Review of Capitalism Unleashed

by John Q on June 27, 2009

Several years ago, Andrew Glyn sent me a copy of his new book, Capitalism Unleashed, which I promised to review. But with one thing and another, I didn’t get to it, and then I received the news of his premature death, which set me back still further. I promised myself that I would do the review as a tribute to Andrew’s memory, and now, I’ve finally managed to do it.

Of course the environment now is radically different to the one in which the book was written, and that means the review must be to some extent informed by the wisdom of hindsight. In the introduction, Andrew notes as the first of the big open questions thrown up by the unleashing of capitalism

Will the ever more complex financial system implode in a major financial crisis and bring prolonged recession

We all know the answer now.

But while this possibility is certainly present in the thinking that informs the book, it is rarely brought to the foreground of our attention. The primary focus is on the way in which global financial capital has broken the bounds of national regulation, and severely weakened both the trade union movement and the viability of socialist and social democratic ideas.

The book is a clear-eyed look, from a socialist perspective, at financial capitalism in its zenith. It covers the policy program of privatisation and deregulation, the explosive growth of the financial sector, and of the global economy more generally, the retreat of organised labour and the stagnation in wages and working conditions that accompanied this retreat, particularly in the US, and, finally the apparent achievement of macroeconomic stability, described by Ben Bernanke as the Great Moderation.

The book does a good job of pointing out the weaknesses of the dominant ideology – the failed promises of privatisation, the LTCM fiasco, derivatives as ‘financial weapons of mass destruction’, the growth in poverty and inequality in most developed countries and so on. But the overwhelming emphasis is on the strength of financial capitalism and on the massive obstacles facing any attempt even to mitigate its harshest features. Some countervailing tendencies are noted (for example, continued public support for egalitarian policies, and the relative resilience of the welfare state) but the overall trend is clear.

In the wake of the global financial crisis, it is certainly worth reading for those of us (myself included) who are arguing that the crisis provides a new opening for social democratic politics. Even with its prestige and ideological hegemony gravely weakened, and its size and profitability substantially reduced, the global financial sector is an immensely powerful force. So far at least, it has been successful in resisting any permanent controls that would fundamentally reduce its freedom or prevent another crisis like the present one.

Andrew Glyn was the ideal of an intellectual: thoughtful, lucid and committed to social justice. All these qualities shine through in this, his last book.



Phill Hallam-Baker 06.28.09 at 3:23 am

I don’t think that it is valid to blame free market fundamentalism for the current fiscal crisis. At worst the fundies provided a pretext for government inaction. But the real legacy of the fundies is the huge US budget deficit, 90% of which can be fairly attributed to the supply-siders.

The market crash is more the fault of Mitch Kapor than any economist. With Lotus 1-2-3 and a little domain specific knowledge, anyone who cared to could quickly build models that convinced them that they understood complex phenomena when in fact the models turned out to have some pretty large systematic defects. And in particular, folk overlooked the fact that once people start to rely on a particular variable in particular ways they create incentives for people to manipulate it.

Red color was a pretty good proxy for ripeness of tomatoes until the growers started to use xylene to cause unripe fruit to turn red. When small size grape tomatoes first appeared, they were grown as a premium product for taste. Then the hydroponic growers saw the premium on offer for the grape tomatoes and started churning out tasteless grape tomatoes that were indistinguishable from the good ones. And then the same thing happened with tomatoes on the vine.

The banks ended up holding huge rafts of illiquid paper because the credit rating agencies had discovered the financial services equivalent of xylene. Bundles of C-grade paper were somehow magically turned into AAA notes.

Its a bad outcome, but I am not at all sure that government bureaucrats are any less susceptible to being taken in by a spreadsheet than a group of complete and utter bankers.


StevenAttewell 06.28.09 at 6:12 am

“The primary focus is on the way in which global financial capital has broken the bounds of national regulation, and severely weakened both the trade union movement and the viability of socialist and social democratic ideas.”

Now I want to read this.


“I don’t think that it is valid to blame free market fundamentalism for the current fiscal crisis. ” I think it is. Without the movement to deregulate existing regulation, and without the opposition to new regulation of the “shadow banking industry,” you wouldn’t have had the environment for the bubble.


