Global capital (2013)

Book Review from the November 2013 Socialist Standard

The Failure of Laissez Faire Capitalism. By Paul Craig Roberts. Clarity Press, 2013.

Paul Craig Roberts is of interest as he is a former Assistant Secretary to the US Treasury under Reagan and an erstwhile columnist for the Wall Street Journal who has written an excoriating attack on free-market economics in this book. In particular, he criticises financial deregulation and ‘offshoring’ of jobs and says these are part of what is effectively a conspiracy by the elites in the US and other Western countries to ensure an increasing amount of wealth goes to the very rich and ever less to everyone else. At one point he claims:

‘The United States is the first country in modern history to destroy the prospects and living standards of its labor force in order to enrich the top 1% of the income distribution. Once a land of opportunity, America is being polarised by globalism into rich and poor’ (p.117).

But there is of course a problem with this viewpoint, and one he does not address. America (like all other capitalist countries) has always been characterised by massive income inequality whereby the people who own and control the means of living receive colossal incomes that bear no relation to the effort (if any) they have made, while the vast majority are exploited to keep them in their positions of privilege and power. Reading this book, anyone would think that it is only since the Clinton administration onwards that these things have been a noticeable feature of life.

In fairness, one of the more positive aspects of this book is that there are a number of interesting facts and statistics presented at various stages to support aspects of his case, including on the real nature of employment and unemployment in the US. For instance, Roberts claims the real unemployment figure is nearer 23 percent than the ‘official’ 7.5 percent. There are also interesting statistics on changes in the US labour markets and on the stagnation of real wages there.

However, real wages for large numbers of US workers have been stagnant or declining from as far back as the early 1970s and this was never fundamentally addressed or reversed by the Reagan administration of which Roberts was a part. Indeed, Roberts seems very coy about Reagan and ‘Reaganomics’ and tries to argue that the growth of laissez faire capitalism has only happened in comparatively recent times as a product of ‘globalisation’. To do this, he engages in some historical sleight-of-hand about Reagan’s supply-side economic policies, claiming that these were really about reforming the US tax system to give incentives to entrepreneurs and workers. But of course they were about far more than this – including attacks on the trade unions to ensure labour flexibility and mobility so as to reduce costs of production. Indeed, some of the very things Roberts now seems to be railing against here.

The fundamental weakness of this book though lies in the lack of solutions proffered. ‘Steady-state’ growth is lauded but there is no serious suggestion about how this can be achieved within capitalism. The most obvious soft-spots Roberts has are for national sovereignty and protectionism, yet he glides over the likely disastrous effects of the latter, which we have of course seen before, and which infamously led to the exacerbation of the economic depression of the 1930s and provoked the subsequent bloodbath of World War Two.

What Roberts has failed to realise is that capitalism has increasingly – over a period of many decades – become a truly global, interconnected system that operates according to its inherent, underlying economic laws. These are impersonal and driven by profit and the competitive accumulation of capital. Furthermore, this proverbial genie of globalised capital is out of the bottle and campaigners for national sovereignty, protectionism and the rest are never going to be able to squeeze it back in again.

Dave Perrin