Capitalism and its Economics: A Critical History
Douglas Dowd’s Capitalism and its Economics is a lucid and convincing examination of the history of capitalism, economic thought, and the relationship between the two. In sharp contrast to modern academia, which often compartmentalizes social reality, dividing and abstracting it to the point of meaninglessness, Dowd emphasizes capitalism’s relationship to history and society’s stratifications of power. Written in clear prose, Dowd recounts the world that capitalism came into, demonstrating how since its inception capitalism has been a social, not just economic, system. For instance, Adam Smith only embraced laissez-faire once
Dowd reveals the untenable assumptions, "assuming away" social reality with qualifications of "all other things being equal," that neoclassical political economy is built on. The wealth of ammunition he supplies is, perhaps naturally enough, foreign to mainstream economics. While the latter presupposes the permanent existence of scarcity of resources, it does not acknowledge that scarcity is intentionally created and sustained by capitalism. Thus, anyone praising capitalism’s "efficiency" can be brought down by noting how foodstuffs are deliberately destroyed to keep prices high, while countless people starve. Similarly, the practice of "planned obsolescence"—incorporating failure into a product’s design to ensure brisk consumption—could not be more antithetical to efficiency. Further, the "lopsided" structure of American jobs, where 15-20 percent of private non-farm workers do not produce anything, but supervise those who do, is surely at odds with popular paeans to our system’s alleged efficiency.
The most factually preposterous assumption of neoclassical economics, according to Dowd, is the theory of competitive markets. "Assuming away" things like the State’s role in the economic process, technological transformations, and social processes, neoclassical economics ignores a reality filled with, among other things, oligopolies engaged in monopolistic price arrangements. Far from the myth of perfect competition, capitalism’s history has seen ever-escalating mergers and acquisitions that have fixed prices, leading from "competition" to "rivalry"—that is, a rigged game. Rather than responding to the market, price arrangements only increase costs to consumers, as companies spend more money on the advertising and superficial product and packaging changes associated with "non-price competition."
Neoclassical economics’ assumption of "rational self-interested consumers" is likewise blown to bits, as Dowd examines the impact of mass advertising, conspicuous consumption, and enormous consumer debt—all highly irrational, yet all prolific and cornerstones of the modern economy’s sustenance.
Although neoclassical economics was largely discredited by its failure to anticipate or respond to the Great Depression, or the ensuing establishment of monopoly capitalism, it has been resuscitated by the global economic slowdown that began in 1973. It was here when global excess productive capacities reduced the incentive for investment in production, resulting in finance capital superseding productive capital. This has led to today’s situation, where profits from net interest are higher than corporate profits, and where stock, bond, and currency markets are all enormously inflated by massive speculation. Further, financial sector debt is nearly double the size of non-financial corporate debt, indicating the grave instability of today’s economy. The dominance of finance over productive capital also portended the further enslavement of the developing world. Persuading governments to curtail subsidized loans to the world’s poorest countries, the financial sector moved in with high-interest loans.
Explicating capitalism’s evolution from colonialism to imperialism to today’s global economy, Dowd’s analysis easily lends itself to other applications. For instance, the "enclosure movement" that commodified land and labor in late 18th century Britain, fulfilling capitalism’s requirement to expand in every direction, bears a rather obvious resemblance to Vandana Shiva’s description of capital’s "enclosure of the biological and intellectual commons (through patenting and genetic engineering, including the enclosure of water and the atmosphere)," ("Monocultures of the Mind," Z December 2002). Similarly, globalized arrangements are reproducing individual irrationalities in entire nations. Whereas relentless advertising encourages Western consumers to want what they don’t need, while not wanting what they do need, coercive trade agreements force Southern nations to export what they need domestically, while importing what they don’t. Framing his discussion with an "analytical quartet" of capitalism, industrialism, imperialism, and nationalism, and exploring how each interrelates and exacerbates the worst qualities of the others, Dowd examines the factors that led to the World Wars, the Cold War, and the eventual dominance of monopoly capitalism. Dowd’s description of a post-war American economy reliant on a government-subsidized military industrial complex is especially relevant to understanding today’s "War on Terrorism." Although written before 9/11, Dowd’s analysis indicates why effective critiques of the
While Dowd never argues that ideology is unique to capitalism, he does explain how the interplay of several factors produced a tremendous concentration of power in post-war
Although Dowd accomplishes a great amount in limited space, his analysis would have benefited from a closer examination of non-capitalist economies. Looking at the
Nevertheless, Dowd concludes the book by writing, "If we are to make substantial and enduring progress toward a better society, we must combat what we have been taught with our own social vision, not just fragments of such a vision." Indeed, the Soviet and Chinese Revolutions, and the retrogression of today’s anti-imperialist fundamentalist movements, reveals that human progress requires much more than the mere negation of capitalism. An intelligent focus, and good starting point that Dowd leaves us with, is his advocacy of changing the structures of production. Avoiding the inherent problems of only focusing on trying to achieve political power, or simply challenging capitalism’s "ideological hegemony," production’s revolutionary transformation would directly alter economic, social, and political relations. This direction could conceivably allow us to eliminate capitalism through creating a new world based on human freedom.