It’s good to see praise for the work of contributors to LEAP such as Andrew Fisher’s warm welcome to Graham Turner’s new book The Credit Crunch. But, in the spirit of comradely debate, here are some comments which show that Graham’s book raises as many questions as it answers.
The book correctly chastises the mainstream press for failing to address the underlying causes of the massive accumulation of debt that exploded in the sub-prime crisis of 2007 and the credit crunch that followed, and he is right to say that this is “out of fear that the contradictions and flaws with the economic philosophy they have espoused will be exposed”. Graham is right again in his critique of the neo-liberal philosophy of unrestricted free trade which has dominated the global policy agenda for the last period.
It’s also true, as Andrew points out, that Graham talks about the growing power of the corporations during the period of globalisation. But there’s hardly a mention of it in the main parts of the book, and any deeper analysis of the underlying causes of corporate growth is absent. Rather than tracing the ballooning of credit and debt as the necessary expression of, and complement to the relentless expansion of capital, as is shown in my book, A House of Cards, Graham’s subsequent interpretation claims the whole problem is the result of policy errors by governments.
While others have traced the growth of a global network of transnational corporations which have transformed the role of national governments, and some even, like Leslie Sklair, have shown the development of a transnational capitalist class, Graham tends to take an anti-historical view, preferring to see the world as it was when Keynes lived and breathed. His is a macroeconomic world of nations competing in a system of more or less free markets. If only they’d followed the interventionist theories and advice of the economist and Lord John Maynard Keynes, governments could have kept the corporations under control and sustained a nice balance between corporate power and workers’ interests.
Graham’s account of the historical build-up to the current crisis takes in the 1920s and 1930s Great Depression, but leaps over the Second World War and the destruction of capital made necessary by the investment frenzy that led to overproduction and the 1929 crash. The creation and elimination of surplus productive capacity is an essential component determining the boom-bust trajectory of the capitalist economy and Graham sidesteps this question.
In my view, seeing the present crisis as a result of “policy errors” is itself a profound error. Policy-makers and corporate power represent a division of labour within the capitalist system as a whole. The globalisation process propelled them into each other’s arms, transformed the roles of the IMF and World Bank, institutions created at the post-second world war Bretton Woods to manage relations between nations (in which Britain was represented by Keynes, but largely sidelined by US interests), and created a process which led to global institutions like the World Trade Organisation. All now became subject to legions of corporate lobbyists serving the self-developing expansion of capital. If mistakes were made their origin actually lies in the accumulation process of capital itself, an objective process reflected in the heads of policy-makers obliged to serve its interests.
Graham’s proposal to rebalance the power relationship as a way of keeping profit levels high assumes that governments are in control, when they are patently not. It’s why he ends his book with a despairing hope. Even as domestic and commercial property prices tumble around the world, Graham’s hope is that central banks and governments can prevent the debt-induced collapse of asset prices by issuing even more credit. He calls it ’quantitative easing’. In my view, this policy is not only unrealistic but also ties us into the retention of the fundamental, exploitative relationships of capitalism as the biggest economic disaster of all times looms. That indeed would be a major policy error when a bold leap to social ownership as the solution to the crisis seems a more progressive way forward.