Friday, July 11, 2014

Book Review: Capitalism: A Very Short Introduction by James Fulcher

Capitalism: A Very Short Introduction by James Fulcher contains an overview of debates about capitalism and how and why it emerged, as well as explaining capitalism's tendency to crisis and comparing its modern incarnations to each other.  Despite a mostly Marxist-inspired analysis, the book ends on a very reformist note, encouraging those that desire to change social conditions to work for reforms within capitalism.

Fulcher examines three historical examples of capitalism, what he calls merchant capital, capitalist production and financial capitalism.  He notes that "all involve the investment of money in order to make a profit, the essential feature of capitalism." (14)  Slightly restating the point, he concludes the first chapter: "So the answer to our question [of what capitalism is] is that capitalism involves the investment of money to make more money." (18)

Fulcher reprises Ellen Meiksins Wood's account of the origins of capitalism in the opening of the second chapter.  With regard to British capitalism, Fulcher highlights combinations and friendly societies as forerunners of unions and the prior growth of merchant capitalism as presaging the emergence of capitalist production.  Earlier, he identifies the "growth of production, consumption and markets in 16th-century England" (21) and Journeyman's societies as antecedents of the aforementioned developments.  Moving even earlier into history, he cites "changes in social relationships in the countryside," (23) the enclosure movement and the Black Death as predisposing Britain to capitalism.  His search for contributing factors takes Fulcher all the way back to 1066, when the Norman invasion established a relatively centralized rule (in contrast to a more dispersed feudal rule in other countries) that prevented feudalism from taking deep root in Britain.

Fulcher then turns his attention to historical capitalist developments outside Britain.  He argues "it is quite wrong to seek the origins of capitalism solely in Britain" (31) citing developments such as the international cloth trade and mining, financiers such as the Fuggers of Augsburg, joint-stock corporations, bills of exchange and book keeping and movements of refugees as important milestones achieved (partially) outside of the British Isles.  Fulcher reminds the reader that "Economic leadership shifted from Italy to Germany and Flanders, then to Holland, and only later to Britain." (31)

Why did capitalism emerge in Europe?  Fulcher quips that "Virtually every distinctive feature of European society has been advanced by someone as the explanation of the emergence of capitalism in Europe." (32)  Fulcher discusses the theory that cities were responsible, but counters that much development originated in the countryside.  He then considers feudalism as a cause, since "such key features of capitalism as markets and wage labor could emerge within feudal society" (33) but retorts that this is hardly inevitable, since Eastern European feudalism intensified when capitalism was developing in Western Europe.  Fulcher mentions the Brenner thesis: "the peasants' capacity to organize against their feudal lords and free themselves from feudal bonds was here critical." (34)  Fulcher rejects cultural/religious explanations such as Weber's, although he does concede that the mass refugee migration caused by cultural differences could have played a part.  He mentions a negative argument about why capitalism didn't develop outside Europe, since a centralized state bureaucracy in other advanced societies provided other, "easier ways to become rich and powerful than through the accumulation of capital and the management of labor." (37)  Fulcher concludes, "The absence in Europe of a single, cohesive, and totally dominant elite of this kind is the common factor that brings together the various explanations we have been considering." (37)

The following chapter takes the reader through three stages of the development of industrial capitalism: anarchic capitalism, managed capitalism and remarketized capitalism.  Anarchic capitalism is "Competitive small-scale manufacturing, weak labor organization, economic deregulation, a strong state and minimal state welfare." (41)  Managed capitalism is "the growth of large corporations, the development of class organization, corporatist relationships between the state and class organizations, state intervention and regulation, state welfare and the extension of public ownership." (46)  The last period is what most would refer to as neoliberalism.  Fulcher ends the chapter by saying "it would be wrong to assume that this is the final stage in the development of capitalism." (57)

Chapter four compares Swedish, American and Japanese capitalism.  Chapter five sees Fulcher in the role of myth-buster, examining manufacturing, telework, tourism, agriculture, money, etc.: "Myth one is that global capitalism is recent, for it has deep historical roots.  Myth two is that capital circulates globally, when in reality most of it moves between a small group of rich countries.  Myth three is that capitalism is now organized globally rather than nationally, for international differences are as important as ever and nation-states continue to play a key role in the activities of transnational corporations.  Myth four is that global capitalism integrates the world, since the more global capitalism has become, the more divided the world has become by international inequalities of wealth." (103)

The final chapter addresses the crises of capitalism.  Commenting on the Tulip Mania, Fulcher writes, "Speculative capitalism was then, as it is now, not just the province of sophisticated financiers but also a popular activity." (106)  Fulcher emphasizes that the collapse of capitalism is not inevitable: "This did not mean, as some of his followers have thought, that Marx believed that capitalism would end in some huge economic collapse.  It would come to an end would when overthrown by the workers it exploited." (108)  He observes that, "Global consumption has not therefore kept pace with global production, and overproduction has been an ever-present threat to profits, wages and employment." (117)  Despite a vaguely Marxist analysis throughout the book, Fulcher concludes with a note of inevitability: "The search for an alternative to capitalism is fruitless in a world where capitalism has become utterly dominant, and no final crisis is in sight or, short of some ecological catastrophe, even really conceivable... Those who wish to reform the world should focus on the potential for change within capitalism.  There are different capitalisms, and capitalism has gone through many transformations." (127)

Tuesday, July 8, 2014

Book Review: Global Economic History: A Very Short Introduction by Robert C. Allen

"Economic history is the queen of the social sciences" is how Robert C. Allen opens his contribution to Oxford's pithy Very Short Introduction line of pamphlets.  His Global Economic History: A Very Short Introduction provides an informative bird's-eye view of economic development over the past five hundred years.

