‘Business as Usual: The Economic Crisis and the Failure of Capitalism’ reviewed by Nicola Livingstone

Business as Usual: The Economic Crisis and the Failure of Capitalism

Reaktion Books, London, 2011. 128pp., £12.95 pb
ISBN 9781861898012

Reviewed by Nicola Livingstone

About the reviewer

Nicola Livingstone is a lecturer in real estate at the Bartlett School of Planning, University …



Different mediums of struggle in response to the financial crisis of 2007 demonstrate an undeniable social momentum against the consequences of the capitalist system today. The Occupy movement across various continents, student riots against tuition fees in the UK, vociferous protests against the degrading and demolition of pensions, concerns for the effects of the Eurozone debt crisis … such responses collectively represent a subordinated and dissatisfied multitude retaliating, demanding change and demanding answers. Crisis is an undeniable and inevitable dynamic of capitalistic financial accumulation. However, the ‘Great Recession’, this particular quagmire of crisis, continues to find expression in the social form today, raising questions about how we got here. Paul Mattick’s book Business as Usual offers clarity concerning the burgeoning financial crisis, primarily through an investigation into its inherent economic characteristics. Mattick attacks the ‘failure of economic theory’ (8) in explaining the crisis, and proposes that through a Marxist-informed approach we might better comprehend this pernicious and omnipresent crisis.
Mattick’s opening chapters set the tone for this short, but effective piece. Information is condensed and integrated clearly, enhanced by an accessible, mainstream writing style. Using the words of Paul Simon, ‘it’s not just me, and it’s not just you, this is all around the world’ (6), the global interconnections and far-reaching repercussions of the present recession and its jobless recovery are situated explicitly. Although there is a global perspective interwoven throughout the book, its figures and content are primarily related to the crisis in America. Mattick’s purpose is to examine the long-term nature of capitalist development, combined with the weaknesses of traditional economic theory, and to suggest that through Marxist concepts we can know better ‘how to think about what is going on’ (9). Marxism is not an anachronism, rather it is the economic approaches towards the crisis which have proved insufficient and muddied the waters of our understanding. Mattick effectively deconstructs the rationalities of economics over the last century (chapters 2-5), actively encouraging the reader to question taken-for-granted, pre-digested social ‘norms’. The history is comprehensive, and concentrates on the effect to which profit and money drive the capitalist system. The concluding chapters consider the relationship between the state and the economy, from the post-world war two golden age to the present mêlée. Mattick discusses how Keynesian policies and austerity measures indicate an inadequate redistribution of capital, where the state and predominant social form remain subjugated to continuing unemployment and poverty. Mattick’s writing is subtly Marxist, and not vehemently anti-capitalist; he suggests (contentiously) that the Left has disappeared. However, Mattick does envision that in the future we will see an essential move towards the ‘construction of a new system for producing and distributing goods and services … beyond the increasingly dysfunctional system, subordinated to the imperative of private profit-making and capital accumulation’ (108-9). This is likely to represent another ‘new wind for capitalism’ (89), rather than a world without it.
The content is easily read, enriched with empirical data and sound quotes. The ‘crisis’ of economic effectiveness is introduced in chapter one, outlining the historical development of the science, from classical (Smith and Ricardo) to neoclassical (Keynesian and Monetarist) practices. The narrative continues into chapter two, and is one of the inherent strengths of the text. Weak and inadequate aspects of economic theory are interwoven with different historical perspectives (not exclusively from the left). Mattick expresses concern over how ‘even those attempting to face up to the current debacle of economic practice and theory continue to accept the basic dogma of the now discredited approach to economics: the idea of an essentially problem-free nature of capitalism’ (21), that the free market is self-regulating. One of the key points of the book is to ground the current crisis in the long-term historical development of capitalism, rather than looking for short-term solutions. Chapter 4, ‘After the golden age’ considers the roots of today’s crisis in the boom and bust periods following world war two and questions the solutions that were applied to mediate their effects. Self-regulation became more akin to state regulation and ineffective policies (chapter 5), resulting in the accumulation of increasingly large amounts of government debt. Thus, at the beginning of the twenty-first century, we had a global economy that was predicated on expanding amounts of speculative debt vehicles and credit, illusory assets. In consistently attempting to readjust and manipulate the market out of depression-induced crises, state governments and finance markets eventually succumbed to the inevitable and collapsed. Just like the man who built his house upon the sand. Fictitious capital had increased in conjunction with the expansion of the financial sector, culminating in implausible figures: ‘By mid-September 2007 the world’s estimated $167 trillion in financial assets had given rise to $596 trillion in derivatives, basically bets on the future movements of asset prices’ (61). The contradictions of the capitalist market are exposed effectively by Mattick, who relates the financial risks (debt repayment, readjustment, stagnation and uncertainty) to the state, national economies and individuals. As we are all aware, the significant effects of the global crisis continue to find contradictory expression today, as wealth inequalities increase and economies smoulder, but Western bankers still continue to receive phenomenal bonuses.
One of the limitations of the book is that although it is jargon-free and explanatory, when Mattick discusses concepts such as money, profit and the form of society, he fails to take the opportunity to deepen the reader’s understanding of some of the key Marxist ideas (the exception to this is his approach to the tendency for the rate of profit to fall). There is no denying that the book is informed by Marxist thought, although if you were entirely new to such concepts you might miss them, many are implicit rather than explicit. It can be appreciated that Mattick has done this to avoid complexities and dense language, but it is also questionable whether a reader entirely unfamiliar with Marx would come away with any greater knowledge of his critique. In terms of the discussion of money, profit and business cycles (chapter 3), the circuit of capital is alluded to indirectly, and more critique is presented of the capitalist system through analysis of the wage-labour relationship. Money is classified as the great (and necessary) mediator in capitalism, with the social significance of money directly related to the expenditure of labour, and the accrual of more money in the form of profit. Consumption, under/over production and their inherent effects on profit are considered from the perspective of an investor or businessman, rather than the subordinate wage labourer, even though ‘it is the social system that produces profit, though individual companies get to keep it’ (46). The tendency of the rate of profit to fall following a slowdown in a particular investment, or indeed national economy, results in a contraction and eventual depression. Such is the cyclical nature of the business cycle. However, in an abstract way, such a downturn in profitability, which can have painful effects for certain investors/economies, will prove generally beneficial to others in the market, who can indulge in investing when values are diminished and an influx of capital, a stimulant, is needed for recovery. Mattick proposes that ‘a depression … the cure for insufficient profits … is what makes the next period of prosperity possible, even as that prosperity will in turn generate the conditions of a new depression’ (50). Indeed, this is the long-term historical dynamic of the capitalist system throughout the world, which Mattick has demonstrated through his writing, yet there is no suggestion of how such effects can be negated, nor how this critical approach may lead us to something better.
The conclusions drawn in chapter 6 apprehensively look to the future of capitalism, and the further crises that could be encountered ahead. Specifically, Mattick discusses the limits of the system, the weaknesses of policies and the potential for ecological catastrophes. He maintains that, due to the depth of this crisis in particular, the manifestation of almost forty years of failed appeasement policies and financial strategies, this is a crisis which must be endured – as there can be no other solution. Economic power will gravitate towards emerging markets experiencing different, more positive movements along the business cycle, where profit will see growth. However, overaccumulation of capital in the Western world has resulted in a recovery for which the majority will suffer, as there are no apparent solutions available within the system. It is the old story of the antagonistic capitalist system, where ‘the working-class majority will pay for whatever mix of stimulus and respect for market freedom governments decide upon, with lower wages and benefits or greater unemployment – in fact, as we can already see, it will be both’ (91). Mattick offers no suggestions for what or how change can be implemented, although he recognises change is necessary, that the profit-making circularity of capitalism needs to be altered. Illustrated by the rich historical and empirical research provided, the powerful message of this suggestive, Marxist-informed critique is how present-day economics, combined with our preconceived notions of capital and governance, is an inadequate, failing perspective on the capitalist system.


