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…
You, Again
Adrienne Rich is the author of more than sixteen volumes of poetry and five nonfiction prose books, the most recent being A Human Eye: Essays on Art in Society (Norton). She is the recipient of numerous awards and prizes, including a MacArthur Fellowship and the 1999 Lannan Foundation Lifetime Achievement Award. | more…
March 2010 (Volume 61, Number 10)
By The Editors
Twice recently, Monthly Review—in “The Vulnerable Planet Fifteen Years Later” (December 2009) and in “Why Ecological Revolution?” (January 2010), both by John Bellamy Foster—has highlighted the fact that the UN Intergovernmental Panel on Climate Change (IPCC) warned in its most recent (2007) report that the Himalayan glaciers could vanish altogether by 2035. Since the appearance of the January issue of MR, however, this has been revealed as an error on the part of the IPCC—a claim that, according to the IPCC itself, should never have appeared in its report.…Global warming deniers, mostly on the right, are making all they can out of this mishap in the IPCC’s report, using it to throw scorn on the whole process of climate change science. Both the mistake itself and the dissemination of the error by scientists, environmentalists, and the news media are being dubbed “glaciergate” by the IPCC’s critics.…Yet science should never be regarded as error free. Indeed, crucial to the working of the scientific method is that science is self-correcting. This particular mistake has already been acknowledged by the IPCC and will be followed up by detailed scientific studies in this area, coupled with attempts to improve IPCC review procedures. | more…
What Every Environmentalist Needs to Know About Capitalism
By Fred Magdoff
For those concerned with the fate of the earth, the time has come to face facts: not simply the dire reality of climate change but also the pressing need for social-system change. The failure to arrive at a world climate agreement in Copenhagen in December 2009 was not simply an abdication of world leadership, as is often suggested, but had deeper roots in the inability of the capitalist system to address the accelerating threat to life on the planet. Knowledge of the nature and limits of capitalism, and the means of transcending it, has therefore become a matter of survival. In the words of Fidel Castro in December 2009: “Until very recently, the discussion [on the future of world society] revolved around the kind of society we would have. Today, the discussion centers on whether human society will survive.” | more…
Sanctions on Iran: What’s Missing from Obama’s New Dialogue
On June 4, 2009, U.S. President Barack Obama gave a key foreign policy speech in Cairo, Egypt. He advocated new, positive relations between the United States and Muslim countries, focusing on relations with the Middle East. He also mentioned establishing new relations with Iran: “There will be many issues to discuss between our two countries, and we are willing to move forward without preconditions on the basis of mutual respect.”…But this new promise “to move forward without preconditions” should be viewed in the wider context of continuous economic and military pressures on Iran and on the entire region of the Middle East. | more…
Why Programs Fail
Several generations of development programs have left the gap between rich and poor countries wider than ever. Decades of aid and foreign investment have extracted many times more wealth than they bring in. Seventeen years after the Earth Summit at Rio, carbon dioxide continues to increase. The non-proliferation treaty has left us with more nukes, more countries possessing nukes, more sophisticated nuclear weapons, more willingness to use them. The fanfare of the Green Revolution has died down, and farmers are still being displaced to cities that can’t accommodate them. The first homes of the Green Revolution are now importers of food. Agricultural yields have increased, but so has hunger. Millennial development goals will not be reached.…It is not that no programs work. There have been dramatic successes such as the eradication of smallpox, the near eradication of polio, the containment of plague.…There is a pattern of a sort: narrowly focused technical solutions reshuffle crises. | more…
Saving History from Oblivion in Guerrero
By Peter Watt
In summer 2009, the case of Rosendo Radilla, the first to deal with forced disappearance by the Mexican state, went before the Inter-American Court of Human Rights (IAHRC). In December, the Court found Mexico guilty of the crimes of systematic human rights violations and forced disappearance. This was a landmark development led by the Association of Relatives of the Disappeared and Victims of Violations of Human Rights in Mexico (AFADEM) and the Mexican Commission for the Defense and Promotion of Human Rights (CMDPDH) in a struggle with the Mexican government to obtain information on what happened to those disappeared by the authorities during the country’s guerra sucia, or dirty war, in the 1970s. | more…
Margaret Randall’s Years in Cuba
Margaret Randall, To Change the World: My Years in Cuba (Piscataway, NJ: Rutgers University Press, 2009), 256 pages, $24.95, paperback.
Margaret Randall has always been too much of a feminist for the socialists and too much of a socialist for the feminists. She is one of the foremost oral historians of recent revolutionary history and, more specifically, of the history of women in revolutions. Yet her work has been consistently undervalued. Her memoir…is a rare double opportunity: an intimate look at the Cuban Revolution from 1969 to 1980, and a fascinating portrait of the development of a historian, poet, and political thinker. | more…
February 2010 (Volume 61, Number 9)
By The Editors
If it is the best of times for the bankers, it is the worst of times for workers. The titans of Wall Street came calling in Washington, D.C. just a few months ago, and were given the keys to the Treasury’s vault. So successful has been the government’s multi-trillion-dollar bailout that even those giant financial institutions in the worst shape are paying back what they owe, mainly to get out from under what they consider to be onerous public interference in their extraordinarily lucrative business activities.…Where bankers once sat quietly while the people’s presumed tribunes in Congress scolded them for their errant ways, now they are dictating the terms of financial “reform” and feeling bold enough to phone in their regrets when fog delayed their plane and they couldn’t make a White House meeting with President Obama, who is begging them day and night to start making loans. | more…
The Age of Monopoly-Finance Capital
Three years ago, in December 2006, I wrote an article for Monthly Review entitled “Monopoly-Finance Capital.” The occasion was the anniversary of Paul Baran and Paul Sweezy’s Monopoly Capital, published four decades earlier in 1966.…The article…[discussed] “the dual reality” of stagnant growth (or stagnation) and financialization, characterizing the advanced economies in this phase of capitalism. I concluded that this pointed to two possibilities: (1) a major financial and economic crisis in the form of “global debt meltdown and debt-deflation,” and (2) a prolongation of the symbiotic stagnation-financialization relationship of monopoly-finance capital. In fact, what we have experienced in the last two years, I would argue, is each of these sequentially: the worst financial-economic crisis since the 1930s, and then the system endeavoring to right itself by returning to financialization as its normal means of countering stagnation. It is thus doubly clear today that we are in a new phase of capitalism. In what follows, I shall attempt to outline the logic of this argument, as it evolved out of the work of Baran, Sweezy, and Harry Magdoff in particular, and how it relates to our present economic and social predicament. | more…
The U.S. Economy and China: Capitalism, Class, and Crisis
The U.S. economy is in bad shape and people are understandably seeking solutions. Many, encouraged by mainstream media and politicians, believe that China’s trade policies bear primary responsibility for the structural decay of our economy and that recovery will require, above all, pressuring the Chinese government to implement “market-freeing” policy changes that will bring the U.S.-China trade relationship into balance.…Despite its popularity, this nation-state approach to understanding the dynamics of the U.S.-China relationship is seriously flawed. | more…