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Political Economy

March 2011, Volume 62, Number 10

March 2011, Volume 62, Number 10

» Notes from the Editors

In the United States, it is now three years since the “Great Recession” began, and twenty-one months since it officially ended. Whether or not the end of the Great Recession means that the economy is now on the way to sustained recovery is another matter. Wall Street has rebounded dramatically, as have corporate—and especially financial sector—profits, but for ordinary men and women, circumstances are nearly as troubling today as they were at the bottom of the downturn in June 2009.… | more |

Mortgaging Irish Independence

From Financial Crisis to Socialist Resistance

A specter is haunting Ireland—the specter of James Connolly.… Connolly was shot to death by a British firing squad for his role in Ireland’s 1916 rising for home rule. Celebrated as a hero of Irish independence by Irish political parties of both left and right, his socialism is all too conveniently overlooked. The Irish struggle is one that speaks to the challenges of independence, sovereignty, and democratic freedom, both then and now, for people of all countries. What value is formal political independence if it is not backed up by economic control; if the real decisions of public policy are made in boardrooms and backrooms rather than main streets and parliaments?… | more |

Capitalism and Degrowth: An Impossibility Theorem

[A]lmost four decades after the Club of Rome raised the issue of “the limits to growth,” the economic growth idol of modern society is once again facing a formidable challenge. What is known as “degrowth economics,” associated with the work of Serge Latouche in particular, emerged as a major European intellectual movement in 2008 with the historic conference in Paris on “Economic De-Growth for Ecological Sustainability and Social Equity,” and has since inspired a revival of radical Green thought, as epitomized by the 2010 “Degrowth Declaration” in Barcelona.… Ironically, the meteoric rise of degrowth (décroissance in French) as a concept has coincided over the last three years with the reappearance of economic crisis and stagnation on a scale not seen since the 1930s. The degrowth concept therefore forces us to confront the questions: Is degrowth feasible in a capitalist grow-or-die society—and if not, what does this say about the transition to a new society?… | more |

ALBA and the Promise of Cooperative Development

Existing international economic institutions and relations operate in ways detrimental to third world development. That is why eight Latin American and Caribbean countries—led by Venezuela, Cuba, and Bolivia—are working to build the Bolivarian Alliance for the Americas (ALBA), a regional initiative designed to promote new, nonmarket-shaped structures and patterns of economic cooperation.… In response to worsening international economic conditions, ALBA has recently stepped up efforts to promote a full-blown regional development process.… Although the precise terms of the agreement are still to be negotiated, official statements point to the creation of an integrated trade and monetary zone, with a new regionally created currency, the sucre.… | more |

Two Letters on Monopoly Capital Theory

Paul Baran and Paul Sweezy’s voluminous correspondence in the 1950s and early 1960s ranks as one of the crucial exchanges of letters between Marxist political economists in the second half of the twentieth century, and, indeed, in the entire history of Marxist thought.… Only a few letters in their extensive correspondence have been published so far.… We have thus chosen to publish two additional letters here in recognition of the joint centennial of the births of the two Pauls: Paul Baran (1910-1964) and Paul Sweezy (1910-2004).… | more |

October 2010, Volume 62, Number 5

October 2010, Volume 62, Number 5

» Notes from the Editors

To understand the disaster that is present-day economics, it is crucial to recognize that we are living today, not only in the deepest economic crisis/stagnation since the Great Depression, but also—as Paul Krugman declared in his New York Times blog on January 27, 2009—in “A Dark Age of Macroeconomics,” in which the central discoveries of the 1930s have been forgotten or discarded. “What made the Dark Ages dark,” Krugman wrote, “was the fact that so much knowledge had been lost, that so much known to the Greeks and Romans had been forgotten by the barbarian kingdoms that followed.” The critical knowledge lost that gave rise to the new Dark Age in Macroeconomics, he claimed, was none other than the Keynesian Revolution centered on the critique of Say’s Law, or the notion that supply creates its own demand. In the context of arguing against government deficit spending, leading economists at the University of Chicago, the bastion of reaction in economics, have reverted to a “pure Say’s Law, pure ‘Treasury view’” by insisting that increased savings automatically lead to increased investment, while government borrowing invariably “crowds out” investment… | more |

The Financialization of Accumulation

In 1997, in his last published article, Paul Sweezy referred to “the financialization of the capital accumulation process” as one of the three main economic tendencies at the turn of the century (the other two were the growth of monopoly power and stagnation). Those familiar with economic theory will realize that the phrase was meant to be paradoxical. All traditions of economics, to varying degrees, have sought to separate out analytically the role of finance from the “real economy.” Accumulation is conceived as real capital formation, which increases overall economic output, as opposed to the appreciation of financial assets, which increases wealth claims but not output. In highlighting the financialization of accumulation, Sweezy was therefore pointing to what can be regarded as “the enigma of capital” in our time… | more |

