Capitalism: Competition, Conflict, Crises

by Anwar Shaikh

Orthodox economics operates within a hypothesized world of perfect competition in which perfect consumers and firms act to bring about supposedly optimal outcomes. The discrepancies between this model and the reality it claims to address are then attributed to particular imperfections in reality itself. Most heterodox economists seize on this fact and insist that the world is characterized by imperfect competition. But this only ties them to the notion of perfect competition, which remains as their point of departure and base of comparison. There is no imperfection without perfection.

In Capitalism, Anwar Shaikh takes a different approach. He demonstrates that most of the central propositions of economic analysis can be derived without any reference to standard devices such as hyperrationality, optimization, perfect competition, perfect information, representative agents, or so-called rational expectations. This perspective allows him to look afresh at virtually all the elements of economic analysis: the laws of demand and supply, the determination of wage and profit rates, technological change, relative prices, interest rates, bond and equity prices, exchange rates, terms and balance of trade, growth, unemployment, inflation, and long booms culminating in recurrent general crises.

In every case, Shaikh's innovative theory is applied to modern empirical patterns and contrasted with neoclassical, Keynesian, and Post-Keynesian approaches to the same issues. Shaikh's object of analysis is the economics of capitalism, and he explores the subject in this expansive light. This is how the classical economists, as well as Keynes and Kalecki, approached the issue. Anyone interested in capitalism and economics in general can gain a wealth of knowledge from this ground-breaking text.

Genres: Economics, Politics, Nonfiction, Philosophy, Theory, Social Science, History

1024 pages, Hardcover

First published February 5, 2016

About the author

Anwar M. Shaikh (born 1945) is a Pakistani American heterodox economist in the tradition of classical political economy.

He is Professor of Economics in the Graduate Faculty of Social and Political Science at The New School for Social Research in New York City, where he has taught since 1972.

Carrying on teaching and research that originated in the context of New Left social movements, Shaikh's political economy has focused on the laws of motion and empirical patterns of industrialized capitalism, based on a theory of competition independent of neoclassical economics.

In specific fields, he has written on the labor theory of value, production functions, international trade, neoliberalism, the welfare state, economic growth, inflation, the falling rate of profit, long waves, inequality on the world scale, and past and current global economic crises.

He graduated from Stuyvesant High School in New York City in 1961, received a B.S.E from Princeton University in 1965, worked for two years in Kuwait, and then returned to the United States to study at Columbia University, from which he received his Ph.D. in Economics in 1973. In 1972 he joined the Economics Department at the Graduate Faculty of the New School for Social Research.

Reviews

[Eugene Kernes · Rating 5 out of 5]

Normally, the economy is described in either a Neoclassical or a Keynesian perspective. Shaikh provides an alternative, the Classical perspective. Each chapter’s issues are discussed in all three ways to view the economy. Each chapter has a theoretical, a historical, and an empirical analysis of the economy using the three different perspectives. Each different economic perspective is represented in how it views capitalism, competition, and its ability to explain real world changes.
Neoclassical is supply side driven, Keynesian is demand side driven, while Classical is profit seeking driven. The explanation on what ails or helps the economy is heavily depended on the theoretical background. Shaikh uses a myriad of economic research and presents the way other authors viewed the topics, providing a flavor of variety of explanations to the same example even within the same the theory framework.
Rather than a static state of equilibrium, Shaikh focuses on economics as a turbulent equilibrating process. Competition is presented as firms vying for profit, price cutting as much as possible. Regulating capital is a major theme for that determines the general price level of the industry. The economy goes through different cycles, represented in the reoccurrence of crises within a time range. This book provides a really good understanding of how a capitalist economy operates.
The book is not an introduction to economics, although the author uses and explains various major research, it does require a pretty good understanding of at least basic economics. Some parts are written very eloquently, while others sporadically explain a little bit of many different research approaches, which means major issues within the research remain unexplained, making it harder to read. One particular problem creates two issues with reading, the problem is that many parts of the book explain what will be discussed in the future. This creates a lot of additional of pages slowing down the read without much information added, and it seems that certain sections require the an understanding of the future topic to comprehend the other presented topic before the future topic is fully introduced.

[Paige McLoughlin · Rating 5 out of 5]

I am going to have to read this again even though I read this once in 2019 and three times in 2020. Marxian or classical economics without the philosophical baggage of inverted Hegelianism. I will give it a proper review when I read it again. I will leave a playlist of a semester-long course that Shaikh taught at "the New School".

