Tag Archives: Capitalism

Review: The Origin of Capitalism: A Longer View

A fascinating re-examination of the genesis of capitalism, along with some thoughts for what that might mean for its future. The origin of capitalism has been the subject of debate, particularly within the Marxist intellectual sphere because of its significance for how it might finish. The first part of this book is taken up with a summary and brief review of this debate. Meiksin Wood’s focus is on the “commercialisation” approach and its variations. In short Meiksin Wood’s view is that this is based on the presupposition that the logic of capitalism (profit derived from exploitation of production based on workers who do not have independent access to the means of production) is eternal, awaiting only the removal of fetters to be released and grow. Even various strands of Marxist thinking see capitalist laws of motion sitting within feudalism simply waiting to be unleashed. Gradual accumulation through trade eventually reaches a tipping point allowing the existing bourgeois in the cities to overturn their feudal chains.

In Meiksin Wood’s view this is wholly unsatisfactory, taking as given what itself needs to be explained – that is how did capitalist relations and forms of property come to be created in the first place. It is not sufficient to simply assume that capitalism existed latent within feudalism waiting to be released. This would mean that we accept the view common in capitalist economics that the ‘laws of motion’ of capitalism represent eternal rules valid throughout the whole of human history. And yet we know that capitalism appeared late, with most societies functioning in non-capitalist ways.

The second and longer section of the book outlines Meiksin Wood’s view that the genesis of capitalism was in fact a specific response to the conditions in rural England in the early modern period. Rather than being driven by the commercial accumulation of wealth, or by technological change, capitalism grows out of the relations of production in the countryside where the development of changed relations between aristocratic landlord and tenant farmer imposes the imperatives of the market on both producers and appropriators. These relations of production, and the creation of a unified national market for domestic products, create an agrarian capitalism that provides the foundation stone for future developments. The bourgeois of the towns and the development of international trade is therefore not what underpins the creation of capitalism, rather it is the changes in the English countryside.

This is an excellent thought provoking discussion of the issues surrounding the development of capitalism in the early modern period.

Meiksins Wood, E The Origin of Capitalism: A Longer View (Verso, London, 2017)


Financialisation and Modern Capitalism

“Financialisation” is an insightful concept when thinking about the modern economy, and how it has changed over the course of the last fifty years. It is something discussed in particular in Greta Krippner’s book “Capitalizing on Crisis” (Krippner 2011).

According to Krippner “financialisation” is associated with a post-industrial economy, and means:

“a broad based transformation in which financial activities… have become increasingly dominant… over the last several decades.”

(Krippner 2011, p.2)

Krippner outlines an example of this process in practice analysing changes in the US economy from the 1960s to the 2000s. Successive policy changes in response to developments in the real economy led to the highly developed financial economy of the 2000s.

In practice this means the corporations come to rely on increasingly on the income from financial investments for their profits, and less on the return on investment in productive industry. Krippner quotes a 2006 study of the Ford Motor Company generating profit primarily by selling loans to purchase cars rather than from the sales of the cars themselves (Krippner 2011, p.3).

This is a fundamental change in how the economy functions, reducing investment in production as companies instead chase profitable financial investments. The system becomes increasingly disconnected from the ‘real’ economy and prone to oscillation and crisis. It’s a process that Marx touches on in Volume 3 of Capital when he describes ‘fictitious capital’, speculation, and the credit system. As more money is invested, the banks use it to create more ‘fictitious’ capital to create more investments and so as the system begins to spiral out of control. It was a process like this which drove asset prices for ‘subprime’ US real estate to unsustainable levels leading to the global financial crisis of 2007-9.

Michael Roberts takes up a similar theme in his analysis of the economy since 2007. His focus is on how companies need to search for different sources of profit as they try to survive a declining rate of profit overall, something which is a standard part of Marx’s analysis of a capitalist economy.

“After 2000, the rate of profit based on net worth remained under the rate against tangible assets for the first time on record, suggesting that the “financial” part of the assets of the capitalist sector became a significant obstacle to the recovery in capital accumulation.”

(Roberts 2016, p.122)

“Profit margins for the large companies are near all-time highs and cash reserves have accumulated, but there is little corresponding investment in the real economy; instead, it is in dividends, stock buybacks, and speculation in financial assets—and, of course, a revival of the property markets.”