September 2010, Volume 62, Number 4

September 2010, Volume 62, Number 4

» Notes from the Editors

During the period stretching from the 1970s through the 1990s, Monthly Review, under the editorship of Harry Magdoff and Paul Sweezy, stood apart in its analysis of the tendency to economic stagnation in advanced capitalism and its view that the economic slowdown beginning in the 1970s was a manifestation of this secular tendency. The financial explosion that also emerged in these years was seen as an attempt by the system to stave off stagnation by means of credit-debt expansion, but at the cost of increasing financial fragility… | more |

The Wisdom of Property and the Politics of the Middle Classes

At the end of the twentieth century, while financial economists satisfied their intellectual pretensions to useful knowledge by conjuring up visions of a world peopled with materialistic consumer-investors optimizing rationally in accordance with their willingness to hazard their wealth, the propertied classes themselves were succumbing to new delusions fostered by the financial markets. The reasoned response of propertied individuals to their experience of the world of speculative finance has created a new political culture with important consequences for the political economy of capitalism… | more |

A History of the Great Bust—Still With Us

Michael Perelman, The Confiscation of American Prosperity. From Right-Wing Extremism and Economic Ideology to the Next Great Depression (New York: Palgrave Macmillan, 2007), 239 pages, $30.00 hardcover.… | more |

Yves Smith, Econned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism (New York: Palgrave Macmillan, 2010), 362 pages, $30 hardcover.… | more |

Some forty years ago, the American business empire viewed itself as under siege as a result of government interventions threatening its freedom of action, demands for annual wage increases in the face of declining corporate profitability, import penetration of its home markets, as well as by loss of global hegemony symbolized by defeat in Vietnam. The empire struck back. A conglomerate of right-wing forces proceeded to declare war on the social reforms and institutions that had taken shape since the 1930s under the wing of an expanding federal government… | more |

The Limits of Minsky’s Financial Instability Hypothesis as an Explanation of the Crisis

Aside from Keynes, no economist seems to have benefitted so much from the financial crisis of 2007-08 as the late Hyman Minsky. The collapse of the sub-prime market in August 2007 has been widely labeled a “Minsky moment,” and many view the subsequent implosion of the financial system and deep recession as confirming Minsky’s “financial instability hypothesis” regarding economic crisis in capitalist economies.…Recognition of Minsky’s intellectual contribution is welcome and deserved. Minsky was a deeply insightful theorist about the proclivity of capitalist economies to experience financially driven booms and busts, and the crisis has confirmed many of his insights. That said, the current article argues that his theory only provides a partial and incomplete account of the current crisis.… | more |

Listen Keynesians, It’s the System! Response to Palley

In an article entitled “Listen, Keynesians!,” published in January 1983 in Monthly Review, Harry Magdoff and Paul Sweezy argued that the radical break that John Maynard Keynes’s General Theory of Employment, Interest and Money (1936) represented for orthodox economics lay in the fact that “For the first time the possibility was frankly faced, indeed placed at the very center of the analysis, that breakdowns of the accumulation process, the heart and soul of economic growth, might be built into the system and non-self correcting.”…In November 1982, only two months before the publication of “Listen, Keynesians!,” Magdoff and Sweezy had pointed out in “Financial Instability: Where Will it All End?” that the question as to whether a major financial crisis (on the scale of 1929) could propel the economy into a deep downturn, approaching the scale of the Great Depression of the 1930s, was still an open one. They were responding here to Hyman Minsky, a proud Keynesian (albeit with socialist leanings), “whose views,” they claimed, were “especially worthy of attention precisely because over the years he has been the American economist who has done more than any other to focus on the crucially important destabilizing role of the financial system in advanced capitalist countries.”… | more |

Financial Instability: Where Will It All End?

The recession that began in the second quarter of 1981 (the second in two years) dragged on into 1982. Most observers look for some recovery in the second half of the year, but hardly anyone expects it to be vigorous. Meanwhile, all the typical signs of stagnation continue to be in evidence. The official unemployment rate which stood at 7.6 percent in 1981 rose to 9.5 percent by the middle of 1982, and the manufacturing capacity utilization rate fell from 79.9 percent to 69.9 percent in the same period.… The counterpart to this stagnation in the realm of production and employment was a continuing ballooning of the financial superstructure of the economy which, as the essays in this volume have been at pains to emphasize, has been one of the most spectacular features of capitalist development during the post-Second World War period.… | more |

Learning from ALBA and the Bank of the South: Challenges and Possibilities

The current period is marked by three overlapping developments: the failure of neoliberalism, the crisis of the East Asian export-led growth model, and South American efforts to advance an alternative regional development strategy. The combination has created a political environment offering important opportunities for those committed to the international struggle to supplant capitalism.… | more |

