Spring books: a capitalist history, a transformation; controlling or replacing capitalism?

This post reviews some recent economics books published by various authors, both Marxist and non-Marxist. Book reviews by Michael Roberts

Let me start with a magnum opus, Capitalism – a global history, by Sven Beckert. Beckert is the Laird Bell Professor of History at Harvard University, where he teaches the history of the United States in the 19th century and global history.  His ‘Capitalism’ is called a ‘monumental book’ by global inequality expert, Thomas Piketty, himself an author of an eariler gargantuan publication back in 2014 called Capital in the 21stcentury (Piketty’s suggestion then was that he was ‘updating’ Marx’s Capital from the 19th century). 

Beckert in contrast is not trying to update or critique Marx’s Capital.  Instead, as an economic historian, he aims to paint a broad canvas of the rise of capitalism from its early embryonic origins, that he takes back to 1000 years ago. He does not provide a theoretical analysis of capitalism as Piketty tries in his book.  This book is very much more descriptive than analytical.  He delivers a global view of capitalism , not confined what he calls the ‘eurocentric’ approach of others. That is the book’s merit, full of anecdotes and examples of capitalists at work worldwide.  But the book’s de-merit is its lack of any systematic understanding of capitalism.  Indeed, it is like the work of Adam Tooze – namely, it is ‘more the how, than the why’.

As the blurb says for the book, “Sven Beckert, author of the Bancroft Prize–winning Empire of Cotton , places the story of capitalism within the largest conceivable geographical and historical framework, tracing its history during the past millennium and across the world. An epic achievement, his book takes us into merchant businesses in Aden and car factories in Turin, onto the terrifyingly violent sugar plantations in Barbados, and within the world of women workers in textile factories in today’s Cambodia”.

Capitalism, argues Beckert, was born global. Emerging from trading communities across Asia, Africa, and Europe.  And capitalism can only be described as a global phenomenon. “This book understands capitalism as, above all, a global development whose local articulations can only be understood globally. The economic dynamics of a given place are inescapably shaped by its connections to the outside world. There is no “French capitalism” or “American capitalism”; rather, there is capitalism in France and America, which have contested and complicated relationships with capitalism elsewhere, indeed everywhere “

Beckert makes big claims for the revolutionary nature of capitalism. “It was a fundamental break in human history not just because it revolutionized economic affairs but because it turned human relations upside down; infiltrated our politics, societies, and cultures; altered the natural environment we inhabit; and made revolution a permanent feature of economic life. The capitalist revolution is the only revolution whose fundamental core is that it is ongoing, that it qualifies as a state of permanent revolution.” 

But of course, he recognises that capitalism has its faults. “Capitalism is also distinctive for the particular kinds of social inequalities and global hierarchies it creates.”  But Beckert does not want to take sides between those authors supporting and those critiquing capitalism. “On one side, Marx’s writings became sacred texts through which to filter the politics du jour; on the other side, scholars read capitalism’s history through the equally sacralizing lens of Adam Smith’s writings. This book strives to avoid either idolatrous extreme.” 

Actually, it is not true that Marx did not recognise the great changes that capitalism made to human progress; or that Adam Smith saw no faultlines in market economies. But Beckert resorts to descriptive history rather than economic insight. As Beckert puts it: “this work is an effort to reclaim capitalism as a territory for historical investigation. This history will show that capitalism is neither a state of nature nor a process whose internal logic determines its eventual outcome in more than the most general way.”  So the Marxist materialist conception of history and Marx’s explanation of the internal contradictions in capitalism are to be put aside; as are the views of mainstream neoclassical economists that markets and profit making are an eternal and beneficial feature of human social organisation. Instead, capitalism is a contingent history.

Beckert does not hide the brutal nature of the emergence of capitalism globally. “Although capitalism’s history is often told as a story of contracts, private property, and wage labor—that is, stylized as a history of the realization of human freedom—there is another story, equally important, about vast expropriations, huge mobilizations of coerced labor, brutality in factories and on plantations, fierce destructions of noncapitalist economies, and massive extractions of resources for private gain. Capitalism rested, as we will see in the chapters that follow, not just on productivity gains but on enormous appropriations”.

Many of the early sections of the book give the reader a panoramic view of the capitalist process at work across the world, even when other social formations like, slavery, feudalism and Asian despotism were dominant. Unfortunately, when Beckert gets into 20th century, the period when capitalism became fully dominant globally as the mode of production and social formation, Beckert’s analysis becomes weaker. He notes the post-1970s crisis of reconstructed capitalism, ie the neoliberal period, but it seems he remains confident that capitalism is here to stay despite the accumulating economic, environmental and geopolitical crises that we see accelerating in the 21stcentury. ”We can anticipate that capitalism will remain a global totality, even if the nature of that totality continues to change, perhaps in radical and surprising ways. We can expect capitalism’s enormous creativity to persist, along with its amazing adaptability.” 