Update 12/21/2020
The book explains a lot about economics that Neoclassical and Keynesian economics purposely ignore or whitewash(I suspect for ideological reasons, after all economists are supposed to be pro-capitalism). It explains a lot of puzzles mainstream economics doesn't unfortunately in explaining it demonstrates very well that Capitalism isn't the best of all possible worlds it is majorly flawed mode of organizing human society. All the bad things people dislike about capitalism are a feature not a bug and are inherent in the system. I recommend any young person studying economics to pick up this book to get the real story instead of the academic party line which at the end of the day is pro-status quo.



Here is the course.
https://www.youtube.com/watch?v=ShIg-...

Here is Shaikh talking to Jacobin Magazine.
https://www.youtube.com/watch?v=ybUxe...

here is Shaikh talking to a libertarian. Who says the left is overly insular.
https://www.youtube.com/watch?v=m0bL7...

[Sauli · Rating 5 out of 5]

The most important economics book since Keynes's General Theory (1936) or even since Marx's Capital vol. 1-3 (1867/1885/1894). Not hyperbole.

[Paige McLoughlin · Rating 5 out of 5]

I am going to have to read this again, even though I read this once in 2019 and three times in 2020. Marxian or classical economics without the philosophical baggage of inverted Hegelianism. I will give it a proper review when I read it again. I will leave a playlist of a semester-long course that Shaikh taught at "The New School".

Update 12/21/2020
The book explains a lot about economics that Neoclassical and Keynesian economics purposely ignore or whitewash(I suspect for ideological reasons, after all, economists are supposed to be pro-capitalism). It explains a lot of puzzles mainstream economics doesn't, unfortunately, in explaining it demonstrates very well that Capitalism isn't the best of all possible worlds, it is a majorly flawed mode of organizing human society. All the bad things people dislike about capitalism are a feature, not a bug, and are inherent in the system. I recommend any young person studying economics to pick up this book to get the real story instead of the academic party line, which, at the end of the day, is pro-status quo.

Update 12/24/2021: I had microeconomics and macroeconomics in college. We used Samuelson's textbook. This was in 1993. My teacher taught normal micro and a heavy dose of Keynesian economics for Macro. I was a kid in the 1970s when the glorious postwar boom transitioned to stagflation and right-wing crackdown in the 1980s. I think Shaikh explains this turn of events and the destruction of the Keynesian Bretton Woods order much better with a classical (aka Marxist) interpretation. I like that his models are very empirical and seem to fit the data of a century and a half of American capitalism, which Neoclassical or even Keynesian economics (which I have a lot of sympathy with). My only qualm with the labor theory of value is that it is very commodity-centered centered and in our economy, which is in large part a service economy, the labor of maintaining people and infrastructure isn't as cut and dried as producing widgets. I think healthcare workers, educators, and administrators yield much more to Graeber's analysis of the war between the care workers of the service economy vs. administrative bureaucrats and bean counters of the bullshit economy. Still, these models can be tweaked.
Update 9/3/2022: Read this again yesterday. I was a little distracted reading in a hospital room (family crisis), but it is a solid economics textbook. I wish it had a more pedagogical style to it because in any sane society, it would be an undergraduate text.

Reread on 11/25/2025
I find this book very good, especially the economic output, wages, and employment, and its theory of the business cycle. I think it does a really good job of explaining the twentieth century, including the bust of the thirties, the boom of mid-century economy, and the stagflation of the seventies and neoliberal order at the end of the century. I certainly think Marxian economics was neglected during the Cold War, but we now have the return of the repressed; both fascism and socialism are on the table again, and I hate fascists.

Here is the course.
https://www.youtube.com/watch?v=ShIg-...

Here is Shaikh talking to Jacobin Magazine.
https://www.youtube.com/watch?v=ybUxe...

