A Theory-Oriented Account Of Benanav-Ackerman On Stagnation Theories After Brenner

if you lose one decade, can you still find the next one?

There’s A Fight

Aaron Benanav and Seth Ackerman have been having an extended debate about capitalism across a variety of media properties recently. This dialog is the latest phase in a longer exchange between a number of different folks, but largely centered around the work of Robert Brenner, a major American academic figure.

The broader exchange itself is a part of the exploration of the possible political implications of a vague yet determined commitment to a particular version of the “tendency of the rate of profit to fall” (TRPTF) within the history of Marx interpretation. The immediate inciting incident of the latest round of this debate is a piece by Ackerman in Jacobin (which, full disclosure, I said very positive things about when it came out) on the rate of profit and the political implications of its dynamics. Ackerman links those implications to an account of a social-political worldview associated with a post-Bretton Woods “long crisis” of overaccumulation and under-investment alongside pervasive mercantilism.

The dialog’s one smoothing feature is that everyone involved, myself included, seems to basically agree at the level of broad political goals. Our main differences seem to me to be in the theoretical means by which each participant arrives at a picture of the “objective” macroeconomic situation and its plausible dynamics. The main point of contention outside these “objective” questions are few, vague, and largely over who ought to direct the state-directed investment that we would all agree – were we to be in actual conversation – is needed. We would all likely say that we support the UAW strike. We each would all probably say we find the technique of hitting particular supply chain bottlenecks to amplify strike impact to be both impressive and innovative. We were (I assume) proud to see an American President walking a picket line.

The biggest point of disagreement over objective matters is on the question of the general Tenor Of Things over time. This is a debate rooted in ancient history: the 2010s, a decade of global stagnation. Was that stagnation a failure of policy or was it an inevitable denouement to capitalist growth? For my part, I believe the stagnation was a policy failure and one which says terrible things about society. 

Despite this, there are a lot of folks of different political and theoretical stripe who all agree that things could not have been different during the 2010s, and that that says something about society as well. Neoliberals take inevitability to mean that the government response was “good enough”. Other, more radical voices take the inevitability of crisis to mean we have to scrap the whole global system without a thought to what might come after: “You pull the whole tooth.”.

The inevitability vs failure framing ended up differentiating oodles of different strands of “2010s Leftism”. I think the reason that this debate winds up centering on Brenner is not so much about his analysis in particular as it is about the mood his analysis is often presented in, its affective valence, how it feels. For all the soi-disant objectivity of this debate, there is something aesthetic at the core.

This is not to diminish the debate. As a Keynes person, it’s natural to me to see vibe and aesthetic as of critical importance to the “animal spirits” of entrepreneurs and the broader economy. Right now, there are real stakes to getting the mood right. The short run has to be managed by tea leaves and gut feelings. The situation has changed relative to the 2010s on a number of fronts: 

1. governments are beginning to demonstrate broad-based commitment to (at least starting) to make the investments necessary for global decarbonization; 

2. household and firm balance sheets are in a radically better place relative to the early innings of the Great Recession; 

3. labor markets have less slack across the board, contributing to higher wages at the bottom end of the income distribution and better outcomes for labor actions (in addition to the genuinely better Biden NLRB). 

The ‘inevitability’ framing – combined with an agreement that things were indeed worse in the 2010s – leads to an oppositional mood organized around the impossibility of things ever getting better. As a pure idea, pure oppositionalism might be fun, and feel very interpersonally radical. But team ‘inevitability’ – even on their own view – have only described reality, when the point is to change it.

Austerity, neoliberalism, etc: all these things are not over. Neither is crisis. The pandemic experience has one clear message though: we know how to use fiscal firepower to kill a recession dead in its tracks. If the soi-disant left plays a role in using pandemic-era inflation to emphasize the inevitability of the 2010s crisis and the impossibility of achieving full employment and sustained growth through a sufficient fiscal response, they should not feel embarrassed to stand alongside that position’s other advocates (Libertarians, Republicans, Generalized Liquidationists, etc). I would hope they might be, however.

