This is a review of Commodity: The Global Commodity System in the 21st Century, by Photis Lysandrou, Routledge, 2019.
In 2014 Thomas Piketty‘s Capital in the Twenty-First Century became an unexpected best seller. Amongst other things it served to draw attention to the huge increase in economic inequality and suggested a ‘global wealth tax’ to address this. At 507 pages of main text this was a magnus opus of sustained (quasi-)Marxist analysis of contemporary capitalism.
Photis Lysandrou has produced a much slimmer volume – at only 79 pages of text (with two additional unnumbered appendices) which to some extent represents a riposte to Piketty. But his analysis deals more centrally with inequalities and again suggests a ‘global wealth tax’ in response. In reviewing Lysandrou’s book, the intention is not to compare the two. Rather I chart the analytical journey of the book – which has its own quasi-Marxist credentials – very much in its own terms.
Analytically, Lysandrou’s book is characterized by Marxism of a very particular kind. It stresses the central role of commodification in a system that is not quite ‘capitalism’ conceived in a traditional Marxist sense. While Lysandrou appeals to ‘Notes on Wagner’ and Capital Volume 1, Chapter 1 (‘Commodities and Money’) for the genesis for his analysis of the commodification process, this is shorn of any connection to labour power as the source of (use-)value (i.e. ‘socially necessary abstract labour time’, as Marx puts it in Capital, Vol.111). It is exchange-value that propels the Lysandrou system. And this is necessary because Lysandrou’s system of commodification operates primarily in the realm of money and finance. Any connection to a labour theory of value is jettisoned very early on. That is why it is a particular form of market fundamentalism, I would suggest.
In the world of economics there are two main types of market fundamentalism: Neoliberal market fundamentalism and Marxist market fundamentalism, and I would place Lysandrou in the latter category. Both elevate a broadly conceived market system as the central plank for the operation of the economy -- indeed, the only determining plank – which coerces all agents to conform to its dictates. This is where prices are set and where distributions are determined. And this is because the market is a huge system bent on commodification, one where financial securities become commodities like anything else. It may be a ‘Marxist’ form of market fundamentalism that drives his system but it is a market fundamentalism nevertheless. Note the structural symmetry between these two. One may celebrate the market system while the other condemns it, but ultimately everything is determined by the market mechanism
One may celebrate the market system while the other condemns it, but ultimately everything is determined by the market mechanism.
As a slight aside there is a wider structural similarity between more conventional Marxism and neoclassical economics in their respective approaches to value/wealth. Both share a representational approach to value. For conventional Marxism value is determined by a hidden, non-measurable realm of ‘socially necessary abstract labour time’ (as noted above) which is then represented by money and prices (which can be calculable). For Neoclassical economics, value is determined by a hidden and non-measurable realm of ‘utility’which is also represented by money and prices (which, again, is calculable). These are variants of an invariant structure: they are both representational theories of value and money.
The analytical problem posed by this is to penetrate through the visible realm of money and finance to find the true hidden structural source of value and wealth. But representational theories of this type are ‘impossible’: they make present an absence, itself a logical impossibility. Thus perhaps Lysandrou is wise to avoid any serious consideration of the Marxist value domain (in distinction to the price domain) though he only falls within the embrace of another form of structural congruence as a result: one involving the two forms of market fundamentalism just described.
But Lysandrou’s form of Marxism is analytically combined throughout the book with a kind of Platonic dualism – or, rather, set of Platonic dualisms. The book operates at two distinct levels. First, an unfamiliar and highly abstract analysis of the commodification process, in which a set of dualisms drives the analysis (e.g., the interactions between population growth and technological progress; physical space and commodity space; internationalisation versus globalization; the ‘associative principle’ versus the ‘commodity exchange principle’; heterogeneity versus homogeneity; horizontal asymmetry and vertical asymmetry). And second, this abstract level has its own duality -– an empirical space of illustrative data and trends, which I will discuss in a moment.
What is missing from this schema, however, is a serious consideration of any ‘intermediate’ level between these two – that of ‘institutions’ broadly conceived – which serve to bridge the two other levels, binding them together in practice and which would produce a much more diverse and differentiated analysis of capital-isms.
