Edmund Berger’s Uncertain Futures provides an important defence of Marxist economic theory, and an analysis of crisis, argues Sean Ledwith

This year marks the tenth anniversary of the onset of the great recession that continues to grip the global economy. In 2007, a mass audience across the Western world was alerted to a crisis in the sub-prime mortgage market in the US. Later the same year, British people witnessed the first bank run in living memory as Northern Rock depositors queued on high streets across the country to withdraw their savings as the chain reaction crossed the Atlantic. The British media started to use the phrase, credit crunch, with remorseless regularity.

The following year, on 15thSeptember, television news featured iconic images of staff at Lehman Brothers Bank in Manhattan, scurrying out of the building, carrying boxes of documentation as their employer filed the largest bankruptcy case in US history. The following year, Gordon Brown’s government was forced to nationalise RBS and Lloyds Banks in order to avert a full-scale financial meltdown. There was an apocalyptic atmosphere circulating around senior financiers and politicians in the major capitals of the capitalist system.

At an extraordinary meeting between the leaders of Congress and US central bankers in Washington, the latter informed the former that unless trillions of dollars were immediately pumped into the economy, ‘we’re literally maybe days away from a complete meltdown of our financial system, with all the implications here at home and globally.’Gordon Brown’s Chancellor, Alistair Darling, reported exactly the same warning in the UK: ‘we faced a situation where the banking system right across the world, never mind Britain, could have collapsed.’

Ten years later, global growth has not fully recovered and workers around the world remain mired in declining wages and living standards. The failure of mainstream economics to account for the calamity was symbolised by former boss of the US Federal Bank, Alan Greenspan, telling Congress: ‘I have found a flaw. I don’t know how significant or permanent it is. But I have been very distressed by that fact.’

Many rightly point the figure of blame at the egregious greed of bankers, property developers and politicians who turned a blind eye to the debt bubble that expanded at an exponential rate in the years before the crash. A Marxist analysis, however, has to look much deeper at the roots of the 2007-08 crisis and integrate it with an understanding of the laws of motion of the whole capitalist system.

Edmund Berger provides such an account for the general reader that is as good as anything else currently available. He notes: ‘not all of this was the cause of the housing market of the United States-it was something far more systemic and intrinsic to the nature of globalised, integrated capitalism’ (p.1). Berger clearly and coherently develops a case for the ongoing relevance of the framework of political economy constructed by Marx and Engels in the nineteenth century: ‘Marxist theory both directly and indirectly lays out a toolbox for approaching the questions of our time’ (p.2).

The crucial theoretical tool in that box, according to Berger, is the tendency of the rate of profit to fall (TRPF) as explained in Marx’s Capital.Berger provides a concise account of how this theory is rooted in a wider analysis of the nature of exploitation in the capitalist economy. The cornerstone of Marxist economic theory is the labour theory of value, as exemplified by Berger:

‘wood, nails, lacquer and metals have a value of their own but it takes the force of labour power to transform these elements into a table, which will then take on a value that is greater than the sum of its parts’ (p.10).

The worker does not sell her labour as such to the boss, but crucially her labour-power. The latter has a unique capacity to generate additional value during the process of production. The difference between the wage of the worker and the value she transfers to a commodity for sale on the market is what Marx refers to as surplus-value; which, in turn, is the source of profit creamed off by the boss.

He further argues every capitalist is compelled by the law of value to seek to undercut his rivals in the market by raising the productivity of workers. The clearest way to achieve this is to invest in more advanced forms of machinery and technology as they become available. However, as human labour is the primary source of value, this competitive drive has the inadvertent effect of raising the organic composition of capital; that is the say, the ratio of dead labour (non-human means of production) compared to living labour (human beings). Consequently, the rate of profit will inevitably experience downward pressure.

Marx did not suggest the TRPF would be a linear process, spiralling down over time toward the spontaneous collapse of the system. Countervailing tendencies could re-set capitalism and postpone its denouement, but even with these factored in, generalised commodity production is a mode of production that is no longer capable of delivering sustainable growth. The theory is not universally accepted even within Marxist economic theory but Berger argues, on balance, the empirical evidence for TRPF is compelling.

