Review Essay Critical Sociology 37(4) 483 –492 Crisis and the Specificity of Analysis © The Author(s) 2011 Reprints and permission: sagepub.co.uk/journalsPermissions.nav DOI: 10.1177/0896920510396386 crs.sagepub.com David Calnitsky University of Wisconsin-Madison, USA In and Out of the Crisis: The Global Financial Meltdown and Left Alternatives. By Greg Albo, Sam Gindin and Leo Panitch. Oakland, CA: PM Press, 2010. Pp. 144, $13.95 (paper). ISBN: 1604862122. The Great Financial Crisis: Causes and Consequences. By John Bellamy Foster and Fred Magdoff. New York, NY: Monthly Review Press, 2009. Pp. 160, $12.95 (paper). ISBN: 1583671846. Zombie Capitalism: Global Crisis and the Relevance of Marx. By Chris Harman. London: Bookmarks Publications, 2009. Pp. 425, $19.39 (paper). ISBN: 1905192533. With each cycle of boom and bust it becomes ever more apparent that to study the history of capi- talist dynamics at the macro scale is to study the history of capitalist crisis. Between the years 1810 and 1920, American institutionalist economist WC Mitchell identified 15 economic crises (cited in Shaikh, 1978). Likewise, the National Bureau of Economic Research identified 11 recessions between 1945 and 2001, a period book-ended by the Great Depression and the current economic crisis (NBER, 2010). The history of capitalism is inseparable from the history of internal shocks and disturbances, that at times generate broad political, social and economic failures which com- promise the system’s ability to reproduce itself. In striking contrast to the actual history of crises, neoclassical economics depicts a highly stylized economic system that is harmonious, efficient, and largely immune to crisis. As Anwar Shaikh (1978) pointed out in his classic review of competing crisis theories, the neo- classical treatment of crisis tends to ground its explanation in criteria that are external to the capitalist system, such as shifts in collective psychology, natural disasters, and political mis- calculations. The economist’s recourse to external means to account for crises that are in fact robust empirical regularities – or differently put, that which ostensibly ought to be a central concern of social science – reflects a theoretical apparatus that is ill-equipped to meet the task of explaining the capitalist system. While each economic crisis tends to be understood as a special case requiring a special explanation of a narrowly bounded economic and political conjuncture, neoclassical economics leaves the general phenomenon of capitalist crisis largely unexplained. Corresponding author: David Calnitsky, Department of Sociology, University of Wisconsin-Madison, 8128 William H. Sewell Social Sciences Building, 1180 Observatory Drive, Madison, WI 53706, USA Email: [email protected] 484 Critical Sociology 37(4) In opposition to this view, Marxists tend to understand each particular crisis in the context of very general sets of contradictions of capitalist production pushed towards their outer limits. In addition to this, it has been argued that the uniqueness of the Marxist understanding of crisis is its internal necessity; that is, crisis is understood to be an essential and persistent feature of capitalism (Clarke, 1994). This essay examines three recent books on crisis coming from different and often contradictory corners of the world of Marxian scholarship. I analyze them next to each other but also in the context of the history of Marxian thinking on crisis. This approach necessarily brings into relief the relationship between theories of the specific crises and general crisis theory. Historically, one can outline three broad and competing theories of crisis often identified with the Marxian political economy tradition (Foley, 1986; Shaikh, 1978; Wright, 1999). First, falling rate of profit theories argue that internal competitive pressures upon individual capitalists lead them to increasingly automate production in order to accelerate accumulation. Paradoxically, this induces a decline in the system-wide rate of profit, which makes the risk of crisis more acute. Secondly, though increasingly rare, theories of disproportionality emphasize the misallocation of capital between consumer and capital good departments of production, where for various reasons a contraction of one department does not correspond to the expansion of the other, generating a broad-based drop in effective demand and hence, crisis. Finally, underconsumption theories of crisis stress the requirements of the capitalist system to rely on an external source of aggregate demand, arguing that the systemic tendency toward increasing inequality in capitalist economies is incongruent with the systemic need to realize investment with profitable sale on the market. This final group