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The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China
The days of boom and bubble are over, and the time has come to understand the long-term economic reality. Although the Great Recession officially ended in June 2009, hopes for a new phase of rapid economic expansion were quickly dashed. Instead, growth has been slow, unemployment has remained high, wages and benefits have seen little improvement, poverty has increased, and the trend toward more inequality of incomes and wealth has continued. It appears that the Great Recession has given way to a period of long-term anemic growth, which Foster and McChesney aptly term the Great Stagnation.
This incisive and timely book traces the origins of economic stagnation and explains what it means for a clear understanding of our current situation. The authors point out that increasing monopolization of the economy—when a handful of large firms dominate one or several industries—leads to an over-abundance of capital and too few profitable investment opportunities, with economic stagnation as the result. Absent powerful stimuli to investment, such as historic innovations like the automobile or major government spending, modern capitalist economies have become increasingly dependent on the financial sector to realize profits. And while financialization may have provided a temporary respite from stagnation, it is a solution that cannot last indefinitely, as instability in financial markets over the last half-decade has made clear.
This incisive and timely book traces the origins of economic stagnation and explains what it means for a clear understanding of our current situation. The authors point out that increasing monopolization of the economy—when a handful of large firms dominate one or several industries—leads to an over-abundance of capital and too few profitable investment opportunities, with economic stagnation as the result. Absent powerful stimuli to investment, such as historic innovations like the automobile or major government spending, modern capitalist economies have become increasingly dependent on the financial sector to realize profits. And while financialization may have provided a temporary respite from stagnation, it is a solution that cannot last indefinitely, as instability in financial markets over the last half-decade has made clear.
227 pages, Hardcover
First published September 1, 2012
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About the author
John Bellamy Foster
96 books197 followersJohn Bellamy Foster is a professor of sociology at the University of Oregon, editor of Monthly Review and author of several books on the subject of political economy of capitalism, economic crisis, ecology and ecological crisis, and Marxist theory.
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Displaying 1 - 8 of 8 reviews
February 21, 2013
This is a rigorous critique of our capitalist economic system and the way contemporary economists analyze it. Building on the work of Paul Sweezy (co-author of Monopoly Capital: An Essay on the American Economic and Social Order in 1966), Foster and McChesney develop a theory of "monopoly-finance capital," in which profits are sought through financial speculation rather than production, in a system dominated by multinational corporations. Among the outcomes of such a system: financial bubbles and stagnation, as demand is insufficient to absorb investment capital.
November 15, 2024
Legendary academic media critic Robert McChesney and radical economist John Bellamy Foster, the author of other thoughtful analyses of the current global crisis, have joined forces in this volume, which features a powerful and lucid account of the litany of horrible things currently taking place in the world economy and its broader implications for the future.
The book is a critique of the world economic system and the striking failure of the mainstream economics profession and social sciences generally to perceive the system's massive structural flaws. They note, for example, how economists failed to prevent the Great Financial Crisis of 2007, despite having received ample warnings from multiple sources across the spectrum of opinion. As the authors put it: "The problem ... was not that no one saw the Great Financial Crisis coming. Rather the difficulty was that the financial world, driven by their endless desire for more, and orthodox economists, prey to the worship of their increasingly irrelevant models, were simply oblivious to the warnings of heterodox economic observers all around them." (8) The authors' main thesis is that since the 1970s, the advanced industrial economies have been marked by persistent stagnation, i.e., slowdown in the rate of economic growth (the data provided in the book does indeed illustrate this point dramatically). Persistent trade deficits and financial bubbles have been the means by which these nations have attempted to compensate for the stagnation tendency. Bubbles do, however, pop, as has occurred repeatedly during this period. Related phenomena are the steadily increasing rate of monopolization (thus moving further and further away from the idealized competitive markets described in neoclassical models), accumulation (the fact that corporations are sitting on tons of cash but won't invest it for lack of attractive profit opportunities), as well as the financialization of the economy and the consequent offshoring of production, taking advantage of what the authors call "global labor arbitrage". All these tendencies merge into one giant ongoing global crisis, with highly ominous implications for the future of the human species. Examining more closely the various strands entering into this picture is what the book is devoted to. The discussion draws heavily on the tradition of radical and heterodox economics, notably the highly prescient and seminal work of Paul Sweezy.
