Zed books, 2010, 243 pp, hbk 1 84813 416 4, £65, pbk 1 84813 417 1, £12.99
Harry Shutt begins with a diagnosis of the evils which led to the financial crisis of the last two years, and particularly the global shift away from capital intensive manufacturing and towards service industries, and thus towards fewer opportunities for productive investment and to pension and other funds seeking increasingly speculative investments (which Shutt correctly terms gambling). Loans looking for lenders meant increasingly risky loans and the eventual collapse of the sub-prime mortgage market in the United States.
Shutt describes the banks bail-out as ‘corporate welfare’ (p.31), outlines the effects of the austerity measures which the bail-out has made necessary, and suggests that
‘it can scarcely be denied that the combination of extreme monetary laxity, rapid fiscal expansion and massive state subsidy of banks and other private-sector businesses constitutes a total negation of the principles of orthodox financial management as traditionally espoused by capitalist market economies. At the same time the pretence that such an unorthodox strategy could be effective in reviving growth in a situation where overborrowing by consumers had already brought the global economy to its knees bespeaks an even more total detachment from reality.’ (p.46)
A major long-term threat to classical capitalism is the devaluation of both capital and labour: capital investment in internet-based media is rarely profitable because it is difficult to demand payment for information which can be so easily shared; and technological change means that the ‘global demand for labour is in long-term decline’ (p.56). Insecurity for both investors and workers is the result. Governments’ concern to maintain growth leads to government policy designed to maintain corporate profits – for instance, the privatisation of state enterprises and assets – in a context in which the increasing costs of the scarce resources of a finite planet and growing public resistance to consumption increasingly constrain growth. An important source of the funds with nowhere to go is the private pensions industry, which Shutt compares unfavourably with the state pay-as-you-go pension system: a system which he rightly suggests doesn’t suffer from a rising dependency ration between retired workers and active workers because productivity is rising. The pharmaceutical, nuclear power and arms industries are castigated as yet more artificial receptacles for investment capital. The profits system, far from allocating resources efficiently, misallocates them.
Shutt’s proposed replacement economic model abandons both growth and the ‘work fetish’ (p.99) as priorities and instead aims ‘to provide people with what they need and want to the maximum extent permitted by the available resources’ (p.108). The policy instruments proposed are greater government control over taxation and capital movement, increased non-profit and state ownership of enterprises, restriction of working hours, and a Citizen’s Income. The final chapters recommend ‘cooperation, creativeness, equality’ and ‘deepening democracy’ and ask whether the current crisis might lead some world leaders to seek a more radical alternative to the status quo.
In the final chapter Shutt returns to an anti-globalisation agenda which emerges at various points in his book, and I wonder whether here he has not sufficiently examined the options. National boundaries are contingent realities, and there is no more reason for recommending a new economic order founded on the nation state than a global one. What surely matters is consistency, e.g., the free movement of capital within Europe needs to be matched by a European tax regime and a European Citizen’s Income. Further exploration of the alternatives would be welcome.
Many of Shutt’s readers will want to argue with particular points, but it is surely more important to experience the general direction of his argument. Whilst his agenda appears radical, he doesn’t in fact attempt to dismantle capitalism. In spite of the rhetoric, what he’s done is to show how capitalism can survive in a new context. One of those contexts is globalisation, and we look forward to Shutt showing how his prescription could work in an increasingly interconnected world.