of theories, most famously known in the work of Rosa Luxemburg, is often closely tied to theories of imperialism where the absorption of the non-capitalist world into the capitalist center delays the collapse of capital accumulation by relying on a fresh source of effective demand. In the 1960s, Paul Sweezy and Paul Baran developed a theory of ‘monopoly capital’ which descended directly from Luxemburg’s underconsumption theory. The theory argued that a ten- dency toward stagnation prevails in the monopoly phase of capitalism as monopolist producers find it more and more difficult to find outlets to reinvest their growing surplus; thus, inadequate buying power leaves a portion of economic output chronically ‘unconsumed’. The compelling story of capitalist crisis in The Great Financial Crisis by John Bellamy Foster and Fred Magdoff, the heirs to (and current stewards of) the monopoly capital school, is anchored to this analysis. The bulk of the short book was first published as separate essays in the journal Monthly Review, where Foster and Magdoff are the in-house political economists. The theory of monopoly capital, rehearsed in the book’s third chapter, goes roughly as follows: capitalism entered a historically new monopoly phase by the early 20th century that was marked by a rising surplus, which resulted from oligopolistic pricing (i.e. the virtual abandonment of price- cutting war between enterprises) and increasing productivity. An exploding ‘surplus’ was accom- panied by vanishing investment opportunities (largely because investment was now dedicated only to replacing means of production as the main components of industry had already been assembled) and an incapacity of the economy to absorb this surplus through the regular channels of investment and consumption. This theory was conceived as a direct foil to Marx’s ‘tendency of the rate of profit to fall’. Thus, while the falling rate of profit tendency might hold under competitive condi- tions, in light of the new uncompetitive era of monopoly capital, it ought to be substituted for the parallel ‘tendency for the surplus to rise’. These conditions are the key stylized facts of monopoly capitalism; accordingly, its normal state should be characterized by chronic stagnation (Foster and Magdoff: 64–66). The traditional question of the restoration of the profit rate thus shifted to the question of the absorption of the surplus. According to Baran and Sweezy (and later Sweezy and Harry Magdoff) the stabilization of capitalism demanded increasing amounts of waste to soak up a growing surplus it could not absorb on its own – in the absence of these external stimulants Calnitsky 485 capitalism ‘would sink deeper and deeper into a bog of chronic depression’ (Baran and Sweezy, 1966: 108). These external stimulants inter alia could take the form of military spending, advertis- ing, or speculative finance. With stagnation as the normal state of monopoly capitalism the subject of analysis is inverted: it is prosperity and not slump which now demands explanation. Thus monopoly capital theory attri- butes the postwar boom to a few historically specific ‘external’ outlets for surplus including the reconstruction of Europe, the accumulation of wartime consumer savings, the Cold War arms race, the explosion of advertising, and the growth of finance, insurance and real estate (Foster and Magdoff, p. 128). As the stimulus from these specific factors petered out, stagnation returned and the economy became increasingly reliant on military spending and finance to propel the relatively modest rates of growth in recent decades. Following Sweezy and Harry Magdoff’s writings for Monthly Review in the 1980s and 1990s, Foster and Fred Magdoff view the unparalleled explosion of financialization as a general reaction on the part of capital to stagnation in the productive sectors.1 A large part of this money-capital was directed not towards productive capital, but instead was used to purchase financial instruments including futures, options, derivatives, hedge funds, etc. (p. 80). It is then argued that the disproportionate growth of finance to production could not go on forever, as debts must eventually be repaid. In a stagnant underlying economy where real wages have been frozen since the 1970s it becomes more and more likely that debts will be defaulted on. As the outlet of finance implodes, endemic stagnation resurfaces, which reduces the utilization of capital and swells the reserve army of the unemployed. The Great Financial Crisis is entrenched in the core assumptions first made by Baran and Sweezy in the 1960s about the nature of mature capitalism. Six of the seven essays that make up the book remind readers that their analysis is embedded in the view that an economic tendency