Marxian economists like to divide the history of capitalism into different epochs: mercantilism, competitive capitalism, and (with the rise of huge multinational corporations in the 20th century), monopoly capitalism -- the latter signaling a move away from price competition and towards increased accumulation. By the 1970s, the authors argue, the world had entered into a new such phase: monopoly-finance capitalism. "Characteristic of [this phase] is the stagnation-financialization trap, whereby financial expansion has become the main 'fix' for the system, yet is incapable of overcoming the underlying structural weakness of the economy. Much like drug addiction, new, larger fixes are required at each point merely to keep the system going." (44) Central banks and government treasuries have become subordinated to the power of finance capital, making the state a direct facilitator of the growth of bubbles. The "political" side of the equation is the intensification in the push for neoliberal "reforms" everywhere -- in reality, no more than a device to boost the profits of big finance at the expense of the working population. Since bubbles is the one real option available to governments for boosting growth, what we can expect to happen in the period following the latest financial crash is either a prolonged period of stagnation or possibly a new financial bubble. Ominous reports in the business press are cited that describe how the financial industry have again begun to peddle exotic debt instruments with a potential for huge losses in the future.
What the financialization of accumulation entails concretely is discussed at some length. Keynes's recognition of Marx's insight that the "monetary" realm of the economy is in principle separate from the "real" economy, with the effect that investors might seek to "make money off money" rather than through productive investment (a concept vigorously denied by orthodox economists) are referenced by the authors as an illustration of the fundamental nature of financial profit, which has gained ascendancy in recent decades in the process known as financialization. The effect of the financialization of accumulation is summed up like this: "financialization, while boosting capital accumulation through a process of speculative expansion, ultimately contributes to the corrosion of the entire economic and social order, hastening its decline." (61)
The steady and ongoing process of monopolization which has proceeded at a dramatic pace throughout the post-World War II period is discussed in detail. This is a highly significant phenomenon, because, as the authors explain: "The economic defense of capitalism is premised on the ubiquity of competitive markets, providing for the rational allocation of scarce resources and justifying the existing distribution of incomes. The political defense of capitalism is that economic power is diffuse and cannot be aggregated in such a manner as to have undue influence over the democratic state. Both of these core claims for capitalism are demolished if monopoly, rather than competition, is the rule." (65) This is indeed the case as the authors show. They review the increasing number of industries that are dominated by a small number of firms, the share of corporate profits held by the largest 200 corporations, and other measurements -- all of them demonstrating an increasing trend towards monopolization. They also discuss how the economics profession has had severe difficulties in coming to terms with this reality. Taking their inspiration from the writer Ronald Coase (a figure with a high degree of totally undeserved credibility), the utterly corrupt Chicago School, notably George Stigler, have resorted to tortured acrobatics in defining the prevailing state of monopoly capitalism as the very peak of perfect neoclassical competition! Amazingly, they have largely gotten away with this stunt, as even scholars on the left have come to largely neglect the monopoly question -- much to the left's detriment, the authors contend with considerable justice.
The authors also review how the expansion of monopoly capital has been taking place on an international plane. Foreign direct investment as a percentage of the income of national economies has gone up considerably. The amount of sales and employment carried out by the foreign affiliates of the largest U.S. multinational corporations has increased quite dramatically. Multinational corporations collude with one another in hiring foreign subcontractors to carry out the production for them as cheaply as possible. This globalization process is often misleadingly referred to as the outcome of increasing competition. As the authors point out, though, the only real competition taking place is that between workforces in different countries, "competing" to see who can endure the greatest exploitation and thus attract foreign investment (capital being mobile while labor is immobile -- the opposite of what Ricardo assumed). Competition between firms is sharply declining -- price competition having become something of a taboo in the corporate world. "The main consequence of the internationalization of monopoly capital for accumulation are the intensification of world exploitation and a deepening tendency to stagnation." (121) In other words, contrary to what cheerleaders of corporate-led globalization like to claim, the process serves to reduce rather than expand the global economic "pie."