(Roberts 2016, p.144)

There is little doubt that weak productive investment is driving poor ‘real world’ economic performance. Analysis by the UCL Institute for Innovation and Public Purposes suggests that “at the root of the UK’s weak economic performance is a low rate of investment“.

“The UK banking sector has largely retreated from funding productive activity in the real economy, and is instead focused on financing and trading existing assets.”

(MacFarlane 2018)

Krippner’s view that individual policy decisions designed to tackle an isolated problem have resulted in long term and fundamental changes to the functioning of the economy  also complements David Harvey’s view on how capitalism handles crises.  For Harvey, building on Marx, capitalism is an inherently unstable system with a number of points where crises can form for different underlying reasons. When a crisis occurs, the response tends to address the immediate short term problem by moving the point of tension elsewhere in the system to re-emerge later.

This is exactly the process that Krippner describes in the US. Policy responses developed in reaction to a present crisis put the economy on the path to the next pinch point and the next crisis, each widening and deepening the influence of finance on the economy as a whole.

“Financialisation” then is a concept that helps the analysis of the modern debt-laden economy both as a response to the tendency of the rate of profit to fall (Roberts) and as a means to avoid an incipient crisis while unintentionally preparing the ground for the next (Harvey).


Krippner, Greta Capitalizing on Crisis (Harvard University Press, Cambridge Massachusetts, 2011)

Roberts, Michael The Long Depression (Haymarket Books, Chicago, 2016)

Harvey, David Marx, Capital and the Madness of Economic Reason (Profile Books, London, 2017)

Macfarlane, L State investment banks as a source of patient strategic finance in the UK (online) (UCL Institute for Innovation and Public Purpose, https://www.ucl.ac.uk/bartlett/public-purpose/state-investment-banks-source-patient-strategic-finance-uk, accessed 19 January 2018)

Marx, Karl Capital Volume 3 (Penguin, London, 1981)

Brexit and the Failure of the Third Way

I recently picked up a handful of second hand New Left Review journals in a local bookshop, varying in date from 1977 to 2000. They include a number of interesting articles, but following the referendum campaign in the UK and the impact of the populist right “Brexit” campaigners I found this short piece by Slavoj Zizek from 2000 on Jorg Haider especially relevant.

Jorg Haider was an Austrian politician who died in a car accident in 2008 – eight years after Zizek’s article – having lead the far right Freedom Party to significant success in Austrian elections, reaching 27% of the vote and joining the governing coalition in 1999.

Zizek uses Haider as a starting point to critique “third way” politics prevalent in 2000 and exemplified by Jeffrey Isaac in another article in the same edition of New Left Review where he argues that it is no longer possible to reject capitalism. The best that can be hoped for is an accommodation. That “coming to terms with capitalism” is both inevitable and desirable, and that left politics should focus on pragmatic problem solving.

Zizek argues forcefully that this approach in fact represents:

“social democracy purged of its minimal subversive sting, extinguishing even the faintest memory of anti-capitalism and class struggle”.

Zizek theorises that politicians of the centre need a radical right in opposition – something to build a coalition of democratic forces against, something to unite the rest of politics against. It is this that allows them to monopolise government. A strategy that is specifically designed to neuter the radical left, to prevent any attempt to challenge the system in the interests of the masses.

“The result is what one would expect. The populist Right moves to occupy the terrain evacuated by the Left, as the only ‘serious’ political force that still employs an anti-capitalist rhetoric”

Sixteen years after Zizek wrote this article, the Labour vote in Scotland collapsed, the Brexit campaign succeeded in attracting disaffected working class voters across wide swathes of traditionally Labour voting areas, and the Labour Party itself is on the verge of falling apart. All the while with a growing right wing insurgency, culminating in the openly racist referendum campaign.

As Zizek predicted then, the third way has turned out to be a dead end for left wing politics. It has developed a political class which has more in common with each other than with many of the people they are supposed to represent. As Rafael Behr points out in his dissection of the failure of the Remain campaign, Labour and Conservatives worked together in the push to stay in the European Union and felt far more in common with each other than might be expected of those supposedly on opposite sides of a class struggle:

“over the course of the campaign, the most senior remainers found collegiate sympathy in a shared world view. As one put it: “We were the pluralist, liberal, centrist force in British politics.” Pro-Europeanism became a proxy for the fusion of economic and social liberalism that had been a dominant philosophy of the political mainstream for a generation, although its proponents were scattered across partisan boundaries.”

