Friday April 25th, 2014, 12:22 am (EDT)

Economics

Political Economy

Why Orthodox Economics Fails

Reviewed: Michael Perelman, Railroading Economics: The Creation of the Free Market Mythology (New York: Monthly Review Press, 2006), 238 pages, paperback, $20.00.
Paul Krugman in Development, Geography, and Economic Theory contends that the reason some economic theories are not widely engaged by economists is because they cannot be modeled mathematically. He goes on to highlight many good ideas that cannot be modeled mathematically. Michael Perelman in Railroading Economics: The Creation of the Free Market Mythology argues that there is another reason that economists do not accept these theories: some theories are rejected for ideological reasons because in economics, the orthodoxy is the free market. Perelman quotes Francis A. Walker, the first president of the American Economic Association, who said that laissez-faire “was not made the test of economic orthodoxy, merely. It was used to decide whether a man were an economist at all” (102). In other words, to be an economist, especially in the post-Soviet era, requires one to agree with the free market—that is, to believe that the market allocates resources efficiently, and that the job of the economist is to get the prices right… | more |

The U.S. Imperial Triangle and Military Spending

he United States is unique today among major states in the degree of its reliance on military spending, and its determination to stand astride the world, militarily as well as economically. No other country in the post–Second World War world has been so globally destructive or inflicted so many war fatalities. Since 2001, acknowledged U.S. national defense spending has increased by almost 60 percent in real dollar terms to a level in 2007 of $553 billion. This is higher than at any point since the Second World War (though lower than previous decades as a percentage of GDP). Based on such official figures, the United States is reported by the Stockholm International Peace Research Institute (SIPRI) as accounting for 45 percent of world military expenditures. Yet, so gargantuan and labyrinthine are U.S. military expenditures that the above grossly understates their true magnitude, which, as we shall see below, reached $1 trillion in 2007… | more |

Four Crises of the Contemporary World Capitalist System

This essay examines aspects of the global political economy that I hope will inform progressive governments and movements for social change. It evaluates the constraints and opportunities presented in the current conjuncture of world capitalist development by analyzing four areas of crisis in the contemporary world capitalist system. These are not the only contradictory elements in the contemporary conjuncture, but they are, in my view, the most salient… | more |

Framing India’s Hydraulic Crisis: The Politics of the Modern Large Dam

For several decades following 1947, the modern large dam in India presented itself as a political conundrum, often voiced in strange, contradictory tones. In an oft-quoted speech in July 1954 Jawaharlal Nehru, India’s first prime minister (1947–64), likened the large dam to a “modern temple.” Later, in a less remembered speech before a gathering of engineers and technocrats in 1958, Nehru, as if in contrition, bemoaned the quest for big dams as a “disease of gigantism… | more |

Disaster Capitalism: An Offer You Can’t Refuse—Or Can You?

Naomi Klein, The Shock Doctrine: The Rise of Disaster Capitalism (New York: Metropolitan Books, 2007), 466 pages, hardcover, $28.00.

At the crossroads of Buenos Aires’s shopping district sits a posh mall called the Galerías Pacífico, a showcase for global brand names and a playground for Argentina’s rich. One day, a film crew descended to the basement. There they found an abandoned torture chamber, its walls still etched with names, dates, and messages from political prisoners disappeared under the military junta. In The Shock Doctrine, Naomi Klein goes digging deep into the basements of global capitalism, from the torture labs of Latin America to the oil fields of Iraq, unearthing the bodies and catching the culprits red-handed. In the process, she demolishes one of the great myths of our time: that free markets go hand in hand with free societies, and that globalized free enterprise brings peace and democracy. Instead, as Klein documents in this definitive history, the new world order is the product of three decades of free-market terror, torture, and shock.… | more |