However, this is something that Lysandrou dismisses, as in the case of the Varieties of Capitalism (VoC) approach. The VoC approach of Hall and Soskice (2001) deals with institutions such as the operation of the labour market and wage setting, the innovation system, education system, political traditions and parties, the financial system beyond just banks and financial asset management, to produce a differentiated account of competing national capitalisms.
The only really active ‘institutions’ recognized in Lysandrou’s account are in fact organizations – the asset management agencies like investment banks and institutionalized investors. Competition between these organizations operates to establish the norms and standards for the trading of securities. It is trading between them that establishes and makes commensurate the universal, homogeneous, global characteristics and prices of securities in the financial commodity space, at this level something recognizable from neoliberal market analysis as well. They share a parallel vision of price formation.
But there is no time (or) space for elaborate dialectics linking zones or levels in the Lysandrou account, only a relentless application of the logic of the dualisms couched in an emphatic style and caught in a structural embrace of movement and counter movement. Of course, there are more nuances and caveats to the analytics than can be discussed here but I offer this in broad outline to give a flavor of the abstract nature of the book’s presentation. One suspects not everyone will be able to penetrate such a formalism, and it is a shame that the analysis is stripped quite so bare.
Even for an informed general reader to struggle through the early chapters might present too formidable a task. If they can however -- or are determined enough to do so – they would be rewarded with a series of what that reader would find as quite startling statistics and trends.
As suggested above there is a domain of empirical evidence accompanying the abstract analysis. Most of this is strangely tucked away in appendices at the back of the book which makes it difficult to relate it to the analysis as it goes along in the main text.
This is unfortunate because it is here that we find the genuine originality of Lysandrou’s approach. He is adept at fishing out the patterns of financial developments in an unconventional but highly relevant manner. If one wishes to know the detail of this it can be found in Lysandrou’s journal contributions published over several years. The book is really a highly truncated version of these and of the 47 references given in the book almost half (23) are to his own writings. As someone who has closely followed these writings over the years I can testify to their originality and richness.
But do we really need all the analytical gymnastics about a necessary commodification of the global economic space contained in the early chapters to either generate these statistical trends or to appreciate their significance? I doubt it. In their own way they speak very much for themselves. What they show is that we are faced with some formidable obstacles in trying to redress the huge inequalities that have arisen in financial wealth since the later 1990s and particularly after the 2007/08 financial crash.
We are faced with some formidable obstacles in trying to redress the huge inequalities that have arisen in financial wealth since the later 1990s and particularly after the 2007/08 financial crash.
Lysandrou knows the workings of the financial system inside-out and is adept at demonstrating the consequences of the huge increase in securities issuance – and particularly of bonds (sovereign and private) – as a prime reason for the financial crisis of the mid-2000s.
Here Lysandrous’s originality is to stress the demand side as the source of the problem – and its role in the lingering consequence for the post-crisis period. Most accounts of the financial crash stress the supply side of security issuance – how CDOs and other ABS mushroomed, who was responsible for their production (commercial banks and the secondary banking industry) and price collapse, and why government borrowing escalated because of fiscal constraints and emergency debt accumulation. But Lysandrou shows that it was the demand for yield by investors that drove these trends, and that its legacy is the huge growth in bond holdings and wealth of High (and ultra-High) net worth individuals (NWIs). And excess demand for investible assets continues to propel the system.
As is well known, the wealthy have been the main beneficiaries of the crisis and they have consolidated their hold over the economic and political agenda since. His suggestions as to what to do about this are discussed in a moment.
Countering US hegemony
The other main element of Lysandrous’ analytical distinctiveness is to stress the continuing and absolutely central role of the US economy in the international system. Based on his empirical analysis he has little time for arguments about the decline of US economic hegemony after the crisis. The importance of the US currency in trade and as the denominator for financial securities remains paramount and will continue to do so for the foreseeable future, he suggests. This gives the US huge legacy power to still control the international political agenda and arrange things in its own interests.
What to do about this?