Here is Shaikh talking to a libertarian. Who says the left is overly insular?
https://www.youtube.com/watch?v=m0bL7...
2 likes · Like ∙ flag
following reviews


READING PROGRESS
September 9, 2019 – Started Reading
September 15, 2019 – Finished Reading
February 5, 2020 – Started Reading
February 8, 2020 – Finished Reading
May 14, 2020 – Started Reading
May 16, 2020 – Finished Reading
October 1, 2020 – Started Reading
October 3, 2020 – Finished Reading
November 27, 2020 – Shelved
November 27, 2020 – Shelved as: to-read
December 12, 2020 – Started Reading
December 19, 2020 – page 49
4.79% "I am fascinated by the destruction of the Keynesian New Deal order by the stagflation of the 1970s to be replaced by the neoliberalism of our discontent, and more so because there are real cracks in that order and possibilities around that. This book has much else, but that is what originally lured me in."
December 19, 2020 – page 56
5.47% "Nice intro, now down to the nitty gritty."
December 19, 2020 – page 75
7.32% "The first chapter dispenses with price signaling and equilibria. The idea of price signaling is a fiction. Manufacturers set prices and deal with the consequences from the consumers. Shaikh introduces the idea of price equalization through a feedback mechanism of gravitational turbulence as sellers try to get the right balance between prices and the amount sold by trial and error for maximum profit. That's the grail."
December 19, 2020 – page 120
11.72% "A nice thing about this model is we don't have to pay attention to rational calculation or utility maximisers, just agents buying and selling for "whatever reason" and let random taste and desire and gravitational turbulence of agent calculations make the supply and demand curves. Superior to trying to posit some sort of naturalized capitalist psychology on people."
December 20, 2020 – page 164
16.02%
December 20, 2020 – page 206
20.12%
December 20, 2020 – page 206
20.12% "Two Marxian predictions seem to bear out in the data. Owners like long working hours because it works better for the bottom line more shorter shifts cost more, everything being equal. Also, the falling rate of profit over time is another thing Marx was right about."
December 20, 2020 – page 256
25.0%
December 20, 2020 – page 327
31.93%
December 20, 2020 – page 327
31.93% "profit equalization seems to happen with competing firms as they squeeze out all the tricks in the book against other competing firms via the feedback of turbulent gravitation. At some point, it becomes stripping out the copper wire to get the last drop."
December 20, 2020 – page 380
37.11% "This stuff explains the system so well and fits the data; it's no wonder this guy is a voice in the wilderness. The point of mainstream economics is to miss the point on behalf of the public."
December 20, 2020 – page 443
43.26%
December 21, 2020 – page 491
47.95%
December 21, 2020 – page 539
52.64%
December 21, 2020 – page 598
58.4% "A chapter on standard explanations of the stagflation of the 1970s that made for neoliberal disaster that followed, and we have had the misfortune of living under ever since. The next chapter has Shaikh's explanation, which makes more sense of why bad things like this happen."
December 21, 2020 – page 698
68.16% "The magic of Keynes is that stimulating for full employment in a recession does increase output, but full employment drives up wages and cuts into profits that capital can plow back into growth. The rate of growth is dampened, but wages take larger shares. Good for labor, bad for capital until you hit the seventies, where stimulus no longer did its magic because growth maxxed out, so you got stagflation and the rest."
December 21, 2020 – page 734
71.68%
December 21, 2020 – page 734
71.68% "Towards the end, it gets more speculative with Kondratiev waves."
December 21, 2020 – Shelved as: economics
December 21, 2020 – Shelved as: eighteenth-century
December 21, 2020 – Shelved as: european-history
December 21, 2020 – Shelved as: early-twentieth-century
December 21, 2020 – Shelved as: early-twenty-first-century
December 21, 2020 – Shelved as: American History
December 21, 2020 – Shelved as: mid-twentieth-century
December 21, 2020 – Shelved as: nineteenth-century
December 21, 2020 – Shelved as: politics
December 21, 2020 – Finished Reading

[David Walsh · Rating 4 out of 5]

I read this book with the purpose of focusing my critical thinking on the "real nature" of Capitalism. By its "real nature" I refer to an economic analysis of Capitalism that is grounded in reality and "real competition" and not on the current thinking of modern orthodox economic theory that is based on a theory of "perfect competition".

The book can be a tough slog through some parts and some who have read and commented on it have missed the point by thinking of it as only a deep survey of competing economic theories. What the book really presents is a new way of understanding the economic principles which drive growth, interest rates, profits, inflation, and unemployment.

I obtained some great insights into the nature of capitalism as I worked through the book which is also used as the the text for the 2 semester course offered by Anwar Shaikh on Capitalism at the New School. For those of you who learn better from lectures, the author Anwar Shaikh has 30 lectures on the 2 semester course available on the YouTube channel for the Henry George School of Social Science. The book provides a remarkably broad and deep understanding of economics.

