John Bellamy Foster and Robert Waterman McChesney
Monthly Review Press, New York, 2012. 227pp., $24.95 hb, ISBN 9781583673133
Reviewed by Hans G. Despain
Hans G. Despain is Professor of Economics and Department Chair at Nichols College, Massachusetts. His work has been published in numerous professional economic and philosophical journals. He has more than 50 articles published in the popular press in an effort to bring political economy and radical philosophy to a wider audience (email@example.com)
This is a most remarkable and important book. It is political economy at its best. It offers a sophisticated explanation of the socio-economic crisis facing the global and domestic economies. The authors further argue that the socio-economic crisis cannot be resolved without a total transformation away from the oligopolistic capitalistic system.
The work of Foster and McChesney can be embraced by all heterodox political economy traditions. Their basic premise begins with Marxian political economy, combine with insights from Veblen, Galbraith, and Post-Keynesian ideas consistent with Hyman Minsky and modern monetary theory, feminist and environmental ideas, and a profound understanding of issues of labor. As impressive is their synthesis of heterodox political economy, their greatest achievement is their ability to illuminate the internal contradictions of contemporary oligopolistic finance capitalism.
The book consists of six well-integrated chapters. Chapter One explains the theory of monopoly capital and stagnation as developed by Paul Baran and Paul Sweezy. Chapter Two argues that finance, insurance, and real estate (FIRE) has grown in importance and is now the primary form of monopoly capital dominating global economies. Chapter Three demonstrates that concentration and centralization have increased during the twentieth and twenty-first centuries. Moreover, since 1975 the importance of multinational corporations and information technology has soared. Chapter Four explores the “internationalization” of monopoly capital and the global exportation of stagnation. Chapter Five demonstrates there is now a “global reserve army of labor” which has strengthened the position of multinational corporations and weakened the position of workers worldwide. Finally in Chapter Six the authors contend that China will not be the source of global recovery, but rather of global stagnation. The internal contradictions of the Chinese economy and the “superexploitation” of the Chinese workers by both multinational and Chinese corporations are sure to soon generate severe stagnation and the possibility of a global recession.
Each chapter can be read independently, each is full of insights. Taken together they tell a most remarkable story: namely, that contemporary capitalism will not successfully recover. Stagnation is the future of the global economy. Inequality will continue to rise and tens of millions will remain chronically unemployed.
This historical account and explanation of the contemporary economic quagmire begins with the theory of monopoly capital as developed by Baran and Sweezy, who in turn drew directly and heavily from Marx. The basics are quite simple, although paradoxical: competition generates a lack of competition. Through market and marketing competition, the giant corporations come to dominate the economic landscape. Galbraithian corporate “planning” and market control exemplifies the behavior of giant corporations and the governing mode of system management. The most efficient firms reinvesting profits successfully in the accumulation process is what Marx called the concentration of capital. Acquisition of competitors and vertical mergers for purposes of economies of scale and scope is the centralization of capital. The historical outcome of market competition is the oligopolization of industry, or monopoly capital.
Monopoly capital is a form of industrial institutional organization extraordinarily capable of generating profits. The oligopolistic corporate hegemony of monopoly capitalism benefits from economies of scales and scope, massive marketing and branding, political lobbying, absence of efficaciously organized labor, and tacit collusion with so-called competitors. Successful oligopolistic corporate hegemony fabricates enormous sales, engineering massive revenues, and behemoth profits. But profits become the Achilles’ heel for the system. Full surplus reinvestment in expanded reproduction becomes all but impossible. Monopoly capitalism becomes so productive, corporations so enormous, and profits so great, that there is literally a lack of reinvestment opportunities to absorb the surplus value created. Thus, at the macroeconomic level, stagnation manifests as the normal state.
Except at the margin of the “sales effort” General Motors cannot get more cars in American garages. Coca Cola cannot get more Coke into American refrigerators. McDonalds cannot get any more Big Macs into the bellies of Americans. No more cars, no more cola, no more Big Macs are needed. Thus, four main strategies to increase profits emerge: 1) compete at the margin for market share; 2) conglomerate, by reinvesting profits in other industries (e.g., Coca Cola’s acquisition of Columbia pictures); 3) financialization of the company’s profits, by either forming a financial arm within the conglomeration (e.g. GM and GMAC), or hire a financial institution such as Goldman Sachs, JP Morgan, Morgan Stanley, etc. to financialize the enterprise’s profits; 4) expand overseas….
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