[iDC] Crisis and the Ethical Economy, second installment

Adam Arvidsson adam.arvidsson at unimi.it
Mon Sep 14 09:05:33 UTC 2009

With a  bit of delay, here is the second instalment of my analysis

of the current crisis from the point of view of  'the ethical economy’

I. First Idea Our crisis is a crisis of transition. 
The present financial crisis is not the first to hit us. Rather, the period
of relative financial calm that marked the persistence of the Bretton Woods
accord (1947-1971) has been succeeded by a series of financial boom and bust
cycles, the stock market in the 1980s, the dot.com boom in the 1990s and now
the sub-prime/real estate bubble. The reasons behind this recent volatility
are many ad interconnected in complex ways.  First, the collapse of the
Bretton Woods system itself created higher levels of volatility (in
particular in currency markets) and greater scope for speculation. Second,
the computerization, networking and technological refinement of financial
markets have vastly increased their speed and scope. Third, deregulation and
other policy decisions has further accelerated the process (like Margaret
Thatcher's decision to systematically transform the British economy from one
centred on industry to one centred on finance and corporate services).

However, at the heart of the expansion of financial markets and, as a
consequence, of financial speculation, there has been a constant and growing
over-supply of capital, driven by a persistent decline in the rates of
profit of virtually all non-financial sectors of the US economy. This
tendency has  accelerated in the 1990s . Tendencies are the same for Western
Europe and, not least, China. The result is that capital finds declining
opportunities for profitable investments in the productive economy, and
tends to migrate to financial markets where gains can be much higher, at
least in the short run. Again this has been particularly true for China
where industrial profits and private savings have been massively channelled
into the US economy (partly for geopolitical reasons), where they have
fuelled the recent waves of debt-driven private and public consumer bonanza.
The flight of capital away from the productive economy and into the
financial economy is a manifestation of the inability of the present
economic regime to put the wealth it produces to productive use. This is an
important point. It is not that there are no more needs to be met in the
world. It is simply that the prevailing techno-political paradigm is unable
to open up the markets by means of which capital could be productively
deployed in meeting such needs. Although there are a number of attempts in
this direction, like venture capital investing in alternative energy
systems, or companies cultivating the 'bottom of the pyramid’, the market of
the global poor, these are the isolated results of mostly private
enterprise, and not the coordinated outcome of systemic initiatives. Such a
co-existence of unmet needs and excess capital, and the financial expansion
that results from this combination is a classic symptom of the immanent
transition form one system to another. Similar things have happened before,
for example in the financial boom of the 1920s that marked the transition
from a 19th century English-style industrial capitalism to an American-style
consumer capitalism. Then the resolution of the crisis consisted in a series
of systemic measures- the New Deal and resulting welfare systems- that not
only managed to realize a more democratic mass consumer society thus opening
up a range of new markets where capital could be deployed to meet hitherto
unmet needs and desires, but de facto institutionalized a new, Fordist,
paradigm of capitalist development. Indeed in his masterful  history of the
'long twentieth century' Giovanni Arrighi argues that periods of
financialization of the economy, like ours, usually constitute the last
phase of a ‘systemic cycle of accumulation’ and signal the emergence of
another one.

The reason behind the declining profitability of investment in the
productive economy is the growing productivity of labour across most sectors
of the economy (excluding some kinds of personal services). In part, this
growing productivity depends on what Marxists call the rising 'organic
composition of capital', that is, the rate of machines and other 'stuff' to
workers. In particular robots and information technology has rendered
workers in factories and offices immensely more productive, drastically
reducing the time needed to produce stuff or do things. The result is a
supply of 'more stuff' and declining prices, which reduces levels of
profits. However, the rising organic composition of capital is per se not
the only factor behind the recent profit squeeze (after all this has been
going on for a long time). Rather, the rising ‘organic composition of
capital’  has also caused the emergence of a new mode of production within
the capitalist economy itself. This new mode of production has a shadowy
presence on the balance sheets of companies, where it figures as what is
known as 'intangible assets'.


Links to full text at 





Adam Arvidsson

Associate Professor

Dipartimento di Studi Sociali e Politici

Università di Milano

via Conservatorio 7

20122 Milano, Italy




Da: idc-bounces at mailman.thing.net [mailto:idc-bounces at mailman.thing.net] Per
conto di Marta Roldan
Inviato: venerdì 11 settembre 2009 22.41
A: idc at mailman.thing.net
Oggetto: [iDC] Looking for colleagues working on the same or related


Hi, I am looking for colleagues interested in studying "creative" labour,
work organization, 
capital accumulation,  and development from a critical perspective, among
related issues. I have been carrying out research bearing on this
interdisciplinary subject in Argentina  mainly (Editorial and now the TV
industry, content production, network projects, workers' subjectivity, etc.)
.We are now discussing  a new law on audiovisual communication that will,
hopefully, be approved by Congress about the end of this month and that
might change the "business model" now in practice. 


I am a senior researcher of CONICET, the National Council of Scientific and
Technical Research of Argentina with institutional site in FLACSO (The Latin
America Faculty of Social Sciences in Buenos Aires). Thank you for your


Martha Roldán imartharoldan at arnet.com.ar


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