As a student and interpreter of the work of John Maynard Keynes, I also don’t really like how Keynes has been portrayed in this fight tout court. I get that Keynes is a helpful stand-in for a particular historiography of the American Twentieth Century. In the context of something like the “Social Structures of Accumulation” literature that emphasizes the importance of the move from “Fordism” to “Post-Fordism” as representing a holistic movement of a relation of wages-prices-and-production, Keynes’ notion of full employment looms large. Even with that caveat, it’s hard to get away from the fact that the theoretical content in Keynes’ actual work presents a lot of problems for how the Benanav/Ackerman Brenner debate is being carried on. For a conversation about theory, the discussion of Keynes avoids theory in favor of (dubiously-)ascribed history of “practice” of Keynesianism. I don’t think this clarifies anything or strengthens anyone’s argument.

Since we have the same goals, we need to be reading from the same book. In the interest of that goal, I’m going to try to recap Benanav and Ackerman’s arguments — in, admittedly, fairly tendentious form. I welcome comment if important detail or accent is missing in any of these recaps. After these critical recaps, an unsurprising guest and I will walk us out with a new analysis for these same issues.

Benanav’s Story As I Understand It

My understanding of the core of Benanav’s argument is:

1.  Productivity growth is both cyclically and structurally weak;

2.  Longue durée demographic factors in developed countries are also structurally weak; 

3.  These two factors together constitute the core “drivers” of economic growth.

The result of the twin weaknesses means weaker economic growth, and more intense and more zero-sum class conflict. A number of different reasonably incompatible accounts of productivity slowdown are all given as examples: Gordon, Baumol, an oddly-summarized Keynes. Benanav deduces that everyone is definitely identifying a productivity and growth slowdown, but can’t quite explain why.

We can look at the background theory in terms of a single causal chain:

Technological Innovation (e.g. Automation) → Productivity Increase (e.g. more Widgets per labor-hour) → Economic (nominal GDP deflated by inflation index) Growth → Class Conflict Over Distribution Of The Social Surplus → Consumption and Savings Decisions → Investment

This chain is understood in a broadly Marxian cast. That Marxist cast rests on some assertions about firm behavior which I don’t think are too important to get into here, though others have hashed them out in some detail.

I have two basic problems with Benanav’s story as I understand it: 

1. The structure of possible empirical identification of this story is weaker than it appears on the surface; 

2. The extreme Ricardianism embedded in its heart.

Empirical Identification

Most of Benanav’s story — and all of its empirical confirmation — rests on movements in productivity data. Let’s just do a quick refresher on how bourgeois economists measure productivity, since the story is using the bourgeois economists’ measures. The first instinct is to think that someone is going around measuring and adding together how many things all the different factories make, but that won’t work, because what units are you going to use to add them up? Accounting for GDP this way would literally require adding apples and oranges.

So, what bourgeois economists have agreed to do is to add up the prices paid for all the things that are sold in the economy, even the implicit payments (implicit prices and quantities are “imputed” by various methods). This is the idea of nominal GDP. Then the bourgeois economists divide the sum of all prices real and imagined by the movement in a weighted basket of goods prices. The prices of that basket of goods is called that GDP Deflator. Of the infinitely many possible GDP Deflators, PCE has become standard.  Finally, the bourgeois economists divide the GDP:Deflator ratio by the number of hours worked in the economy. 

In sum: changes in measured labor productivity have to be driven by changes in one of the three following measurements:

1. Nominal GDP; 

2. The GDP deflator;

3. And the total number of hours worked.

Benanav’s Baumol argument is, within this frame, an argument that 

1. Nominal GDP will grow slower than:

2. The GDP Deflator (inflation) due to a shifting composition of the economy towards services and away from manufacturing while:

3. labor hours will hold constant or grow.

In Baumol’s toy model, these 3 outcomes are society’s inability to improve productivity in high-labor-intensity sectors (the usual examples are barbers and symphonies).

In comparison, Benanav’s version of Brenner’s particularly 70s inflected argument seems to be an unexplored skepticism of the validity of government investment. Benanav implicitly and sometimes explicitly is skeptical of investments' ability to bring faster nominal GDP growth back without stoking inflation, as a consequence of the limits to productivity improvement. Thus we cannot have a broadly capitalist mixed economy. Benanav takes as given the experience of inflation in the 70s and relatively high industrial wages then, by global standards. Sure, centralized government investment worked for Japan, and then China, but only at the cost of industrial growth elsewhere.