But this world view simply is not shared by a large portion of the electorate that have seen their standards of living held static or decline in the name of maintaining global capitalism. Worse, this political class has driven a narrowing of the “Overton Window” of political discourse which has essentially made only one choice available, no matter who you vote for. As Zizek points out in his article:

“The consensual form of politics in our time is a bi-polar system that offers the appearance of a choice where essentially there is none, since today poles converge on a single economic stance”

It seems clear that the vote for Brexit is a revolt against this political class and the consensus form of politics that has been created. It is a revolt however that raises questions about how it can be expressed when the parties on the left have abandoned the field. The victory of Brexit and the rise of Donald Trump suggest that the radical right are successfully exploiting this discontent.

The shift to the right will only be addressed when the modern left finds a way to express this discontent, providing a real alternative to the single economic vision offered by the mainstream political parties. Until then government remains in the grip of an increasingly discredited centre which both pushes dissent to the right and uses it to create the illusion that “there is no alternative“.

This edition of New Left Review is number 2 of the second series from January-March 2000 and was therefore written at the height of the ‘Third Way‘ debate.


Hegemony is a key concept in the writing of the Italian Marxist Antonio Gramsci, a key figure in the inter-war Italian Communist Party who was imprisoned by Mussolini, eventually dying in prison in 1937. Hegemony is the theory of how a dominant class can govern by consent and without the overt use of force. It explains that classes do not govern by simply controlling the levers of state power. Rather they develop their dominance through the institutions of civil society which impose a value consensus even across opposing sides. The terms of political and economic debate become determined by the values of the dominant class, creating a window of acceptable discourse (the “Overton Window“). Policy dictated by the interests of the dominant class becomes seen as common sense – “there is no alternative“.

How then can the left realistically make the case for change, when the debate can only take place within terms dictated by the dominant class? The trajectory of modern social democratic parties in the west across the last 30 years charts their failure to effectively answer this question.

In their book “Inventing the Future” (which I reviewed recently), Nick Srnicek and Alex Williams use the concept of hegemony to explain how neoliberalism came to dominate western governments during the 1980’s and 1990’s. They describe neoliberalism as a specific project pursued across the decades from the 1930’s onwards through think tanks, journalism, and economics departments slowly building to a position where it became viewed as the only possible set of policies which could be pursued by any government, no matter what it’s affiliation. Neoliberalism became hegemonic.

If the left is to be successful in the future, Srnicek and Williams use Gramscian language to suggest that it must construct a similar long term project, based around a number of key points. First that of reclaiming progress. After the collapse of Soviet communism visions of the future became dominated by the inevitability of some form of capitalism. Supplanting capitalism is they believe impossible from a defensive posture.

Progress is a matter of political struggle, following no pre-plotted trajectory or natural tendency… any form of progressive politics must set out to construct the new.

This developed image of the future must be universal if it is to compete with capitalism’s all encompassing and expansionary fabric.

Anything less than a competing universal will end up being smothered by an all-embracing series of capitalist relations.

Finally the left should pursue ‘synthetic’ freedom. The freedom offered by capitalism is negative, it is freedom from interference by the state. It is entirely compatible mass poverty, starvation, homelessness, unemployment, and inequality. The left must pursue a freedom which is capable of being realised.

‘Synthetic’ freedom recognises that a formal right without a material capacity is worthless.

Taken together these point towards what the authors call a ‘counter-hegemonic’ project to pull the left out of it’s current localist and defensive posture, a strategy which demonstrates a practical application in thought of Gramsci’s theory as part of an approach to rebuilding the modern left.

Seventeen Contradictions and the End of Capitalism

David Harvey‘s “Seventeen Contradictions and the End of Capitalism” is a wonderful outline of the dynamics of capital as both a process and a thing. It makes a thought provoking starting point for those inquisitive about many things which are taken for granted in mainstream economic and political discourse. It introduces the sort of dialectical style of analysis used by Marx. Identifying and analysing contradiction is an extremely powerful mechanism to unpick the basic processes which underpin the operation of capital.

Each of these contradictions is worth a post in themselves, but here I just want to capture a summary.

Harvey identifies 3 distinct types of contradiction. The ‘foundational’ contradictions which are fundamental to the operation of capital. As Harvey notes, they interlock to create the basic architecture for capital.

