Ponzi Scheme Capitalism: An Interview with David Harvey

by Steffen Böhm

David Harvey’s work on political economy, urbanism and the legacy and ongoing theoretical interpretation of Karl Marx has been at the forefront of critical debate across the humanities and social sciences since the 1970s. In Seventeen Contradictions and the End of Capitalism, recently published by Profile Books, the pre-eminent economist and thinker provides an incisive guide to the world around us, and a manifesto for change. In this interview, Harvey discusses the significance and centrality of the theory of political economy to understanding the post-2008 landscape; he also considers the transformation of the meaning of labour, digital technologies, rentier capitalism and emergent spaces of hope and promise.

Did you feel a need to write Seventeen Contradictions and the End of Capitalism now, five years after the big crisis, as a response to this particular historical junction?

I think it’s a combination of that, but also a continuation of a project that I’ve been involved in, over the last ten years. For lack of a better phrase, I’ll call it ‘the Marx project’, which has been to make Marx’s Capital, in particular, more accessible. It comes together with the fact that the crisis of 2000 and 2008, which was officially over in 2009, has continued to have impacts on large segments of the population. For these large segments, the crisis is not over, even if it’s over for the capitalist class with the top 1% in particular coming out of it very well. It seemed to me a good moment to reflect on the underlying problems of capital, and also, to ask a question to the Left: If you want to be anti-capitalist, what would it mean? What is the case for being anti-capitalist as opposed to pro social justice, or pro the eradication of poverty without touching global wealth and NGO projects? I felt it was time to try to clarify some of those issues.

In a nutshell, your answer to the question, what it means to be an anti-capitalist, is to understand how the economic engine functions.

Yes. But it seemed to me that we have to have some clarity as to what the problems are with the economic engine, and to what degree many of the other issues we’re looking at derive from the malfunction of the economic engine.

You do make that distinction between capital and capitalism, which I think is key to understanding the book. Could you just tell us again why you think it is important to make that distinction? You talked about all of these struggles that are going on in capitalism, which you have a lot of respect for, and you’ve written extensively about these in other books, but why do you think there’s a need to come back to capital and the economic engine?

It derives from the Marx project, but I want to make it clear that when Marx is writing, he’s not writing about everything there is. He’s writing about the economic engine in three volumes of Capital. I ask a question: how valuable is it to isolate the political economy in this way? I think there’s a considerable value in so doing because it tells us things without which we cannot really understand what happened in 2000 and 2008. You cannot understand the lingering effects of that, which are absolutely dramatic for many people, without understanding how the economic engine is and what might be wrong with it. If a problem is economistic, then it should be addressed in economistic terms, and it can’t be somehow or other ignored. If we have, say, the emergence of long-term unemployment in the United States, we have to understand what the roots of that are. If we have the patent of technological change, which is where we’re moving meaningful labour, and turning labour into increasingly meaningless activity, then we have to understand what the roots of that are. If there’s widespread alienation in society, both in terms of relationship to production and also increasingly towards what one might call ‘compensatory consumerism’, or mindless, excessive consumerism. If that is the case, then we have to understand where it’s coming from, and if we need to address some of those issues. We also want to understand how it is that we have all of this technology right now, which is supposedly labour saving, and time saving, yet by the same token we find ourselves with less time to do anything meaningful with our lives. We have to understand where that is coming from.

On the other hand, I don’t want to suggest that that is all there is, and that the only thing that matters is dealing with those particular problems. I try to understand many other issues, which are being broadly addressed in terms of identity politics and all the rest of it. Those are very important issues, and there are many sources of oppression of women and, of course, there continues to be intense racisms, and struggles over those issues I fully support.

Just to continue with that for one moment though. If we follow dialectics in the proper Marxist sense, could one not argue that what’s going on in the engine room is dependent on what’s happening on deck as well? Capital is a social relation, which, Marx obviously highlights again and again. The metaphor of the ship with the engine room is good. This technology is down there, and we seem unable to stop it. But is there not much more of a dialectical relationship in that there’s a going up and down from the decks to the engine room? Isn’t there a much more dynamic relationship between these layers?