The expansion of international monopoly-finance capital has as a concomitant the expansion of an enormous global reserve army of impoverished workers, ready to be employed under the most horrific conditions, which capital can take advantage of through "global labor arbitrage". The authors review the facts about the size of this reserve army, showing that there are vast pools yet to be untapped. The system of superexploitation of Third World labor is thus likely to continue for a long period ahead. Marx's writings on this topic were to prove prescient, as is shown in the book. "The new imperialism of the late twentieth and twenty-first centuries is ... characterized, at the top of the world system, by the domination of monopoly-finance capital, and, at the bottom, by the emergence of a massive global reserve army of labor." (130)
The book ends with a fascinating discussion of the state of Chinese economy and society. With the stagnation of the Triad economies (North America, Europe, and Japan) in recent decades, the growth rate of China, which remained high through the 2007-09 crisis, has fulfilled the supremely important function of keeping the world economy from completely tanking. Rather ominous signs are, however, on the horizon at the present time: it is very likely that a financial bubble has taken root in China. If it were to burst, the consequences could prove devastating indeed. Apart from that, China suffers from massive internal problems: extreme inequality, too low a rate of consumption due to the extremely low wages of workers, (most of them temporary rural migrants), enormous and growing ecological problems, etc. There is huge unrest among Chinese workers, who are highly militant, suggesting that the Chinese revolution might one day be born again. The authors also review how China's "growth" is something of a myth. The goods referred to as "exports" from China, in actuality contain a remarkably low level of value added in China (only a couple of percent of the retail price). Huge multinational corporations based in the Triad economies are very much involved in profiting off Chinese manufacturing. These factors, again, suggest that fears about China becoming the next dominant economy appear rather overblown. As the authors put it, in the "global supply-chain system, China is more the world assembly hub than the world factory." (170)
Summing up, the book is a highly riveting and often horrifying account of the enormously powerful forces of global financial-monopoly capital wreaking havoc on human society in every corner of the world, a process we can expect to continue for the foreseeable future. At times the discussion goes a little too far in its striving to subsume all world events under the rubric of a certain economic "theory", namely that of Marx, expanded by Paul Sweezy and others. The Marxian theory is probably the "least bad" among the choices available, however. Nevertheless, by and large, the theorizing doesn't reach the point where the discussion fails to convey the reality in all its starkness. The conclusion to be drawn from the panorama laid out in the book is that working people better commit themselves to militant struggle to resist the hurricane-like forces of exploitation and immiseration. Crucially, such a struggle needs to be internationalized. The authors sum it up nicely when they point out that "The real struggle ... is one of creating international solidarity between Chinese workers, who are suffering from extreme forms of exploitation (even superexploitation), and workers in the developed world, who are currently losing ground in a race to the bottom." (182) Education is the first step. For that purpose, this book constitute an invaluable tool.
