Andrew Gamble: Capitalist crises and the politics of recession: Review

The Spectre at the feast: Capitalist crises and the politics of recession

London / 2009 / £14

Fortunately this statement is not on the cover, but in the last chapter, and the reader that has stuck with Andrew Gamble’s book will have found much to educate and stimulate thinking about the capitalist economy.

Andrew Gamble’s academic career started in Sheffield University’s Politics Department, where in the mid to late 1970s, on the back of his and Paul Walton’s excellent introduction to Marx’s political economy (From Alienation to Surplus Value), he guided a generation of students, including me, in the study of Das Capital. Students during the 1970’s global capitalist crisis, we were able to understand and act upon our grasp of the root causes of the recession.

In his journey from Sheffield to his current post as Professor of Politics at Cambridge University, Gamble has cast aside his Marxism for a cosmopolitan liberalism, but he remembers enough of it to do a reasonably good job in presenting an overview of competing interpretations of the causes of capitalist crises in general and this current one in particular.

The second chapter, for example, summarises very well the views of Marx, Hayek, Schumpeter, Polayni and Keynes on the roots of capitalist crises and the preferred policy responses – from radical state intervention to let-it-rip market fundamentalism.

At the outset Gamble summarises the key causes of the current malaise and here there is nothing too novel about his approach. He follows many commentators in tracing the proximate causes of the credit crunch to the asset inflation in the US housing market and the securitisation of debt instruments founded upon that – particularly sub-prime – market.

But he does rightly make two important points. First, that this bubble is one of a long line of such financial bubbles in the history of capitalism and that they are endemic to it, not some failure of policy. Secondly, he establishes the inner connection between the recent bubbles (including the dotcom bubble of the late 1990s) and the extensive boom in global capitalism centred on Asia in the 1990s onwards. He remarks:

“A second major factor which made the boom possible was the emergence of China, India, Brazil and other rising economic powers in the 1990s. The dramatic leap, in particular, of Chinese economic growth in the 1990s, propelled by the movement of rural workers into the cities on the eastern coastal strip, made possible a supply of cheap manufactured goods which kept inflation low in rich countries. The high savings ratio in China created large surpluses, which were lent to western governments and western banks, and helped create the credit to allow consumers to continue buying the goods China was producing. The bringing into play of such vast populations in both world production and world trade was a transformative event for the global economy, and helped create the conditions in which the financial growth model could succeed for such a long time, despite the numerous bubbles and instabilities.” (p18)

Gamble’s main theme in The Spectre at the Feast is to draw a distinction between financial crisis and crises of capitalism, as well as the connections between them. The former inevitably arise from the over-extension of a boom in conditions of the increasing independence of the financial sector from the underlying industrial economy; at a certain point a crash becomes inevitable.

But general crises of capitalism are different, rarer and do not inevitably arise out of a financial crash. He argues we have only seen two such crises globally in the last 100 years – the 1930’s Great Depression and the 1970’s stagflation.

These crises are prolonged ruptures in the whole economy, giving rise to a major collapse in output and employment; but more than this, they are transformative events in politics and ideology, which do much more than leave a few ripples on the surface of society, before normal service is resumed.

President Roosevelt’s New Deal after 1932 gradually upended the established consensus on the role of the capitalist state in solving economic crisis; the emergence of neo-liberalism in the late 1970s wrought a full-scale counter-revolution in policy-making too, paving the way for deregulation, privatisation and a breach in the post-war compromise between the bosses and the labour movement.

Much of the book then is an account of these periods as well as informed speculation as to whether the current post-credit crunch recession will morph into a similar far-reaching transformative period in world economics and international relations.

As indicated earlier, for Gamble the jury is still out. Completed in early 2009 when the recession was taking hold, he clearly sees the scale of the decline involved; but he suggests that the measures already undertaken by EU and US governments as well as those in Asia, would probably be enough to avert a protracted depression-style descent. In this sense he believes a period of 1970s style stagnation, may be more likely.

Indeed, what is interesting about the policy response of the various capitalist states during 2008 is what an eclectic mix of policies has been set in train. What we have witnessed is a pragmatic combination of policies from the opposed schools of Milton Freidman – high priest of post-war monetarism – and his nemesis John Maynard Keynes. For example the chair of the US Federal Reserve and Freidman devotee, Bernard Bernanke, injected huge quantities of money into the US economy last year in order to encourage major banks to keep supplying credit to the rest of the economy.

This has been supplemented under Obama’s administration by a £750bn fiscal stimulus, a reflationary package to jump start demand that is straight out of the Keyensian textbooks. Broadly similar dual packages have been implemented across the world.

It is thus difficult to discern as yet an emerging rival ideological consensus on a par with the 1930s or 1970s; rather the battle in bourgeois politics is around which elements of the established policies were most to blame for the calamity? After an initial period of defensiveness last year, the market fundamentalists are pushing the view that it was all a failure of the regulators, in that the Federal Reserve’s policies allowed money to get too cheap after 2000 and thereby encouraged house price inflation.

For their part the liberal regulators, rightly celebrating the death of the “efficient markets thesis”, point to the lax and unenforced regulations that encouraged and rewarded massive risk-taking that contributed to the near systemic meltdown of financial markets last autumn.

Gamble is also probably right to suggest that the current period has more affinities with the 1970s than the 1930s in another regard. The years of the Great Depression was a time of major transition in international relations. The First World War had failed to resolve the problem of global capitalist leadership; Britain’s power and influence were waning but that of the USA had yet to take its place.

The crash of 1929 and after did put a final nail in the coffin of the liberal international order, but nothing emerged to replace it. In the gaps, national protectionism and beggar-thy-neighbour policies won out, sinking the world economy.

Today, the right has gained most from the current turmoil, as insecurity among the working and middle classes mounts and as the working class reformist parties and trade unions fail to offer a vigorous systematic anti-capitalist alternative.

Yet at a state level protectionist policies have so far been muted, the global economy remains relatively open and the power and initiative of the US (and its subaltern Britain) to act as world leaders for the international bourgeoisie in this crisis is maintained and largely unchallenged.

Gamble is right in the later chapters to outline the growth and significance of the rise of China and India for world economics and politics, but he also right to insist the timeline for this to mature into a major challenge to US dominance is longer than many people assume.

Finally, Gamble’s own prescriptions for the current crisis fall firmly in the camp of the liberal and cosmopolitan regulators – those who seek to weaken and harness the financial markets and strengthen the role of the global south in international decision-making bodies.

He fairly summarises the anti-capitalist critique of the crisis, although rather one-sidedly focuses on nationalisation of the financial system as the movement’s answer. In itself an important immediate demand of the left to direct finance to job creation – especially in green technology industries – nationalisation alone does not root out the essential cause of capitalist crises; namely, the private ownership of the main means of production and finance.

Only a set of policies that end this and put the whole economy under the direction of a democratic but centralised planning system, geared towards halting climate change and radically redistributing wealth, can be truly labelled anti-capitalist.

Last winter there was such a huge loss of self-confidence by international business leaders and global capitalist politicians – as well as their scribes and propagandists – that a sizeable, working class party that agitated on the streets and factories for radical anti-capitalist solutions could have gained a mass audience and be better placed now to ensure the architects of the crisis do not get another chance to screw up.

That moment passed, but there is enough material in Gamble’s book to arm socialists and anti-capitalists for the arguments that lie ahead.

Thu 17, December 2009 @ 11:03