T
he most common policy responses to the Great Recession have been various forms of “quantitative easing”: central bank actions which use newly printed money to buy up various forms of bonds, increasing bank lending and buoying stocks and asset prices. These waves of liquidity have driven share- indexes, price-earnings ratios, and commodities back into the stratosphere. Yet, still saddled with huge private and public debts, unable to reduce chronically high unemployment, the U.S. and E.U.’s economies have hardly experienced a recovery in any meaningful sense. Quarterly reports indicate only anemic growth, and further social unrest looms in the face of new rounds of austerity measures. China seems to be winding down as well.

In The Endless Crisis (Monthly Review Press, 2012), John Bellamy Foster and Robert McChesney place these most recent economic woes within the historical arc of 40 years of economic stagnation. Their heterodox blend of Marxism and Keynesianism argues that the downturn in economic performance is the result of three principal causes: the monopoly power of a small number of international manufacturing giants, the drying-up of productive investment opportunities, and the neoliberal attacks on wagesleading to decreased effective demand. While it is true that each of these factors is a necessary element for understanding the crisis tendencies of capitalism, how they coalesce into an actual crisis during the period in question is not convincingly demonstrated. The result is an intriguing monopoly-focused study, but one in need of supplementary accounts more adept at framing the major episodes in the crisis prone development of global capitalism since the Second World War.

The Endless Crisis follows the framework of Paul Baran and Paul Sweezy’s classic study Monopoly Capital: following postwar capitalist expansion, highly productive mega-firms were able to secure profits through informal “collusion” between them, and no longer depended on market-based price competition. The effect was paradoxical for economic growth classically conceived. These established firms could secure “incumbent advantages,” which allowed them to create temporary barriers to the entry of new, more efficient producers. The tendency for profits to diminish as incumbents hunker down and slash prices in order to stave off the incursions of newcomers was then exacerbated by a growing demand-side crisis, with wages falling as the result of attempts by management and neoliberal states to curtail the power of labor. 

It is under these conditions that Bellamy Foster and McChesney correctly urge readers to understand the turn toward finance, which for decades now has played an increasingly important role in helping to deliver positive quarterly reports. Until the Financial Crisis of 2007, debt-fueled finance helped shore up consumer demand for mortgages, household consumption, education, and health expenses. While their study’s counter-history to mainstream neoliberal narratives of integration and efficiency is a clear reminder that planned disinvestment, financial trickery, and the immiseration of workers go hand in hand with the development of global capitalism, they fail to root their account in the actual historical development of the postwar world, tied as they are to a “monopoly-capital” framework. Robert Brenner’s painstakingly detailed book— The Economics of Global Turbulence—arguably set the benchmark for explaining the timing and duration of the “Long Downturn.”

The Endless Crisis dismisses Brenner’s emphasis on the sphere of circulation and the dynamics of international competition, without seriously considering the objective basis for their own reliance on the concept of monopolization. According to graphs they themselves provide, the period between 1972-87 (generally recognized as the onset and deepening of the long downturn) actually witnessed a general diminution of capital concentration. Evidently, declining economic performance is not always caused by monopoly concentration. Indeed, for Brenner, “monopoly-capital” is a valid category for the immediate postwar period until the end of the 1950sa period of relatively slower growth and declining reinvestment compared to the huge uptick of employment, growth and productivity made possible by the war effort. This was also a period of the relative preponderance of American firms in the world market and before overseas competitors like Germany and Japan made their presence felt within the American marketplace. During this period, large firms’ possession of recently established fixed capital discouraged the growth of investment, which then led to somewhat lower productivity growth compared to the US economy during and immediately after WWII.

But the evidence of stagnation cited by Baran and Sweezy in their classic book pales in comparison to the declines in profit and reinvestment from the 1970s onward. For Brenner the principal cause of the long downturn is the persistent overcapacity in the worldwide manufacturing sector. As firms in Japan and Germany were able to combine highly efficient machinery with relatively cheaper wages, they increasingly competed for market share in the US. These later developing economies, which would include the South East Asian “Tigers” and China, produced the same things as American firms, only cheaper. Here, in the greater number of international firms competing to meet a relatively stable amount of American consumer demand, is the clearest proof of the insufficiency of Bellamy Foster and McChesney’s monopoly-capital argument. The total effect was a forcing down of prices and then profits. American firms did not cede their position to these new international competitors but stuck it out, using their incumbent advantages to stay afloat with ever diminishing but tolerable profit rates. This same period also witnessed the expansion of multinational firms and increased foreign direct investment in low-wage parts of the world. Instead of a Schumpeterian period of “creative destruction” that might have shaken out inefficient producers and created the basis for the growth of more productive plant and equipment, firms opted to set-up shop in the low-wage zones of the global South. There ensued a “preservative relocation” of large American firms in India, China, Indonesia, Vietnam, etc. 

But despite the problems Bellamy Foster and McChesney have in locating the precise cause of stagnation in the manufacturing sector, they do provide a clear- sighted approach to the world economy in the coming period. The penultimate chapter of the book offers a nuanced reading of Marx’s famous “General Law of Accumulation” and the epochal shift of manufacturing from rich countries to the low-wage zones with their seemingly inexhaustible “relative surplus popu- lations.” Perhaps the most significant nation in this drama is China, which despite having had its economy double in size three times since 1978, continues to have some of the lowest wages in the world. According to estimates, the countryside still has 45% of China’s potential labor force – creating the conditions for an extended period of a low-wage industrial arbitrage, vis-à-vis other industrial economies. This demographic bedrock offers a stark contrast to the optimism of many commentators who expect deliverance from the great recession through continued Chinese growth and global trade rebalancing. China’s repressed- consumption growth model depends on high levels of consumption in the US and Europe, but as this diminishes it remains to be seen whether other emerging economies (Brazil, South Africa, etc.) can absorb more Chinese exports. China’s per capita income will certainly be too low for the foreseeable future to absorb the products being churned out of its neo-Dickensian factory floors. The growth levels China has sustained since the 2008 financial crisis have been largely aided by government supported stimulus and huge debts associated with urban expansion and real estate speculation. These capitalist contradictions with Chinese characteristics only add to the uncertainties confronting a world economy in a recession without an end in sight. 

The rebalancing of China—the biggest trade-surplus country in the world today—remains a daunting challenge for policymakers with little appetite for decisive action. The drawn-out and contradictory process of rebalancing might combine several trends witnessed since the early 2000s. China’s continued expansion into the mining and extractive industries of the global South, especially Africa, may continue apace and provide an auxiliary sponge to soak up China’s exports, since many of these countries contain emerging consumer markets. At the moment, however, the stock of China’s outward Foreign Direct Investment flow amounts to less than 30% of its holding of US Treasury bonds. In the short-term China still has every incentive to maintain its policy of purchasing dollar denominated assets and holding down the value of the Renminbi to ensure export competitiveness. Easy credit for domestic enterprises and local governments will continue to expand and with it the exacerbation of overcapacity problems outlined above. Easy central bank credit too has sustained increases in the values of land, real estate, and financial assets in a similar fashion to the asset-price bubbles, which propped up the American economy before 2007. Yet, the Chinese economy is set to grow by 7.4% this year, an admittedly phenomenal rate compared to those of the US and EU. The question remains: how long can high growth be sustained in China if it depends upon on an American economy sputtering its way through QE-3? So far, the kingfisher will not indicate a favoring wind. 



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