of view, with the virus of alien class
In retrospect, the SWP's response to Nicaragua was shameful. No other
organization on the left was better situated by history and experience to
help lead a broad, non-sectarian, action-oriented movement against the
U.S.-sponsored contra War.
Equally shameful was the organizational clampdown around
"proletarian norms" and especially the expulsions or driving out
of older comrades who had spent their life building the organization.
Comrades like Frank Lovell, George Breitman, Jimmy Kutcher, anyone who in
any way, shape or form seemed out of sync was got rid off. Their years of
proven commitment was presented as an aggravating factor for any charge,
no matter how flimsy or trumped up. Certainly Jim Cannon, with his
infamous "onion skin" school of informally raising ideas with
selected comrades all over the country, would not have lasted one week
under this regime. Lucky Trotsky wasn't alive: "Of all comrades,
certainly lev davidovich should have been most conscious of the need for
proletarian discipline as the former leader of the red army, and should
have raised his hand to ask for permission to go to the bathroom." I
can hear Jack giving the spech now.
I read many of the essays linked to from your home page where you talk
about your SWP experiences, and your analysis of the roots of much of
this. Also from there I went to the Australian party's site, and read much
of the parallel material accessible from there, and found that I agree
with much of it, by and large.
Certainly the "catastrophism" of the transitional program got
revived time and again during my life in the SWP. I joined being promised
that the "new radicalization" would not be decisively reversed
until the working class had its shot at power; later this was blended with
the idea of big class battles ahead, and eventually liquidated into it. As
far as I can tell now, about a quarter century (!) from the original
"turn," the SWP thinks the big class battles are still just over
I had meant this to be a couple of introductory paragraphs to my main
points about the economy, and the long wave issue, but it's getting too
I just want to point out that Camejo's experience and general political
drift is not at all unique. I think it flowed from some of the positive
political features of the pre-1974 or 1975 SWP, as well as, of course,
other influences. And that -- based on what you've written -- I think I
would largely agree with his analysis of the current evolution of the
Your "ad hominem" post about Peter and his stock market
activities should not lead people to dismiss the idea that capitalism,
especially American capitalism, is experiencing a profound boom, with
deep-seated causes, and not just a particularly vigorous uptick of the
business cycle thanks to a combination of favorable and largely accidental
conditions. I know you appreciate this point, as you do not dismiss
Peter's ideas with a "consider the source" but address them
substantively. I just wanted to emphasize this point here.
I am not a stockbroker, and --frankly-- consider most conventional
stock brokering, investment analysis, stock picking and so on to BE a form
of astrology. (For many reasons why, see the book, A random Walk down Wall
Street.) As for "social" or "progressive" investment,
what little hard data I've seen suggests you do better with a monkey
throwing darts at the stock pages of the Wall Street Journal. Then again,
that is true of virtually all managed stock funds, investment advisers,
newsletters and stock-picking strategies. But the "progressive"
ones do a little worse than the rest.
But I DO believe Peter Camejo's theses --as you describe it-- is
largely right, giving him a little "discount," not just for his
social origins or his current job, but also for his trademark hyperbolic
The extraordinary rise of the stock market reflected in Standard and
Poors P/E ratios in the mid-to-high 20s is largely justified, based on an
acceleration in the growth of profits of the average large U.S. company.
For several years this growth had been double-digit, last year it slipped
a bit to just under 10%. (Here and throughout, many stats being offered
are mostly from memory, as my case is largely "qualitative" not
I say largely because it's evident to me that financial and similar
markets usually overshoot, and are not infrequent victims of speculative
bubbles (there is, I suspect, a direct lineage from the Tullip craze of
the 1600s to the dot com craze of today). The market may be a touch high
right now, but with interest rates about where they've been for several
years, and no real sign of inflation or recession on the horizon, and
strong growth, I would not worry about long term investments.
Short-term stock market speculation around individual issues or index
options isn't something I'd recommend to anyone. You're likely to make
some money in markets like this one, which have been going up steadily
years after year. But a poor bet could cost you plenty even in this
market, and just about any bet can wipe you out in a downdraft.
Many of the points you make about the uncertainties of future earnings
and P/E ratios and so on are very good ones, when applied to individual
stocks or sectors in a short time frame. I don't believe they're
applicable to the market as a whole, on average, over time. In the last
analysis, what you buy when you buy stock is a share of the future profits
of the company, and the discounted value, i.e., the value today of that
future flow of income is simply a function of the prevailing interest
rates. It may be that the current stock market valuations turn out to be a
financial bubble, like the Nikkei at 40,000 a decade ago, but I do not
think that is what is happening. I believe the DOW 10,000 is grounded in
an extraordinary expansion of economic activity and profits.