  1. Use value and exchange value;
  2. The social value of labour and its representation by money;
  3. Private property and the capitalist state;
  4. Private appropriation and common wealth;
  5. Capital and labour;
  6. Capital as process or thing;
  7. The contradictory unity of production and realisation.

The ‘moving’ contradictions create shifting patterns of change which alter how capital presents itself at any given time, altering the nature of politics and struggle. They continuously evolve driving the dynamism of capital.

  1. Technology, work, and human disposability;
  2. Divisions of labour;
  3. Monopoly and competition: centralisation and decentralisation;
  4. Uneven geographical developments and the production of space;
  5. Disparities of income and wealth;
  6. Social reproduction;
  7. Freedom and domination.

Finally the ‘dangerous’ contradictions. Harvey notes that the contradictions capable of destroying capitalism change over time. He attempts to identify those which are visible in our own time and represent a clear and present danger to the survival of capital.

  1. Endless compound growth;
  2. Capital’s relation to nature;
  3. The revolt of human nature: universal alienation.

The final section on universal alienation is the most idealistic. Harvey draws a parallel to the anti-colonial struggle and draws the conclusion that capitalism is unlikely to be finished without a violent struggle. In general this is the least convincing part of the book. Harvey is better at analysing the world than sounding like a convincing revolutionary.

The book finishes with some outlines of what the anti-capitalist struggle might aim for, drawn from each contradiction. The analysis presented by Harvey provides a framework within which to think about the operation of capital in the modern world, and how we might approaching changing the nature of economy and society. What becomes clear though is how far the organised left has to go in building a coherent programme of action which is capable of putting this into action.

Marx: An Overview of Capitalism as seen from Volumes 2 and 3

There is a superb segment within Part 5 of Capital Volume 3 which provides provides an overview of how Marx conceived the different functioning parts of capital operating as a system. It also has tremendous relevance to our own form of capitalism where the realities of production seem to have been left behind, and we exist in a sort of dream state where money can seemingly generate a profit simply because of it’s inherent nature.

The passages are in chapters 30, 31, & 32 (from the Penguin Classics edition translated by David Fernbach) where Marx pulls together the various threads of production, circulation, and distribution to create something akin to an overall system view, drawing together threads from all three volumes of Capital.

Capitalist production rests on the creation of surplus value, which is generated during the production process by living labour power. This surplus value is appropriated by the capitalist and must then be sold in the market to realise both the capital invested at the start and the surplus value generated. True value is determined by the quantity of labour required to create the commodity. This is broadly the ground covered in Volume 1.

At this point capital moves into the circulation process which Marx divides into three fundamental and interlocking circuits, those of money capital, productive capital, and commodity capital. Set together these form what David Harvey compares to blood flowing around the body of capitalism.

In the money circuit, money capital is used to drive the production process and create commodities which are then converted back into money.

In the productive circuit the starting point is the pair of labour power and means of production. Used to create commodities which when converted into money can be used to buy more means of production and labour power to start the process again.

In the commodity circuit, stock converted into money and pushed through the productive process creates a larger stock of commodities.

These three interlock to create the whole circuit from money, to means of production and labour power, to commodities, and back into money again. At any given time any single business will have capital committed within each three of these circuits. Maintaining the flow around and between each circuit and through the whole system is vitally important. Capitalism is a fundamentally dynamic system, any pause in circulation is likely to precipitate a crisis.

Finance capitalism and credit lubricates this system. The complexity of the required flow, and the need for hoards of money to be available to bridge pauses, gaps, and disproportionality leads to the elaboration of a credit system to get around the need for money to be held in an unproductive hoard. This credit system also allows for money which does accumulate at rest to be recycled out elsewhere via the banks.

Credit therefore addresses one problem by keeping things moving, but does it by creating another. This is the financial system which allows those who have accumulated capital in the past to grab control over current production and for speculation and purely financial crises to appear which end up damaging accumulation. In other words as wealth accumulates and is distributed unevenly it creates significant imbalances.

It seems to me that in essence this is how modern western capitalism operates. The accumulated wealth of the past has allowed the west to act like a rentier maintaining a large financial system that appears to operate according to different rules disconnected from production. Marx’s analysis suggests that this cannot last forever. The fundamental importance of value production will reassert itself eventually and in the meantime this over-financialised system will be unstable.

To me this analysis of the circulation and distribution of capital from Volumes 2 and 3 bring Marx’s thinking on capitalism much closer to the modern world with rapid financial flows across an interconnected system.