The book is a critique of the world economic system and the striking failure of the mainstream economics profession and social sciences generally to perceive the system's massive structural flaws. They note, for example, how economists failed to prevent the Great Financial Crisis of 2007, despite having received ample warnings from multiple sources across the spectrum of opinion. As the authors put it: "The problem ... was not that no one saw the Great Financial Crisis coming. Rather the difficulty was that the financial world, driven by their endless desire for more, and orthodox economists, prey to the worship of their increasingly irrelevant models, were simply oblivious to the warnings of heterodox economic observers all around them." (8) The authors' main thesis is that since the 1970s, the advanced industrial economies have been marked by persistent stagnation, i.e., slowdown in the rate of economic growth (the data provided in the book does indeed illustrate this point dramatically). Persistent trade deficits and financial bubbles have been the means by which these nations have attempted to compensate for the stagnation tendency. Bubbles do, however, pop, as has occurred repeatedly during this period. Related phenomena are the steadily increasing rate of monopolization (thus moving further and further away from the idealized competitive markets described in neoclassical models), accumulation (the fact that corporations are sitting on tons of cash but won't invest it for lack of attractive profit opportunities), as well as the financialization of the economy and the consequent offshoring of production, taking advantage of what the authors call "global labor arbitrage". All these tendencies merge into one giant ongoing global crisis, with highly ominous implications for the future of the human species. Examining more closely the various strands entering into this picture is what the book is devoted to. The discussion draws heavily on the tradition of radical and heterodox economics, notably the highly prescient and seminal work of Paul Sweezy.
Marxian economists like to divide the history of capitalism into different epochs: mercantilism, competitive capitalism, and (with the rise of huge multinational corporations in the 20th century), monopoly capitalism -- the latter signaling a move away from price competition and towards increased accumulation. By the 1970s, the authors argue, the world had entered into a new such phase: monopoly-finance capitalism. "Characteristic of [this phase] is the stagnation-financialization trap, whereby financial expansion has become the main 'fix' for the system, yet is incapable of overcoming the underlying structural weakness of the economy. Much like drug addiction, new, larger fixes are required at each point merely to keep the system going." (44) Central banks and government treasuries have become subordinated to the power of finance capital, making the state a direct facilitator of the growth of bubbles. The "political" side of the equation is the intensification in the push for neoliberal "reforms" everywhere -- in reality, no more than a device to boost the profits of big finance at the expense of the working population. Since bubbles is the one real option available to governments for boosting growth, what we can expect to happen in the period following the latest financial crash is either a prolonged period of stagnation or possibly a new financial bubble. Ominous reports in the business press are cited that describe how the financial industry have again begun to peddle exotic debt instruments with a potential for huge losses in the future.
What the financialization of accumulation entails concretely is discussed at some length. Keynes's recognition of Marx's insight that the "monetary" realm of the economy is in principle separate from the "real" economy, with the effect that investors might seek to "make money off money" rather than through productive investment (a concept vigorously denied by orthodox economists) are referenced by the authors as an illustration of the fundamental nature of financial profit, which has gained ascendancy in recent decades in the process known as financialization. The effect of the financialization of accumulation is summed up like this: "financialization, while boosting capital accumulation through a process of speculative expansion, ultimately contributes to the corrosion of the entire economic and social order, hastening its decline." (61)
The steady and ongoing process of monopolization which has proceeded at a dramatic pace throughout the post-World War II period is discussed in detail. This is a highly significant phenomenon, because, as the authors explain: "The economic defense of capitalism is premised on the ubiquity of competitive markets, providing for the rational allocation of scarce resources and justifying the existing distribution of incomes. The political defense of capitalism is that economic power is diffuse and cannot be aggregated in such a manner as to have undue influence over the democratic state. Both of these core claims for capitalism are demolished if monopoly, rather than competition, is the rule." (65) This is indeed the case as the authors show. They review the increasing number of industries that are dominated by a small number of firms, the share of corporate profits held by the largest 200 corporations, and other measurements -- all of them demonstrating an increasing trend towards monopolization. They also discuss how the economics profession has had severe difficulties in coming to terms with this reality. Taking their inspiration from the writer Ronald Coase (a figure with a high degree of totally undeserved credibility), the utterly corrupt Chicago School, notably George Stigler, have resorted to tortured acrobatics in defining the prevailing state of monopoly capitalism as the very peak of perfect neoclassical competition! Amazingly, they have largely gotten away with this stunt, as even scholars on the left have come to largely neglect the monopoly question -- much to the left's detriment, the authors contend with considerable justice.
