↳ Book+review

December 3rd, 2020

↳ Book+review

Transition Theory

On Jairus Banaji’s A Brief History of Commercial Capitalism

Capitalism is either eternal or it isn’t. There are people who defend the first view, or something close to it—the multivolume 2014 Cambridge History of Capitalism opens in Babylonia, circa 1000 BCE—but it is much more plausible that capitalism, like most other social phenomena, has its origins in specific historical developments. The trouble is that, once you’ve got everyone to agree that capitalism has a history, you have to define what capitalism is and then explain when, where, why, and how it emerged.

Of course, no one thinks you can date the transition the way you can specify when a battle took place or a patent was filed. But even after abandoning false precision, those who’ve grappled with the problem of defining and explaining capitalism’s emergence have been unable to agree even on which centuries and continents were involved. These questions are likely no closer to resolution today than they were when European radicals started using the word “capitalism” two hundred years ago.

For many, the whole question of origins is a pseudo-problem—you can write economic history without modes of production. But those who have dreamed of transcending capitalism find it harder to let go of the thorn. If the object can’t be defined, can it be dismantled? If there was no starting point, can there be an end? Marxist scholars have been central to the origins debate, but Marx himself said enough different things on the topic to inspire contending schools, each speaking in his name.

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July 1st, 2020

Balanced Sheets

On the conceptual and methodological stakes of Trade Wars Are Class Wars by Matthew C. Klein and Michael Pettis

Good writing on international macroeconomics reads like a detective novel. There’s a suspicious event—hundreds of millions of dollars in phantom FX swaps, a container port’s worth of missing exports—and an enormous cast of closely-linked characters. But instead of a preternatural ability to see the clear-cut means, motive, and opportunity of fictional characters in a pulp whodunit, the macroeconomic detective is armed with the knowledge that balance sheets always balance. This simple insight, that every transaction has two sides, means that there are certain aggregate relationships between transactions that must obtain for the world economy. Knowing this, it’s possible to chase actors across seemingly unrelated balance sheets to find where the system as a whole was forced to balance. From here, the skillful economist can identify the long-run tendencies that a given balance is likely to create. (Wynne Godley famously predicted the Global Financial Crisis in just this way, following US mortgage debt around the world and back.) This kind of detective work is difficult, and often unpopular. The balance sheet approach cuts through political and media platitudes to reveal who the winners and losers are in a given regime. By taking this approach to examining trade policy, Michael Pettis and Matthew Klein have, with Trade Wars Are Class Wars, written the ideal book for understanding the long-run trends that have shaped our dysfunctional present.

Pettis and Klein tell a broad story about the last fifty years of global economic development, which links the dynamics of global supply chains and tax evasion, and the historical shift from wage-led to profit-led growth.

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July 11th, 2019

Keynes versus the Keynesians

A new book by James Crotty reexamines the career of John Maynard Keynes

What drives economic growth and stagnation? What types of methodologies and tools do we need to accurately explain economic epochs in the past and present? What models and policy approaches can lead to prosperity for all? These questions occupied the mind of John Maynard Keynes from World War One until his death in 1946. Keynes, one of the most influential economists of all time, is often claimed to have “saved capitalism.” His legacy, as understood by most of the economics profession, was to cure laissez-faire capitalism with countercyclical fiscal policy—using expansionary government spending during recessions to increase output and employment.

In his new book, Keynes Against Capitalism, economist James Crotty argues that this interpretation of Keynes is profoundly mistaken. Keynes, Crotty argues, wanted to replace capitalism with his own program of “liberal socialism.” Through the book, he demonstrates that 1) Keynes fundamentally rejected the theoretical model that undergirds laissez-faire capitalism; and 2) the cornerstone of Keynes’ liberal socialism program was permanent, large-scale public and semi-public investment guided by the state, accompanied by low interest rates and capital controls.

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