(New York: Monthly Review Press, 2012)
Since the Great Recession hit the US in late 2007 there have been competing understandings of the nature and causes of this devastating economic crisis. Mainstream economists have struggled to explain what caused it and what measures are necessary to revive the economy. As Paul Krugman noted in the New York Times Magazine, the majority of mainstream economists did not anticipate such a catastrophic event. Trapped by questionable assumptions, mathematical modeling, and ideological blinders, they neither foresaw the crisis nor could account for its magnitude. In fact, in 2003 Robert Lucas, then head of the American Economic Association, said, “The central problem of depression prevention has been solved.”
Since the Great Recession other mainstream economists have suggested that what happened was a rare and completely unpredictable event which fell outside the parameters of their models. Interestingly, as Foster and McChesney argue in The Endless Crisis, the work of John Kenneth Galbraith, Paul Krugman, Joseph Stiglitz, Nouriel Roubini, and New Yorker economics writer John Cassidy, has suggested a different account of the financialization of the economy and the potential for an economic crash. Orthodox economists marginalized these critics for having exposed the weaknesses of the dominant paradigm, which is only tenuously connected to the real world and is hostile to historical and theoretical understandings of capitalism.
In mainstream economics capitalism as a theoretical construct has been replaced by the free market economy, which has been declared the ultimate arbiter of public policy. It is little wonder that the very academic and business economists charged with developing a practical understanding of the economy went into shock when the Great Recession hit. In their world such an event was simply not theoretically possible. Into this breach step Foster and McChesney, continuing the tradition of Monthly Review, with their analysis of the contradictions of monopoly-finance capital.
This book provides a clear explanation of why the Great Recession occurred and how the crash constituted a wide-scale failure that was entirely predictable. The authors reject the assumption that capitalism can always right itself by letting unfettered market forces reign. Their analysis is grounded in that developed by Baran and Sweezy in Monopoly Capital (1966), and later by Sweezy and Magdoff in the pages of Monthly Review and in subsequent books. The Endless Crisis is likewise an expansion of articles originally published in Monthly Review. The authors’ piercing assessment of mainstream economists and of the capitalist economy remains faithful to Sweezy and admirably extends the critique to the present period, an era marked by the hegemony of finance capital in a global capitalist system.
The book argues that to apprehend the dimensions of the Great Recession and to develop a theory of capitalist crises, one has to examine capitalism as a totality, including the contradictions inherent in a financialized economy. Adhering to Sweezy’s earlier arguments, the authors suggest that the present form of capitalism exhibits a “gravitational pull towards overaccumulation and stagnation” which in the past may have been offset by military spending, the expansion of sales efforts, and the growth of financial speculation.
Unlike more orthodox economists, they do not see the major problems of capitalism as having been solved or mitigated by the tools developed by economists since World War II. Instead they see a form of capitalism which is inherently unstable, which exhibits a tendency toward stagnation, and which is riddled by a new set of contradictions. Moreover, they see the Great Recession as emblematic of a structural crisis of capitalism rather than an aberration or a rare conjuncture of unrelated events. With each step taken by leaders of the capitalist world to solve the crisis and restore growth, the ante is raised when the next downturn occurs.
Later in the book, Foster and McChesney assert that the contradictions inherent in the internationalization of monopoly capital are global in scope and are readily apparent in the development of the Chinese economy. While China has long served in the press as an example the positive effects of globalization, it too has been affected by the economic crisis. For the authors, the Chinese economy represents a microcosm of the possibilities for overaccumulation and stagnation, and reflects, both internally and externally, the strengths and weaknesses of global capitalism. The authors make it clear that there are definite limits to the possibilities of solving US economic problems by exporting the paradoxes of capitalism to China or to other fast-growing economies. While it is certainly true that as Rosa Luxemburg said, “capital must be able to mobilize world labor power without restriction,” in global capitalism this is not a smooth process. Workers who are increasingly pulled into a system which seeks to exploit them and deny them their humanity eventually resist.
It is to these authors’ credit that they “think big” and place the current economic crisis into a global historical theory of capitalism which highlights its continuities with the past. In doing so they demonstrate that the Great Recession was the inevitable product of capital responding to the threat of stagnation by focusing on new, more risky, and potentially more profitable forms of financial exploitation. For a time these new financial instruments created a great financial bubble which suggested that a new era of capitalism was dawning that promised even greater rates of profit. However, when the bubble burst, the potential of these new financial instruments to wreak havoc on the world economy was realized. What Samir Amin has described as the “late capitalism of generalized, financialized and globalized oligopolies” was, for the authors of The Endless Crisis, a recklessly constructed house of cards that puts profits before people. This tragically and systematically flawed financial system created a series of bubbles which evaded much notice and any regulatory control, and eventually made apparent the systemic corruption and inequality built into the institutions of global capitalism.
Foster and McChesney have accomplished a great deal in this short book. They have cast aside the uncritical optimism of mainstream economists and demonstrated the superiority of an understanding of the recession which is grounded in political economy and historical analysis. In doing so, they have transcended the barren analysis of the professional apologists for capitalism. More importantly, they have asked the right questions and developed a compelling alternative approach which challenges us to create another way of grasping the roots of the crisis. They have courageously put forward a thesis which suggests that the normal state of global capitalism is stagnation, and that the solutions to this problem prefigure the next crisis.
This is not to say that the authors have covered everything. In a small book like this they cannot be expected to offer a comprehensive perspective. There are certainly important questions to be raised about the theory of capitalist crisis that Sweezy and others put forward. The authors’ faithful adherence to this perspective demonstrates a consistency in analysis. However, it may also be a weakness. Their approach separates them from mainstream economists, but it also distances them from more orthodox Marxists. Marxist critics might find fault with the authors’ dismissal of Marx’s argument that there is a tendency for the rate of profit to fall under capitalism. At issue is whether the crisis is due to the contradictions inherent in the production of surplus value or whether it emanates from the sphere of circulation. Echoing Sweezy, the authors focus on the problems created by overaccumulation in the sphere of circulation. However, it is not clear that these offer the best vantage-point for understanding the era of monopoly finance capital.
These are matters for further debate and dialogue. In the concluding chapter on China, the authors claim that “the endless crisis” cannot be resolved within the confines of the capitalist system. From their perspective, the crisis is intimately connected to the contradictory nature of the accumulation process, and only a global uprising against the capitalist system can remedy the situation.
Reviewed by Peter Seybold
Indiana University/Purdue University-Indianapolis