Allen divides modern economic history into three periods: a mercantilist period from 1500 to the Industrial Revolution in the start of the 19th century; a catch-up period in which "Western Europe and the USA made economic development a priority and tried to achieve it with a standard set of four policies: creation of a unified national market by eliminating internal tariffs and building transportation infrastructure; the erection of an external tariff to protect their industries from British competition; the chartering of banks to stabilize the currency and finance industrial investment; and the establishment of mass education to upgrade the labor force;" (2) and finally a period of Big Push investment.

Allen notes that "Between 1820 and the present, the income gaps have expanded with only a few exceptions." (3)  The exceptions are Japan and the East Asian Tigers, with the Soviet Union as a less complete success and China still in the process today. (6)

"Why has the world become increasingly unequal?" (14) Allen asks.  He contends geography (location of natural resources, lack of tropical disease, ease of transportation) matters, but is rarely the whole story.  Cultural explanations that evoke work ethic such as Weber's are "no longer tenable." (14)  Literacy and numeracy are certainly important, but it is controversial whether and how political and legal institutions are as well.  He concludes that "technological change, globalization and economic policy turn out to have been the immediate causes of unequal development." (16)  The great divergence began with the "first phase of globalization," beginning with the voyages of Columbus, Magellan et al.  Literacy developed in this period as a result of the commercial economy, not as a result of the Reformation. (26)

The next question Allen tackles is why the Industrial Revolution happened in England.
While noting England had a "favorable political system" and an "emerging scientific culture," (29) ultimately the fact that Britain had a unique situation where "labor was expensive and capital was cheap" ensured the Industrial Revolution was British. (33)  Incremental developments in textile production (which Allen points out "owed nothing to scientific discoveries" (33)) and the invention and subsequent refining of the steam engine were important innovations.

Following the emergence of the Industrial Revolution in England, rapid economic development spread to Continental Europe.  Mainland Europe may have lagged behind Britain because of archaic institutions (swept away by the French Revolution and Napoleonic Wars, but only after Waterloo could Europe take advantage of this) or the disadvantages of playing catch-up or a labor/capital price structure unlike that of England. (40-41) Allen notes the striking contrast in this period between "the rich countries, who, as a group, pushed technology forward, and the rest of the world, which seemingly made no innovations at all." (46)  He continues: "The obvious question is why [low income countries] do not adopt the technology of the Western countries and become rich themselves.  The answer is that it would not pay... The Western countries have experienced a development trajectory in which higher wages led to the invention of labor-saving technology, whose use drove up the labor productivity and wages with it.  The cycle repeats.  Today's poor countries missed the elevator." (51)  And later, in the context of textiles: "Comparative advantage implies that the unbalanced productivity growth of the Industrial Revolution should have furthered industrial development in England, while de-industrializing India.  And that is what happened." (57)  "The story of Indian textiles was the story of much of the Third World in the 19th century." (61)

Allen then devotes two chapters to the Americas and Africa, respectively.  After a discussion of the Staples thesis, Allen states that, in terms of economic development, "The major difference between the USA and Latin America was the share of the population that was socially excluded," with Latin America excluding a much larger share of its population (natives and blacks were around two thirds of total population in Latin America, in contrast to one seventh in the US). (89)  In the case of Africa, it lacked advanced agrarian civilization in 1500, so it was in no position to have an industrial revolution. (92)  Today, "The reason that Africans are poor is because the continent's agriculture generates a First World War standard of living." (109)  The next chapter examines the failure of the standard model of economic development in Russia, Japan and Latin America.

Regarding Big Push development, Allen remarks, "The only way large countries have been able to grow so fast is by constructing all of the elements of an advanced economy -- steel mills, power plants, vehicle factories, cities, and so on -- simultaneously.  This is Big Push industrialization." (131)  The USSR provided what looked like a model for a poor country to develop before the growth rate started declining in the 1970s.  Japan "grew rapidly by closing three gaps with the West -- in capital per worker, education per worker, and productivity." (139)  Mass schooling closed the education gap, and state-led industrialization closed the other two.  The chapter ends with a discussion of China.

In the Epilogue, Allen contrasts the success of East Asian development with the failures of Latin American development: "These countries have avoided the inefficiencies that Latin America has endured in trying to shoe-horn modern technology into small economies either because they were so large that they could absorb the output of efficient facilities or because the were given access to the American market at the expense of American production." (147)  Allen ends on an ambivalent note: "Which of the many initiatives followed by these countries was the most effective, however, remains the subject of a great deal of debate.  Also, it is not so clear whether the successful policies can be transplanted to other countries.  The best policy to effect economic development, therefore, remains very much in dispute." (147)