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Unending Hard Times: Whose Is the Toil and Whose Is the Wealth?

John Bellamy Foster and Robert W McChesney.  The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China.  New York: Monthly Review Press, 2012; Kharagpur, India: Cornerstone Publications, 2013.  pp x + 227.  Rs 150.

The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China

The secular decline of decadal average annual real gross domestic product (GDP) growth rates of the Triad economies (the United States, West Europe and Japan) from the 1970s to the present — that of the first decade of this century being the slowest since the 1930s, and that of the second likely to be even slower — has resurrected the words long gone into disuse from the mainstream economics lexicon: “depression” and “stagnation”.  Accompanied as the dismal growth rates are by stagnant or declining real wages, massive unemployment, growing inequality and a general deterioration in the quality of life of the vast majority of the people of the Triad countries, an endless crisis seems to have befallen them.

The Great Financial Crisis of 2007-09 was itself linked to this stagnation, the latter, reflecting, in Keynesian terms, a chronic deficiency of effective demand.  Given a continuing weak propensity to invest (in the economic sense of the word), a gravitational shift of economic activity from the production of goods and non-financial services to finance — the process of financialisation — has been underway, entailing the deployment of money capital in the financial markets and in speculation, more generally, to make more money, bypassing the route of commodity production, and this has been one of the main ways of counteracting stagnation.  But each time a financial crash has occurred, it has led to the resurfacing of stagnation.

Tendencies of Monopoly Capital

In 1966, Paul Baran and Paul Sweezy, in their classic work Monopoly Capital: An Essay on the American Economic and Social Order, taking off from where Michal Kalecki and Josef Steindl had left off, threw light on the profound tendency to stagnation in a monopoly capitalist system, whose main institutional forms are the giant corporations and the financial system associated with them.  Basically, via the concentration and centralisation of capital, outlined by Marx, competition gives way to monopoly (what in mainstream economics is known as oligopoly), which retards the process of accumulation of capital, thus giving rise to more vigorous tendencies to stagnation.  At the level of the corporations, the increased ability to conglomerate and further international expansion confronts the reduced scope for extension.

In the class struggle — between the two main classes, involving exploitation by capital and workers’ resistance to it — the management of the giant corporation has the upper hand, thus raising the rate of surplus value to attain a higher rate of profit, and thereby making possible a higher rate of accumulation.  Moreover, with oligopolistic pricing, the uniform rate of profit of competitive capitalism gives way to a “hierarchy of profit rates” — highest in tightly oligopolistic product markets and lowest in the most competitive ones.  This leads to a skewed distribution of the surplus value generated, one that favours the larger, more monopolistic corporations; they, in turn, can possibly “reinvest” a larger proportion of their profits, making feasible a higher rate of accumulation.  But, on the demand side, the giant corporations tend to regulate and slow down the expansion of productive capital in order to maintain their higher rates of profit.  The contradiction between the capacity to produce and the capacity to consume of a system organised on capitalist lines asserts itself, and the lagging power of consumption gives rise to the tendency towards stagnation.1

There are, however, important counteracting forces — the “sales effort” of the corporations; civil and military expenditures of the government, the latter, involving militarism and imperialism, essential ingredients of the economic and political process; “epoch making innovations” creating significant investment outlets; and financialisation.  Foreign investment though, contrary to other Marxist analyses, is not an avenue of surplus absorption since the inflows of the surplus from such investment far exceed the investment outflows, and thus aggravates the surplus absorption problem rather than alleviating it.

Over the years since Baran and Sweezy’s Monopoly Capital first appeared, Sweezy, alongside Harry Magdoff, both then editors of the distinctive independent-socialist magazine Monthly Review, enriched their readers’ understanding of the financial sector, even as that sphere was expanding at breakneck pace, becoming increasingly more complex, both in the US and internationally.  Moreover, they threw light on how developments in the financial field were changing, in important ways, the structure and functioning of the real economy, dominated by the giant corporations.  Indeed, in recognising and competently analysing the latest changes within the institutionalization of the capitalist function, as they have occurred, from the mid-1960s to the first decade of the 21st century, the Monthly Review has been far ahead of most journals/magazines.