Or does he? “Eventually, however, there will be a moment when capitalism ends. Regardless of whether we fear or hope for that end, capitalism, like everything in human history, is finite, even if it is impossible to say when or how it will end or what will replace it.”  But even if capitalism is to give way to a new stage of human social organisation, it will take a very long time and “be interwoven within capitalism itself, just as capitalism was itself embedded in noncapitalist societies for centuries.”  Or maybe not – if the “ecological and social crises unfolding right now and right here become unbearable”.   All these maybes are a product of his descriptive approach to the history of capitalism.

Another opus magnum is the latest book by former World Bank lead economist and global inequality expert, Branco Milanovic.  I have posted several times on Milanovic’s indepth studies of global inequality, but this new book is not so much about inequality but more about what he considers is the great transformation in the world economy that is taking place –namely the movement of economic power from North America and Europe to Asia. “The first defining change is the much greater importance of, and the movement of economic activity towards, Asia and the Pacific.”

The second big change is the result of that shift. As China became richer, the Chinese people also became richer. That meant that people who were in the lower-middle class in the US, Germany, or Italy, for the first time in the last 200 years, fell behind substantial numbers of people from Asia. “At the level of the nation-state, we have had a movement towards much greater importance of Asia in economics and politics. At the level of personal incomes, we see the decline of the Western middle class.”

Milanovic argues that the Industrial Revolution transformed the countries that were leading the industrialization—the UK, France, Northern Europe, then the United States, and finally Japan—and made their people much richer than people elsewhere. But In the last 40 years, we have had, for the first time, a serious challenge to that. Countries in Asia are now not only catching up but, in some cases, even overtaking Western countries technologically.

This has led to a new cold war not now based on ideology (capitalism v communism, as with the US and the Soviet Union), but now economically between the US and China. If China continues with real GDP growth rates 2-3% points higher than the US rate, within one generation, and a maximum of two generations, you will have the same number of people in China who are above the US median income as Americans. “If one thinks that the real sign of catching up is when China becomes equally rich on a per capita basis as the United States, it will take a long time. But before that happens, China as a nation would be much more powerful than the United States simply because it is so much bigger.”  But see my forthcoming paper on Catching up , to be published by the World Association of Political Economy. 

Milanovic says there are three views on the benefits or otherwise of the globalisation of trade and finance in the last 40 years. The mainstream one is that trade among nations benefits all countries and so leads to peace. Adam Smith is more nuanced and argued that only ‘balanced trade’ would maintain peace. But there is the Hobson-Luxemburg-Lenin theory, which holds that the big powers would fight for control of the resources and assets of the rest of the world and that would eventually lead them to war ie imperialism.  Milanovic tends to a mix of the last two views.  The end of globalisation and free trade has led to a loss of living standards for many in the West and thus “a huge dissonance between different parts of the Western population.”  I would add that globalisation led to a massive transfer of value and resources from the Global South to the Global North, hitting living standards not just in the Global North but also for the vast majority in the Global South..

According to Milanovic, neoliberal globalism has now been replaced by ‘national market liberalism.’  Tariffs are being imposed and immigration controls are increasing.  The world has moved from option two to option three. ”We still have neoliberalism, but only at the national level. We end up with a version of neoliberalism stripped of its international component.” Milanovic concludes that “we clearly have a global disorder.” But he lays his hope on the world moving towards a multipolar system. Eventually, “we can build a more equitable international system where major powers have a greater stake than they do now.”  So a new balance of trade and finance and economic power can emerge. Option three becomes option two again, hmm.

Mariana Mazzucato is another rock star economist of the ‘left’, once called the world’s scariest economist.  I have reviewed many of her previous books (search my blog). But it seems she does not really scare the international powers that be.  She is regularly invited to speak around the world at various mainstream economic gatherings and as an adviser to governments.  Her latest book is called The Common Good Economy.  This follows on from a previous book, the Mission economy. – each time a new attractive title suggesting economic innovation and insight.

Mazzucato tells us that “Our economic system is broken. The climate crisis is accelerating. Inequality is deepening. Public trust is crumbling. Wealth concentrates in fewer hands while governments scramble to fix what markets can’t do, rather than to shape them from the outset.”  So what should well-meaning governments do? Instead of trying to correct these ‘market failures’ and trying to patch up problems, governments need “to proactively build the economy we need”.  She offers a ‘new theory of the common good, one which allows governments and businesses to develop purposeful economic relationships, creating value and building spaces where human flourishing can happen.”

As in previous books, she starts from the premiss that what is needed is ‘partnership’ between an ‘activist’ state and capitalist businesses – ‘participation and reciprocity’.  You see “capitalism and workers’ rights are not in tension — they are co-dependent. Industrial policy that includes workers in design and delivery produces better outcomes for all.”   So the answer is not to replace capitalism, but to strengthen worker representation in decision-making bodies, including corporate boards.  