So the question is really, how likely is it that the economy will keep
growing briskly enough (with whatever temporary ups and downs, since I'm
sure the business cycle has not gone away) to allow companies to generate
that kind of growth in profits. And, basically, that question comes down
to another one: how much is the productivity of labor growing?
On the face of it, looking at official statistics, things don't look
good. Labor productivity is supposedly growing at 1.7%/year (1994-1998), a
nice pickup from the 1.2% rate of the previous twenty years, but still
abysmal by historical standards. But that isn't the whole story.
Official statistics say manufacturing productivity has grown at a 4.3%
rate over the past four years, the highest figure in (at least) half a
century. That's more than double the 2% rate of the 50s, substantially
more than the 3% rate of the 60s. Moreover, clearly, this rate is NOT
primarily a product of closing down inefficient production plants, but of
opening new, more efficient facilities and upgrading existing ones. I say
clearly because despite the vigrous growth, capacity utilization has
drifted down to 80% from close to 85% a few years ago. New capacity is
being installed at a slightly higher rate than that of growth. I also
think it incorporates the beginning of an "internet dividend"
that manufacturing companies will get, both from just-on-time ordering of
inputs, direct sales of products, and elimination of intermediaries at
Manufacturing productivity statistics are the most reliable because
they are the most straightforward to measure. You see how much was
produced, adjust the dollar amount for inflation. Substract the
inflation-adjusted cost of inputs, divide by the number of hours and
compare the output in dollars this year to last year to come up with the
And I say again: 4.3% is an EXTRAORDINARY figure for a 4-year average.
Much higher and you start getting close to Asian Tiger and Chilean Miracle
territory. It also correlates fairly nicely with GDP growth.
So if manufacturing productivity is growing so quickly, as is the
economy, how can overall productivity be so dismal? The obvious answer is:
it can't. The productivity figure of the business sector of the economy as
a whole (government and non-profits are excluded from the calculation)
might well be double or triple the official figure. Or more. One thing is
for sure. The government knows its figure is so wildly off base, it can't
even begin to guess what the REAL figure is. As a matter of fact, it
doesn't even know how to DEFINE the real figure.
What the h.....?
You heard me right. Double or triple. Or more.
For the productivity of the entire business sector of the economy to be
growing so slowly, when manufacturing productivity is growing so rapidly,
productivity in the service sector MUST be zero or even negative, i.e., it
is falling. Moreover, as three articles in the February isssue of the
Monthly Labor Review examine in great detail, service sector productivity
must have been stagnant or declining for the PAST QUARTER CENTURY, when
the gap between business sector and manufacturing productivity first
Now, the Bureau of Labor Statistics has never published the actual
non-manufacturing productivity statistic. They do not consider it
sufficiently reliable. You have to guesstimate from the manufacturing and
the overall figures what the nonmanufacturing component must be. But why
they include it AT ALL in the overall figure if it is so unreliable is a
mystery to me.
At any rate, the BLS articles are indicative of the problems with
non-manufacturing numbers. We know what the output of a factory is. So
many widgets and such and such a price for a total value of so much. But
what is the output of a bank? The economists aren't sure, they can't
agree, so for practical purposes, a government bureau gets some estimated
figure for the number of hours worked in the past year, multiplies by a
dollar fudge factor and ... that's the "output."
And indeed, the BLS researchers' analysis of the unpublished numbers on
which the overall productivity statistics is based reveal that banks,
insurance, construction, health services and utilities all have had very
strong NEGATIVE productivity numbers for a quarter century or so.
This is simply risible. The efficiency of banks hasn't been dropping
for a quarter century. It's been going up. The problem, the government
experts suggest, lie with the way "output" is calculated. In
banking, "output" is projected by hours worked. A similar
procedure is used for construction. In health insurance,
"output" is premiums paid to the company minus benefits. In
sector after sector, you get the same problem. What is the
"output" of a retailer? Or a wholesaler? Or a movie theater? Or
a web site? In very many cases you come up with, total sales minus costs
of inputs. And the bottom line on that is that as your store or whatever
gets more efficient, this is never captured as a "productivity"
saving, but rather as a drop in output. Yet for society as a whole, it
certainly does represent an efficiency that we no longer have individuals
staffing little stalls in markets to facilitate the circulation of a few
dollars' worth of commodities each day. It means, among other things, that
we have people to build web sites, for example, which would not be the
case otherwise. [This whole statistical mess, BTW, provides rather
striking confirmation of the Marxist position that ONLY commodity
production creates value, that activities like retailing add no value.]