First, Lysandrou is a supporter of the EU and – perhaps surprisingly for a Marxist economist – the Euro currency project. This is because, in his view, it provides the possibility of developing an alternative to US hegemony: in contemporary geopolitical terms it presents the only realistic alternative to continuing US economic dominance. China and the renminbi do not (as yet) represent a credible challenge to this.
In contemporary geopolitical terms [the EU] presents the only realistic alternative to continuing US economic dominance.
Secondly, Lysandrou wants to champion a ‘global wealth tax’ implemented and supervised by a global tax authority. He is against a tax on financial transactions, a policy that has emerged from the heterodox literature on ‘financialization’ and seen as an attempt to restrain the further growth of international financial activity – and which has gained some traction within the EU.
From Lysandrou’s point of view a blanket tax on all such transactions is too restrictive – it does not discriminate between socially useful financial transactions – those necessary to balance portfolios for instance – and purely speculative ones. Rather he emphasizes HNWIs and particularly u-HNWIs as mainly responsible for the financial crisis.
Here his argument against Piketty is that Piketty puts only a moral case for such a tax because he absolves the global super-rich from having had any causal role in the subprime crisis whereas Lysandrou gives both a moral and an economic case by showing that the super-rich played a crucial causal role. His Global Tax Authority would operate to bring some order into the regime of international taxation and concentrating on finding and taxing the super-rich. This is not fleshed out in any detail and several technical questions remains as how exactly the tax would be collected, how tax revenues would be spent and who would decide on this, and whether it is best to tax individuals or the organizations that hold their wealth – individual are adept at hiding their wealth but this is less easy for organizations. And, whilst it is to his credit that Lysandrou raises this proposal once again, one suspects it is an impossible policy project in the current international political climate.
The proliferation of stuff
Finally, let us return to Lysandrou’s analysis of the full commodification process to make a few concluding remarks.
A first problem is that his analytical approach is haunted – one might even say tainted – by a tone of inevitability about it (something explicitly recognized in the text at times). The grand commodification process marches on regardless of what it is confronted with. Thus why or how could a tax system be effective in the face of such inevitability? Is what Lysandrou calls ‘control’ possible? This problem arises as a consequence of adopting an emphatic and universal structural model of evolving processes that are almost impervious to the particularities of historical time, at least since 1700.
Why or how could a tax system be effective in the face of such inevitability?
Second, it can be noted that Marxism is not the only approach to the idea of commodification as driven by market forces that propel economic advance (e.g. Polyani in The Great Transformation). A consideration of alternatives would have been useful in enriching the analysis.
It is also worth recognizing that ‘modernity’ (perhaps in distinction to ‘capitalism’) is actually a huge system for generating ‘stuff’ rather than just commodities. ‘Financial stuff’ like trader chat room posts, anonymous crypto exchanges, tax haven transaction and deposits, off-exchange platform clearing, and the like, has exploded in recent years and can largely evade commodification.
Of course, there are constant pressures to try to bring this type of activity into an official commodified realm. But as soon as something is established along these lines, a new circumvention is devised. The proliferation of stuff goes on. So, any switch of emphasis away from commodities to stuff would also have been welcome.
Thirdly, is there a single global price for any type of financial asset of a particular kind? Lysandrou develops his own version of globalization where there is no place for the specificities of national financial systems, which would give rise to continued differential price formation and significance.
The trouble with any form of market fundamentalism is that it tends to impose the requirement of a single price as the system-outcome almost before the analysis has begun. But was the ‘global financial crisis’, for instance, quite as universal and ubiquitous as claimed? Or was it rather a North Atlantic financial crisis with certain, though limited, international spillovers to other economies and regions?
Photis Lysandrou has produced a wide-ranging and forceful analysis. But one is left with the feeling that the chapters could have been better presented the other way around: starting with the empirics which are more accessible to an average reader – even an academically trained average reader – and then to have related this to the unfamiliar logic of the commodification process.
This would have made it a more attractive product for an informed general reader. However, sticking with the book as presented will provide its own rich rewards. It offers a fresh illumination of the reasons for the financial crisis and a compelling argument for a policy of taxing those organizations where the HNWI/u-HNWI hide their – for the most part – ill-gotten gains.