Governments must encourage capitalist companies to invest but under what she calls “green and social conditionalities across all sectors” so “ensuring we socialize both risks and rewards through smart (??) public financing.”   What is needed is not socialism, but with “strong social contracts into our industrial policies now, we can ensure this historic wave of green investment builds an economy that works for both people and planet.”  We need “mission-oriented industrial policy that treats workers as co-creators of value — with conditionalities that share the rewards.” Mazzucato sort of admits that such a social contract with conditionalities placed on the big multinationals, the fossil fuel giants and the financial sector would be “a delicate task, as too much micromanaging with a shopping list of conditions can, of course, stifle innovation.” On the other hand, “close relationships with private firms could make governments prone to capture.”  Indeed!

Mazzucato continues her merry way across the globe at conferences, government meetings etc to advocate ‘mission projects’; conditionalities on big business and a social contract between workers and bosses – all for the ‘common good’ economy.  Dare I say it, but clever jargon and trendy titles do not make for radical change.

Ann Pettifor in her new book, Global Casino, does not even look for radical change.  You see, unregulated global finance is causing the crises we see in the world economy.  The global market in money – housed in the offshore ‘shadow’ banking system – holds $217 trillion in financial assets and operates beyond the reach of any nation’s taxman. Asset managers, private equity firms, and pension and sovereign wealth funds scoop up the world’s savings for investment and manage them as they choose, unaccountable to politicians or the citizens who elect them.

But it does not require socialist or very radical measures to sort this out.  Pettifor: “societies and gov­ernments can take back control of the global financial system. We have done it before and can do it again. Indeed, it is imperative that we do so, if we are to manage the twin threats of climate breakdown and biosphere collapse.”  Pettifor reckons that in those halcyon days after the second world war, a global financial order was established with the Bretton Woods agreement to manage ‘global imbalances’ and currency and trade flows as well as regulation of financial excesses and recklessness.  But President Nixon blew all this up internationally when he took the dollar off the gold standard in the early 1970s and later government leaders deregulated the financial sector, turning the world economy into a giant casino.  This was the reason for the global financial crash in 2008-9 –  it has nothing to do with falling profitability of capital or any other rigid Marxist explanation.  The answer now is to return to the post-war period of managed trade and financial regulation – simples.  But I think not.

What is stopping a return to global regulation being implemented is the current ideology. Pettifor, in an interview on her book: “If you read the Financial Times, people who talk about managing trade are treated as mad Trotskyists. I dare not say it because I don’t want to be branded as a mad Trotskyist, I’m just a very moderate Keynesian, for God’s sake. But even my moderate views are considered extreme in the world of free markets. And how we overcome that ideology is the issue that we face.”

You see Pettifor knows what she is talking about – unlike the rest of us on the left. “What always strikes me about the great financial crisis of 2007–9 was that the Left didn’t know it was coming. I am very proud of having written The Coming First World Debt Crisis (2006), but the rest of the Left didn’t see it coming. People talked about globalization as if it was a given. And then when it blew up, there was no plan B. We didn’t even know it could happen. We were as stupid as the chair of the Federal Reserve, Alan Greenspan. The Left was as stupid as Greenspan, who said he didn’t believe it could happen.” Actually many on the left (at least the Marxist left) did see the financial crash coming (see my paper here). And what is this plan B to replace globalisation and unregulated speculative finance?  According to Pettifor, it is restoring proper regulation.  But regulation always fails. Indeed, since the Great Recession, there have been several banking crises, despite increased regulation.  

Moreover, if the cause of all our woes globally is an uncontrolled financial sector, why does Pettifor not call for the public ownership of the banking system in the major economies and the closure of hedge funds and other speculative forms of finance capital? Instead, Pettifor offers a tax on speculative financial transactions and capital controls on footloose capital flows – and which governments are going to introduce these?  This is like putting a bandage on a gaping wound with blood flowing from a pierced artery.

Mazzucato offers us capitalism with ‘conditionalities’ for the common good and Pettifor offers us capitalism ‘regulated and managed’. Only one book proposes ending the capitalist mode of production and it is not by a feted academic, but by an Irish Marxist activist. James O-Toole’s Economics for the Exploited is written from a working class point of view.  He explains clearly and simply how capitalism works and why it cannot deliver the needs of humanity any more.

O’Toole covers Marx’s law of value and answers its critics clearly (he explains Marx’s law of profitability and even deals with the so-called ‘transformation problem’).  He explains the cause of economic crises, inflation and the rise of imperialism. And he outlines the case for a planned economy under common ownership and democratic control as the way forward for humanity and the planet.

“Modern humans have been on Earth for around 300,000 years. Class society is a few thousands years old and capitalism only a few hundred. There’s nothing “natural” about this system. In those few hundred years capitalism has brought us to the point where corporate greed could actually destroy the natural underpinnings of any advanced social order. The clock is ticking. This system isn’t natural. We can live in other ways. We workers produce this system. It’s in our hands. Workers have to take control.”