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Dr. Doom to the WSJ: Marx Was Right. Capitalism May Be Destroying Itself

by on Aug. 13, 2011, under Debt Crisis, Economics, Marxism, Politics, Recession

Nuriel Roubini, interviewed by the WSJ, suggests that Marx might be right after all. In addition to being a professor of economics at New York University he is chairman of Roubini Global Economics a, consulting firm. Known on Wall Street as ‘Dr.Doom’ and the ‘Permabear,’ he successfully predicted the 2008 economic collapse.

Roubini began academic research and policy making by teaching at Yale while also spending time at the International Monetary Fund (IMF), the Federal Reserve, World Bank, and Bank of Israel. Much of his early studies focused on emerging markets. During the administration of President Bill Clinton, he was a senior economist for the Council of Economic Advisers, later moving to the United States Treasury Department as a senior adviser to Timothy Geithner, who is now Treasury Secretary. —sourced from Wikipedia

Here is a transcript of a portion of that interview posted byh goinsouth at DailyKos:

WSJ:  So you painted a bleak picture of sub-par economic growth going forward, with an increased risk of another recession in the near future.  That sounds awful.  What can government and what can businesses do to get the economy going again or is it just sit and wait and gut it out?

Roubini:  Businesses are not doing anything.  They’re not actually helping.  All this risk made them more nervous.  There’s a value in waiting.  They claim they’re doing cutbacks because there’s excess capacity and not adding workers because there’s not enough final demand, but there’s a paradox, a Catch-22.  If you’re not hiring workers, there’s not enough labor income, enough consumer confidence, enough consumption, not enough final demand.  In the last two or three years, we’ve actually had a worsening because we’ve had a massive redistribution of income from labor to capital, from wages to profits, and the inequality of income has increased and the marginal propensity to spend of a household is greater than the marginal propensity of a firm because they have a greater propensity to save, that is firms compared to households.  So the redistribution of income and wealth makes the problem of inadequate aggregate demand even worse.

Karl Marx had it right.  At some point, Capitalism can destroy itself.  You cannot keep on shifting income from labor to Capital without having an excess capacity and a lack of aggregate demand.  That’s what has happened.  We thought that markets worked.  They’re not working.  The individual can be rational.  The firm, to survive and thrive, can push labor costs more and more down, but labor costs are someone else’s income and consumption.  That’s why it’s a self-destructive process.

 

The full interview is here.

 

This entry was posted on Saturday, August 13th, 2011 at 3:42 pm and is filed under Debt Crisis, Economics, Marxism, Politics, Recession. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

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  • leftfield

    “…there’s excess capacity…”

    If you are a worker who’s been laid off or one that is chronically unemployed, they are talking about you.  You are “excess capacity”, a moniker that says as much as anything about your role in the system.

    • O-dog

      Good thing my “role in the system” is not decreed by the state. Under the dysfunction of a collectivist system I imagine the moniker “excess citizenry” would be more appropriate.

      • leftfield

        “Good thing my “role in the system” is not decreed by the state.”

        Just as the sun will rise and set tomorrow without any exercise of “free will” on your part, your role in the system is not a choice you make.  Both are true even if you live under the illusion that your prayers make the sun rise and set, and that you are free.

        • O-dog

          Says you.

          • leftfield

            You wound me deeply.

          • O-dog

            I should have included a smiley.

      • Zack

        Tangential to the discussion.  I agree with Hayek that a collectivist govt leads to tyranny, however this article is about Marx’s critique of capitalism, not about whatever govts his followers enacted.

        • O-dog

          It’s possible to have a legitimate discussion centered around Marx’s critique of capitalism, just like it’s possible to have a legitimate, academic discussion about the meaning of the Apostle Paul’s writings on morality. The problem is that the writings of both parties are used almost exclusively these days to advocate for particular sociopolitical agendas. It’s not about “whatever govts his followers enacted” as if those represent a phase that humanity has now emerged from, it’s about those governments that his followers are still trying to enact, using anachronistic principles in an appeal to some of the worst impulses of humanity.

  • leftfield

    “You cannot keep on shifting income from labor to Capital without having an excess capacity and a lack of aggregate demand.”  

    Under capitalism, upward migration of capital is to be expected in the absence of efforts by government to restrain it.  At a certain point and lacking intervention, I would expect the “excess capacity” to achieve a critical mass and explode.  As always, I view this possibility with mixed emotions.  People will suffer more than they already have in the process of learning to see the true nature of the system.  Hopefully, through their suffering their illusions will be shattered, along with the system that emslaves and alienates them.  

    • O-dog

      So in other words, you have mixed emotions about government intervention in the marketplace because without it people would see that unregulated capitalism will fail. This would somehow prove that properly regulated capitalism will fail as well, instead of merely providing us with the ability to use GPS technology on our cell phones. Sounds like I should have hung on to that ox and plow.