April 2008, Volume 59, Number 11

April 2008, Volume 59, Number 11

» Notes from the Editors

The United States and the world economy are now experiencing a major economic setback that began in the financial sector with the bursting of the housing bubble, but which can ultimately be traced back to the basic problems of capitalism arising from class-based accumulation (see the Review of the Month in this issue).…Things are clearly much worse, with respect to the general public understanding of these problems, here in the United States, the citadel of capitalism, than elsewhere in the world. We were therefore bemused by an article entitled “Europe’s Philosophy of Failure” by Stefan Theil, Newsweek’s European economics editor, appearing in the January–February 2008 Foreign Policy. Theil writes of the “prejudice and disinformation” incorporated in French and German secondary school textbooks dealing with economics. Such textbooks he complains “ingrain a serious aversion to capitalism.”… | more |

The Financialization of Capital and the Crisis

With the benefit of hindsight, few now doubt that the housing bubble that induced most of the recent growth of the U.S. economy was bound to burst or that a general financial crisis and a global economic slowdown were to be the unavoidable results. Warning signs were evident for years to all of those not taken in by the new financial alchemy of high-risk debt management, and not blinded, as was much of the corporate world, by huge speculative profits. This can be seen in a series of articles that appeared in this space: “The Household Debt Bubble” (May 2006), “The Explosion of Debt and Speculation” (November 2006), “Monopoly-Finance Capital” (December 2006), and “The Financializ-ation of Capitalism” (April 2007). In the last of these we wrote…… | more |

Finance, Imperialism, and the Hegemony of the Dollar

The July–August 2007 crisis in subprime mortgage markets precipitated the collapse of the market for asset-backed securities, forcing huge write-downs of more than $45 billion on the balance sheets of major banks. In the aftershock, interbank lending dried up. Bond insurers and money market funds were beset by a loss of confidence as the credit squeeze spread. The plunge in stock markets in January 2008 suggests that the repercussions of the collapse of the subprime mortgage market are still working their way through financial markets. With over 170,000 jobs lost and the expected spate of foreclosures, many observers believe that the credit crunch has pushed the economy towards a recession.… | more |

“Market Economy” or Oligopoly-Finance Capitalism?

Capitalism and market economy are not synonymous, as the dominant political discourse and conventional economists would have one believe. The specific characteristic of capitalism as a system is that it is based on private ownership of the means of production; an ownership which by definition is that of a privileged minority. This private ownership (aside from land ownership) has taken the form of exclusive rights over important equipment associated with modern production technologies, from the first industrial revolution at the close of the eighteenth century to the present day. The majority of non-owners are thus obliged to sell their labor power: capital employs labor; labor has no free use of the means of production. The bourgeois/proletarian divide defines capitalism; the market is only the management form of capital’s social economy.… | more |

Nepal’s Geography of Underdevelopment

Baburam Bhattarai, The Nature of Underdevelopment and Regional Structure of Nepal: A Marxist Analysis (Delhi: Adroit Publishers, 2003), xx, 540 pages, hardcover, Rs 600 ($14).

Emerging from a middle-peasant family background in Nepal, Baburam Bhattarai excelled at school and then, with a Colombo Plan scholarship in hand, studied architecture and planning in India. By the early to middle 1980s, the theoretical structure of spatial and regional planning studies had changed—in a Marxist direction. Bhattarai wrote his doctoral dissertation at one of the centers of political-theoretical ferment—the Centre for Study of Regional Development, at Jawaharlal Nehru University (JNU) in New Delhi—finishing in 1986. While he was a student, Bhattarai was president of the All India Nepalese Students Association on its founding in 1977. He joined the illegal Communist Party of Nepal (Masal) in the early 1980s. Returning to his native Nepal in 1986, he was the spokesperson of the United National People’s Movement during the 1990 uprising, and from 1991 the Coordinator of the United People’s Front Nepal, the legal front of the Communist Party of Nepal (Unity Centre), which in turn gave birth in 1995 to the Communist Party of Nepal (Maoist) (CPN[M]). Bhattarai served prominently in the Peoples’ War 1996–2006, and is now de facto second in command of the CPN(M). As of the date of writing preparatory negotiations for Constituent Assembly elections are still taking place, with the fate of the monarchy and the future direction of Nepalese society to be decided in the continuing struggle… | more |