Free Trade in Agriculture: A Bad Idea Whose Time Is Done

The push for “free trade” in agriculture first took hold in the 1980s. It was part of a package of policies and investments that moved food and agriculture systems away from government control (too often centralized and unresponsive) toward private ownership. Ironically, private ownership has led to an even more centralized and tightly controlled food system. Local communities have been left more disempowered than they were before, and, increasingly, developing country national governments have found themselves disempowered, too. This essay considers what advocates of free trade promised developing countries, what actually happened, and what some alternatives might look like.… | more |

Capitalism in Wonderland

In a recent essay, “Economics Needs a Scientific Revolution,” in one of the leading scientific journals, Nature, physicist Jean-Philippe Bouchaud, a researcher for an investment management company, asked rhetorically, “What is the flagship achievement of economics?” Bouchaud’s answer: “Only its recurrent inability to predict and avert crises.”1 Although his discussion is focused on the current worldwide financial crisis, his comment applies equally well to mainstream economic approaches to the environment — where, for example, ancient forests are seen as non-performing assets to be liquidated, and clean air and water are luxury goods for the affluent to purchase at their discretion. The field of economics in the United States has long been dominated by thinkers who unquestioningly accept the capitalist status quo and, accordingly, value the natural world only in terms of how much short-term profit can be generated by its exploitation. As a result, the inability of received economics to cope with or even perceive the global ecological crisis is alarming in its scope and implications.… | more |

The Sales Effort and Monopoly Capital

On the eightieth anniversary of the 1929 Stock Market Crash that led to the Great Depression, the United States is once again caught in a Great Financial Crisis and deep downturn of an order of magnitude comparable to the 1930s. At the center of this crisis is plunging consumer spending, caused by the destruction of household finance as a result of decades of wage stagnation and the piling up of debt.1 Consumer spending in today’s economy, dominated by giant firms, is significantly dependent on the sales effort, i.e., marketing as a whole, with advertising as its most conspicuous form. But the sales effort is also ebbing in the crisis, contributing to the general decline. So integral is the sales effort to the regime of monopoly capital that one cannot be understood without the other.… | more |

The Neoliberal Restructuring of Turkey’s Social Security System

For almost thirty years Turkish capitalism has taken the form of neoliberalism. Turkey’s subordination to the world neoliberal order started in the late 1970s and was pursued consistently after the 1980 military coup. The coup reflected Hayek’s contention that a transition to “free markets” may require a dictatorship.1 By dissolving political and social opposition, the coup provided the necessary political environment for the shift from the import substitution industrialization that framed economic policy since the 1960s to an export-oriented economics. During the interim regime (1980–83), Turkey experienced a fierce process of depoliticization, which limited the opportunities for an effective opposition against the launch of neoliberal policies. All segments of the labor movement that had made political gains in the preceding decade were banned from politics and the majority of prominent activists were imprisoned. The general elections held in 1983 were a farce. The military rulers banned all political parties that had organic links to pre-coup political organizations and that were in opposition to the coup and the interim regime, and allowed only three political parties to participate.… | more |

Financial Implosion and Stagnation

“The first rule of central banking,” economist James K. Galbraith wrote recently, is that “when the ship starts to sink, central bankers must bail like hell.” In response to a financial crisis of a magnitude not seen since the Great Depression, the Federal Reserve and other central banks, backed by their treasury departments, have been “bailing like hell” for more than a year. Beginning in July 2007 when the collapse of two Bear Stearns hedge funds that had speculated heavily in mortgage-backed securities signaled the onset of a major credit crunch, the Federal Reserve Board and the U.S. Treasury Department have pulled out all the stops as finance has imploded. They have flooded the financial sector with hundreds of billions of dollars and have promised to pour in trillions more if necessary—operating on a scale and with an array of tools that is unprecedented.… | more |

The Human Costs of Economic Growth

Amiya Kumar Bagchi, Perilous Passage: Mankind and the Global Ascendancy of Capital (Lanham, MD: Rowman & Littlefield, 2005), 395 + xxiv pages, hardcover, $76, paper, $34.95.

The great debate of social science for the last two centuries at least has been how to account for the extraordinary economic growth of the modern world. We all know the basic picture. The overwhelming majority of authors have argued that the story is that of the rise of the West. There have been, however, two opposing versions of this narrative. One is the Whig interpretation of history, which argues that it has been a story of steady social, intellectual, and moral progress whose explanation lies in some particular characteristic of the West (often just of England). In this version, the world is reaching its summit of progress today. The second version is Marxism, which has argued that the rise of the West is part of a larger story of steady dialectical and conflictual historical development. In this version, the present West-dominated world order will inevitably be superseded by another phase of historical development, in which capitalism will be replaced by communism… | more |