Benanav’s broadly Schumpeterian (at least, the Schumpeter of Capitalism, Socialism and Democracy) argument is that increasing automation and capital investment leaves less and less opportunity for further investment by reducing the number of workers in manufacturing and undercutting its traditional developmental role. Others have pointed out this path recently. Productivity statistics seem then to be almost like a bell curve over time. The rise in the bell curve is due to more nominal output per unit labor for constant inflation rate over time as improvements in technique lead to labor productivity. The fall in the bell curve is due to the relative fruits (producer surplus in aggregate) of those improvements competed away, after which firms turn the screws on labor. OR, if combined with the Baumol argument, then marginal restraint in service sector wage pressures the curve down as inflation underperforms due to something like a price war in manufactured goods.

Finally, Benanav’s demographic argument is that the supply of “more labor hours” will dry up as developed world populations age, leading, within this frame, to an upper bound on the growth of labor hours which has to translate into lower nominal GDP or higher inflation in order to constrain measured productivity.

Rank Ricardianism

There is little more normal or boring than arguments over the dynamics of the GDP Deflator in contemporary macroeconomics. The thing that really rubs me the wrong way about this whole exchange is the more or less explicit Ricardianism lurking within the overaccumulation/underinvestment story. I talk about Ricardianism in depth in a number of places in my explication of Keynes, but I will just link the one, and provide a simple explanation here.

The story of a basically fixed set of possible investments which can run out is fundamentally pre-Keynesian. Keynes’ point is that eventually the Quasi-Rents that capital goods are able to command eventually will fall to zero at a point of non-scarcity. This is radically different from saying that we are going to run out of things to invest in. The disappearance of scarcity is when things get interesting, not boring. 

Keynes' story is diametrically opposed to the Ricardian explanation. Ricardians hold that eventually both the extensive and intensive margins to cultivating land in a given area fall to zero. The intensive margin is the reward for investing into the same land - improving crop, ordering the latest seed drills, etc. The extensive margin is just buying more land. The original Ricardians were fascinated by the zero sum nature of the extensive margin and not confident the intensive margin would save us. Further, the margins seem to be a permanent feature of reality that could potentially fix values without recourse to the contingent social structure of price making. Those values have yet to be convincingly fixed.

If the margins on investment in given land were to disappear then logically enough the investment would cease. Everything has reached a steady state. The classic story goes like this: First, you use up all the good farmland; then, in order to get more good farmland, it’s worth it to irrigate the bad farmland; then, when you use up all the bad farmland, you intensify investment into the good farmland; then, when there’s nothing more you can do to make it more productive, you intensify investment into the bad farmland. Then, once you’ve done this, the things that can change how many farm products you get are: enough (disciplined enough) labor, the weather, the cost of inputs, and whether you own the farm or just work it. From there, the economy is a zero-sum contest of wills. Implicitly this is all happening at permanent full employment, because everyone whom the margins allow is working on the farm. Anyone not working on the farm simply doesn’t contribute enough to be worth it to the margins.

This story is eminently criticizable and was much criticized. Keynes’ critique is far more fundamental than most of the criticisms in the literature though. The simple fact of fundamental uncertainty means that not only will the economy not necessarily reach a steady state given by fixed physical margins, the economy is not even pointed towards one ever. Instead, what happens is folks will make use of the cash system to build things they think will be helpful in securing more cash. Their thinking will be right sometimes and wrong other times, and those past purchases will structure the future things that can be coherently incorporated into the existing physical capital structure of the economy. In sum, the messy process of price making is more permanent than the vaunted margins. 

And really, the intensive/extensive development metaphor is fine so far as it goes, but the possibilities of new things to invest in does not seem quite so limited by the farm these days. In fact, the dearth of investment opportunities has far less to do with the characteristics of the existing physical capital structure than it is is a function of the expected demand picture. Keynes was a trader, and so used a definition of the word “investment” that would be given by an actual person making an actual investment decision, and not a Marxian one. Whether or not that was a principled decision, Keynes used it to make sense of the fact that new and likely-profitable investments can become EXTREMELY limited when one is in an environment of structurally low demand.

