The Enigma of Capital and the Crises of Capitalism, by David Harvey, Profile Books £14.99 256 pages, FT Bookshop price: £11.99
Timing is everything in markets and in revolutions too. Goldman Sachs protected itself from the bursting of the housing bubble better than its rivals in 2007 by shorting mortgage securities. David Harvey’s call for the overthrow of capitalism is equally deftly timed.
Karl Marx argued that capitalism was a self-consuming and crisis-prone system that held the seeds of its own destruction. What better moment to resurrect some of his ideas than after a crisis on a scale not seen since the 1930s? If this is not a revolutionary moment, what would be?
There is a branding problem: “Communism is such a loaded term as to be hard to re-introduce,” Harvey writes. Accordingly, he prefers “the Party of Indignation, ready to fight and defeat the Party of Wall Street and its acolytes and apologists everywhere”.
Harvey is a polymath who has been a professor of geography and anthropology, and ventures into economics in this elegant, if ultimately unconvincing, book. Not long ago, he might have found it difficult to get much attention outside leftwing academia but his market has expanded.
The book contains seven chapters on what has gone wrong and an eighth on what to do about it. Predictably, the first seven are more convincing than the eighth. Even Harvey is semi-apologetic about his project, as if to recognise that it is a non-starter. His critique of capitalism is interesting for going far beyond the wave of discontent about Wall Street’s practices as exemplified by Goldman. As he says, the 2008 crisis was the latest of many since 1973, a phenomenon he blames on neo-liberalism and globalisation.
Harvey points out that Joseph Schumpeter, the economist who coined the phrase “creative destruction”, was in agreement with Marx in believing capitalism combined both qualities. The two men disagreed on which had the upper hand, with Schumpeter arguing for creativity.
Harvey uses the 2008 crisis to argue that Marx had it right all along, that capitalism’s restless search for “3 per cent compound growth” ad infinitum means that it is bound to chew up resources and exploit labour. They are not the unfortunate by-products of the system; they are the system.
In his view, the credit bubble was the way to reconcile the stagnation of median wages in western societies with the need to have a vibrant consumer market. The workers were no longer given steady employment and decent wages; they were offered subprime mortgages and cheap credit cards instead.
Although some of it comes over as standard issue leftism, Harvey’s analysis is interesting not only for the breadth of his scholarship but his recognition of the system’s strengths: “The performance of capitalism over the last 200 years has been nothing short of astonishingly creative.”
It is also entertainingly swashbuckling in its dismissal of all Wall Street’s claims to be adding to general prosperity. He compares private equity firms with the “pirates, priests and merchants” who accumulated capital during the late medieval period in Europe.
He is less compelling when he turns to what might be done to damp or eliminate economic crises – his manifesto for the Party of Indignation. Say what you like about Marx and Lenin, a call for armed revolution is clear enough; Harvey’s solution is less so.
“Radical egalitarianism in social relations, institutional arrangements based in some sense of common interests … labour processes organised by the direct producers … these could be the co-revolutionary points around which social action could converge and rotate,” he writes.
Well, perhaps. This reader is more tempted to conclude that Wall Street should behave itself and socialism can wait. Given a choice between synthetic collateralised debt obligations or the revival of syndicalism, most people would vote for neither of the above.
John Gapper is a columnist and FT associate editor