Book Review (Shutt 2009)
The Trouble With Capitalism: An Enquiry into the Causes of Global Economic Failure
Zed Books. 2009. ISBN 1848134223. 256 pages. £16.99 (pbk)
Reviewed by Andrew Johnston, Sheffield Business School, Sheffield Hallam University (29 March 2010)
While the title of this book suggests that it is one of a growing number of books describing the current state of the world economy, it actually first appeared in 1997 and is reprinted here in its original draft but with a new introduction. This time around the book captures the zeitgeist of the times, starting with the premise that the capitalist system is inherently flawed and then proposing a rather radical change of emphasis.
The central idea of the book is that the current capitalist system is characterised by a capital glut, i.e. there is a surplus of investable funds in existence and an inexhaustible search to find outlets in which to invest. Shutt argues that the saturation of consumer demand in western economies is the main factor behind this development, therefore, demand for more goods simply does not exist and investment cannot be directed into increasing output. In addition, Shutt argues that the survival of the modern state is in question; political pressure to cut taxes and de-regulate the economy has left most western economies with mounting debts. Yet deregulation such as freedom of movement for capital, deregulation of the banking system, bailing out of banks and tax breaks for firms has undermined the nation state in favour of promoting the profit making ability of business.
Now this book is not just a critique of the current neo-liberal economic policies and a call for a return to the ‘golden age’ of Keynesianism. The author lavishes equal levels of critical analysis on both of these approaches to policymaking. Shutt argues that Keynesianism is just a front for the public subsidy of business, while that the growth observed since the introduction of monetarist policies is just a fallacy, a result utilising excess capacity created by previous downturns. Therefore, Shutt argues that there exists a proven record of failure of both types of economic policy. Indeed, all types of economic policies merely prop up the capitalist system and perpetuate the endless search for return on surplus capital. This last point, Shutt argues, has brought about a ‘forced uniformity’ of both left and right thinking on policy.
The arguments in the book are set out logically, beginning with an overview of how the capitalist system developed followed by three chapters that examine post-war economic policymaking. Shutt follows this with the main bulk of his arguments outlining flaws in the system across various facets of the system from western economies to post-Soviet and third world economies. The final chapters set out the author’s vision of a world without profit. Here Shutt advocates the tackling of imbalances between rich and poor rather than merely the endless pursuit of growth. The author continues his arguments by suggesting that profit maximisation should no longer be the main objective of firms.
Shutt’s answer to these problems is three-fold; firstly, he promotes ‘a new collectivism’, where the pursuit of profit is limited by limiting the return on capital, introduces public accountability for industries where risk is underwritten by the tax-payer (i.e. the financial sector), and lower prices and higher wages are delivered through resources being directed into producing goods rather than providing a return on investments. Secondly, Shutt promotes ‘a new democracy’ where citizen’s are able to determine the allocation of resources, greater levels of public consultation exist, and transparency and openness are the main characteristics of a system designed to legitimise the role of the state. Thirdly, Shutt proposes ‘a new globalism’ where policies are designed to increase output and employment in the Third World and that less developed countries are integrated into a world economy driven by democratic accountability.
One criticism of Shutt’s approach is the lack of a thorough examination of the alternatives proposed, at one point noting that ‘it would be pointless to speculate on the precise institutional requirements that might emerge’ when discussing the development of ‘a new democracy’ (pg. 220). Admittedly he does state that he is trying to highlight the need for change without resorting to dogmatism, yet the lack of analysis of his own arguments dilutes their strength. Reference is made to the relevant work within the discipline, yet on reading this one does not get the feeling of a comprehensive overview of the literature. The arguments would be strengthened with a more liberal use of data to outline them, data that is widely available from the OECD or UNTCAD for example. In addition, there is no real villain of the story; who is it who makes the system corrupt and inefficient? Is it all capitalists? Is it policymakers? Are economists to blame for promoting the pursuit of profit? This is not really addressed by a book that looks at the system rather than its component parts. This book has a wide target audience, both academics and non-academics would find this book interesting; it is written in an accessible style and uses language that is relatively non-technical. Academically, the book is useful for generalists as well as those looking for an overview of the capitalist system and exploring alternatives to the system and the endless search for returns to capital. As a result, the book is not confined exclusively to those in the economic geography sphere. In fact, the book is distinctly aspatial in its analysis, so it could be a more useful read for those looking at capitalism as a system rather than the location of activities within the system. Having said that, this book could provide an interesting starting point to build a critique of capitalism that takes into account the spatial dimension of economic activity.
Overall, this is an interesting and accessible book that presents a somewhat unique perspective on the problems with the capitalist system. It is well worth reading as a starting point to examining the capitalist system and the potential solution to these problems.