Abstract
The editors of this handbook set themselves the ambitious task of providing coherent heterodox frameworks to understand the capitalist economy while drawing out the differences and commonality between these approaches. In six parts divided into thirty-seven chapters, the reader is taken through heterodox theory, the anatomy of capitalism and its dynamics, and, finally, proposals for transforming the capitalist “social provisioning process.”
Thankfully, the book does not develop its themes primarily in opposition to orthodoxy but as insightful perspectives in their own right. By and large, the heterodox traditions set out in the book can be characterized as those that perceive of the economy as a reproductive/circular, monetary, capitalist market system. The strongest chapters expose the reader to the history of thought and succeed in situating clearly its theoretical perspective in relation to others, while giving a critical assessment of the limits of the approach at hand. There is a certain ambivalence in the editors’ views on the desirability of synthesizing heterodox traditions, and those contributions that attempt such a synthesis yield mixed results.
The variety of topics covered is wide, and in some instances the selection appears a little haphazard. For example, there are chapters on banks in developing countries and shadow banking but not on banking or the financial system more generally. The logic of the separation of the handbook into its different parts is not entirely convincing. The division among “theoretical cores of heterodox economics” (part II), the “anatomy of capitalism” (part III), and the “dynamics of capitalist socio-economic structure” (part IV) is not always evident in the contributions. The “theoretical cores” cover the social provisioning process, social surplus, accumulation regimes, monetary theories of production, effective demand, value, price, distribution, and the micro-macro link. The “anatomy” deals with institutions, interactive agency, households, business enterprise, competition and governance, legal form of business, money and monetary regimes, banks, informal economy, and poverty and inequality. “Dynamics” comprises accumulation, trade, global production, labor processes, business cycle, growth, financialization, international development, and energy and the environment. This structure could have worked if each part had had more internal coherence, which is admittedly difficult—if not impossible—to achieve with such a multitude of independent contributors. Given that there is no thread between the chapters within each part, a topic-based structure might have provided the reader with a more accessible approach to the heterodox terrain, and the contributions in the volume would have fit under the five headings of value and wellbeing, accumulation and production, money and finance, growth and crisis, and state and power.
Despite clear statements on the importance of money, there are few chapters on the topic, and unfortunately these do not provide the broad exposition that I would expect from a “handbook” as a reference work on the topic. The core chapter on money and monetary regimes is more or less limited to the perspective of modern monetary theory, and the policy chapter on restructuring financial systems, although richer in content, falls short of a satisfactory approach to the subject.
The treatment of money is unfortunately representative of many contributions to this book, with authors limiting the exposition of a broad topic to their perspective with a cursory nod to others. There is not space here to look at each contribution in detail but the chapters in part V, which outline proposals for the transformation of the system, illustrate the limitations of the book in general.
The exit strategy from capitalism’s ecological crisis (chapter 31) posits that the ecological crisis cannot be solved by the reform of existing structures but requires a new type of economy. This new economy is a new stage of capitalism in which ecological preservation is compatible with a new regime of capitalist accumulation. The need for a radical change is acknowledged but it seems that it can only take place within the capitalist structure. Unfortunately, we are not told how the current drivers of accumulation would be overcome or why the “transformation” of capitalism has to result in capitalism.
Chapter 32 deals with the restructuring of financial systems. After an interesting exposition of the link between mainstream arguments and the interests of the financial industry, it proceeds to a somewhat scattered discussion of money and banking. The author promotes “functional” finance and banking in which banks are “decentralized, supervised, and regulated” and “stable exchange rates and relatively closed financial systems are needed for national spaces of production to be relatively protected from what would otherwise be rough and disruptive seas of global finance” (453f.). Given that a “humble yet functional banking system has no need for a strong central bank” (453), it is not surprising that full reserve banking or one of its variants is not mentioned, although it feels like a gap in a chapter that otherwise sets out proposals for restructuring the financial system. The reasoning in favor of functional banking and finance is a bit thin, and it would have been beneficial to explain how a nation fully entangled in the global (finance) system would achieve stable exchange rates and carve out its national space of production.
When rethinking the role of the state (chapter 33), we are led to the conclusion that the state “has both the capacity and opportunity to use its power. . . to. . . promote a social-democratic welfare state” (468). Even if one does not suffer from libertarian government phobia, the chapter is an all too unreflective treatment of the state. The author flies the flag for “state capitalism” as a new form of modern capitalism and brings Russia into the discussion, which fatally undermines the case. I am not sure how the Russian kleptocracy comes to be characterized as “aimed at ensuring sustainable and broad-based economic growth” (466), or why Russia is reckoned to provide a good example of a state having the potential to nurture “the democratic fundamentals of the economy” (467). It would have been more instructive to look at real-existing state capitalism in, for example, China—and perhaps Russia falls into that category as well—to understand the systemic drivers that make these societies into quite the opposite of what the author aspires the state to be.
In contrast, chapter 34 on the corporation and corporate governance sets out comprehensively the role and power of corporations in capitalist economies and the historic turn from corporate investment in industrial capacity to investment in stock repurchase. It presents a well-argued case to counter corporate asset concentration and the attendant inequality by “democratizing” capitalism and rebalancing the power between capital and labor. Rebuilding trade unions, greater worker representation on corporate boards, industrial strategies, aggressive antitrust legislation, and a state commitment to full employment are key proposals for creating inclusive prosperity.
