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The Trouble with Capitalism

The Trouble with Capitalism

Harry Shutt

(2009)

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Abstract

The recent collapse of the banking system and instability in the financial markets has dramatically shaken confidence in the global economic order. Is the current variant of 'free market' capitalism really sustainable? The Trouble With Capitalism - originally written, with remarkable prescience, in 1998 - anticipates such a development and explains the underlying economic fragility it has revealed. Rather than being merely a temporary blip in the march of capitalism, Shutt argues forcefully that the on-going crisis has arisen as a result of fundamental economic problems, stemming from the growing redundancy of both labour and capital since the 1970s. In doing so, he exposes the sham of the laissez faire prospectus, showing that state power and capital are increasingly being used to prop up capital while pretending that the aim is to roll back the frontiers of the state. The implications of the author's startling conclusion (re-examined in a new foreword) - that the maximisation of profit must cease to be the main basis for allocating resources - are profound.
'Identifies an impressive array of potential problems.' The Christian Science Monitor 'Shutt is one of the few to expose capitalism’s lies and imperfections, faults that critically threaten our democratic survival.' Publishers Weekly 'In this thoughtful treatment of the current economic scene, one feels convinced that the collapse of Western civilization as we know it is at hand.' Library Journal 'Offers no easy answers, but suggests the West is going to have to face the fact that profit-maximising capitalism has run its course.' Tribune 'Based on wide knowledge, well documented source material and sharp analysis, everyone who reads it will learn from it...' Liberation 'This has been the most interesting discussion with an economist I have ever had in my life' George Galloway, Press TV 'Shutt [has] a message for every saver and investor: a crash of 1929 proportions is almost inevitable' Dan Atkinson in The Guardian (on the first edition of this book)
Harry Shutt was educated at Oxford and Warwick Universities. He worked for six years in the Development and Planning Division of the Economist Intelligence Unit. He then moved to the Research Department of the General and Municipal Workers' Union (1973-76) and subsequently became Chief Economist at the Fund for Research and Investment for the Development of Africa (1977-79). Since then he has been an independent economic consultant. His books include 'The Myth of Free Trade: Patterns of Protectionism Since 1945', (1985), 'The Trouble with Capitalism: An Inquiry into the Causes of Global Economic Failure', (Zed 1999), 'A New Democracy: Alternatives to a Bankrupt World Order' (Zed 2001) and 'The Decline of Capitalism: Can a Self-Regulated Profits System Survive (Zed 2004).

Table of Contents

Section Title Page Action Price
About the author ii
Foreword: Apocalypse Now? vii
Notes xiv
Introduction 1
1 | The Origins of Modern Capitalism: A Brief History to World War II 5
Notes 17
2 | The Post-1945 Economic Dispensation in the West 19
The Proactive State 20
Figure 1 Total government expenditure (% of GDP), OECD countries 21
International Collaboration 24
Emerging Contradictions 29
Notes 33
3 | The End of the Boom and the Neo-classical Reaction 34
Market Saturation 35
More Limited Investment Opportunities 37
Table 1 OECD: variations in rate of change in output, private consumption, fixed investment and consumer prices 38
Ambivalence on Inflation 41
Notes 44
4 | The Illusion of Orthodoxy 46
‘Monetarism’ 46
The Pursuit of Fiscal Rectitude 49
Privatisation 50
Figure 2 OECD: the pattern of production and fixed investment growth since the 1950s 57
A Policy of Desperation 57
Figure 3 OECD: gross public debt, 1970–97 60
Notes 61
5 | Incurable Addiction to State Support 63
The Interventionist Tradition 66
Lenders of Last Resort 68
The Fiscal Crisis: Threat and Opportunity 73
Notes 76
6 | Globalisation and the Power Vacuum 77
Banking Deregulation 78
Speculative Excesses 80
Anarchy in the Foreign Exchange Markets 82
Offshore Financial Centres 84
The Triumph of Short-termism 85
Notes 91
7 | Technological Nemesis 92
1. Labour Devalued 93
2. Capital: Devaluation Resisted 97
Revolutionary Implications 104
Notes 108
8 | Coping with the Capital Glut 110
Expanding the Outlets for Investment 111
Maintaining the Return on Investment 124
Notes 131
9 | Wider Symptoms of Disintegration: I – The Wreckage of Soviet Communism 133
The Relative Success of Eastern Europe 141
China: The Great Exception 143
Notes 147
10 | Wider Symptoms of Disintegration: II – Third World Catastrophe 149
The Failure of ‘Reform’ 159
A Common Thread 164
Notes 164
11 | A Crisis of Legitimacy 166
The Spread of Lawlessness 167
Loss of Accountability 175
Notes 180
12 | Can the Profits System be Saved? 182
Patterns of Demand 184
Portents for the Future 187
A Rebirth of Consumption? 188
Environmentalism: Less Opportunity than Threat 190
Illusory Potential of the Third World and the Former Communist Bloc 191
Retreating to Determinism 194
Conclusion: No Way Out 195
Notes 196
13 | Political Paralysis 198
The Trauma of the Left 198
Rebound of the Right 201
Forced Unanimity 204
Popular Red Herrings 208
Strategies of Desperation 210
An Ideological Impasse 211
Notes 212
14 | Essential Features of a Sustainable World Order 214
An End to Growth-Dependency 217
A New Collectivism 217
A New Democracy 219
A New Globalism 222
An Inescapable Choice 229
Notes 230
Index 231