The the authors are among the world’s leading economists known for their critical assessments of capitalism. And the blurb for the book says, âTraditional economics views capitalism as an isolated and closed system. In this groundbreaking book, authors Utsa Patnaik and Prabhat Patnaik argue that this is both historically false and logically untenable. An essentially money-consuming economy like capitalism is only conceivable if it is situated in a pre-capitalist framework that it dominates and modifies for its own ends.
The interested reader will get a glimpse of what to expect. By its very nature, the book is written by scholars and for scholars. A review of the book may therefore not be of interest to lay readers. This is particularly the case with Parts II and III and, to some extent, with Part IV. However, for anyone interested in the current state of capitalism, including that of our country, there are some valuable insights throughout the rest of the book, especially parts IV, V, and VI. This exhibition therefore focuses on them.
Part IV is about money. The question being debated is whether money is just a medium of exchange that facilitates transactions, or whether it is something that people want to hold for itself, say, as a form of wealth. What if there was an entity that combines these two aspects, a transaction facilitator and a form of wealth? According to the authors, this is exactly what finance does.
Read also: Capitalism, populism & the crisis of liberalism
For a long time immediately after World War I, gold played this role and was called the âgold standard,â with transactions between countries being settled through gold. The gold standard had a checkered history, and at the end of World War II, the US dollar replaced gold as the medium of transaction between countries. Indeed, the US administration was able to convert any national currency into gold for a fixed dollar price. This arrangement lasted until the early 1970s, when the United States was no longer able to honor its commitment.
From then on, currency transactions became a flourishing activity controlled by private agencies, ushering in the era of finance. The International Monetary Fund (IMF) tried to intervene. According to the authors, “all of this meant a change in the role of the IMF, from being simply an occasional lender to countries experiencing balance of payments stress and advising them to undertake ‘stabilization’, to become an instrument of international finance capital. , get countries to undertake a “structural adjustment” that would open them to unlimited global flows of goods, services and capital, including above all finance.
They continue: “The opening of economies to global financial flows has brought about a shift in the relative weight of the nation-state and the new globalized finance capital” (p. 261). The state tried to assert itself, but the rapidly expanding finance, with the active support of multinational corporations, found ways to get the state to become an ally, mainly by threatening to move to another country.
A quick overview of the origin and rapid spread of capitalism that the authors provide in many chapters is necessary here. Let us remember that for a long time the only “economic” activity of man was for what was necessary for his survival, the gathering of fruits and nuts. This was followed by the cultivation of food grains – early agriculture. Merchants quickly emerged as the first professional class, stocking food and traveling beyond traditional establishments. In the long feudal history of humans, there were these two distinct groups, the cultivators and the merchants.
Read also: Bias as a basis
Feudalism itself had two classes, the landowners who owned the land and the laborers who did the cultivation itself, obtaining enough grain for their survival. At some point, landowners in England found that there was a demand for wool in parts of the European continent and that it would be more profitable to fence their land, populate it with sheep, remove the wool from it. wool and sell wool in Europe. The workers thus driven out became those who had only their work to earn a living.
Technological innovation, particularly the use of steam for industrial activity, laid the groundwork for the “industrial revolution”, with capital seeking profit using the abundant workers who were forced to sell their goods. work for a living. If this is true, the productive stage of capitalism was an accidental consequence of science and technology. Within the framework of global transactions made possible by finance, capitalism is returning or advancing towards market capitalism.
What role does the state play in this new stage of capitalism? Has the state withdrawn, as some neoliberal supporters of the present claim? This is not the case. What has happened is a change in the nature of state intervention, say the authors in one of the pivotal chapters (Chapter 17). âThe essence of neoliberalism consists of a double change in the class configuration and a concomitant change in the nature of the state and its modus operandiâ¦. Contemporary globalization implies … that within every country, not just in metropolitan countries but also in others, there is a financial oligarchy or what we would prefer to call a corporate financial oligarchy which is globalized in the sense of traveling the world in search of gain instead of seeking an exclusive economic territory of its ownÂ»(P.269, italics as in the text).
In turn, within every capitalist economy there are effectively two groups, the globalized corporate financial oligarchy and the rest made up of small capitalists, small producers, peasants and artisans of which the state becomes the boss. The state depends on the former and becomes the champion of the “little man”. The priorities are also clear: wherever there is conflict between the two groups, the state makes it clear that it leans towards the first.
Read also: For a collective struggle against capitalism
Corporate finance, for its part, discovered that because of the fall in wages in the former colonies, it was to their advantage to locate production there. China, and to some extent India, have been the main beneficiaries of this reflection. After the opening of these countries (India initially in the 1980s and substantially after the âReformsâ of the 1990s), they were able to celebrate the strong increase in gross domestic product (GDP). In fact, however, it largely reflects the growth in income and wealth of the highest income groups (conveniently referred to as the âmiddle classâ), who mimic the way of life in metropolitan areas. At the bottom, it’s a different story as revealed by the increasing suicide of the peasants.
This, however, is only the temporary triumph of capitalism. Its inherent difficulty today is that it lacks an exogenous stimulus that could provide a floor to revive. It only has bubbles which ensure awakening for a while. Rising asset prices provide these bubbles, here today and gone tomorrow, as the financial crisis in the United States demonstrated in the first decades of the century. Individual states can try to protect domestic capital, but capitalism is no longer domestic: finance capital ensures its global flow. Capitalism will not die, it will limp, with the state trying to provide support. This is the backdrop for the fascist tendencies visible in many parts of the world. Finance capital lends its support to such tendencies, thus making fascism acceptable to broad sections of the population, impressed by a visible and high-profile “development” program and achievements.
After making these assessments, the authors turn to socialism as a possible alternative to capitalism. There is a chapter devoted to capitalism in the story. In the feudal context, capitalism was a progressive order. However, this was not the case in colonial countries where capitalism coexisted with the conservative ethos. In the former colonies, an alternative must therefore be found.
It is in this context that the authors turn to socialism. Recalling the situation in which Lenin found himself in Russia during the first years of the 20th century, they say that the capitalists there made common cause with the feudal elements fearing that any attack on feudal property would be interpreted as an attack on ownership per se, including their own property. So they formed an alliance with the owners. This is the situation in many third world countries today.
Read also: Recycled capitalism
What if a progressive party came to power with the support of the working class? It will have to face the fury of finance capital which controls the outflows of capital that no party in power can afford. The options would then be to heavily tax the rich and also impose restrictions on imports, thus relying on the domestic market for economic growth. This in turn will require a redistribution of land and the development of agriculture according to cooperative and collective principles with the consent of the peasants.
The authors add: âThis type of development trajectory that we have described seems to have little to do with socialism. But if socialism is seen as the ultimate destination of a development trajectory, then its pursuit must be characterized by the measures just discussed. But even the pursuit of such a trajectory will encounter serious obstacles. (p.341)
The authors describe some of these obstacles. The first is that the party, or even a coalition of parties engaged in the agenda, will find it difficult to gain power. But if it does, “then the financial outflows will become a torrent.” There can be coups d’Ã©tat provoked by outside forces. If this does not happen, there will be propaganda about what capitalism has achieved: it has developed productive forces and even reduced absolute poverty. âWhat we will see, in other words, are not necessarily wars and death camps, but a more or less prolonged period of the falsification of society, from which only socialism can save humanity. (p.350).
The book, one of the most learned works on capitalism, ends with this declaration of hope.