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7 of 8 people found the following review helpful
5.0 out of 5 stars Very good.., 17 Nov. 2010
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This review is from: The Enigma of Capital: And the Crises of Capitalism (Hardcover)
This book does an excellent job of explaining how we got into our current mess. It essentially explains how capitalism works, why it is by nature prone to periodic crisis, and how it has adapted at several crucial points over the last 200 years to overcome obstacles to continuous expansion. And perhaps most crucially how it may have finally run out of road.

Perhaps the most interesting insight is how adaptations have been made to overcome potential crisis. After WWII, there was a real risk of a massive global slump like there had been after WWI. Due to overcapacity. However a solution to this was found by the Americans lending money to Europe in the form of the Marshall Plan to create overseas markets, and at home, promoting consumerism and ensuring that most workers had well paid unionised jobs in order to create demand. The same process took place across the western capitalist world, thus rescuing capitalism.

By the 1970s however, high wages had become detrimental to profitabillity and capital accumulation. And so started the era of neoliberalism spearheaded by Thatcher and Reagan, who ensured that unions were smashed and jobs outsourced.

As real wages in the west stagnated however. This created a problem of maintaining demand. The solution to this was to make credit easilly available, and to make people substitute debt for wages to maintain consumption. Which for a short while worked. But as we have seen was never a sustainable solution. So where does it go now?

Essentially, to function, capitalism must constantly find productive outlets to soak up surplus capital, otherwise it is plunged into crisis. Perhaps inevitably in a finite world, it is becoming increasingly difficult for it to do this in a legitimate way, hence the deliberate creation of bubbles (.com, property etc) and the invention of fictitious financial "assets", which caused so much havoc to the world financial system in 2008, when they turned out to be worthless paper.

If this analysis is right, then we should expect to see regular serious crisis erupt in the near future, as capital either has nowhere to go, or is sucked up into yet more bubbles, followed by collapse and crisis. Capitalism as we have known it, may well become increasingly dysfunctional, and may be nearing the end of the road as a legitimate economic system.

The author gives only a vague account of what might replace it, calling for a revival of the concept of communism, although not offering much more detail than that.

Altogether a very interesting read.
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