The Trouble With Capitalism, by Harry Shutt

Abstract

Harry Shutt The Trouble With Capitalism, Zed Books: London, 2009, 237 pp: 9781848134225 14.99 [pounds sterling] (pbk) In this contribution to the critical financial histories of our times, Harry Shutt explains why he thinks the current crisis may be the end for capitalism as we know it. The book opens with brief chapters sketching the history of capitalism up to the Second World War, followed by a sketch of the workings of the western economies since 1945. Later chapters offer more detailed analyses of current economic difficulties and policy responses. The historical narrative is similar to others in this increasingly crowded field, such as John Bellamy Foster and Fred Magdoff (2009) or Robert Brenner (2003). The principal reason why the current recession may be the final crisis of capitalism is the capital glut thesis. This is similar to the tendency to overaccumulation identified by Marx, then developed by David Harvey, Paul Baran and Paul Sweezy, John Bellamy Foster and other Marxists. Capitalist industry generates too much profit searching for too few investment outlets, with the bourgeoisie chasing around the world in their search for new markets and new investments, only to end up back where they started, facing an even bigger crisis. The next reason why the current crisis may prove terminal is that, according to Shutt, both Keynesian and neoclassical/neoliberal economics have failed. Keynesianism failed in the stagflation of the 1970s; neoclassical economics failed in the succession of bubbles and busts since 1980. There is much to commend in The Trouble With Capitalism. In the historical surveys of capitalism to 1980, the author makes an interesting and useful argument concerning the end of the long postwar boom. The boom itself followed from the confidence felt by both consumers and the private sector in government, keeping the macroeconomic framework stable. This enabled consumers to take on long-term debt such as mortgages and car loans without the fear that such risks would ruin them financially. The welfare state would provide for their children's education and healthcare, and would pay a pension in retirement. Growth began to slow, according to Shutt, when a majority of households in the rich countries had bought their first cars, refrigerators, TVs, etc. From then on, 'the markets for the most durable products ... tended to be more and more governed mainly by replacement demand, rather than by continuous opening up of new groups of buyers' (p. 35). At the same time, there were also signs of a contradiction between government policy and commitment to free markets. More importantly for the viability of the system, profitable investment opportunities were drying up. This final problem, emerging from the long boom, is developed in later chapters of the book. According to Shutt, the long-term cause of the current recession has been 'the impossibility of sustaining high enough economic growth to support the value of capital assets ... while at the same time meeting the income and welfare requirements of the mass of the population' (p. 184). In making this argument, Shutt is on similar ground to David Harvey (1999) and others. Unlike Harvey, Shutt presents the capital glut as an immediate threat to the entire global capitalist economy. The depth and intractability of the crisis is demonstrated, in Shutt's argument, by the myriad policies pursued by governments since the 1970s. All of these policies were sold as means to restore long-term economic growth and ali of them achieved no more than inflating a financial bubble, leading to a crisis more severe than the last, making the problem of capital glut worse. …