The Ricardian story is one of secular stagnation: the tendency of the margin to fall. Secular stagnation — as many midcentury Marxists pointed out (Kalecki, Baran, Sweezy, Steindl are the first to come to mind) — is a question of insufficient demand-side intervention on the part of the government to reduce inequality and restore conditions of wage-led growth. To my thinking, this viewpoint culminates satisfyingly in (Bhaduri & Marglin 1990 (a cousin of (Taylor and Krugman, 1979)!).

From a Keynesian perspective, the Ricardian story gets the macroeconomic dynamics completely backwards. For Keynes, “technological innovation” was a question of the change in the technique of production employed. Problem is, “technique of production” is neither abstract, nor a simple: production is a social arrangement of the use of machines and other objects to make things people are willing to trade cash for. For Keynes, the width of production means the central question of productivity is a question of “which actual machines are being used to produce which actual things”. Economic analysis of any stripe which relies on nominal measurements in order to successfully aggregate quantities of the production of diverse things cannot speak to the question of actual production.

Firm-level productivity is then primarily a question of which machines entrepreneurs own, and which machines they use, and which ones they would like to replace when. Labor discipline and surplus extraction are more like failures than inevitabilities. The relevance of the functional dependence of firm-level productivity on technique has obvious implications for decarbonization and the climate transition. To transit, we will have to replace tens or hundreds of millions of machines and techniques. 

What all this economic jargon means is just this: if there is technological innovation which drives a change in productivity, the productivity change has to do its work through a decision by some specific entrepreneur to invest in some specific new capital good for use in production.

The question is now: what leads entrepreneurs to invest in new equipment? The answer is simple: effective (which is to say expected, and expected to be actualized) demand.

Only if consumers are going to want what the equipment makes, and have the cash to act on that want at a price point that makes sense for the machine and technique of production, will productivity change happen. When firms feel like they’re going to need more capacity badly enough in order to meet future demand that it’s worth spending money on, they invest in new equipment.

Keynes’ problem with trusting the market and its firms — far from being any kind of strict technocrat — is that investment is an incredibly finicky and bewilderingly social mechanism for the development of the productive structure of the economy. Entrepreneurs get freaked out at the slightest sign of trouble, especially after the 2010s. When Entrepreneurs get scared they drop the load and bolt. The next Great Recession might be hiding around every corner, in the same way the next “Great Inflation” is lurking around every corner for economists of my parents’ generation.

There’s also a complicated feedback cycle involved here: when investment falls, spending and incomes fall, which makes investment look less worthwhile; run that enough times, and it’s hard to imagine the case for building a factory in the US ever again (at least at this level of abstraction). 

With that critique in mind, we come to the government. The US government in particular has a mammoth hand in deciding what the level of effective demand for the economy as a whole is. The example of having the government pay people to dig holes and fill them in with fifty-pound notes in glass bottles was specifically used as a joke about the OPERATION OF THE GOLD STANDARD about the kinds of things which would still work even if useful things like building more housing and public goods and hospitals and elder homes were out of reach for POLITICAL reasons. Not economic ones.

For Keynes, it ultimately gets too irritating to continue leading private capital around by the nose past a certain point. The government itself is going to have to undertake the investment necessary to make sure full employment is maintained and stagnation doesn’t set in due to an economy-wide investment strategy that focuses solely on profits and not on needs.  

Keynes' ideas might involve some transvaluation of values in order to really grok, but that’s usually the price of progress. However, grokking Keynes does entail that if you want to do any of these things, you have to actually get ahold of the mechanism for administratively doing them. Lack of mechanism is one of the major problems in macroeconomics: there are a lot of opinions, and not a lot of commonly-used-tools.

To put this story in the terms used for Benanav’s arguments, Keynes would argue that 

1. nominal GDP is something that governments can positively affect by reversing recessions;

2. Once that’s taken care of, governments can use policy to look to reduce the forces that push up GDP Deflator, which is to say: lower inflation by enhancing supply-side capacity and gearing market governance towards inflation prevention. 

3. Hours worked is also well within the US government’s capacity to affect, especially given the history of labor forcing the governmental establishment of various wage and working hour regulations.

In the General Theory, Keynes argues that the best way to get to this point is by simply letting a boom run: businesses have little incentive to economize on labor — and thereby upgrade to more productive machines — without some friendly competition for topline revenue. Ruthlessly forcing “exit” on firms that are not at the immediate productivity frontier is a way to raise productivity, but one traditionally advocated by the Austrian economists. Keeping healthy demand in the market when recession threatens gives firms breathing room and space to compete, rather than being forced together in a room whose walls are shrinking.

