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Economic Theory

Neoliberalism: Myths and Reality

Agreements like the North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO) have enhanced transnational capitalist power and profits at the cost of growing economic instability and deteriorating working and living conditions. Despite this reality, neoliberal claims that liberalization, deregulation, and privatization produce unrivaled benefits have been repeated so often that many working people accept them as unchallengeable truths. Thus, business and political leaders in the United States and other developed capitalist countries routinely defend their efforts to expand the WTO and secure new agreements like the Free Trade Area of the Americas (FTAA) as necessary to ensure a brighter future for the world’s people, especially those living in poverty… | more…

Privatizing Education

Education is an essential part of modern economic progress, yet in recent decades, the right wing has consistently been unfriendly to public education. For example, the Walton family’s donation of $20 billion to help conservative causes was weighted toward the privatization of public education.… The economic effects of privatization will not be felt immediately. Over time, however, as a larger share of the workforce suffers the handicap of inferior education, the negative effect on all aspects of society will be unmistakable.… | more…

December 2005 (Volume 57, Number 7)

Notes from the Editors

At the end of October John Bellamy Foster and Martin Hart-Landsberg (coauthor with Paul Burkett of China and Socialismand author of Korea: Division, Reunification and U.S. Foreign Policy—both published by Monthly Review Press) traveled to Mexico City to participate as representatives of Monthly Review in the Fifth Colloquium of Latin American Political Economists. John spoke on “Imperial Capital: The U.S. Empire and Accumulation.” Martin presented a paper (cowritten with Paul Burkett) on “China and the Dynamics of Transnational Capital Accumulation.” Among the conference participants who met with John and Martin in a special meeting for Monthly Review were Guillermo Gigliani of Economistas de Izquierda (EDI) in Argentina (see “Argentina: Program for a Popular Economic Recovery” in the September 2004 issue of MR), Alejandro Valle of Mexico, the chief organizer of the Fifth Colloquium, and Leda Maria Paulani, President of the Sociedade Brasileira de Economia Política (SEP). Our hope is that this important meeting will lead to the establishment of a strong connection between MR and Latin American political economists confronting neoliberalism. The final outcome of the Fifth Colloquium was itself a landmark event: the founding of the long-planned Sociedad Latinoamerica de Economía Política y Pensamiento Crítico (Latin American Society of Political Economy and Critical Thought). The new organization will not be simply (or mainly) an academic and professional organization but will be actively dedicated to opposing neoliberalism and to supporting political and social movements for radical change in Latin America. We salute our Latin American political-economic comrades in this important struggle… | more…

Rethinking ‘Capitalist Restoration’ in China

Over a quarter century after China ventured onto the market path, it is high time to take a hard look and ask some very tough questions. That is what Martin Hart-Landsberg and Paul Burkett did in “China and Socialism: Market Reforms and Class Struggle” (Monthly Review, July–August 2004) and they concluded that “market reforms” have fundamentally subverted Chinese socialism. The considerable costs of economic liberalization, they argued, reflect the inherent antagonisms of the capitalist system that is in the midst of being imposed. “Market socialism” is at best a contradiction in terms, an unstable formation that only awaits progressive degeneration: “the Chinese government’s program of ‘market reforms,’ which was allegedly to reinvigorate socialism, has instead led the country down a slippery slope toward an increasingly capitalist, foreign-dominated development path.”… | more…

Privatization at Gunpoint

The transfer of assets from peripheral states to international financial oligarchies is one of the defining tenets of the neoliberal counter-revolution. As a general rule, this latest form of neocolonial transfer of surplus to the industrialized core has proceeded relatively successfully in many peripheral states, with many Latin American states standing out as significant exceptions. In Pakistan, where the ruling state oligarchy has historically been the equivalent of a comprador bourgeoisie, this process has accelerated since it was initiated in the late 1980s… | more…

The ABCs of the Economic Crisis: What Working People Need to Know

The ABCs of the Economic Crisis: What Working People Need to Know

The economic crisis has created a host of problems for working people: collapsing wages, lost jobs, ruined pensions, and the anxiety that comes with not knowing what tomorrow will bring. Compounding all this is a lack of reliable information that speaks to the realities of workers. Commentators and pundits seem more confused than anyone, and economists—the so-called “experts”—still cling to bankrupt ideologies that failed to predict the crisis and offer nothing to explain it.… | more…

