The Great Financial Crisis

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John Bellamy Foster and Fred Magdoff, Monthly Review Press; £10.95

Monthly Review (MR) has been a leading journal of the US left since 1949. In its pages writers such as Paul Baran, Paul Sweezy and Harry Magdoff set out a distinct analysis of capitalism as it existed after the Second World War. This short book collects several recent MR essays by John Bellamy Foster and Fred Magdoff, along with two original chapters, that continue this task - with particular reference to the current economic crisis.

Much of the material will be familiar to regular MR readers and occasionally arguments are repeated in successive essays. Nonetheless, this is a serious body of analysis and it is useful to read it together in this form. The accounts of the frenzy of financial speculation and the growth of debt in the run-up to the crisis are particularly good. Like Socialist Review and its sister publication, the journal International Socialism (IS), this collection roots the bubbles of debt and speculation in problems faced by the "real" economy.

Specifically, Foster and Magdoff extend MR's longstanding contention, first set out by Sweezy and Baran in the 1960s, that post-war capitalism contains an inherent tendency towards stagnation. This was, for them, driven by the formation of monopolies that could manipulate prices, creating surplus profits that the system struggled to absorb. The result was productive overcapacity, and hence slowing investment, along with the growth of areas of "waste" spending such as arms production. The massively overblown financial system represents another such waste area.

In many ways MR's analysis paralleled that developed in IS and elsewhere by authors such as Mike Kidron, Tony Cliff and Chris Harman. But the MR tradition has three drawbacks relative to this IS tradition.

First, for MR, crisis is seen as a result of limited consumption. IS placed greater emphasis on Marx's famous "law of the tendency of the rate of profit to fall". The current crisis is, at root, a consequence of the failure of profit rates to recover substantially from the low level they reached in the late 1970s. Marx's "law" is mentioned in passing in this collection but is neither explained nor placed at the centre of the analysis. The authors rely more on John Maynard Keynes and subsequent left Keynesians than they do on Marx for their general account of crisis.

Second, the MR tradition tends to see contemporary capitalism as stagnant everywhere and always. But in the period since the Second World War several economies, most recently China's, did, at least for a time, break through and see rapid growth. Indeed even the US restructured its "real" economy to an extent in the 1980s in the face of intense global competition. This was important in attracting some of the money from external sources that helped to finance recent bubbles.

Third, the MR tradition tends to downplay inter-imperialist rivalry. In this collection imperialism is seen primarily as the plunder of the Third World, rather than a system of conflict between rival national capitalisms within a system that develops unevenly. Foster and Magdoff explain that they have limited their analysis to US capitalism - but it is impossible to explain the trajectory of the world system without taking imperialist rivalry into account.

These criticisms should not deter people from reading this book, which is well worth engaging with. Like the wider MR tradition it remains one of the very few serious left wing attempts to come to terms with contemporary capitalism.