He cites the work of leading Marxist economists today such as Andrew Kliman and Michael Roberts who are supportive of the hypothesis. The former has ‘produced his own model that shows an overall decline across the modern era’(p.16). The latter’s extensive analysis of US economic data indicates that ‘each successive period of rising rate of profit is lower than the period of ROP that preceded it, with recovery time from each period of falling ROP becoming more protracted. There is, in other words, evidence that there is a tendency for the rate of profit to fall’ (p.15). Berger makes a case for TRPF being the fundamental fault-line in the capitalist system but he does not neglect other aspects of the Marxist analysis of crisis such as underconsumption (p.115) and long wave theory (p.25).

Berger provides a summary of the post-World-War-Two performance of the global capitalist system attaining an apex of profitability in 1963 but then commencing a downward trajectory from 1975; peaking again the mid-1990s, taking us up to the crash of 2008 (p.17). Therefore, the US housing bubble and the related predatory lending culture of the years leading up to that crash were, the symptoms, not the causes, of a deeper malignancy in the system:

‘The Great Recession was not about bad banking, moral hazards or irrational behaviour; it can be contextualised as the coming together of multiple systemic tendencies inherent to this phase of the system’s development’ (p.46).

Linked to these economic trends, the author supplies a crisp account of the shifting political currents that have characterised Western policy-makers since 1945. The high tide of capitalist expansion followed World War Two was accompanied by the ideological hegemony within professional economics of the Keynesian paradigm, outlined concisely by Berger:

‘increase the possibilities of demand through welfare, job-growth programs and other forms of government stimulus enabled through deficit spending. Only through successful government intervention, Keynes argued, could the capitalist economy reach something that looked like an equilibrium based on full employment’ (p. 21).

Berger notes, however, that it is a common fallacy that the emergence of Keynesianism in the 1930s played the key role in pulling the US economy out of the Great Depression. FDR’s New Deal programme of massive federal spending and regulation is widely lauded as the model of demand-management economics in action. The author corrects this view by pointing out by 1937, four years after FDR entered the White House, production in the US had fallen by 30% and unemployment was rising again up to almost 20% (p.31). As Berger puts it, ‘the New Deal was, in actuality, incapable of resolving the contradictions of Fordist capitalism and thus unable to resolve the crisis of the Great Depression’ (p.32).

The true source of the so-called golden age of capitalism was, in fact, the wholesale destruction of huge swathes of the means of production across the world, and especially in Western Europe, that enabled the US state (later followed by Germany and Japan) to kick-start the cycle of surplus-value accumulation almost from scratch. This wholesale destruction of capital was also one of the countervailing tendencies referred to by Marx in the previous century as a method of off-setting the rising organic composition of capital, and thereby, the declining rate of profit.

This analysis is a sobering reminder that although World War Two was the most calamitous military conflict humanity has endured thus far, from the viewpoint of capitalism it was an economic necessity in order to clean out the build-up of toxins in the system. Berger also notes how capitalist recovery in the West after 1945 was assisted by the ideological smokescreen of the cold war, which:

‘played an essential role in this boom by ushering in an unprecedented arms build-up, which funnelled billions into the defense industries. The Keynesian era was, in other words, simply a new form of the war economy’(p.33).

The author does not mention them by name, but this perspective is an affirmation of the theory of the permanent arms economy, devised in the 1950s by Tony Cliff and Mike Kidron, to explain how massive military spending on nuclear weapons (i.e. waste) acted as another means to off-set investment in the means of production and consequently obviate the TRPF.

