image no longer in the archive The Credit Crunch: housing bubbles, globalisation and the worldwide economic crisis by Graham Turner (Pluto 2008) £14.99
Piers Mostyn's review will appear in issue 4 of Socialist Resistance magazine.
At any time there would be a crying need for a detailed but accessible debunking of the capitalist economy. But never more pressingly than today, with mass misery looming as it crash lands.
This book doesn’t set out to do that. But it does analyse how the market economy has failed on its own terms.
The basic thesis is that the roots of the present recession lie in companies relocating production in search of cheaper labour costs abroad. Central banks had to keep interest rates low to stimulate growth as a result and the flipside of this was rising debt. In particular rising house prices were relied upon as a reflationary measure – referred to as the “money illusion”. Eventually the credit bubble burst. “A pronounced swing in the relative strength of capital versus labour”, he argues, “lies at the heart of today’s financial turbulence.”
He recommends a rebalancing of worker and environmental rights against the pervading dominance of corporations. At heart this will involve a fight for workers rights in the developing world, particularly China and the economies of South Asia.
His critique is based on Keynsian economics, arguing that there has been a failure to learn lessons from the 1930s and the 17 year recession in Japan engendered by a similar financial crisis in 1990.
I found parts difficult to follow, re-reading passages repeatedly in an occasionally vain bid to grasp what they were on about. I am still wrestling with the “Keynsian liquidity trap”.
Although written in Spring 2008, at first it seemed dated, with references to the credit crunch of late 2007 and early 2008 already bypassed by last Autumn’s bank crashes. But its strength lies in the fact that its focus is not on contemporary twists and turns and what lies round the next corner.
Instead it traces the deep historical roots of the crisis. Looking back to the collapse of the post-World War II international monetary system - with US indebtedness and trade deficit arising out of the Vietnam war - he traces the growth of Reaganomics, Thatcherism and the rise of monetarism. A centrepiece of the book is a detailed analysis of the Japanese financial collapse in the 1990s, something he has particular personal knowledge of, having worked there in financial services.
He also nails responsibility, showing that it lies not so much with the greed of financiers and bankers or the incompetence of regulators – describing them as “mere actors” - but with governments and policy makers.
In particular he exposes Gordon Brown’s boasts of “10 years of GDP growth, the longest in 300 years” and “an end to boom and bust”. He shows how the British economy, far from being well placed to weather the storm, had personal and private sector debt soaring at a higher rate than any other industrialised economy over the past decade. These statistics dwarf the run up of debt in the late 1980s “Lawson boom” under the Tories.
For me an inevitable conclusion to Turner’s analysis, is the functional inability of the global market economy to efficiently match the world’s resources to the needs of its population in the long-term. Neo-liberalism, particularly, relies on totally flawed presumptions about the behavioural response of millions of atomised individuals to crude economic levers. However Turner never takes a step back to consider this type of overview. A systemic alternative, planning based on social ownership and democratic control, is not raised.
Scandalously, 18 months into this crisis there is yet to be any real political accountability. There has been a virtual conspiracy of silence as to the historical roots and political responsibility. This book provides a useful starting point for turning that around.