The Endless Crisis reviewed by Counterfire

The Endless Crisis

John Bellamy Foster and Robert W. McChesney, The Endless Crisis: How Monopoly-Finance Captital Produces Stagnation and Upheaval from the USA to China (Monthly Review Press 2012), 227pp.

Many people will be aware that our economy is in trouble. And many will also be aware that it will stay in trouble for some time to come. The British government keeps on pushing its austerity agenda, which, in addition to wrecking the lives of hundreds of thousands of families and individuals who have their benefits slashed, further sucks demand out of the economy, making a speedy recovery increasingly unlikely. The developments in mainland Europe are similar. As European leaders force austerity policies on indebted countries, the outlook for the people across the continent is grim, and many will indeed think that what we have been living through since 2007 is an ‘endless crisis’.

However, John Bellamy Foster and Robert W. McChesney have not written yet another book about how short-sighted and ideological responses to the financial crash have prolonged the crisis, or indeed made it worse. They tackle a much more systemic problem, as the slightly unwieldy subtitle suggests: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China. In short, they concern themselves with the tendency of the capitalist economy towards stagnation; a trend which long precedes the financial crisis and has been apparent in the USA, Europe and Japan at least since the 1960s. The reason why our economy has become so dependent on the finance sector, the authors argue, is precisely this stagnation tendency.

Unsurprisingly, mainstream economics has been very slow to recognise this as a major issue. ‘The reason for this,’ the authors write, ‘can be traced to the fact that neoclassical economists and mainstream social science generally have long abandoned any meaningful historical analysis. Their abstract models, geared more to legitimizing the system than to understanding its laws of motion, have become increasingly otherworldly’ (p.5). Very unlike mainstream economists, Foster and McChesney do not confine themselves to theoretical analyses of stagnation and monopolisation, but trace the historical development of stagnation theories over the past century, drawing mainly on the work of Marxist economist Paul Sweezy, but also Joseph Schumpeter and John M. Keynes.

The book’s argument is laid out clearly and convincingly, and is supported by a wealth of facts and figures as well as Marxist theory. Monopoly capitalism has its origins in the late nineteenth century, when the era of competitive capitalism (the age of liberalism, during which there was a huge development of factories and infrastructure), gave way to an economic system in which capital was increasingly concentrated. The enormous productive capacity of this system, however, has to deal with growing problems of effective demand and overaccumulation: ‘Once industry had been built up and existing productive capacity was capable of expanding output rapidly at a moment’s notice … the demand for new net investment for the rapid expansion of Department I [factories, railways, communication infrastructure etc.] was called into question.’ Therefore, too much production becomes an ever-present threat, that is to say, the system ‘tends at all times to generate more surplus than can be easily absorbed by investment (and capitalist consumption)’ (p.35).

Under monopoly capitalism, where ‘the benefits of economic progress tend be concentrated in the growing surplus of the big firms rather than disseminated more broadly by falling prices throughout the entire society’ (p.37), this tendency becomes more severe. Slow growth and stagnation, then, are not anomalies, but rather the general way in which the system works. The challenge is rather to account for the opposite state of affairs, ‘to explain the anomaly of fast or full-employment growth, focusing on those specific historical factors that serve to prop up the system’ (p.39). The economic boom years after World War II, for example, can be explained by the effects of automobilisation, military spending, the re-building of Europe and Japan, and the build-up of consumer liquidity during the war. As the influence of these outside factors waned, the boom began to run out of steam in the 1970s…

Read the entire review on Counterfire