June 2007, Volume 59, Number 2

June 2007, Volume 59, Number 2

» Notes from the Editors

In January 2007 the Development, Concepts and Doctrine Centre of the UK Ministry of Defence published a ninety-page report, entitled Global Strategic Trends, 2007–2036, highlighting a wide array of potential dangers to the prevailing order over the next thirty years. The report is organized around three “Ring Road Issues”: (1) climate change, (2) globalization, and (3) global inequality (p. xiii). Global warming and the possibility of abrupt climate change, together with the end of “the golden age of cheap energy,” are seen as placing increasing strains on populations throughout the planet (p. 31). The globalization of the world economy, embodying “particularly ruthless laws of supply and demand,” is viewed as creating new interdependencies, contradictions, and conflicts. Expanding global inequality, the UK Ministry of Defence insists, could lead to “a resurgence of not only anti-capitalist ideologies . . . but also to populism and the revival of Marxism” (p. 3)… | more |

Wage Stagnation, Growing Insecurity, and the Future of the U.S. Working Class

The most important promises used to justify capitalism are that your children will have a better life than you do, and in President Kennedy’s famous words, “a rising tide lifts all boats,” meaning everyone benefits from the accumulation of capital. These promises ring hollow in a period in which the relative position of the working people of the United States is declining and its ruling class is able to appropriate an increasing share of the national income. This pattern of accumulation and appropriation has become evident to many Americans and this awareness is beginning to affect political consciousness… | more |

The South Has Already Repaid its External Debt to the North: But the North Denies its Debt to the South

The South has already repaid its external debt to the North. Since the onset of the global debt crisis, precipitated in 1979 by a sharp increase in the Federal Reserve’s interest rates by Paul Volcker, the developing/ emerging market economies as a whole have paid in current dollars a cumulative $7.673 trillion in external debt service.1 However, during the same period their debt has increased from $618 billion in 1980 to $3.150 trillion in 2006, according to figures published by the International Monetary Fund (IMF). The external debt of this group of countries, comprising 145 member states, will continue to grow throughout 2007, according to the IMF, to more than $3.350 trillion. The debt of the Asian developing countries alone could rise to $955 billion. Although they have already repaid, in interest and capital, far more than the original amount due in 1980, these countries are now carrying a burden of debt much larger than they faced at the beginning of the period… | more |

China, Capitalist Accumulation, and Labor

Most economists continue to celebrate China as one of the most successful developing countries in modern times. We, however, are highly critical of the Chinese growth experience. China’s growth has been driven by the intensified exploitation of the country’s farmers and workers, who have been systematically dispossessed through the break-up of the communes, the resultant collapse of health and education services, and massive state-enterprise layoffs, to name just the most important “reforms.” With resources increasingly being restructured in and by transnational corporations largely for the purpose of satisfying external market demands, China’s foreign-driven, export-led growth strategy has undermined the state’s capacity to plan and direct economic activity. Moreover, in a world of competitive struggle among countries for both foreign direct investment and export markets, China’s gains have been organically linked to development setbacks in other countries. Finally, China’s growth has become increasingly dependent not only on foreign capital but also on the unsustainable trade deficits of the United States. In short, the accumulation dynamics underlying China’s growth are generating serious national and international imbalances that are bound to require correction at considerable social cost for working people in China and the rest of the world … | more |

