By Nick Werle
The late economist Hyman Minsky wrote that after fortunes inflate on the back of a speculative bubble, and after investors’ irrational optimism and overvalued assets inevitably collapse, an economy enters a “period of revulsion,” when people remember that it’s risky to bet big on an uncertain future. Likewise, it’s always during the depths of a hangover that a drinker remembers how whiskey invites its own overconsumption and swears that the only way to avoid another descent into this purgatory is to never touch the stuff again. But after the fog leaves and with a clear head regained, he forgets the pain after the party and declares another Manhattan to be an eminently reasonable investment. Of course, the trick is to recall at just that moment how miserable you’ll be after another three. A pessimistic economist faces the same cyclical popularity as a tee-totaling friend; a consoling voice the morning after becomes a buzz killer as soon as night falls again.
For economists focused on capitalism’s tendency to foment crisis, it’s important to make the most of investors’ revulsion. Indeed, if there’s ever a time for Marxists to find an eager audience for their theories of capitalist overaccumulation, it’s in the wake of a financial crisis. The moment is particularly ripe for David Harvey, a Marxist trained as a geographer, who has made a career of explaining why surplus capital has such an affinity for real estate and describing how overproduction regularly reconfigures the spaces in which we live. Both Ben Bernanke and a slew of Neo-Keynesians led by Paul Krugman have pointed to a “global savings glut” – originating in the current-account surpluses of net exporters such as China, Japan, and Germany and flowing to the bloated real estate markets of the United States and Western Europe – as the fundamental imbalance responsible for the latest boom and bust. To Harvey and his fellow Marxists, the global savings glut is not a historical fluke but an instance of an intrinsic tendency for capitalist economies to overproduce, and the great North Atlantic real estate bubble is but another temporary answer to their perpetual problem: What can absorb the great mass of overaccumulated capital?