The Book at a Glance

In the book under review, the authors, John Bellamy Foster and Robert McChesney, focus on stagnation in the aftermath of the Great Financial Crisis of 2007-09 and its relation with financialisation, and the impact of these phenomena on the US and on China.  They take off from where John Bellamy Foster and Fred Magdoff’s The Great Financial Crisis: Causes and Consequences (2009), which I reviewed in Economic & Political Weekly,2 left off.  The main way that monopoly capitalism found to reproduce itself over the last four decades being through financialisation, the system is now monopoly-finance capitalism.

In the Triad economies, monopoly-finance capital is locked in a “stagnation-financialisation trap” (the worsening of stagnation in the aftermath of a financial crash when financialisation comes to a standstill), even as it is linked to the growth in the emerging economies via the global labour arbitrage — whereby multinational corporations exploit the differences in wage levels in the world in order to extract surplus profits.  The result is the worsening of the overall problem of surplus capital absorption and financial instability in the centre of the world economy (p 16).

One must, of course, keep in mind that all this has been unfolding in the context of a shift in the economic base of political hegemony from the realm of the real economy of production to the domain of speculative finance.  The book focuses on how all these aspects work out at the global level, mainly in relation to the Chinese economy.

Exploitation Buttresses Financialisation

There are a number of insights in the book that are worth highlighting.  First, the systemic political imperative is to restore the process of financialisation in the aftermath of the financial crash, and so the Keynesian approach involving expansionary fiscal policy and the re-regulation of the financial sector gets short shrift (indeed, fiscal deficits come under political attack); rather, the revival of the process of financialisation in order to boost the finance-driven economy through the “wealth effect” (the tendency for consumption to grow, even in the absence of the growth of incomes, due to rising asset prices) gets top priority.  This is the main political response to extricate monopoly-finance capital from the stagnation-financialisation trap.

Second, even as stagnation in the Triad economies is the dominant reality in the current phase of globalisation, the latter is characterised, among other things, by the dominance of multinational corporations (MNC) whose interests lie in the world economy as a whole, where a system of international private property rights is more or less in place, permitting a relatively free movement of capital between countries.  Large MNCs, through their foreign subsidiaries, control their respective global commodity chains, either as the principal buyers or the principal producers of the final product, with the conception of both product and process closely guarded by them.

Production is located in emerging economies with large reserve armies of labour relative to their respective active wage-labour forces.  Very high rates of surplus value involving the prolongation of the working day (and week) to the extent possible, and changes in the proportions in which the working day is divided between necessary and surplus labour involving a severe diminishing of necessary labour time, are thus made possible.  The latter involves managements, first, in keeping down the wage rate, and second, in reorganising the labour process and introducing new technologies to increase the productivity of labour, both in order to decrease the necessary labour time.  Workers become appendages of the machines with which they work, so much so that some of them suffer from involuntary muscle twitches.  Exports of the product are mainly a function of demand in the Triad economies, mainly the US, with its large current account deficit.  The large current account surpluses of the exporting countries find their way to the capital markets of the Triad economies, reinforcing the financialisation of the capital accumulation processes centred over there.

Tendency to Monopolization

Third, the authors’ assessment of the process of concentration and centralisation of capital, the tendency to monopolisation, empirically, theoretically and historically, is thought-provoking.  They even throw light on how transnational production is altering the nature of oligopolistic rivalry.  Has globalisation altered the tendencies that Baran and Sweezy found in their classic work, Monopoly Capital?  As I would put it, Foster and McChesney’s basic argument is as follows: Economic globalisation in the sense of free trade in goods and services and the institution of international private property rights leading to free capital mobility would, initially, undermine many “tight” oligopolistic market positions, but gradually, through the processes of concentration and centralisation at the global level, a fresh pattern of “tight” oligopolistic market structures would emerge, at the national, regional and global levels.  Once more, the tendencies Baran and Sweezy found in their book Monopoly Capital would surface and lead to such structures.

