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The Enigma of Capital and the Crisis This Time 89 There are many explanations for the crisis of capital that began in 2007. But the one thing missing is an understanding of “systemic risks.” I was alerted to this when Her Majesty the Queen visited the London School of Economics and asked the prestigious economists there why they had not seen the crisis coming. She being a feudal monarch rather than an ordinary mortal, the economists felt impelled to answer. After six months of reflection, the economic gurus of the British Academy submitted their conclusions.The gist was that many intelligent and dedicated economists had worked assiduously and hard on understanding the microprocesses. But everyone had somehow missed “systemic risk.” A year later, a former chief economist of the International Monetary Fund said, “We sort of know vaguely what systemic risk is and what factors might relate to it. But to argue that it is a well-developed science at this point is overstating the fact.” In a formal paper, the International Monetary Fund described the study of systemic risk as “in its infancy.”1 In Marxian theory (as opposed to myopic neoclassical or financial theory), systemic risk translates into the fundamental contradictions of capital accumulation.The IMF might save itself a lot of trouble by studying them. So how, then, can we put Marx’s theorization of the internal contradictions of capitalism to work to understand the roots of our contemporary dilemmas? This is the task I set myself in writing The Enigma of Capital: And the Crises of Capitalism.2 In writing it, I found, however, that conventional versions of the Marxian theory of crisis formation were inadequate and Chapter 3 The Enigma of Capital and the Crisis This Time David Harvey 90 Harvey that it was necessary to take a fresh look at the arguments on crisis formation laid out in Capital and, even more important, in The Grundrisse. In the latter work, Marx argues that the circulation, and accumulation, of capital cannot abide limits. When it encounters limits, it works assiduously to convert them into barriers that can be transcended or bypassed. This focuses our attention on those points in the circulation of capital where potential limits, blockages, and barriers might arise, since these can produce crises of one sort or another. Capital, Marx insists, is a process of circulation and not a thing. It is fundamentally about putting money into circulation to make more money.There are various ways to do this. Financiers lend money in return for interest; merchants buy cheap in order to sell dear; and rentiers buy up land, resources, patents, and the like, which they release to others in return for rent. Even the capitalist state can invest in infrastructures in search of an improved tax base that yields greater revenues. But the primary form of capital circulation in Marx’s view was that of production capital. This capital begins with money, which is used to buy labor power and means of production, which are then brought together in a labor process, under a given technological and organizational form, that results in a new commodity to be sold on the market for the initial money plus a profit. A part of the profit, for reasons I take up later, has to be capitalized and launched into circulation to seek even more profit. Capital is thereby committed to a compounding rate of growth.The quantity of global goods and services traded through the market (which now stands at around US$55 trillion) has grown at an average rate of around 2.25 percent since 1750 or so.3 In some places and times, it has been much higher, and elsewhere , much lower. This fits with the conventional wisdom that a growth rate of 3 percent is the minimum acceptable level at which a “healthy” capitalism can operate.The average global growth rate from 2000 to 2008 was exactly 3 percent (with plenty of local variation). Anything less than 3 percent is problematic, while zero or negative growth defines a crisis that, if prolonged, as in the 1930s, defines a depression. So the problem for capital is to find a path to a minimum compound 3-percent growth forever. There are abundant signs, however, that capital accumulation is at a historical inflexion point where sustaining a compound rate of growth is becoming increasingly problematic. In 1970, this meant finding new profitable global investment opportunities for US$0.4 trillion. Resumption [3.144.96...

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