A Review of "The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China" by John Bellamy Foster & Robert W. McChesney

David Fields I Social Economics I Book Review I December 11th, 2014

The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China. John Bellamy Foster & Robert W. McChesney Hardcover: 224 pages. Publisher: Monthly Review Press (September 1, 2012). Language: English. ISBN-13: 978-1583673133

The Monthly Review, since its inception, has been carrying on some of the best works in radical political economy. Economists Paul Baran, Paul Sweezy, and Harry Magdoff set out the analytical foundations of what has come to be called the Monthly Review School.

Karl Marx, having written in the nineteenth century, wrote about a particular phase of capitalism, which was predicated less on oligopolies than today, although it was moving in that direction. In the best tradition of a historical-materialist approach, which seeks to understand the world as dynamic, rather than static, Monthly Review writers have realized that the organization of capitalism has changed. While the general driving force, the structural imperatives of increased expansion and accumulation of capitalism remains, the way it goes about doing so is inherently different. Competition, as we commonly think of it, has ended with the rise of monopoly capitalism-a system in which competition is between only handfuls of large firms. This is not the result of greedy individuals, but, rather, part of a larger systemic feature of capitalism. What sets the Monthly Review School apart is not just the commitment to keen intellect, but the ability and desire to engage with and incorporate non-Marxian political economy into analyses.

John Bellamy Foster and Robert W. McChesney continue this strong tradition of analytically sharp Marxian political economy in The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China. Endemic systemic crises set the table for explaining the rise of certain historically specific features of the economy. Since capitalism is predicated on endless accumulation, it is a system that tends towards stagnation. New historically specific phases of capitalism are structural attempts to alleviate the crisis prone tendencies.

Over-accumulation stemming from the so-called golden age of global capitalism has ensued an era of underconsumption as exemplified by low profit rates and chronic excess capacity. As such, what has taken place is an historical transformation towards the process of financialization. With an inability to absorb effectively economic surpluses, concerning the promotion of rising wages along with productivity, NFCs, or non-financial corporations, are coerced to paying a larger share of their internal funds, specifically via debt leveraging (including consumers), to financial institutions. These financial institutions, which are increasingly concentrated in the hands of fewer and fewer people, have become some of the most powerful actors. Increasing concentration of control within the financial sector lends credence to Marx's (1894: 544-45) argument that what Foster & McChesney call the age of monopoly finance capital is one in which

[t]he credit system, which as its focus in the so-called national banks and the big money lenders and usurers surrounding them, constitutes enormous centralization, and gives this class of parasites the fabulous power, not only to periodically despoil industrial capitalists, but also to interfere in actual production in a most dangerous manner-and this gang knows nothing about production and has nothing to do with it.

In this sense, contemporary monopoly power reflects the subservience of captains of industry to powerful bankers, whereas in the past, as Baran & Sweezy famously detailed in Monopoly Capital: An Essay on the American Economic and Social Order, the relationship was reversed. Since financial markets are, by their very nature, unstable, long-term corporate growth is left to short-term survivalist strategies of maximizing immediate profits; this is what William Lazonick & Mary O'Sullivan (2000) identify as the shareholder value orientation of corporate governance.

Financialization is the transformation of future streams of (profit, dividend, or interest) income into tradable financial assets. It is a 'pattern of accumulation', so to speak, in which profit making occurs through financial channels rather than through trade and commodity production (Krippner, 2002). It reflects the extensive systemic power and importance of financial markets, financial motives, financial institutions, and financial élites (Epstein, 2001).

Industrial capitalists are coerced to siphon off large interest payments to a conglomerate mass of moneylenders (Panico, 1980). Financial profits are a transfer of a part of the total surplus value created (and, by implication, realized) in production to the financial sector (Bakir and Campbell, 2010), which in the age of monopole finance capital is quite large. As such, industrial capitalists must engage in short-term speculative investment, instead of long-term productive real investment, in order to handle the burden of costly interest payments-the social cost is nominal wage suppression, if there is an effective absence of labor resistance; the US, for instance, has succeeded in this capacity by unleashing highly regressive economic policies (cf. Campbell, 2004).