Achieving full employment (chapter 35) suggests a unified full-employment policy in the form of a job guarantee. This policy is unified in the sense that it takes account of Marxian and post-Keynesian diagnoses of the employment problem, namely the reserve army of labor caused by structural and technological change and the lack of effective demand. Given the necessary brevity of each chapter the contributions cannot go into all the details, but it would have been useful to understand how the types of jobs for the guarantee would be chosen—to make them meaningful and a real alternative to private employment as well as to prevent the establishment of modern workhouses. The consequences of such a policy would also have been interesting to contemplate, with backbreaking or monotonous low-paid private sector work crowded out by the job guarantee, which could lead to a fundamental restructuring of the economy. Regarding the current waste of human potential one might also have cast a critical eye to private employment without a social purpose in, for example, the financial sector. The job guarantee is a difficult and valuable project but, looking at the wider aims, perhaps the long-term ambition should be “worthwhile” rather than “full” employment, especially in light of the importance of social wellbeing that is highlighted in the chapter that follows.
The final chapter in part V looks at social welfare and social control through an institutional lens to trace the emergence of the welfare state and the competing motives that define its evolution. The more recent “capture of the state and the welfare state by the elite. . . is more obviously aligned to the promotion of particular interests” (504), which explains the retreat of welfare provision. While it is arguable whether the elite is more powerful now than in the past, the authors unfortunately do not tell us how and why, nor do they explain how elite interests manage to influence policy more strongly at present than before. Moving on to the medicalization of society and the social construction of aging, the authors touch on a number of interesting issues without a clear narrative. That “social control. . . can be seen to operate in complex and subtle ways” (506) should not have prevented a more definitive exposition of the links between health, age, dependency, and the economy. In the final section, the authors propose a solution to making decisions about the welfare system on the basis of the “instrumental valuation principle.” This topic alone could have occupied the whole chapter, especially to draw out the problems with the definition of values and how the instrumental valuation principle could be made to count in practice against the overwhelming elite interests identified earlier in the chapter.
The concept of “social provisioning” runs throughout the book as an organizing principle. A large number of chapters pick up this thread, but I believe the use of this concept to structure the entire handbook is deeply problematic. It frames the object of economic analysis as the question of “provisioning.” Accordingly, an early chapter claims that “heterodox economics may well be defined as the study of the social provisioning process” (37). Carrying on in this vein, chapter 13 for example, on Households in heterodox economic theory, conjectures that the “continuation of life should [thus] be paramount in the conceptualization of households” (189), which appears to be far too limited a perspective if we just think of the role of households in the transmission of cultural norms, patterns of domination, and the reproduction of the labor force.
Few people would deny that a “social provisioning” approach is more desirable than the narrow neoclassical conceptualization of provisioning as “economizing.” It analyzes how far the economic system is able to provide for human needs—or perhaps those of life on earth in its totality—in an equitable and sustainable way, rather than limiting the purpose of economics to justifying the market system as the mechanism for the efficient allocation of resources.
The problem with making “provisioning” the central question of economic analysis is that it takes a pre-analytical position that assigns an inherent purpose to the economy and skips over the analysis of capitalism on its own terms. This ultimately means that it cannot achieve a deep understanding of the drivers of capitalism, just as the apologia of neoclassical economics cannot. I think this is a fundamental flaw: we first need to be clear on how far certain reproductive underpinnings are constitutive of and necessary for capitalism before we can move on to a critique of the system and proposals for improvement.
At the same time, the handbook pays essentially no attention to the concepts of exploitation and imperialism as analytical tools to examine the history and contemporary mode of capitalism. This inattention highlights a fundamental difficulty with an undertaking such as this book. How does one manage to fairly represent incongruous analytical stances? In this case, using the common thread of social reproduction had the effect of limiting the diversity of heterodoxy. If the editors had conceptualized heterodoxy in a different manner the structural and historic drivers of the capitalist dynamic would have been given far greater (and deserved) prominence.
Although I applaud the approach not to look at heterodoxy simply in contrast to orthodoxy, I feel it is an omission that the role of equilibrium as a reference point of analysis is not problematized and its usefulness for heterodox approaches reviewed more thoroughly. Indeed, the dividing line between orthodox and heterodox analysis may perhaps best be drawn according to whether or not an equilibrium position is regarded as a desirable or necessary object(ive) of investigation—rather than in reference to the social provisioning process.
Equilibrium-based, allocation-centric orthodox analysis is ahistorical in its approach, which is one key reason for its intellectual sterility and its inability to interpret the economic reality of capitalism in a convincing way. While heterodox economics is per se not required to be historical, insofar as it purports to analyze capitalism it needs to acknowledge the historical “embeddedness” of this (as any other) system and thus the historical contingency of any grand theory.
In its totality, the handbook does not reach the level of scholarship I had hoped for when opening its pages. One can find a large number of interesting and thought-provoking points, but many chapters lack the coherence or comprehensiveness that I believe should characterize the contributions to a reference work on heterodox economics.