      • leftfield

        No, this is not the origin of my conflict.  My conflicted emotions in the event of economic collapse would be glee over the anticipated end of capitalism mixed with sadness in the knowledge that the people who suffer the most under capitalism will suffer more in its immediate death throes.

  • RH

    Marxism, communism collapsed much as capitalism is collapsing/contracting as some are saying today due to bankrupting ideology of desire to world domination, the greatest lie, myth ever told was that Reagan defeated the old soviet union, he merely was on office when they destroyed themselves via embroiling themselves in a bankrupting war in the grave yard of many great empires “Afghanistan” and it is Deja vu we are in same position as they were, desiring world top dog position via military might, with empty pockets to pay for it! The second greatest lie, deception being told lately is only 50% of americans pay taxes, tell that one to the 98% working class, whether they be above average wages, average wages, minimum wages on welfare, social security, retirement penions, dividend/annuity check income every time they buy gas, groceries, clothes, goods of any kind, services, pay fee’s for anything from the drivers license they use daily, to them annual ones like a dog license etc., the list of fee’s is endless and its a tax but the tax hawks them GOP/Tea publicans don’t want anyone to know it so they use lies, deceptions a famous tactic in war! The only ones who have been doing good since 2000 and still do good is them truly rich, not them paper rich fools, morons they hire to speak for them!

    • leftfield

      The Soviet Union was not the only expression of socialism at the time of its collapse and socialism did not come to an end with the end of the Soviet Union. 

    • Clownfart

      Dude, try a period or two, sometime.

      • RH

        I could use my spell check and pretend to have a high intellect, many degrees as some love to profess on line, but alas I have never had a sagging ego, low self esteem that needed any props to make me feel good!:-) If my poor grammar, mistyping bothers you a simple uneducated piece of advice is don’t read it and stress them old heart valves!:-) Some folks are so anger, bitter, self obsorbed with the woes of the world which have been around since Eve lured Adam to bite into that forbidden fruit, and will continue till time ends, so don’t worry be happy!:-) Communism and Socialism often are referred to in same context but but if one does a bit of study, they hated each other so much during world war II they fought each other to ones demise in war, but a unique irony is two socialist countries are our best friends in todays world, Canada, UK! Ironically America is a mixture of capitalism/socialism some might say taking the best of both, and as with all things in life one has ups and downs, we are unfortunately in a down trend right now!:-)

  • RH

    Sorry to bust anyones bubble of the world, but economic recessions, depressions have historically been around a long time, do a bit of research and one can find many in our own countries past, its a normal process, painful like a womans birthing pains no doubt unpleasant and not nice for those living through them, I remember distinctly my grandparents talking of the hardships they endured during the 1930′s, they had no money, grandpa hunted variety of wild game, kept some chickens, a small garden, couple hogs, they survived, lived full lives, did they like what they endured no, but one can give up and do as some did jump out of them high rise buildings, or learn to adjust, today we see folks commiting murder/suicide, entire families, husband/wife and kids, sometimes its the husband who turns murderous/suicidal and other times the wife, often one can find a economic issue, job loss, foreclosure looming, in todays society we have the truly rich them 2%, then the remainder of us 98% are a mere two pay checks, dividend/annuity/pension checks from homelessness and poverty, but sadly in that 98% exist those rare birds who think they are in that 2% but are merely paper rich, they tend to like to call themselves fiscal conservatives, christian religious zealots, we see them at these tea party events wearing their cute out of season colonial holloween outfits, but thank god they are a mere minority within the GOP which is at best 22% of the national electorate, one can hope they go the way of the whig party into extinction!

  • RH

    I find China’s mix of communism/capitalism interesting, a mirror reverse image of our own capitalism/socialism mix! I cannot say what future economic structure will be, unless some apocalyptic event occurs we will have a money based economy in the world, trade will go on between nations, and if the world does have the many apocalyptic scenaarios which might be nature or man made we may all be back to the stone age, barter and hunter/gather existence!:-)  Albert Einstein predicted the 3rd world war would be fought with nuclear weapons, the 4th with bows and arrows!:-) One can either worry or not worry about the direction of this old world I prefer to not worry, since my one vote is counted in variety of cyclic elections and I have no delusions of grandeur of being in any grand majority!:-)

  • PRT

    Some ancient knowledge – The bible speaks about each man eating from his own vine. That is nationalism, that products used by a people should be made by those people. That separating labor from consumer does not work.
    Probably 70 to 90 percent of all manufacturing and food production should be enacted by laws to be produced internally for the population of every nation. That keeps the labor/consumer link strong and it the only sane way to do it.

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