The authors also review how the expansion of monopoly capital has been taking place on an international plane. Foreign direct investment as a percentage of the income of national economies has gone up considerably. The amount of sales and employment carried out by the foreign affiliates of the largest U.S. multinational corporations has increased quite dramatically. Multinational corporations collude with one another in hiring foreign subcontractors to carry out the production for them as cheaply as possible. This globalization process is often misleadingly referred to as the outcome of increasing competition. As the authors point out, though, the only real competition taking place is that between workforces in different countries, "competing" to see who can endure the greatest exploitation and thus attract foreign investment (capital being mobile while labor is immobile -- the opposite of what Ricardo assumed). Competition between firms is sharply declining -- price competition having become something of a taboo in the corporate world. "The main consequence of the internationalization of monopoly capital for accumulation are the intensification of world exploitation and a deepening tendency to stagnation." (121) In other words, contrary to what cheerleaders of corporate-led globalization like to claim, the process serves to reduce rather than expand the global economic "pie."
The expansion of international monopoly-finance capital has as a concomitant the expansion of an enormous global reserve army of impoverished workers, ready to be employed under the most horrific conditions, which capital can take advantage of through "global labor arbitrage". The authors review the facts about the size of this reserve army, showing that there are vast pools yet to be untapped. The system of superexploitation of Third World labor is thus likely to continue for a long period ahead. Marx's writings on this topic were to prove prescient, as is shown in the book. "The new imperialism of the late twentieth and twenty-first centuries is ... characterized, at the top of the world system, by the domination of monopoly-finance capital, and, at the bottom, by the emergence of a massive global reserve army of labor." (130)
The book ends with a fascinating discussion of the state of Chinese economy and society. With the stagnation of the Triad economies (North America, Europe, and Japan) in recent decades, the growth rate of China, which remained high through the 2007-09 crisis, has fulfilled the supremely important function of keeping the world economy from completely tanking. Rather ominous signs are, however, on the horizon at the present time: it is very likely that a financial bubble has taken root in China. If it were to burst, the consequences could prove devastating indeed. Apart from that, China suffers from massive internal problems: extreme inequality, too low a rate of consumption due to the extremely low wages of workers, (most of them temporary rural migrants), enormous and growing ecological problems, etc. There is huge unrest among Chinese workers, who are highly militant, suggesting that the Chinese revolution might one day be born again. The authors also review how China's "growth" is something of a myth. The goods referred to as "exports" from China, in actuality contain a remarkably low level of value added in China (only a couple of percent of the retail price). Huge multinational corporations based in the Triad economies are very much involved in profiting off Chinese manufacturing. These factors, again, suggest that fears about China becoming the next dominant economy appear rather overblown. As the authors put it, in the "global supply-chain system, China is more the world assembly hub than the world factory." (170)
Summing up, the book is a highly riveting and often horrifying account of the enormously powerful forces of global financial-monopoly capital wreaking havoc on human society in every corner of the world, a process we can expect to continue for the foreseeable future. At times the discussion goes a little too far in its striving to subsume all world events under the rubric of a certain economic "theory", namely that of Marx, expanded by Paul Sweezy and others. The Marxian theory is probably the "least bad" among the choices available, however. Nevertheless, by and large, the theorizing doesn't reach the point where the discussion fails to convey the reality in all its starkness. The conclusion to be drawn from the panorama laid out in the book is that working people better commit themselves to militant struggle to resist the hurricane-like forces of exploitation and immiseration. Crucially, such a struggle needs to be internationalized. The authors sum it up nicely when they point out that "The real struggle ... is one of creating international solidarity between Chinese workers, who are suffering from extreme forms of exploitation (even superexploitation), and workers in the developed world, who are currently losing ground in a race to the bottom." (182) Education is the first step. For that purpose, this book constitute an invaluable tool.
March 30, 2018
Authors John Bellamy Foster and Robert W. McChesney marshal an impressive collection of material to present an understanding of the capitalist dynamics that have brought the world to its present state of crisis and why that is the natural outcome of these dynamic forces, examining the crisis from a global perspective.