When businesses raise productivity by forcing fewer workers to do more with less…more doesn’t actually get done most times. This is why Keynes’ advice is simply to let booms run, while governments take on a gradually but permanently expanding role in deciding what ought to be invested in. In this way, they can contribute positively to the building-up of the supply side, enhancing capacity and reducing inflation risk in the long run.

Ackerman’s Story As I Understand It

Ackerman’s story has three different parts. 

The first is a lineage of a specific tradition of Marxian thought and ecclesiology – the social organization of the body of the church. The dynamics of tradition and its ecclesiastical work is what I think Ackerman does a good job at.

I have a personal investment in this race too. The lineage I learned Marx within flows through students of Shaikh. I’m not partial to that lineage, but rather that understanding is load-bearing for me in the way that I think about the economy. Shaikh’s tradition has structured my thinking in some pretty idiosyncratic ways, given that his thought was presented to me sub rosa as A Standard Interpretation, so I rebelled against it like a normal teenager does. It’s nice to see it laid out as a Tradition And Ecclesial Structure, especially in relation to the broader arcs of Ackerman’s piece.

The second is an account of the political strategy and affective valence attached to the idea that “things will not get better” that Ackerman argues are an important part of Robert Brenner’s work and underlying thesis. This is a real 2010s type question, and feels like something approaching culture war at this point: is it possible for things to get better in the near term if we work at it, or no? The 2010s — and the whole broad Mark Fisher aesthetic that came alone with it — answered “no”. Without rehashing the argument of the previous section, one can see how that “no”came from a misperception of the limiting factor on the 2010s economy. The limiting factor was effective demand, not objective margins or productivity or demographics.

The third and last part is an explanation of how easy it is to jump between these two things – the TRPTF and the Brenner Story – on the basis of affective similarity. But, as Ackerman correctly points out, this jump can’t really be done successfully without sacrificing a pretty significant amount of overall theoretical coherence. This isn’t really a critique of Brenner, and much more a critique of the use of Brenner, or even “critique of The Brenner Guy as a Type Of Guy”.

Ackerman uses three parts to explain a possible worldview that might have social or political implications for left strategy. I don’t really do politics, so I won’t be commenting on that, but I have certainly talked with folks on the long end of connecting all these stories together in pursuit of an explanation of their bad vibes. The connective tissue I would offer is, you guessed it, Maynard Keynes.

The Ghost Of Keynes’ Story As I Would Tell It

Well, you knew I had to invite him. The ghost of Maynard Keynes and I would start with a broad observation. From 1945 - 1973, we had a historically novel governmental contribution to aggregate demand coupled with a growing ability to meet that demand through investment. His ghost, always tasteful, would likely point to Minsky on this point. Then the combination of: 1) changes in the structure of the global economy consequent on the investment undertaken in that period, 2) an energy shock which produced a shock to the whole system of 3) exchange rates and international trade upset the apple cart.

Throughout the 1970s and 1980s, the US built out a ton of energy (esp. fossil fuel) infrastructure to deal with inflation from the energy shock. At the same time, Japan had been aggressively pursuing mercantilist strategies (which can be good for the home country, and also are allowed, but are definitely not optimal) combined with domestic industrial policy. The legacy of MITI shows this clearly.

The US response to inflation, energy shocks, and external mercantilism was done in a manner more or less specifically designed to punish labor as a means of getting out of the problem of destabilizing inflation. This did a lot of very bad things over the short, medium, and long run.

In the short run, it stabilized supply and demand by making working people relatively poorer and thus less able to buy energy, rather than by bringing more energy supply online. In the medium run, the punishing response made bringing that necessary supply online cost more than it otherwise would have, stretching out the time taken to build out capacity to meet newfound monetary demand from, essentially, women entering the workforce much more strongly. In the long run, it led to a structural bias in the accumulation of income and wealth towards lower-MPC individuals (the very rich), as a consequence of the method of stimulus used to offset the strong short-run negative demand impact of rate hikes (this is the Reagan tax cuts). These lower-MPC (richer) individuals spend a smaller proportion of their marginal dollar of income, providing fewer jobs and less economic stimulus than if that same dollar had gone to a higher-MPC (less rich) person.