China, Capitalist Accumulation, and Labor

Most economists continue to celebrate China as one of the most successful developing countries in modern times. We, however, are highly critical of the Chinese growth experience. China’s growth has been driven by the intensified exploitation of the country’s farmers and workers, who have been systematically dispossessed through the break-up of the communes, the resultant collapse of health and education services, and massive state-enterprise layoffs, to name just the most important “reforms.” With resources increasingly being restructured in and by transnational corporations largely for the purpose of satisfying external market demands, China’s foreign-driven, export-led growth strategy has undermined the state’s capacity to plan and direct economic activity. Moreover, in a world of competitive struggle among countries for both foreign direct investment and export markets, China’s gains have been organically linked to development setbacks in other countries. Finally, China’s growth has become increasingly dependent not only on foreign capital but also on the unsustainable trade deficits of the United States. In short, the accumulation dynamics underlying China’s growth are generating serious national and international imbalances that are bound to require correction at considerable social cost for working people in China and the rest of the world.… | more |

April 2007, Volume 58, Number 11

April 2007, Volume 58, Number 11

» Notes from the Editors

The U.S. economy in early March 2007 appears to be rapidly decelerating. Orders for durable goods in manufacturing dropped 8 percent in January and the manufacturing sector as a whole shrank during two of the last three months for which data is currently available (November–January), representing what is being called a “recession” in manufacturing, and raising the possibility of a more general economic downturn (New York Times, February 28, 2007)… | more |

The Financialization of Capitalism

Changes in capitalism over the last three decades have been commonly characterized using a trio of terms: neoliberalism, globalization, and financialization. Although a lot has been written on the first two of these, much less attention has been given to the third.* Yet, financialization is now increasingly seen as the dominant force in this triad. The financialization of capitalism-the shift in gravity of economic activity from production (and even from much of the growing service sector) to finance—is thus one of the key issues of our time. More than any other phenomenon it raises the question: has capitalism entered a new stage?… | more |

The Only Viable Economy

Once upon a time the capitalist mode of production represented a great advance over all of the preceding ones, however problematical and indeed destructive this historical advance in the end turned out-and had to turn out-to be. By breaking the long prevailing but constraining direct link between human use and production, and replacing it with the commodity relation, capital opened up the dynamically unfolding possibilities of apparently irresistible expansion to which — from the standpoint of the capital system and of its willing personifications — there could be no conceivable limits. For the paradoxical and ultimately quite untenable inner determination of capital’s productive system is that its commodified products “are non-use-values for their owners and use-values for their non-owners. Consequently they must all change hands. . . . Hence commodities must be realised as values before they can be realised as use-values.”… | more |

The Imperative of an International Guaranteed Income

Twenty-first century capitalism is not an improved and benign version of its nineteenth- and twentieth-century manifestations, nor will it ever be, despite daily bluster by the system’s practitioners and apologists that a rising tide of prosperity will soon lift all boats. The animating principles of capitalism governing the pursuit of profits are as hollow and iniquitous now as they were in 1848, especially where human exploitation and the distribution of wealth are concerned. As super-capitalist Warren Buffett remarked recently in a trenchant understatement: “A market system has not worked well in terms of poor people” (The New York Times, June 27, 2006)… | more |

February 2007, Volume 58, Number 9

February 2007, Volume 58, Number 9

» Notes from the Editors

Monthly Review Press is publishing an exceptionally strong collection of new books in 2007. However, like most small presses the modest budgets we can devote to the promotion of these books scarcely allow us to be heard above the din created by the massive promotional campaigns of the large corporate publishing firms, which are, of course, mere arms of much greater media conglomerates. We are therefore hoping successfully to promote these new books mainly by word of mouth with the help of MR readers and friends. In this space last month we referred to Michael D. Yates’s new book, Cheap Motels and a Hot Plate, which is now available. Two other new releases are Jean Bricmont’s Humanitarian Imperialism: Using Human Rights to Sell War (translated from the French by Diana Johnstone), and The Socialist Register, 2007: Coming to Terms with Nature, edited by Leo Panitch and Colin Leys. Bricmont’s book seeks to reintroduce the critique of imperialism to the global discussion on human rights, while the new Socialist Register addresses the emerging eco-socialist critique of capitalism… | more |