Book Review from the February 2005 issue of the Socialist Standard
Capital Resurgent. Roots of the Neoliberal Revolution. By Gérard Dumenil and Dominique Lévy. Harvard University Press. £35.95.
The first parts of this book are filled with graphs and tables which deal with categories Marxists can recognise, such as the rate of profit, the rate of capital accumulation, and the share of wages and of profits in value added. Dumenil and Lévy argue that what drives the capitalist economy is the rate of profit and that this had begun to fall even in the 1960s. They explain this by the slow-down in the technological progress of the previous two decades which had provided an expanding market for producer goods and so had driven the whole economy forward; this resulted in a fall in the rate of capital accumulation and consequently in the high level of unemployment that was a feature of the 1970s and 1980s. This is one possible Marxian explanation.
But then the approach changes. In the 1970s double-digit inflation benefited industrial capital at the expense of finance capital as loans could be repaid in depreciated money. According to Dumenil and Lévy, finance capital fought back by staging what they call a “coup” on 1979 – a sudden rise in interest rates as a way of trying to stop inflation. This put the boot on the other foot with, again according to the authors, firms having to use their profits to repay loans rather than re-investing them, so penalising growth and sustaining unemployment. This marked the beginning, they say, of the current period of “neoliberalism”, of deregulation and return to “free market” economics, as practised by Reagan in America and Thatcher in Britain.
Dumenil and Lévy see this as a deliberate policy choice, imposed by finance capital and its representatives in government rather than any government’s reaction to a particular set of capitalist conditions. Their position can be summed up as “another policy is possible” (rather less ambitious than “another world is possible”, but a more accurate reflection of what the movement whose slogan this is actually stands for). This other policy turns out to be the sort of monetary, financial and tax measures favoured, and applied in the 1950s and 60s, by the Keynesians which, according to the authors, worked acceptably enough, as far as this sort of thing is possible under capitalism, until the rate of profit dropped for other reasons and finance capital staged its coup.
A rather odd conclusion for writers claiming to be in the Marxist tradition, but even odder is their analysis of the 1929 crash and 1930s slump in purely monetary and financial terms, even suggesting that these could have been avoided if the right policies had been pursued.