Call it silicon silliness or the digital revolution, the transformation
of workplaces has been profound, and unless I miss my guess, we're far
from the end of it.
Is manufacturing the sector where application of new technology is
likely to have had the greatest impact? I submit not. A worker from a 1972
car plant transported to today's assembly line by a time machine would
probably fit right in, even though some things have been automated and
many others streamlined (then again if the worker lands at a chip fab
she's just as likely to think she's arrived, not in her future, but on
But a bank teller, or a secretary, or an accountant, or a bookekeeper,
or a bookmaker, or a journalist, or a TV producer, or a film maker, or a
nurse would be totally at sea if time shifted 25 years to today.
I could give a ton of annecdotes to this effect but my point is the
following: if you actually stop to think about how the economy has evolved
at the micro level, and try to reconcile that with a quarter-century-long
stagnation in efficiency everywhere except in manufacturing, this simply
does not compute.
Part of it is that the government statistics suffer from the same
problem as the cynic of the well known aphorism, who knows the price of
everything and the value of nothing. So for example, in analyzing Plain
Old Telephone Service (POTS), the government statistician may note with
satisfaction that not much has changed since ma bell got broken up back in
1984. A dollar or two more or less, perhaps. All this talk to
telecommunications revolution, he'll say, is rubbish.
But if you look at it from my end of my phone line, things are very
different. I've got a fax attached to the phone line, and a computer. Ten
years ago, I used the phone perhaps a few minutes a day. Today, I use it
an hour or more, between reading the New York Times, answering e-mail,
logging on to computers at work, reading Bureau of Labor Statistic reports
that caught my fancy, buying stuff and sundry other things. AOL reports
that its nearly 20 million subscribers stay online an average of 55
minutes/day. Ten years from now, I suspect "POTS" will be dead
or dying, replaced by "virtual" point-to-point voice
communication circuits implemented as data traffic on tcp/ip networks.
This is already being rolled out to big companies.
Viewed, not as a cost/line, but as cost/minute of use, the actual price
of phone USAGE has crashed, even if you add to the phone companmy's $25
the $20 AOL gets (although not from me -- I'm relying more and more on
Netzero, the free ISP).
Now, the question is -- where are we in the digital revolution? Have we
just about reaped all the potential efficiencies that it is going to bring
(including "hidden" --from statistics-- benefits, like the phone
use). I think not. In many areas, the revolution is just beginning. Things
like television, movies, books, are JUST NOW beginning to go digital. How
much fuel does your furnace waste because your thermostat is too stupid to
know whether you're up, asleep, out, or in the kitchen? How long before
refrigerators learn the usage patterns of their owners, so as to chill
things just a little more before breakfast and dinner time? A few years
ago a mobile TV reporting team was 4 or 5 people with 8 or 10 cases of
heavy equipment costing somewhere around $100,000 or more.
Now you can put all that in a briefcase, including a $3,000 three-chip
camera that can give you pictures as good as the $30,000 professional
cameras. Sure, one guy told me, you feel a little silly setting up at a
press conference, people think some tourist snuck in.
EVERYTHING that can be digital WILL BE digital, and at least for the
next 10-15 years, Moore's law -- that the number of components you can put
on a given area of silicon doubles every 18 months -- will continue to
My best guess is that over the next decade or so we're going to
continue reaping extraordinary benefits from digital conversions, and,
with whatever ups and downs, will continue with an extraordinary economic
Jose G. Perez
I found Jose's post very interesting. I think what he says is a useful
antidote to the tendency of many on the left, including some on this list,
to see capitalist crisis around every corner and imagine that every glitch
is the opening act of imminent collapse. The world capitalist economy has
weathered the Asian crisis and does not seem about to succumb to any major
disasters in the next couple of years.
I think, however, Jose's view might be at the other extreme, where he
imagines that new technological developments are somehow going to buoy up
capitalism for a rather long time. (Immanuel Wallerstein was in NZ last
year, and predicted the meltdown of the entire world capitalist system. .
. . in 2050. If I thought that was the best we could hope for, I'd retire
I tend to think the system is quite fragile, but that the greatest
thing it has going for it is not new technological breakthroughs, but the
disintegration and discrediting of any opposition. There simply is no
credible alternative, in the eyes of masses of people.
Stalinism and social democracy have deeply discredited notions of
collective solutions, although fragments of the far left continue to
attempt to prettify these twin monstrosities and thereby delay the
possibility of building new forms of collectivism, ie real working class
collectivism. The working class has taken a huge battering and although it
is has not been defeated in the way it was in the 1930s and 1940s, it is
largely confused, demoralised and shell-shocked. A degree of
disaggregation and atomisation, in terms of workers' consciousness, has
also set in.