One of the strengths of Berger’s analysis is a weaving together of the strands of the economic and political levels of society to produce an integrated account of the evolution of capitalist societies in the Western world in the modern era. Having noted the correlation between the great boom and the ascendancy of Keynesianism, he traces the links between the slowing down of profit rates, intermittently, since the mid-1970s with the emergence of the neoliberal paradigm, not just in economic theory, but right across all aspects of our lives. He recounts how theorists such as Mises, Hayek and Friedman operated as outliers on the margins of economic theory in the postwar decades as Keynes reigned supreme. When economic slowdown morphed into political crisis in the 1970s, however, they took their place at the centre of the policy making process. One of the most critical moments in the transition from boom to slump, and from Keynesianism to neoliberalism, was President Nixon’s decision to end the dollar’s convertibility to gold in 1971. This lit a fire under the Bretton Woods arrangement of the postwar era that had held the Western economies together in the name of an American-dominated consensus.

Berger notes how Milton Friedman was one of the right-wing economists who urged Nixon to pull the plug on Bretton Woods in order to unleash the forces of rampant financialisation. The neoliberal gurus did not have an answer for the long-term decline in the rate of profit but they had discovered a means of enriching the elite at the expense of the social-democratic gains carved out by the labour movement in the preceding decades. The consequences of this seismic shift in economic priorities are still with us:

‘the rate of exploitation has sped up considerably, extracting higher rates of surplus value from workers. The result has been a sharp increase in income inequality, with the top 10% of income earners taking a greater and greater share of the total US income and nearly rivalling that of the bottom 90%’ (p.40).

Berger vividly explains how neoliberalism in the twenty-first century has mutated into more than an economic theory and become an insidious mind-set that pervades all aspects of contemporary life: ‘in our time and our minds we are far more exhausted; in our leisure far more seduced; in our relationships far more atomised’ (p.130). The resulting social polarisation that has become one of the hallmarks of our politics is also dealt with in a stimulating manner by Berger in his concluding section.

He thoughtfully discusses the rise of populisms of the left and right in the years since the crash of 2008. The latter have taken the virulent form of anti-immigrant and nationalistic brands such as Trump in the US and Ukip in the UK. More uplifting has been the insurgent electoral campaigns of Sanders in the US and Corbyn here. Berger engages in a valuable discussion of how revolutionaries should engage with these forces, which are refreshing alternatives to the bankrupt models of Clintonism and Blairism respectively, but still seek to reform capitalism from within in a manner that falls short of a revolutionary rupture.

He rightly argues that an ultra-leftist mentality that stands on the side-lines and focuses exclusively on the shortcomings of these new manifestations of reformism would be utterly misguided. The task for the revolutionary left is to work alongside these revived forms of left electoralism when appropriate, but always looking for opportunities to make the case for change that goes beyond the logic of capital.

This strategy of ‘syncopation’ (p.132), as Berger terms it, is strikingly similar to Trotsky’s call in the 1930s for united fronts as the vehicle of activism in the West:

‘The material conditions of the present none the less demand that the full forces of reformism be brought to the fore to combat neoliberalism. Reform and revolution are not diametrically opposing systems, but are intricately bound together. To reform capitalism, at this stage is a revolutionary act, though only a part of a wider revolutionary struggle’ (p.129).

Although the author rightly emphasises the importance of joint struggle by reformists and revolutionaries in the current conjuncture, he rather muddies the waters in the closing section by not clearly identifying the organisational vehicle for authentic change. Berger repeats the hackneyed criticisms of the best-known theory in this area: ‘we must contest Lenin’s essentialist claims that the worker cannot develop a consciousness beyond his or herself or that they can be steered in the proper direction by educated representatives of the propertied classes, by intellectuals’ (p.134). Recent scholarship by Lars Lih, Paul Le Blanc and others has blown the cobwebs off this caricatured assessment of Leninism and replaced it with a more nuanced view of the revolutionary party as being composed primarily of the best activists from within the working class itself. Thwarted upsurges in this decade in countries such as Egypt, Turkey and Greece have served to underline the ongoing relevance of the Leninist model of organisation.

Berger concludes his otherwise highly readable mix of diagnosis and prognosis with a reminder of a slogan one group of American socialists in the early twentieth century used to encapsulate the need for pragmatism and utopianism to operate in tandem in the work of revolutionaries: ‘We must build the structure of the new world in the shell of the old’ (p.137).