Crises or Crisis: 1970 vs. 2008 // Tombazos on the Reproduction of Capital
On Stavros Tombazos. Global Crisis and the Reproduction of Capital. Palgrave Pivot, Cham, Switzerland, 2019. 90 pp.
English language readers may know Stavros Tombazos for his Time in Marx: The Categories of Time in Marx’s Capital, a reading of the core concepts of all three volumes of Capital as falling under different conceptions of time or temporality – the ‘linear time’ of production of Vol I, the ‘circular time’ of circulation of Vol II, and the ‘organic time’ of their unity in Vol III (Tombazos 2015). While framed as a Marxian analysis of the 2008 financial crisis and slow recovery, Global Crisis and Capitalist Reproduction is also an empirically oriented investigation into the economic dynamics of the deflationary, recessionary and austerity tendencies of global capitalism since the 1970s, of which the 2008 crisis was an expression.
At a general level, Tombazos draws on his conception of economic crisis as outlined in Time in Marx; namely, that in each case, capitalist crisis is an instance of ‘organic arrhythmia’. ‘Healthy growth’, as it were, presupposes a relative equilibrium between the rhythms of the three circuits of money capital that make up Marx’s ‘reproduction schemas’ in Capital Vol II, where the circuit of money capital pertains to the rhythm of valorization, the circuit of productive capital pertains to the rhythm of accumulation, and the circuit of commodity capital pertains to the rhythm of the realization of value.
Tombazos’s analysis of 2008 is inextricable from his analysis of a broader structural obstacle in value augmentation since the 1970s. The 2008 crisis was predominantly a crisis in the realization of value (an arrhythmia in the circuit of commodity capital) while the crisis of the 1970s was a crisis of decreased profitability (an arrhythmia in the circuit of productive capital). Global Crisis and the Reproduction of Capital can be summarized as an analysis of the ongoing crisis in the realization of value that is a resulting negative externality of capital’s own relative success in solving a crisis in profitability (the crisis of the 1970s), but at the expense of the social development traditionally associated with capitalist growth.
Methodologically, Tombazos isolates three specific sections of Capital as having particular explanatory value with regard to the crisis of 2008: the first four chapters of Vol II (containing the analysis of industrial capital), the chapters of the same volume analyzing the ‘reproduction schemes of capital’, and the analysis of the relationship between industrial capital and money capital developed in Vol III.
The core empirical arguments in chapters two and three (‘Profitability, Accumulation, and Industrial Capital’ and ‘Private Consumption, Wage Share of GDP and Reproduction Schemas’) leverage the threefold distinction between circuits of industrial capital in Vol. II (i.e. money capital, production capital, and circulation capital) while chapter four (‘Money Capital, Fictitious Capital, and ‘Toxic Capital’) draws on Marx’s analysis of money capital as distinct from industrial capital in Vol. III. Chapter five (‘Economic Policies and Economic Perspectives’) focuses on policy responses to the conjuncture and in particular, on negative rates as an attempt to save the Euro. “Economic policies prevented the collapse of the financial system and in Europe saved the Euro,” he writes, “but did not lead to an exit from the crisis’ (61). This is the case globally insofar as 2008, ‘is the most serious episode of the same long-term downward wave that began in the 1970s. It is the crisis of the capitalist reaction and the neoliberal response to this crisis of the 1970s’ (84). These middle chapters are likely navigable only by those familiar both with mainstream and Marxian political economy. They are however book-ended by a more approachable introduction and conclusion, as well as helpful ‘abstracts’ that summarize the contents of each chapter.
In an extension of the theoretical presupposition of Palgrave’ Insights Into Apocalypse Economics series – which takes as its premise the thesis that neoliberal economic policy dating from the 1980s has not only failed to rejuvenate the prosperity of the post-WWII ‘golden age’ economy, but has generated a widening spectrum of pathologies threatening humanity – Tombazos describes contemporary world capitalism as, fundamentally, ‘trapped in the same fundamental contradiction since the late 1960s: It refuses to offer what society is asking for’ (83). Institutions deviate from neoliberalism in the present only as much as needed to ensure the neoliberal horizon is the only future. This ‘colonization of the future’ is – as we will see – not merely operative at the level of collective imagination.
Marxist debates on crisis have historically been dominated by discussions about the falling rate of profit. For Tombazos however, this singular focus has obscured a different but related dynamic fundamental to an understanding of the specificity of capitalist social reproduction in the neoliberal era; namely, the increasing divergence of the rate of profit and the rate of capital accumulation, where the sorts of long-term investments in fixed capital that have usually constituted the boom and bust nature of the ‘business cycle’ are increasingly less sensitive to increases in profitability. This is reflected in the upward trend in the ratio of surplus value/net investment in fixed capital (alternatively expressed as an increase in the ratio of the net operating surplus of a given total economy to the net investment in fixed capital). Capital’s response of this problem has been decreasing levels of surplus investment in fixed capital, opting instead to search for other outlets for value augmentation. The short term begins to dominate the long term here, and the question becomes what happens to this surplus capital that, in a previous era, went toward fixed capital investments.
