Abstract
The most significant body of Marxist thought originating from North America is the monopoly capitalist school of Baran and Sweezy (1966), which argues that over-accumulation and declining demand are the sources of capitalist crisis in advanced economies dominated by monopolies. Amongst some Marxists, emphasis upon demand generates hostility, with accusations of under-consumptionism used to discredit a theory’s Marxist credentials. This is illustrated by Howard and King (1992), who argue that Baran and Sweezy’s approach is ‘left-Keynesian’. Despite criticisms, this theory remains alive within the scholarship of John Bellamy Foster and Robert W. McChesney, who provide a lucid and excellent attempt to both affirm and restate monopoly capitalist theory, and utilise it to explain global capitalism’s recent crisis.
Bellamy Foster and McChesney begin by arguing that stagnation, illustrated by slow growth, unemployment, underemployment and excess productive capacity, contrary to mainstream economic thought, is normal for capitalism. In the late 19th century, the advanced capitalist nations matured, with the emergence of oligopolies and industry being sufficiently built up due to rapid growth during the previous century. Investment within production, capitalism’s logic for increased accumulation, therefore declined as a source of demand, with growth becoming more reliant upon consumption. Continuing to characterise capitalism today, along with the increasing exploitation of labour and oligopolies having banned price competition, Foster and McChesney argue that capitalism is saturated with surplus capital seeking investment. Moreover, the highly productive nature of capitalism, alongside the fact that surplus capital is concentrated in fewer hands and contributing to high levels of inequality, results in surplus goods lacking demand. Falling demand generates increasing excess productive capacity, reducing further the incentive to invest surplus in production. Consequently, monopoly capitalism is characterised by a stagnant productive base. With stagnation being normal, it is periods of significant economic growth that need explaining, and can be (it is suggested) by identifying specific historical factors, including war and epoch-making innovations such as the railway and the automobile, while capitalism in all periods relies upon state expenditure and the sales effort.
Drawing upon foundations laid by Baran and Sweezy, the authors argue that since the 1970s, and with the end of the post-war boom that initiated a continual decline in the growth of the productive base of the advanced capitalist nations, there has arisen a great financial apparatus absorbing surplus and stimulating demand in terms of FIRE (finance, insurance and real estate), complex financial instruments, private debt and asset bubbles. These all contribute to ‘wealth effects’ that encourage consumption. With stagnation infecting production, finance has constituted the most significant source of stimulus over the last three decades, shifting the centre of gravity from commodity production to the use of capital, to directly increase capital accumulation. For Foster and McChesney, this represents a new historical phase with the growth of monopoly-finance capital.
While stimulating economic growth in the short-term, central to their claim is that, in the long run, financialisation results in greater instability as debt levels increase and asset bubbles burst. The Great Financial Crisis of 2007-09 and the stagnation that followed originated with the implosion of the global financial system which could no longer contain its own contradictions, illustrated by depreciating asset values, declining house prices, debt default and reduced private consumption. Despite neoliberal rhetoric of ‘rolling back the state’, attempts to contain a crisis of monopoly-finance capital fall to the state, as lender of last resort, rescuing faltering financial institutions and flooding markets with new capital, as occurred at the height of the crisis. Such dramatic interventions illustrate the importance of finance for a stagnant economy. While the long-term effects of financialisation are disastrous, the productive base is not in a position to stimulate sufficient levels of expansion, and therefore ever larger levels of financial activity are needed in order to stimulate growth, illustrating what Foster and McChesney refer to as the stagnation-financialisation trap.
Further to their argument is the fact that, despite mainstream thinking on both the left and right, capitalism has not witnessed a global resurgence of competition since the 1970s. Rather, monopoly dominance is both stronger at the start of the 21st century than ever before, and international. Unable to identify investment opportunities at home, the emerging markets of the global South have proven invaluable as outlets for surplus absorption. Significant quantities of capital have been absorbed through funding the growth of global mergers and acquisitions, while the identification of new markets has stimulated demand. Echoing the work of Harry Magdoff (1969), a close collaborator of Sweezy’s, the global expansion of monopolies, the authors argue, illustrates the imperialistic nature of monopoly-finance capitalism. However, the growth and exploitation of the global reserve army of labour has been especially beneficial. The ‘superexploitation’ of labour, as the authors refer to it, has been the basis for the expansion of emerging economies such as China, which are given particular attention in the final chapter, with this having contributed to increasing profits and imperial rents for monopolies due to low wages, in turn enforcing stagnating wages within the advanced capitalist nations. While profits may increase in the short-term, problems of surplus absorption are exacerbated, with over-accumulation intensifying as demand must be found for capital and goods produced overseas. Foster and McChesney conclude that in the long-run, global expansion, rather than absorbing surplus, only serves to transfer it to the investing country.
It is a courageous Marxist who argues the centrality of demand for capitalism. Monopoly capitalism does this, and in this book, Foster and McChesney admirably advocate and advance this tradition. This is a much-needed analysis recognising that the over-accumulation of surplus and problems of absorption, linked with the global dominance of monopolies, are the root cause of capitalist crisis, and providing an insightful illustration of the qualitative nature of capitalism in its attempt to combat these problems.