Sure. I would accept that we should have an organic kind of conception of society, in which indeed we see the dialectical relations. I would accept that. At the end of the day, I would want to analyse capitalism and not remain content with just analysing capital, but I think part of analysing capitalism is to understand how the engine is working. That’s all I’m really doing, and it’s not all there is, it’s not the only struggle in town and it’s not the only worthwhile struggle in town, so I’m perfectly willing to accept that. But I also wanted to overcome what I think is a misunderstanding of what Marx is trying to do. There is a myth that somehow or other he was trying to understand everything there is and that he succeeded in doing so. I don’t think he was about that at all. I think he was narrowly focused on a critique of classical political economy, and out of that came a shadowy version of an alternative and the like. I wanted to acknowledge the power of what he did, but at the same time acknowledge the limitations of his project. What my project is, which follows in his footsteps, is saying: let’s deal with the economic engine and let’s recognise its significance.

Do you sometimes think back to 150 years ago when Marx was doing his analysis? Sitting in the British Library, sifting through thousands and thousands of pages of books, reports, papers? Does this image give you energy to continue Marx’s project today?

I’m sure we now have technological capacities to do the sort of thing he did far faster, and with much less effort. I think it is still a considerable difficulty right now, which is what Marx didn’t really face in the same way we do, that there is a plethora of information now. The amount of stuff that’s out there is huge. Marx confined himself to largely looking at just the classical political economists, and he looked at pretty much all of their writings, but he cites less than 200, I think. If I tried to write about what’s going in the world right now, of capital, by only looking at 200 people, you would say that we’ve got to look at what people are writing about China, India, and Latin America, so in other words, we have a massive amount of information.

We don’t have time, unfortunately, to talk about all of the 17 contradictions you identify and discuss in your book. So, I’ve picked out a few that caught my eye in particular. I’d like to start with Contradiction Four, which in another book you might have called ‘accumulation by dispossession’. Here, you call it ‘private appropriation and common wealth’; is this the same thing? It’s going back to that body of work of yours, which of course has been very influential, that is concerned with ‘accumulation by dispossession’.

I think accumulation by dispossession is part of it, but what I wanted to do here, by discussing the appropriation of social wealth, is to also to take into account the market process. In some ways it is egalitarian and also contains within itself a principle which has always been important to me. This is the power of the principle that there’s nothing more unequal than the equal treatments of unequals. The market is a very good example of this, as legally we are equal. We are therefore persuaded that the market is fair, but when we enter into the market and you are more endowed than me, then you can wait. I can’t wait and I’m likely to give up my commodity immediately because I’m hungry. You’ve got resources, you can wait me out, and you can actually force a higher price, then after a while that means that you become even wealthier so that you can wait even more, and I become even more desperate to trade my commodity. So, here in principle, is the egalitarian market exchange, and it’s between legally equal people, but they’re differentially endowed. The result is that some of the rich people get very much richer and the poor get poorer by a legal process, and it’s not illegal, robbery by dispossession and all the rest of it. I want to suggest that the private accumulation of social wealth occurs through the market process without necessarily having to go through the tactics of dispossession. I would then add the process of a dispossession, the initial endowments which are set up by primitive accumulation, or of that mass dispossession, the peasant populations have access to the land and so on. Yes, the dispossession side is in there, but I also wanted to say that this inequality comes out of the fair market process, which is of course foundational for understanding Marx’s Theory of Surplus Value.

So, by definition, the market is legally equal but it automatically produces inequality?

Yes. It’s an equal system that produces inequality. That’s its character, which is why capitalists always like free markets, in principle.

If you look around the world, where are the current hotspots of that process of private appropriation, as well as dispossession, through what one might call ‘normal market forces’?