3 May 2012

One comment

  1. Paul Mattick writes:

    Thank you for a thoughtful and careful review–of course, I particularly appreciate your agreement with much of what I say, though disagreement is also useful and stimulating.

    On one issue, you have misinterpreted me, however: when you say that I make “no suggestion of how such effects [of economic crisis] can be negated, nor how this critical approach may lead us to something better.” To the contrary, the book ends with an extended discussion of people’s capacity to act in new, non-capitalist ways; on the real basis for an alternative system of production in the world created by capitalism; of forms of activity that one can imagine leading from the emergency created by crisis and ecological catastrophe to the creation of new social relations.

    In this connection, I should observe that there is a misunderstanding in the statement that I “envision that in the future we will see an essential move towards the ‘construction of a new system for producing and distributing goods and services … beyond the increasingly dysfunctional system, subordinated to the imperative of private profit-making and capital accumulation’ (108-9). This is likely to represent another ‘new wind for capitalism’ (89), rather than a world without it.” This conflates two completely different discussions: The hypothesis of “a new wind for capitalism” (p. 86) is based on “ignoring … both the costs of economic catastrophe in human suffering and the threat this suffering might pose to what the bureaucrats call ‘social cohesion'”; the other passage looks to a flowering of precisely those threats in the form of anti-capitalist social movements.

    I mention this only because I think it shows that the author of the review and I see even more eye to eye on political issues that she seems to think.

    Thanks again.

    Paul Mattick

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