I would, of course, caution against positing any secular increase in monopolisation — paraphrasing Sweezy, I would say, after all, with hindsight we know that the tendency to monopolisation “is not as ubiquitous and overwhelming as [the Austrian Marxist Rudolf] Hilferding imagined”; and, surely there are “powerful countertendencies — the breakup of existing firms and the founding of new ones. . . .”3

Labour Market in a Global Framework

Fourth, Foster and McChesney highlight two realities in their perspective on the labour market in a global framework — the existence of a massive global reserve army of labour and the “global labour arbitrage” opportunity (exploiting international wage differences to obtain higher returns on capital) — both in the context of the shift of global production to the emerging economies, oligopolistic competition, stagnation and financialisation.  For 2011, using International Labour Organization (ILO) data, they estimate the size of the global active labour army as 1.4 billion wage workers.  The size of the global reserve army in the same year is 2.5 billion persons, 1.8 times the size of the active labour army, and this is the background against which the labour market in a global setting works, underlining the functional role that unemployment and underemployment plays in a capitalist system.  The reserve army of labour is, thus, as Marx once put it, “the pivot [our emphasis] upon which the law of supply and demand for labour works.”  Indeed, the shifting of certain sectors of production to the emerging economies to take advantage of the international immobility of labour and the existence of subsistence wages over there has led to stagnant or declining real wages and the diminishing of necessary labour time in the Triad economies.

China: Balancing Aggregate Demand?

Fifth, the authors highlight a fundamental contradiction that stands in the way of the Chinese economy rebalancing its components of aggregate demand, namely, reducing the proportion of the sum of investment and net exports in favour of household consumption.  With the economies of the Triad mired in stagnation, China’s economy has been widely viewed as one of the principal means of lifting the world economy, and hence the wish that China should rebalance the components of aggregate demand in favour of household consumption.  However, the problem, the authors say, is that the suggested way of rebalancing is fraught with a fundamental contradiction.  It requires a dismantling of the low-wage, global labour arbitrage model of capital accumulation in global supply chains wherein China is the world’s assembly hub, for it is only with a very significant increase in the real wage rate that the path of economic growth can shift to a mass consumption-led track.

What Now?

What does one make of all this?  The powerful forces unleashed by monopoly-finance capital in the Triad economies and in China, as outlined in this book, seem to have come to a head.  The long stagnation in the Triad economies alongside MNCs taking advantage of the global labour arbitrage opportunity has led to perpetual dire straits, unending hard times for the vast majority of the people there.  In China, despite unprecedented economic growth over the last three decades, the size of its reserve army of labour is still a high proportion of the size of its active wage-labour army, this partly because of the high rate of growth of labour productivity that the adoption of technology imported from the Triad economies and the associated structure of production/demand have made possible.4  The labour arbitrage opportunity will thus continue to prevail and be taken advantage of by monopoly-finance capital, this with the redirection of a significant part of the surplus (generated in China in the production process) to the Triad economies to buttress the financialisation process centred over there.

Nevertheless, will the new Chinese working class that has emerged ultimately respond by demanding a significant role in the political realm in China, bringing the Maoists back to the centre stage of Chinese politics?  And, in response to their unending hard times, will the US working class precipitate the formation of some sort of a labour party?  Will both the Chinese and the US working classes coordinate their politics and begin to take on the crucial question of their respective aggregate rates of surplus value?  Political agendas such as these are nowhere on the horizon even as there is an urgent mass need for their fulfilment.  If Stephen Hymer, whose seminal work in international political economy the authors draw upon,5 were alive today, he too would surely have been analysing what is happening, and, like the authors of The Endless Crisis, there would have been no doubt as to the side he would have been on.  On another note, I have come to think: As an intellectual and in the light of his works, Paul Sweezy was, indeed, the Karl Marx of the 20th century.



1  See Paul M Sweezy, “Monopoly Capitalism,” in Marxian Economics, John Eatwell, Murray Milgate and Peter Newman (Eds), London: Macmillan, 1990, p 302.

2  Bernard D’Mello, ‘”Financialisation’ and the Tendency to Stagnation,” Economic & Political Weekly, 9 May 2009, pp 27-30.  Re-published in MRZine on 9 May 2009 at <>.

3  Paul Sweezy, op cit, p 299.

4  Prabhat Patnaik, “A Perspective on the Growth Process in India and China,” IDEAs Working Paper No 05/2009, at <>.

5  For instance, Stephen Hymer, “International Politics and International Economics: A Radical Approach,” Monthly Review, March 1978, pp 15-35.

Bernard D’Mello ( is Deputy Editor, Economic & Political Weekly, Mumbai.  A version of this article also appears in Economic & Political Weekly 50.25 (20 June 2015).

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