Review of 'The Decline of Capitalism', Harry Shutt, Zed £9.99
Harry Shutt must be the Reggie Perrin of orthodox economy. It seems he's done the sums and they don't add up... and now he's gone awol. The critique and conclusions in The Decline of Capitalism are strikingly Marxist.
On page two Shutt lays out the case for the prosecution. Capitalism has: left the economy in deepening stagnation; created widespread economic insecurity - witness the collapse of private pension schemes and the creation of a permanent 'underclass'; increasingly marginalised poor countries containing 80 percent of the world's population, leading to financial and environmental catastrophe, civil war and mass emigration; produced frequent crises in liberalised financial markets, caused by stagnation and insecurity and linked to growing incidents of fraud and organised crime.
'A more functional alternative would inevitably entail phasing out the wasteful diversion of economic value... into the pockets of a small minority', is the solution Shutt proposes to the problems created by competitive accumulation of wealth. In seizing surplus wealth and ploughing it back into further production capitalists hold down the rate of consumption while raising output. This creates the crisis of overproduction, which we know as the business cycle, or 'boom and bust'.
In a later chapter Shutt points out the other key fault of capitalism. As technology progresses, capitalists invest less in workers (who produce value) and more in technology (which doesn't). Applied across the economy this leads to a general decline in the rate of profit. Capital cannot be profitably recycled and tends to be used for speculation. There's a wonderfully instructive table in his chapter 'The Deluge Postponed'. As the stock market index rises, the price/earnings ratio increases, while the actual dividend steadily declines.
In recent times capitalism developed two strategies for dealing with these problems. One was the post-war consensus, involving large-scale intervention in the economy, and massive spending on the military machines. The system broke down because it was not able to overcome capitalism's fundamental problems.
The alternative was supposed to be 'monetarism'. Tax cutting and deregulation were intended to 'unleash the forces of enterprise' and therefore stimulate growth and prosperity. The strategy also failed spectacularly.
Contrary to monetarist ideology there is no 'free market'. Loosening up regulations encourages financiers to make risky investments, underwritten largely by the state. This creates long-term public sector deficits, making it difficult to sustain public services, which is handy for private investors looking for new markets, as these services are soon privatised (maintained by yet more public subsidy).
Someone once commented that Karl Marx's Capital read like a gothic novel. The Decline of Capitalism has a similar feel - from zombie companies kept afloat by subsidies, to shark conglomerates that stay alive by feeding on smaller concerns. The leitmotivs of fraud and desperation crop up again and again. Companies like Enron, Worldcom and Parmalat defraud investors with state complicity while governments manipulate employment, inflation and growth figures to sustain market confidence.
In 'Beyond the Cataclysm' Shutt lays out his alternative: public ownership and control of industry, cancellation of debt, a Tobin tax of sorts and redistribution of wealth. He is vague upon what new 'criteria' would be used to stimulate industry or how they would be implemented. I would suggest that's why he underestimates the scope of the anti-capitalist movement.