A few militant strikes here and there do not change this. For instance,
we have some people on the far left in New Zealand, mainly the NZ wing of
the IS current, who boldly declare on the front page of their paper that
there is 'a mass uprising' going on in this country against the
government. Back in the real world, the days lost through industrial
action in the past year are about a meagre 5 percent of the figure in the
late 1980s and early 1990s.
One of the things that often sparks radicalisation is when the system
cannot meet people's rising expectations. Unfortunately, workers today
often have almost no expectations from the system anyway. This is one
reason why Blair has had such an easy run of it in Britain. The 'cling-on'
left (the space cadets who are still attached to the British Labour Party)
argued that putting Labour in power would raise workers' expectations
which would then not be met, and a new round of struggle would break out.
Duh! All that has happened under Blair is that workers' expectations have
been lowered even further.
The same is true in places like New Zealand, where we face the
likelihood of a Labour-led government (probably in coalition with the more
leftish Alliance). The election campaign hasn't even started and Labour is
already making clear that it has no goodies on offer, even as an electoral
bribe for workers. When the Alliance suggested new legislation to give
workers four weeks a year paid holidays, both the Labour Party and the
leader of the main trade union federation came out opposing this, saying
the 'country' couldn't afford it!
Anyway, to return to Jose's email. There was one further thing, I
wanted to pick up on which is his figures on productivity growth. The
problem with the figures he cites is that they don't necessarily indicate
a dramatic economic surge. For instance, there are two ways of increasing
productivity. One is that you reduce the size of the productive workforce
and make the remainder work harder. This may make productivity figures
look good, but actually doesn't give the economy much of a kick at all,
because you aren't necessarily producing any more commodities or any more
value than you were before.
In New Zealand, there was a marked increase in productivity through the
slash and burn 'new right' reforms carried out by Labour in the mid-late
1980s and National in the early-mid 1990s. But total output was stagnant.
In fact total output in about 1995 had only just returned to the output
figures of 1984!
So pure productivity figures can be quite misleading.
The other way of increasing productivity is that you massively increase
constant capital (especially fixed constant capital - machines,
technology) and expand both productivity and total production. So here you
are not only more productive, but you have expanded the total output and
total value. This is what the postwar boom did. (Of course, since this
brings about a rise in the organic composition of capital, so it also
results in falling profit rates, thus real booms always contain the
elements which lead to recession and slump.) But I cannot see that the
much-vaunted 'technological revolution' of the 1990s, nor the productivity
figures Jose mentions, are commensurate with the postwar boom, a genuine
boom in which not only productivity but total output rose massively.
Mere growth in individual productivity, if not accompanied by a growth
of output, creates an atmosphere of stagnation within society. On the one
hand, things seem to be getting better in terms of official figures and
there may be little resistance, but, on the other hand, because total
output is not growing, there is no real dynamism across the economy as a
whole. Much of the rest of the economy is left sluggish, and very little
is on offer in terms of social reform, crumbs for the masses and so on.
This is certainly the ways things 'feel' in New Zealand at present, and
there is empirical proof in the figures for productive output. I wonder if
it is similar in the USA.
I am no economist, but I have been a professional computer programmer
since 1968. One of the things that provides me is an "insider's"
view of the ups and downs of the computer industry, which most pundits,
from Toffler to Camejo, regard as driving our prosperity. I am skeptical.
On Oct. 12, 1985 IBM reported 3rd quarter earnings of $2.40 per share. The
closing price of the stock that day was $125.62. The third quarter
earnings per share in 1998 were reported as $1.56, but the stock was
selling for $137.87. I can tell you this much. Based on figures like
these, IBM's future is very cloudy.
Columbia just replaced an older IBM RS6000 machine with a new one. It
is 18% more expensive, but 2,500% more powerful. This means that the
replacement curve will flatten, just as it did for mainframes and as it
did for PC's. The silicon revolution cuts both ways. On one hand it makes
production more efficient. On the other hand, it tends to dampen the
profit outlook for manufacturers.
The same problem exists for software manufacturers. A number of
companies have gone bust since the early 90s, because the cost of adapting
object-type modules into the production line has become more feasible.
Software production has become more and more of a Fordist enterprise, at
least in terms of shrink-wrapped products.
While this has inspired folks like Toffler and Camejo to throw their
hats in the air, the other side of the dialectical coin is that less
profit is being generated. The stock market bubble is based on the
expectation that high technology companies can create ever-increasing
earnings per share, whereas in fact the opposite expectation is more