[Patrick Lu 嘉泺 · Rating 5 out of 5]

The text clearly belongs to the more literal side of economics and could serve as a good break from the typical, essential courses. Professors could read this for leisure but students often find difficulties in understanding its systematic logic. The text goes over widely on discussions of neoclassical, heterodox, Keynesian and classical economics. Shaikh elaborates on these schools of thought excellently and every section and subsection is packed tightly with academic thought. It is essential that the reader has quite a bit of prior knowledge before tackling Shaikah's big work. The Oxford scholarship website and youtube have plenty of resources devoted to Shaikh's theory on the real competition.

[Eric Bottorff · Rating 5 out of 5]

This has good claim to being the best work of economic theory of the last 30 or 40 years.

[Lucille Nguyen · Rating 4 out of 5]

Thoughtful, scholarly exposition of an argument that classical economic theory grounded in turbulent competition and information asymmetries is more explanatory than neoclassical theory. However, some grounding in why predictive capacity is less important than realistic assumptions needs to be made, and I don't believe that Shaikh made that case very well (even though I tend to agree). I think some consideration to the economic theories of administration from Herbert Simon might have been useful to think through, given that Shaikh and Simon shared similar critiques of production functions — like Shaikh's famous HUMBUG production functions. Nonetheless, a fascinating argument that a different set of assumptions is more explanatory than the neoclassical synthesis, which is definitely more comprehensive than other heterodox theories of economics. This book is often described as Shaikh's magnum opus and that reputation is well-deserved.

[Federico]

Only skimmed today.

A very interesting attempt at a cohesive overview of a range of topics in political economy. The author tries to finish the job Marx couldn't bring to its conclusions.

Most chapters read like a literature review and the evidence considered is very USA-centric. Overall the book is very dense but still usable, for example when in need of an alternative view on some orthodox concept or when trying to look for a common vocabulary to talk about very different authors.

"Climate change" is not mentioned once, externalities are mentioned briefly. Piketty's objections to infinite growth are summarily dismissed by invoking necessary accounting identities.

In conclusion, I probably won't try to read it from cover to cover any time soon, but I might.

[Mikel · Rating 5 out of 5]

Fucking phenomenal. A whole life's work and put into a single, 1,000-page book. It is simultaneously a book on the history of economic thought and an elaboration on economic theory. It reconstructs the classical alternative to the neoclassical, keynesian, and post-keynesian traditions, drawing on Smith, Ricardo, and Marx. It is formally rigorous, based on solid empirical evidence, philosophically sound, and historically aware.

If I had to criticize something: his chapter on the business cycle is too descriptive. There is great empirical work on this issue from a classical perspective, and I think it is a wasted opportunity. Similarly, I wish he included a chapter on inequality (Shaikh has great stuff on the two-class econophysics theory of inequality). Finally, the two most glaring holes are uneven development at the international level (his chapter on international trade is mostly limited to exchange rates), and climate change, but I get that it is already long enough and that the book is limited to what he has written on before.

I am not sure I buy his solution to the transformation problem, and his evidence on equalization of profit rates is very hard to interpret and might very well be mere statistical noise. Still though, the single best modern economics book out there. I come back to it at least once a month.

[Theodore Wright · Rating 3 out of 5]

I originally tried to read this book over a year ago, but didn't make it through the first 100 pages. Now that I'm finished, I can say I'm pleased with the result. Anwar Shaikh is a very important figure in Economics due to his role as a sort of "middleman" in the field. Challenging ideas put forth by Post-Keynesian, Marxian, and Neoclassical Economists alike, whilst maintaining the assumptive power of his own paradigmatic pariah. Although I disagree with some of the work provided, still important to read, least to acknowledge.

[Сметана Кошка · Rating 5 out of 5]

This is the most comprehensive economic text I have read. Shaikh covers every important “mainstream” economic concept stemming from Classical and Marxian theory up to Post-Keynesian theory and beyond. This is essential economic reading. There are also two-semester’s-worth of online lectures that cover the topics in the text, and they are more digestible.

[Dillon]

fsu online

[sidnawi]

to revisit & rewatch with the associated playlist

very dense, however I don't think it's essential. lots of maths & theoretical derivations which aren't relevant to the non-specialist.
read part 3 of the book if short on time

good stuff re the theory of competition as well