Political Economy
The medieval kingdom that is twentieth century Oaxaca has imprisoned hundreds of citizens arbitrarily and unjustly. Dozens more have disappeared, victims of paramilitary escuadrones de muerte (death squads). Thousands have been beaten, tortured, and robbed, lost their jobs, or have been forced into exile because they objected to government wrongdoing.…The King’s minions who control Oaxaca’s political and economic systems are a small minority of the state’s population, “but they are a powerful minority. There is no transparency. The governor arranges, controls, dispenses as he wishes—he is the head cacique, he has the legislature and the judicial system in his pocket.” Change means overthrowing the governor and the system of government that he manifests and represents. | more…
Has the power of financial interests in U.S. society increased? Has Wall Street’s growing clout affected the U.S. state itself? How is this connected to the present crisis? We will argue that the financialization of U.S. capitalism over the last four decades has been accompanied by a dramatic and probably long-lasting shift in the location of the capitalist class, a growing proportion of which now derives its wealth from finance as opposed to production. This growing dominance of finance can be seen today in the inner corridors of state power. | more…
Kim Phillips-Fein, Invisible Hands: The Making of the Conservative Movement from the New Deal to Reagan (New York: W.W. Norton, 2009), 356 pages, $26.95, hardcover, $16.95, paperback.
Kim Phillips-Fein has provided us with a very fine account of how we got where we are—in a stranglehold of big business conservatism that has by no means been broken by the liberal electoral victory of 2008. She has not only absorbed a considerable amount of secondary literature, but has also combed through the archives, combining her impressive research and insights with a well-paced narrative populated with a variety of interesting personalities—all quite well-to-do, all white, almost all male, and yet a very diverse and interesting lot. | more…
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…
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…
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…
John Bellamy Foster is a leading exponent of the theoretical perspective that continues in the tradition of Baran and Sweezy’s Monopoly Capital. This new edition of his essential work, The Theory of Monopoly Capitalism, is a clear and accessible explication of this outlook, brought up to the present, and incorporating an analysis of recently discovered “lost” chapters from Monopoly Capital and correspondence between Baran and Sweezy. It also discusses Magdoff and Sweezy’s analysis of the financialization of the economy in the 1970s, ’80s, and ’90s, leading up to the Great Financial Crisis of the opening decade of this century. | more…
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…
It is now universally recognized within science that humanity is confronting the prospect—if we do not soon change course—of a planetary ecological collapse. Not only is the global ecological crisis becoming more and more severe, with the time in which to address it fast running out, but the dominant environmental strategies are also forms of denial, demonstrably doomed to fail, judging by their own limited objectives. This tragic failure, I will argue, can be attributed to the refusal of the powers that be to address the roots of the ecological problem in capitalist production and the resulting necessity of ecological and social revolution. | more…
Today orthodox economics is reputedly being harnessed to an entirely new end: saving the planet from the ecological destruction wrought by capitalist expansion. It promises to accomplish this through the further expansion of capitalism itself, cleared of its excesses and excrescences. A growing army of self-styled “sustainable developers” argues that there is no contradiction between the unlimited accumulation of capital—the credo of economic liberalism from Adam Smith to the present—and the preservation of the earth. The system can continue to expand by creating a new “sustainable capitalism,” bringing the efficiency of the market to bear on nature and its reproduction. In reality, these visions amount to little more than a renewed strategy for profiting on planetary destruction. | more…
Today the capitalist economies of the world are in deep trouble. Some economists have theorized that the linkages between the United States and the rest of the world had been weakened as other nations gained more economic autonomy. A decoupling thesis was presented claiming that a crisis in one part of the system (say, North America) would not affect other major parts (say, Europe and Asia). We now know this is not true. Toxic assets were sold around the world, and banks in Europe, Asia, and Japan are in trouble too. Housing bubbles have burst in Ireland, Spain, and many other countries. In Eastern Europe, homes were bought with loans from Swiss, Austrian, and other European banks, payable in European currencies. As the economies of Hungary and other nations in the region, which financed their explosive growth with heavy borrowing from Western banks, have gone into recession, their currencies have suffered a sharp deterioration in exchange rates. This means that mortgage payments have risen sharply, as it now takes many more units of local currency to buy the Swiss francs or euros needed to pay the loans. In some cases, mortgage payments have doubled. | more…
We recently received a very thoughtful letter from Ted Trainer, an Australian ecological socialist (author of Abandon Affluence! and Saving the Environment) who teaches at the University of New South Wales, asking us about the “surplus problem” and its relation to borrowing in the present economic crisis. We wrote a short reply with our answers. —Eds. | more…