These long run issues are still actually very big. In this version of the Keynesian story, programs of economic stimulus from the 1980s onward were being directed towards their least-effective ends: cutting the taxes of the already wealthy. Not only do the wealthy have a lower MPC, Engel’s Law means the wealthy also tend to purchase things that have a very low elasticity of investment: positional goods. This whole redirection of income within the circular flow of the economy contributed to an environment of structurally lower demand, which led to lower growth, and thus slower investment over that period. Even worse, the scale of the stimulus continued to shrink alongside ambitions as a growing body of theory which argued “there is nothing that can productively be done about recessions by the government, whether fiscal or monetary” grew in academic influence. At the same time, bigger and bigger pools of dollars were exiting the circular flow to sit in a sinking fund as ballast for a range of financial activities. These have an associated MPC of 0.

In 2008, that process hits its absolute nadir. TARP and QE might have sounded like a lot of stimulus money if you were just hearing about the economy for the first time, but in terms of the actual engine of economic growth — dollars in the pockets of high-MPC folks — they did not get very far, because the program just swapped one kind of asset for another. 

One way to understand this decoupling of apparent stimulus from actual outcome is through the basics of effective demand. If everyone can see that demand is in the toilet (the vibes are off and NO ONE wants to buy anything), then no matter how low interest rates go, you won’t actually get very much economic stimulus out of those low rates because banks won’t want to lend to folks interested in investing in new capacity. Everyone is saying “show me where your demand is coming from” and there is a smoking crater. The government declines to fill that crater in any way. Things like the pandemic-era Temporary Superdole, or more aggressive financial strategies that centered the wealth of homeowners and the employment prospects of non-homeowners as targets were off the menu. The economy just stays in a slack position, seemingly, forever after that. The cratering has the apparently unintuitive effect of decoupling the GDP Deflator from “money printing” as well. Why would the price of tea rise if nobody is buying it at the current price? And yet folks will still post charts with M2 on them. When the Fed started raising rates later in the 2010s, most involved in monetary and fiscal policy at the time were perfectly satisfied with an unemployment rate of 5%.

That is, until we finally get a large burst of actual fiscal stimulus when the pandemic happens.

The fact that real fiscal stimulus happened during a period of moderate-to-severe supply disruption was, all things considered, not optimal. In fact, the fact that it still worked under these hindered conditions – far from the largely financial problems of the Great Financial Crisis –  is further evidence of its power. Were we to have responded to the 2008 recession similarly, the ensuing decade would have been dramatically different. 

On the one hand, the legacy of the past 40 years of running the economy “cold” on purpose combined with the optimizations made to a low demand economic environment made it so supply chains had a hard time opening up the throttle in the immediate moment when demand returned. On the other, the pandemic itself made it generally extremely difficult to open that throttle up anyway.

That avalanche of money was going to agents that had been cash-constrained for the past 10+ years: firms, households and state + local governments. Households finally cleared up some long-running balance sheet problems that were still hungover from the 2010s. Most importantly, the tight labor markets compressed the nominal wage distribution at the bottom of the income ladder. Just think, if you owe some payday lender $450, it’s a lot easier to pay that off at a nominal wage of $15/hour than $7.25/hour.

Rehearsing these facts is not to say that everyone has it great now and should quit whining. Rather I am saying that certain numbers have moved in positive ways over time, and that should be the basis for demanding more. Most particularly, it should be the basis for demanding more recession responses like the most recent one, and stronger and more powerful systems of unemployment and social support. 

The hope now, in the aftermath of the most successful recession response in the history of the US government, is that it actually is possible to put people back to work quickly by giving more money to high-MPC (low income) folks. Genuine commitment to full employment would be a massive reversal in economic policy. Achieving this reversal, given the degree of recent empirical success. However, dogmas die hard. Maybe everyone will just accept that the next time there’s a recession that pain is actually good for workers and we shouldn’t fight for a similarly overwhelming federal fiscal response as that which ALREADY WORKED during the pandemic.

At the risk of retreating into litotes, that’s the conclusion of this piece. But me, personally, I think everyone is really overlooking how important Mercantilism is to this whole thing, which Keynes also provides a way to think through. But this post is already too long, so I’ll just link to another, longer, post here.