There are the normal market forces, and then there are the primitive accumulation aspects. Of course, we’ve seen some really dramatic appropriations of social wealth. Look at the emergence of an oligarchy in what was the Soviet Union, and the tremendous concentrations of wealth in Russia. You look at the sorts of processes that have been going on in China, such as the dispossession of peasant populations of land particularly, and resources and assets we’ve got. Globally, what we call ‘land grabbing’ is going on across Africa and throughout Latin America as well. There’s been a lot of dispossession going on these last 20 or 30 years. In my view it has a lot to with the fact that we’ve got a lot of surplus capital that can’t find profitable investment opportunities. That surplus capital tends to go into the procuring of assets, and asset values have become very critical. For instance, just take land and property, there’s been tremendous pressure on land and property prices, both in urban areas but also in large areas of Africa, and Latin America. I think that what this signals is the shift of capital away from productive activity to becoming rentier. We have got the emergence of a rentier economy, in which control over assets becomes significant, and the assets can be of various sorts. The classic ones are land and property, but now you’ve got intellectual property rights, which are a crucial aspect being fought over almost daily. And beyond that, you have other kinds of assets, the art market for example.

The whole emphasis on the rentier state has been highlighted by autonomous Marxists in recent times. How far would you agree with their analysis? They’re coming out of a particular tradition that started in Italy in the 1970s, and in the book you talk about Hardt and Negri, and this whole emphasis on ‘immaterial labour’. Is there a connection between what you just said, and their argument, which of course you are critiquing as well?

Yes, but I tend to look at it the other way around. Ever since writing The Limits to Capital, I’ve been talking about the rent problem, property markets and the role of the rentier economy. I think the Autonomists have correctly identified this as one of the major features of the economy, which has been emerging particularly around the role of urbanisation, in relationship to capital accumulation. So, I would be with them on that, or I would argue actually that they’re with me on that. But I think that where they go wrong is in starting to talk about this immaterial labour. I’m not quite sure what they’re really talking about here, because it turns out that the immaterial labour they’re talking about is very material. So, what is it then? Is it about changing people’s consciousness directly? Well, capital has always been trying to do that sort of thing. Are we moving into an acceleration of return over time of consumption, which to me is a terribly important argument. As we accelerate return over time of consumption, does that mean we move more and more into a production spectacle?

The opening of the Olympic Games may be a spectacle and could be considered an immaterial event, but if you look at the materiality involved in its production, there’s an enormous absorption of materiality in the production of this spectacle. To the degree that there is a desire to create forms of consumption which are instantaneously consumed, even to the point where the distinction between production and consumption disappears. We start to see things like Facebook, where ‘prosumers’ are active. We, as Facebook users, are creating much of the value, but look at who’s getting filthy rich. Zuckerberg has become a billionaire, in effect extracting rents from what we have created by our participation in Facebook. I think we have to adjust the rentier configuration away from just land, and look at all kinds of places. The art market is one. I think most media structures, such as Google and Facebook, are also rentier structures, and in effect, what I would call, parasitic activities in the sense that they’re not really producing value in the classic Marxist sense. However, this is where you get into the discussion over the collective labourer, general intellect, and famous passages in the Grundrisse where Marx is purportedly abandoning the Labour Theory of Value. I actually think it’s a bit of a misreading of Marx, but that’s another conversation.

You do seem to be saying that we are entering a period where that labour theory of value needs to be questioned. Can you just expound on that a little bit? What is here different to Marx’s times? Let us maybe stay with Facebook because it’s a good example. What’s different here? How is the Labour Theory of Value not applicable to analysing Facebook?

The labour theory of value may be applicable to analysing Facebook, provided you redefine what the Labour Theory of Value is about. You’re faced with two choices. You either abandon the Labour Theory of Value and say there’s an alternative theory of value, which some of the people in the field would say you have to do. Somebody like Michel Bauwens would say: we’ve got to come up with an alternative value theory. I’m not convinced of that. But at the same time we can’t sit here and think of value production only in terms of manual labour, for example, making something with a hammer. What we have to think about is how value gets produced by the collective labourer. This is actually broached in Volume I of Capital, that surplus value is extracted not from individuals but from the collective labourer. Where does the collective labour begin and end? What happens when something gets subcontracted out of the factory; is that part of collective labour? There are all kinds of questions of this sort that Marx doesn’t answer very well, and I think we have to take up the question of the collective.