They argue persuasively that, in the absence of dramatic innovations such as the automobile or the steam engine, which have not occurred for several decades, stagnation is the expected norm, particularly in "mature" capitalist economies. Nor will hoped-for demand from "emerging" economies such as China and India be able to make up for stagnant demand in the advanced capitalist countries. China and India contain too large a reserve army of underemployed labor for wages to substantially increase there; therefore Chinese and Indian consumption will not be a path out of world economic crisis as many orthodox economists and political leaders have hoped, according to The Endless Crisis.
Orthodox economics, dominated by rigid Chicago School thinking, completely failed to predict the financial meltdown and subsequent stagnation. The reason for that lies in orthodox economics existing as an ideological campaign that long ago severed itself from analyzing the real world. In strong contrast, The Endless Crisis explodes ideological myth-making.
The book is a very needed departure from the usual apologetics for capitalist outcomes. The authors provide a single source for understanding the present economic impasse, laying out with devastating precision the reasons for the economic crisis, the inevitability of crisis, the inequality and instability inherent in the capitalist system, and the need to move to a more humane system.
They argue persuasively that, in the absence of dramatic innovations such as the automobile or the steam engine, which have not occurred for several decades, stagnation is the expected norm, particularly in "mature" capitalist economies. Nor will hoped-for demand from "emerging" economies such as China and India be able to make up for stagnant demand in the advanced capitalist countries. China and India contain too large a reserve army of underemployed labor for wages to substantially increase there; therefore Chinese and Indian consumption will not be a path out of world economic crisis as many orthodox economists and political leaders have hoped, according to The Endless Crisis.
Orthodox economics, dominated by rigid Chicago School thinking, completely failed to predict the financial meltdown and subsequent stagnation. The reason for that lies in orthodox economics existing as an ideological campaign that long ago severed itself from analyzing the real world. In strong contrast, The Endless Crisis explodes ideological myth-making.
The book is a very needed departure from the usual apologetics for capitalist outcomes. The authors provide a single source for understanding the present economic impasse, laying out with devastating precision the reasons for the economic crisis, the inevitability of crisis, the inequality and instability inherent in the capitalist system, and the need to move to a more humane system.
July 2, 2021
This is an excellent book that analyzes the stagnation that has settled, particularly since the 2008 crisis, in the world economy. It brings a point of view different from that of mainstream economic analysis.
The book is composed of several articles that appeared in Monthly Review magazine. It is unfortunate that an effort was not made to better weave together the original articles, so as to remove the redundancy of reiterating points that appear in prior chapters.
Of all the chapters, perhaps the one on China is the most dated. Much change has happened there since 2012 to confront the points raised in the chapter. Perhaps a follow up volume or a second revised and better edited 2nd edition would remedy that.
The book is composed of several articles that appeared in Monthly Review magazine. It is unfortunate that an effort was not made to better weave together the original articles, so as to remove the redundancy of reiterating points that appear in prior chapters.
Of all the chapters, perhaps the one on China is the most dated. Much change has happened there since 2012 to confront the points raised in the chapter. Perhaps a follow up volume or a second revised and better edited 2nd edition would remedy that.
January 4, 2021
I found it a good primer on the theories of the journal Monthly Review surrounding the theory of 'monopoly capital' seemingly developing it further to be now 'monopoly-finance capital'. They have a good theory of the great financial crash which is more unique than a simple look at the declining rate of profit, but instead localising it in the contradictions of capitalism, with capitalism being naturally stagnative, which thus produced a financialisation of the economy in the core to offset this, which was the basis for the 2008 crisis.
March 30, 2023
An excellent and well written perspective of how financial capitalism and western liberalism has given birth to an era dominated by upheaval, fiscal weakness and rising asian superpower.
Thoroughly enjoyable!
Thoroughly enjoyable!
January 2, 2025
Not accessible enough for me, I’m sure the book is important and brilliant but not well versed enough in economic terms and academic prose to understand it.
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January 2, 2018با ترجمه افتضاح خسرو کلانتری
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