The Japanese Economy in Structural Difficulties

According to The Annual Economic Fiscal Report (July 2004) prepared by the Ministry of Economic and Fiscal Policy, the Japanese economy is recovering from the prolonged stagnation that began with the bursting of the financial bubble in 1990-91. This recovery started at the beginning of 2002. It is characterized by the restored increase of both profitability and spending on plant and equipment in the private business sector and an increase in demand from abroad, while public spending (like public works) has been rather held down. In the fiscal year 2003 (up through March 2004) for instance, the Japanese real Gross Domestic Product (GDP) was said to have grown by 3.2 percent. Contributions to this growth rate came from the growth of domestic demand in the private sector (2.9 percent) and the growth of foreign demand (0.8 percent), offset by a mild decline in government spending (minus 0.6 percent). The annualized rate of GDP growth in the quarter January-March 2004 was said to have reached 5.6 percent and especially encouraged the official expectation of a strong economic recovery… | more…

The End of Rational Capitalism

The twentieth century’s dominant myth was that of a “rational capitalism.” The two economists who did the most to promote this idea were John Maynard Keynes and Joseph Schumpeter. Both were responding to the great historical crisis of capitalism manifested in the First World War, the Great Depression, and the Second World War. In the wake of the greatest set of horrors the world had ever seen, accompanied also by the rise of an alternative, contending system in the Soviet Union, it was necessary for capitalism following the Second World War to reestablish itself ideologically as well as materially. In terms of the ideological requirement, the two economists who accomplished this most effectively were Keynes and Schumpeter—not simply because they epitomized the best in bourgeois economic ideology, but also because they were the leading representatives of bourgeois economic science. What they set out in their analyses were the requirements of a rational capitalism and at least the hope that these requirements would be achieved… | more…

The Rise of China and the Demise of the Capitalist World Economy

The Rise of China and the Demise of the Capitalist World Economy

In recent years, China has become a major actor in the global economy, making a remarkable switch from a planned and egalitarian socialism to a simultaneously wide-open and tightly controlled market economy. Against the establishment wisdom, Minqi Li argues in this provocative and startling book that far from strengthening capitalism, China’s full integration into the world capitalist system will, in fact and in the not too distant future, bring about its demise.… | more…

The Great Financial Crisis: Causes and Consequences

The Great Financial Crisis: Causes and Consequences

The bursting of the housing bubble and the ensuing financial debacle have left most people, including many economists and financial experts asking: Why did this happen? If they had been reading Monthly Review, and were familiar with such articles as “The Household Debt Bubble,” “The Explosion of Debt and Speculation,” and “The Financialization of Capitalism,” they would not have needed to ask. In their new book, The Great Financial Crisis: Causes and Consequences, Monthly Review editor John Bellamy Foster and long-time Monthly Review contributor, Fred Magdoff, update this analysis, exploring the whole course of what is now known as “the worst financial crisis since the Great Depression”: from the debt explosion and housing bubble to the subprime debacle and federal bailout. They argue that this latest financial crash, although greater than any since 1929, is itself a symptom of deeper problems connected to the stagnation of the “real” or productive economy of mature capitalism. Financial bubbles have become the chief means of countering stagnation, but these inevitably burst, bringing the underlying economic problems back to the surface. The only recourse of the system: new and bigger bubbles, leading, as they too pop, to still greater financial crises and worsening conditions of production—in what has now become a vicious cycle.… | more…

Scarcity of What and for Whom?

Michael Perelman, The Perverse Economy: The Impact of Markets on People and the Environment (New York: Palgrave Macmillan, 2003), 224 pages, hardcover $55.00.

There is no shortage of opinion within the circles of policy and punditry that the free market is, or ought to become, the new Atlas. The dominant discourse holds that the weight of the world, and its scourges from poverty to pollution, can only be borne and transcended through utter reliance on the market. Michael Perelman’s latest book confronts this position head on, arguing that far from providing a basis for sustainability and health, markets provide and respond to incentives which impoverish, dehumanize, mutilate, and kill workers, and which are leading us further into ecological ruin. Perelman scrutinizes a number of pillars of conventional economic theory, assessing them under the light of their implications for people and the environment, and emerges with an argument that economic theory justifies an unjustifiable system. This requires two separate points. First, the market produces disastrous results for workers and for nature. Second, economics as a profession has consistently functioned to obscure and apologize for those results… | more…

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