There’s also the question of what kind of labour gets involved in the production of the machine? Which is what Marx is addressing in the Grundrisse, that the knowledge which gets internalised into the machine becomes absolutely foundational to the productivity of that machine, the productivity of the machine is then connected to the productivity of the labourer who stands by the machine, but the intelligence is now embodied in the machine. When it becomes artificial intelligence, we’re talking about another stream of value production which is coming from the cognitive activity of people. Some people would say we’re in a stage of ‘cognitive capitalism’. I don’t like that. I think that knowledge has always been vital to the production process. At the same time, I have to recognise the degree that technology has become a business of its own, and the dynamism of technology is no longer dictated by simply what’s going on in the industrial sector. So, we have a much more complicated field in which value is being produced, in which a scientific worker, who is producing the knowledge that then gets embodied in the machine, then becomes part of the collective labour. Therefore, they are as much a part of value production, as is the labourer who stands there next to the machine pressing the buttons.

To say that it’s become more complicated, and maybe the production line has become globalised or more complex, is one thing, but then to then say the labour theory of value really doesn’t hold anymore; that’s another jump, isn’t it?

Yes, and I’m not prepared to do that at the moment. To be honest, I haven’t worked that out to my own satisfaction one way or the other. My instinct is not to abandon the Labour Theory of Value, but to reformulate what that theory of value is about. I had this argument the other night with somebody who said: well, Marx says value is labour time. I said: no, it’s not labour time, its socially necessary labour time, and what capital is about is to define the field of what is socially necessary, and I think we still need to keep with that. Of course, socially necessary in that sense also means there’s a demand for it. The question of what happens when there’s weak demand for something and what happens to the value of theory on the demand side, as well as on the production side, has not been very well understood even in the Marxist tradition. It should have been dealt with a long time ago.

For me, on page 69, you write an important sentence right at the end of the Capital and Labour chapter. You say that the overemphasis of that relationship, and the contradictions between the two, and ‘its treatment as if it operates autonomously and independently of the other contradictions of capital have … been damaging to the full-blooded revolutionary search for an alternative to capital and, hence, capitalism.’ It’s quite a statement to make. Could you explain why you make quite a forceful statement of that order, about the relationship and the contradiction between capital and labour? What pushed you, as it were, to make such a statement?

I’ve long held that the extraction of value from, let’s say, the living space has been just as important to capital as the extraction of value from the production space. I’ve often been highly criticised in Marxist circles for taking that position. Since I’m interested in urbanisation and what goes on in urban life, the closer I got into looking at the theoretical structure of Volume II of Capital, what I started to see was that in the circulation of capital, the place where value is produced is not the same as the place where it’s realised, that capital can been produced here. It can be realised by the merchant capitalist, or by the banker, or the landlord. Even to the point where labour may gain concessions from direct production, get higher wages, but lose all the wages back by rising rents and all the rest of it.

There is a level of exploitation which is occurring in urban life, which I think is very significant, and that therefore struggles against the telephone company, the landlord, against the power of Wal-Mart, and all the rest of it, are just as important as the struggle at the point of production. I wanted to make that point. I think the history of Marxism has always been about the main struggles in production, and these other, secondary forms of struggle that I talk about don’t really matter very much. But this struggle in the realm of production doesn’t necessarily get the labourer anywhere if it can all be recuperated by other elements of the bourgeoisie extracting it from the living space in various ways.

If you look around the world, do you really see this overemphasis of the realm of production still holding true today?

Not as true today as it was, but it is still the case that there are segments of the Left which still stick to it, workerist and productivist kind of notion that is central to what they’re doing, and still having the image that the proletariat is constituted by the industrial worker. I suspect that the profit margins of the direct producers of surplus value in China are very low. A lot of the surplus value is realised by Wal-Mart, or Apple, in the United States, and if you look at the wealthiest corporations right now, who are they? They’re Wal-Mart, Apple, no longer General Motors and the like.

If you look at the world in terms of Spaces of Hope, which of course is the title of another book of yours, where do you see the most promising spaces of hope? Of course, we can’t just create alternative spaces of hope in one locality. Sure, space and locality are important, but struggles need to be connected to a global understanding of the 17 contradictions you are talking about. Where do you think are the most promising spaces, from your vantage point at the moment?