In fact, US authorities have been willing for the last three decades to allow for higher levels of unemployment and stagnating wages, which has been implicated in private debt-led consumption expansion, with cheap exports from China fulfilling effective demand (Barba and Pivetti, 2009). On the European side of the equation, for instance, the most significant development over the past three decades has been the emergence of German economic dominance (Hein & Truger, 2010). The German economy has reached a core hegemonic position of the European world-system, so to speak, in which the German mark, which has transformed into the Euro, has been the nominal exchange rate anchor for the Euro area that, since the early 1980's, has set in motion viscous cycles of competitive disinflationary policies, a German dysfunctional' mercantilism (Hein & Truger, 2010) of maintaining trade surpluses and creating the credit capacity necessary to finance trade deficits of dependent 'external' markets, such as those of the so-called PIGS, inevitably leading to the European debt crisis (cf. Fields & Vernengo, 2012)

What is at hand is a complex system where financial institutions have absolute command over property (Marx, 1894: 570), and is reminiscent of a reality of which Marx depicted in a letter to Nikolai Danielson in 1879:

Railroads […] steamships […] were […] the means of communication adequate to the modern means of production […] they were the basis of immense joint stock companies, to commence by banking companies […] they gave in one word, an impetus never before suspected to the concentration of capital, and also to the acceleration and immensely enlarged cosmopolitan activity of loanable capital, thus embracing the whole world in a network of financial swindling and mutual indebtedness, the capitalist form of "international" brotherhood.

Altogether, The Endless Crisis is a brilliant critical articulation and expose of the nature of modern capitalist stagnation. The only critique is how the authors paint Hyman Minsky as a sort of mainstream economist who attacked Keynes for his placing the analysis of financial implosion in the long run, and not specifically with respect to short-run cyclical rhythms (58). This is a bit harsh (if not unfounded), for it can be argued that Minsky contributed to long-run analysis by assessing the degree to which excessive de-leveraging after speculative-led consumption bubbles causes a doubling over of contradictions in a downward spiral of asset price deflation, ensuing a normal unemployment equilibrium, a self-reinforcing phenomenon, which is Minsky's explanation of long-run stagnation (Keen, 1995).

Nevertheless, the book provides the reader with a clear framework through which to assess contemporary capitalist contradictions. The general argument is that reforming parts of the current capitalist world-system will not end resolve such crises. As such, financialization is not a solution to the general laws of motion of the dominant mode of production, but rather an outgrowth of it. Thus, thinking structurally and about systemic change is a more realistic solution to the general problem at hand.


Baran, P. A., & Sweezy, P. M. (1968). Monopoly Capital: An Essay on the American Economic and Social Order. New York: Monthly Review Press.

Bakir, E. & A. Campbell (2010). "Neoliberalism, the Rate of Profit and the Rate of

Accumulation," Science & Society, 74(3): 323-342

Barba, A. & M. Pivetti (2009). "Rising Household Debt: Its causes and macroeconomic implications-a long-period analysis," Cambridge Journal of Economics, 33: 113-137

Campbell, A. (2004). "The Birth of Neoliberalism in the US: A Reorganization of Capitalism," in A. Saad-Filho & D. Johnston (ed.) Neoliberalism: A Critical Reader, London and Ann Arbor, MI: Pluto Press

Epstein, G. (2001): "Financialization, Rentier Interests, and Central Bank Policy," Political Economy Research Institute, University of Massachusetts Amherst, mimeo.

Fields, D., & Vernengo, M. (2012). "Hegemonic currencies during the crisis: The dollar versus the euro in a Cartalist perspective," Review of International Political Economy, DOI:101080/09692290.2012.698997.

Foster, J. B., & McChesney, R. W. (2012). The Endless Crisis: How Monopoly-finance Capital Produces Stagnation and Upheaval from the USA to China. New York: Monthly Review Press.

Hein, E. & A. Truger (2010). "Finance-dominated capitalism in crisis - the case for a Global Keynesian New Deal", Institute For International Political Economy Berlin Working Paper No. 06/2010, Berlin School of Economics and Law

Keen, S. (1995). Finance and economic breakdown: modeling Minsky's" financial instability hypothesis". Journal of Post Keynesian Economics, 17(4): 607-635

Krippner, G. (2005). "The Financialization of the American economy," Socio

Economic Review , 3(2): 173-208

Lazonick, W., & O'Sullivan, M. (2000). "Maximizing shareholder value: a new ideology for corporate governance," Economy and Society, 29(1): 13-35

Marx, K. (1879). Letter to Nikolai Danielson, April 10.

Marx, K. (1894). Capital Vol. III. New York: International Publishers.

Panico, C. (1980). "Marx's analysis of the relationship between the rate of interest and the rate of profits,"Cambridge Journal of Economics , 4: 363-378