Bonfire of Illusions: The Twin Crises of the Liberal World

by Alex Callinicos

Something dramatic happened in the late summer and autumn of 2008. The post-Cold War world came to an abrupt end. This was the result of two conjoined crises. First, in its brief war with Georgia in August 2008, Russia asserted its military power to halt the expansion of NATO to its very borders. Secondly, on 15 September 2008 the Wall Street investment bank Lehman Brothers collapsed. This precipitated a severe financial crash and helped to push the world economy into the worst slump since the 1930s. Both crises marked a severe setback for the global power of the United States, which had driven NATO expansion and forced through the liberalization of financial markets. More broadly they challenged the consensus that had reigned since the collapse of the Soviet bloc in 1989 that a US-orchestrated liberal capitalist order could offer the world peace and prosperity. Already badly damaged by the Iraq debacle, this consensus has now suffered potentially fatal blows. In Bonfire of Illusions Alex Callinicos explores these twin crises. He traces the credit crunch that developed in 2007-8 to a much more protracted crisis of overaccumulation and profitability that has gripped global capitalism since the late 1960s. He also confronts the interaction between economic and geopolitical events, highlighting the new assertiveness of nation-states and analysing the tense, complex relationship of interdependence and conflict that binds together the US and China. Finally, in response to the revelation that the market is not the solution to the world's problems, Callinicos reviews the prospects for alternatives to capitalism.

Genres: Politics, Economics, Philosophy

144 pages, Paperback

First published May 3, 2010

About the author

Alexander Theodore Callinicos, a descendant through his mother of Lord Acton, is a political theorist and Director of the Centre for European Studies at King's College London. He holds both a BA and a DPhil from Oxford University.

Reviews

[Mark Hebden · Rating 5 out of 5]

This is billed as the first left analysis of the global financial crisis of 2007-2009. It’s a little difficult to call anything an analysis since events are proving that the crisis is ongoing, and could last many more years. As far as a “story so far”, this is very thorough. Callinicos makes the point that the war between Russia and Georgia and the “credit crunch” were two sides of the same coin, drawing in a modern imperialism and making the hegemonic power of America redundant in a changing world. He seems to suggest that the financial crisis is a changing of the guard from naked liberalism to state capitalism such as that espoused by China and Russia.

The book is broken up in to two sections; Finance Humbled, and Empire Confined. The authors draws on Hayek, Mynsky, Marx and Harvey for his varied analysis and criticisms for the economic situation. The direct relations between the capitalist system and nation state sponsors are laid bare.

The shock of seeing what most economists thought was The System to live by fall to pieces has held everyone in a state of paralysis. Instead of looking for new methods of extraction, the same people are attempting to restructure the old system and hide under the duvet, hoping it won’t all happen again. The fact is that the flaws in capitalism have always been there, and this cycle of bubbles and their bursting will continue as long as we continue to worship an economics and a politics that denies humanity its philosophical grounding in social justice. While money remains more important or even as important as people we will continue to see that same commodity destroy the world.

The first part of Callinicos’ book is the theory of how the crisis came about, the second takes in the geopolitical sphere and how this crisis has changed the delicate power balance in the world. His facts are backed up by empirical data, and while much of the book is deeply ingrained in economics, it isn’t impossible to follow. The conclusion demands a change in the system in response to the crisis in the liberal world. He agrees with democratic planning of economies in a nod towards Keynesianism, while focusing on a decentralising of power. He stops short of advocating outright anarchism such as that espoused by Hardt and Negri. Overall this is a good example of how a grounding in basic Marxist economic thinking is relevant in the economics zeitgeist today. It’s well written by a great thinker, and though not the most radical book at a time when perhaps we need radical solutions, it is a very good profession of progressive realism.

[Andrew · Rating 4 out of 5]

You better be ready for a torrent for references. There's a very journalistic style to this book--very straight to the facts and sources--but when he speaks for himself he's clear and makes use of the facts at hand. A rather perfect name for a title.

[Manolo Ferrer · Rating 1 out of 5]

One-sided view of the 2008 financial crisis. Not as good on the facts as many other books and even movies. References the FT too much.

[Andrew · Rating 3 out of 5]

The problem with reading historical events as the world crisis of liberal capitalism is that a few years later, Russia is in the doldrums and the American economy is on the up. That's not to say that Callinicos is wrong. He's probably right that the US is on a slow descent out of hegemony. But I doubt it's going to lead to the sort of wholesale implosion Callinicos seems to be hoping for.