I tend to say, where are those spaces where they’re very aware of all of these contradictions and at least have some kind of inclination to try to do something about it, even if what they’re trying to do is not very successful. I would say right now that at least there are some spaces where there is a willingness to look at these contradictions, and these would be places like Ecuador and Bolivia. I say that because right now I’m working down in Ecuador and they’re very interested in having people like me there to talk about what it means to do urban territorial development. Whether that was a good idea on their part, I don’t know, but at least they’re open. They’re certainly open to these ideas about the knowledge economy and they’re working with trying to build peer computing into what they’re doing. At least they’re aware of the contradictions, but as we see in Correa’s decision to abandon the Yasuni initiative over not drilling in the Amazon, they are really in the middle of these contradictions and don’t necessarily come down on the right side. But at least there’s a conversation going on over these questions.

Just to finish us off, can we have a quick word about the endless compound growth argument? Because as I think you acknowledge in the book, it’s maybe the least well understood, dangerous contradiction; one of the most fundamental contradictions that is built into the workings of capital. What I found inspiring here in the logic of the compound growth argument is that it almost lets us predict, of course not precisely, how the 21st century could possibly pan out, and all the horrors that could be associated with it, simply because capital has to find so many new opportunities to invest its money. It’s almost like a horror story, in a way as you would argue that horror story can’t really be stopped without stopping capital.

Yes, for me the strongest imperative to the anti-capitalist is to say that we cannot sustain compound growth and we have to think about an alternative. When compound growth of 3% was what capital was about, talking about what was going on in Britain and the United States, that’s one thing. We’ve been seeing a huge expansion of the capitalist system after 1970, with the absorption of China into it, the collapse of the Soviet Block and the absorption of India and Indonesia and many other countries. And what we are facing now is a compound growth on top of all of this. I think about what cities looked like in 1970 and what they look like now. I was in Turkey just recently and every city in Turkey had a vast new building project. It’s just astonishing, and you imagine that being compounded upon for the next 30 years, and what will cities look like in 30 years time in terms of density, and sprawl, when 70% of the world is urbanised.

Can we not foresee an almost ridiculous phase of capital - where on top of hyper-development there comes further hyper-development? Where fictitious capital is created out of fictitious capital. I think we already largely see this in some markets.

Yes, just to take London for example, and this whole business of the bedroom tax. We should put a bedroom tax on private property which is held and not actually used. There’s a vast amount of private property, and the more affluent it is, the less it’s used, lying wastefully around. It has always been the Lockean principle that if you don’t use it you’re going to lose it. There’s a whole lot of stuff that is not used by the rich, but then they put a bedroom tax on low-income populations. This is completely the wrong way around. One should have a bedroom tax on the affluent, and release all of that into the market. This would solve the housing problem, but of course first there would be a crash in housing prices, a huge crash.

My question would be: can we not foresee a continuation of that ridiculousness for the foreseeable future, where you have one fiction built on another fiction, one crisis to the next?

Yes. I raise that question a bit in the book by saying there are these fictitious forms of capital that can continue to circulate and feed off each other, and they’re all Ponzi schemes, which can sometimes go on for a long time. Yes, there may be some possibility we’re moving into this era of fictitious capital formation and circulation, which is then managed by the central banks because they can just add zeros to the money supply at the drop of a hat, and have been doing so. First off, it seems to me increasingly senseless, and I suspect that people will start to say, well what’s the point of all of this? Secondly, I think the internal contradictions of that are that there’s going to be crashes, but then there have been financial crashes popping off all over the place for the last 20 years and capital has survived. For instance, there’s one in Indonesia, one in Argentina and then there’s one somewhere else. Dubai World goes bankrupt, somebody else goes bankrupt, there are all these asset bubbles popping up all over the place, and maybe we can continue in that vein for a while. But at some point, I think the possibilities will run out.

David Harvey's Seventeen Contradictions and the End of Capitalism is published by Profile Books.