Comment from T. Masterson
Time April 8, 2010 at 2:23 am

As a Marxist and a student of political economy, I cant say I was to impressed with this book. Its quite redundant and fails to explain the basic dynamic of the phenomena which are discussed paragraph after paragraph. For example, the authors argue that the ‘financialization’ of capitalism has created a situation in which the imminent collapse of the housing bubble which we’ve seen created within the past decade or so, will lead to a “debt-deflationary spiral” in the world economy in general. Magdoff and Foster fail to articulate; a. exactly what a “debt-deflationary spiral” is, b. how exactly this is an inevitable outcome of the downfall of that sector of finance-capital built upon the seemingly ceiling-less housing boom, and c. what exactly this means for the so-called “real economy.” They also spend pages upon pages championing a book some Marxist intellectual wrote during the 1970s, boasting about how prophetic it proved to be. In short, no original ideas were put forth in this publication, and I now regret ever purchasing and reading this book. As sad as it for those of us on the far left, reading Krugman, Steiglitz or any of those neo-Keynesian, “left-wing” economists is much more informative than spending time and mental energy on these two clowns. To form your own understanding of what is happening now, read Marx’s Capital, and of course Adam Smith’s Wealth of Nations, and then read the Financial Times or Wall Street Journal.
Rating: 3 / 5

Comment from balyzu
Time April 8, 2010 at 5:23 am

The positive reviews by the pioneer of World systems analysis Immanuel Wallerstein, as well as American political economists Robert Pollin and Robin Hahnel were the main reason why I decided to check out this book. Unfortunately, it failed to live up to my high expectations. To put it in banal terms, it is not bad, but it is not good either.

On the one hand, it exposes the reader to a range of important indicators that are helpful in understanding the recent economic developments (the change in the level of debt relative to GDP owed by households, industrial firms, financial firms, and the government; the share of total profits in the US economy that go to financial firms; the volume of financial transactions that point to their speculative and volatile nature; the distribution of income, etc.). Moreover, it provides a good glimpse of existing intellectual thought on these recent developments (the neoliberal orthodoxy, the left-liberal “financialization” thesis promoted by American Post Keynesian Thomas Palley and others, the “stagnation” thesis advocated by Marxist theorists of the Monopoly Capital tradition, etc.).

On the other hand, the prose is extremely repetitive, most probably because the majority of the book was pulled from the Monthly Review articles. The authors’ defense of the Monopoly Capital tradition is not helped by the incessant repetition of essentially the same references to Sweezy and Magdoff, who held that mature capitalist economies are prone to “stagnation”. The theory of “vanishing investment opportunities”, famously disparaged by Schumpeter is here treated almost as an axiom. Alternative reasoning, such as “crowding out” of productive investments by financial speculation which is very profitable in the short term, or the possibility that the stagnation of the neoliberal era chiefly flows from the politically driven changes to the income distribution, are either dismissed in a cursory manner or overlooked. The policy prescriptions are likewise confused and ambiguous: “socialism”. No, thanks, I would much rather prefer something insightful.

This book is not useless. However, its analysis is ultimately unpersuasive and its policy prescriptions unworthy of note. If you are interested in sensible unorthodox analysis, I would recommend looking into what figures like Thomas Palley, Dean Baker, and James Galbraith have to say about the neoliberal era and the recent debacle.
Rating: 3 / 5

Comment from John Schuyler
Time April 8, 2010 at 7:24 am

Very excellent discussion with abundant and well-presented data. Distracting, however, is the authors’ insistence (in several chapter ends) that the only proper fix is to recast the system into socialism (abundant government control and wealth redistribution). At least they offer recommendations.
Rating: 4 / 5

Comment from Michael Emmett Brady
Time April 8, 2010 at 8:24 am

I agree that there is much in this book which is valuable .The authors pinpoint the problem of speculation and securitization ,which is the process by which the private commercial banking industry and Wall Street Investment Banks,which have all collapsed or rechartered themselves as private commercial banks in order to avoid collapse, attempt to expand speculative finance into as many corners of the economy as they can in order to provide themselves with the opportunities to profit from the manipulation of balance sheet items under the name ” financial services ” without the production of any real goods or services.The diagnosis of the problem ,and the negative consequences impacting Main Street that result from the speculative economy created by Wall Street, are also correct.However,the solutions suggested overlook the analysis provided by Adam Smith over 230 years ago.

Smith’s analysis of the problem of banking and speculation was covered on some 80 pages ( See The Wealth of Nations,1776,pp.260-340,Modern Library (Cannan) edition,with the foreward by Max Lerner ) .Smith makes it clear that the central bank must prevent the private commercial banks from extending loans to three categories of borrower.These three categories are projectors,prodigals,and imprudent risk takers.What were the consequences if these categories of borrower obtained bank loans ?Smith simply notes that the savings deposits loaned out by the banks will end up being wasted and destroyed.The savings will not be transformed into investment.Smith’s other main solution was to maintain low fixed rates of interest permanently in the long run a little bit higher than the equilibrium rate available to the most creditworthy of borrowers.Loans were to be targeted toward the sober individuals who would use the loans to create businesses or expand existing businesses.Smith’s solution is very similar,if not identical,to that proposed by Keynes on pp.321-327,338-353, and 371-378 of the General Theory (1936).This book presents and incorporates,even if the authors themselves do not realize it, an excellent restatement of conclusions that have been reached by diverse thinkers ranging from the ancient Hebrew prophets of the Old and New Testament and Jesus Christ to Socrates,Plato, Aristotle,Augustine,Aquinas,Smith,Marx,Veblen and Keynes.The essential point is this-Who do the banks lend to ? Smith said it best.Do the banks make most of their loans to the “sober ” citizens who will use them productively to start businesses and/or expand existing businesses,or do the loans go the ” imprudent risk takers,prodigals and projectors “, identified by Adam Smith in The Wealth of Nations,who will use the loans to start bubbles ,based on the leveraging of debt. This leads inevitably to a mania,panic ,crash,and a recession or a depression . Smith’s last category is identical to Keynes’s speculators and rentiers or Veblen’s captains of Finance.The loans can be used either for productive investment in capital goods/plant,and equipment( Veblen’s captains of Industry) that will provide a solid foundation for future economic growth and Prosperity (Smith’s Wealth of Nations) or it can be used for speculation (Veblens’s captains of Finance)that leads to recession and depression.It is as simple as that.

I have deducted 1/2 of a star because of the apparent ignorance on the part of the authors concerning the economic wisdom of the ancients.
Rating: 5 / 5

Comment from Keith Sadler
Time April 8, 2010 at 8:53 am

Finally a review from an anti-capitalist viewpoint. Another great thing is that as a compilation of articles previously written(with some new stuff) these guys really saw the crisis before it unfolded. On the downside there were quite a few paragraphs duplicated from previous articles as reference to readers of the current article. Overall from a leftist(me) who doesn’t understand the complicated in & outs of modern day economics this book was great. As a worker I understand the rampant exploitation but not the way the system functions
Rating: 4 / 5