Starting from the empirical observation that in the US, Japan and EU there is an increase in the ratio of private consumption to wage share of GDP, Tombazos argues that the excess surplus not invested in fixed capital ends up largely as easy loans to working class households borrowing to consume; i.e., as debt. Adjusting Marx’s expanded reproduction schema to account for the borrowing of workers, Tombazos shows how borrowing at low interest rates proves an effective outlet for surplus value unable to be realized through investment in fixed capital in the short term. Borrowing of course stimulates consumption and consumption has a positive effect on investment and employment.
Yet Tombazos describes this expansion of money capital in the form of borrowing as ‘structurally unstable and from the outset has an expiration date.’ This instability is grounded in the fact that the borrowed amount increases not simply due to the excess of surplus value diverted from longer-term fixed capital investment to working class debt, but due to the interest that accrues on a loan. Debt servicing therefore rises as a share of wages. As he puts it, ‘the financial system of the neoliberal period has allowed the massive “transfer” of future demand by wage earners in the present time through the rising of debt, whose servicing increasingly undermined the disposable part of their wages for consumption’ (7). If debt is simply a claim on the value of future wages (and government bonds therefore a claim on the value of future taxation), the (real or imagined, but certainly politically actual) ‘expiration date’ rapidly approaches as soon as markets begin to doubt whether the accumulated rights on those wages will ever be redeemed.
Tombazos goes on to describe the extent to which financial derivatives and other instruments of securitization made possible by various policies of deregulation facilitate the easy transfer of surplus formerly invested in longer-term fixed capital investments into loan capital. These instruments were originally conceived as risk management tools. The sale of securities consisting of different types of loans functions to decrease the risk profile of the riskiest loans (i.e. the non-servicing loans) through the distribution of these loans (and their risk) to a ‘generalized Other;’ i.e., to the financial system writ large. For Tombazos, this spread of ‘toxic’ capital has the effect of increasing the opacity and complexity of the global financial system generally for. Risk becomes more difficult to detect insofar as the risk assumed by creditors reappears systemically.
The shifting around or generalization of risk is of course not synonymous with its disappearance. We have moved ‘from a system where the granting of a loan meant the assumption of the underlying risk […] to a system that ostensibly decouples the loan from that risk through the sale in the form of a financial derivative product’ (7). One way to reduce the ‘toxicity’ of the accumulated rights over future wages – i.e. to guarantee the horizon of increased profitability through loan capital, usually through the issuance of government debt – is essentially to dismantle the welfare state, insofar as states, through their interventions to rescue the financial system, undertake to rescue these ‘toxic’ values by transferring the cost to the taxpayer. This is the political level at which, for Tombazos, ‘class struggle’ is operative. Neoliberalism does not only ‘refuse to offer what society is asking for,’ it turns against society to save itself.
Peter Osborne has pointed out how Marxist crisis theory – which itself, probably not coincidentally, found a renaissance in the 1970s – is haunted by a disjunction between the general-historical character of the concept of crisis in its modern form (which includes the notion of crisis as a condition of possibility of transition to a new mode of production) and the conjunctural and comparatively narrow focus of Marx’s own ‘theory of crisis’ as a theory primarily of periodic crises (Osborne 2010). This is a disjunction Tombazos seems well aware of when he opens his book by distinguishing between ‘periodic’ and ‘structural’ crises. ‘Marx himself dealt only with periodic crises, since the discussion on long-term economic waves, which presupposes a relatively long capitalist history, began after Marx’s death’ (2).
Yet insofar as ‘permanent crises do not exist’ (Marx 1989: 497), one wonders whether ‘crisis’ is the relevant term for the so-called post 1970 ‘structural crisis’. If the ‘historic nature’ of the crisis is precisely due to that fact that ‘exiting the crisis cannot be achieved by deepening neoliberalism or partially revising it, a policy “summed up” by a relatively tighter supervision of the banking system’(69) – if there are, in other words, no policy solutions other than social regression to the structural crisis of neoliberal capitalism that can, on the one hand, untangle the web of ‘toxic’ capital while, on the other, avoid the crisis in the falling rate of profit that subtends it – one wonders wonders if the crisis is really capitalism’s (in its economic form) at all.
And yet what is this all a crisis of? In his recent Crisis as Form (Osborne 2022: 38), Osborne I think offers the most succinct formulation:
“It is part of the core concept of crisis as the moment of decision within a transitional process (at its limit, in the medical origin, a transitional process within illness from life to death), that it cannot be permanent. What is increasingly referred to as ‘permanent crisis,’ then, is no longer technically a crisis, but a new and terrible form of social reproduction…capitalist crisis is always a crisis in the consistency of the social itself…in brief, what was crisis has become a new general form of the social.”
22 April 2020
This is an edited version of a review originally published in Marx & Philosophy Review of Books: https://marxandphilosophy.org.uk/reviews/17948_global-crisis-and-the-reproduction-of-capital-by-stavros-tombazos-reviewed-by-brendan-harvey/.
Marx, Karl 1989 Theories of Surplus Value Amherst, MA: Prometheus Books
Osborne, Peter 2010 An Increasing Topicality Radical Philosophy 160 (March/April)
Osborne, Peter 2022 Crisis as Form London: Verso
Tombazos, Stavros 2015 Time in Marx: The Categories of Time in Marx’s Capital Chicago: Haymarket Books