Nick L 06.28.09 at 8:46 am

In the UK at least it doesn’t seem as if there will be any major opening for social democratic policy. The situation is rapidly returning to ‘business as usual’ in the city. The only thing that seems to have changed is that the public have been left with the bill for the last decade of excess. Austerity beckons, but financialised capitalism hasn’t been muzzled.

In part the problem is a relationship that Glynn understood well: the structural dependence of the state on capital. The UK government depends on the chicanery in the city of London to fund the public spending that provides legitimacy for the current neo-liberal settlement. The government lacks the imagination to conceive of an alternative to dependence on high finance and is too timid to introduce any strong regulation for fear of chasing away ‘wealth creators’.


Tim Worstall 06.28.09 at 10:16 am

“the growth in poverty and inequality”

Eh? We’ve just had (on the global level) the greatest poverty reduction in history, as hundreds of millions have climbed up out of destitution. What growth in poverty?

As to inequality, within countries, yes, but again, globally (as Milanovich has pointed out, both Concept 2 and Concept 3) inequality has fallen.


Alex 06.28.09 at 10:28 am

Shorter Tim: Everything is for the best in this best of all possible worlds!


JoB 06.28.09 at 11:41 am

Shorter Alex: Everything is for the worst in this worst of all possible worlds!

(or did you want to give a more nuanced response?)


ejh 06.28.09 at 12:20 pm

Experience does not suggest that it would have been worth it.


JoB 06.28.09 at 12:36 pm

You suggest Tim’s last name is missing an ‘of’ in the middle?


Patrick S. O'Donnell 06.28.09 at 12:43 pm

While it is true that the numbers and trends on global poverty and inequality have been encouraging of late (although what appears to be an increasingly recalcitrant phenomenon, relative deprivation, is on the rise; see Amartya Sen, ‘Conceptualizing and Measuring Poverty,’ in Grusky and Kanbur, eds., Poverty and Inequality, 2006); the recent financial crisis in the hyper-industrialized affluent nations is deleteriously affecting so-called developing countries (and no doubt some of the effects will take time to be noticed). Alas, most of the numbers speak for themselves:

In any case, there’s no cause for complacency or self-congratulation and I, for one, am grateful that Glyn’s aforementioned virtues shaped his last book, a work, no doubt, most of us could benefit from reading.


Patrick S. O'Donnell 06.28.09 at 1:01 pm

The following facts and figures are also sobering (also from Anup Shah’s site):

The new figures from the World Bank therefore confirm concerns that poverty has not been reduced by as much as was hoped, although it certainly has dropped since 1981. However, it appears that much of the poverty reduction in the last couple of decades almost exclusively comes from China:

China’s poverty rate fell from 85% to 15.9%, or by over 600 million people
China accounts for nearly all the world’s reduction in poverty
Excluding China, poverty fell only by around 10%

(Given the kind of economic growth that has contributed to China’s success on this front one might reasonably entertain how sustainable it is, if only because its ecological consequences are quite devastating and rarely taken into consideration, economically speaking).


a.y.mous 06.28.09 at 2:25 pm

But isn’t China the ‘biggest supply-sider evah!’?


Tim Worstall 06.28.09 at 3:50 pm

Patrick, fascinating link.

“In 2005, the wealthiest 20% of the world accounted for 76.6% of total private consumption.”

“World gross domestic product (world population approximately 6.5 billion) in 2006 was $48.2 trillion in 2006.

* The world’s wealthiest countries (approximately 1 billion people) accounted for $36.6 trillion dollars (76%).”

So the top 20% of the global population (or perhaps the 20% that live in the rich countries) both produce and consume 76% of everything that is produced?

It shows the inequality, certainly, but of both production and consumption, not consumption alone.


Patrick S. O'Donnell 06.28.09 at 4:04 pm

Who argued that there was inequality in consumption alone?


Stuart 06.28.09 at 6:17 pm

It shows the inequality, certainly, but of both production and consumption, not consumption alone.

Were you expecting them to get 5% of income and then consume a further 71% of Global GDP on credit?


John Quiggin 06.29.09 at 3:57 am

I meant to guard against thread derailment by mentioning that the discussion of rising inequality focused on developed countries, though there is also an excellent chapter on China. Belatedly, I’ll edit to make this clearer.


Tim Worstall 06.29.09 at 8:13 am

“rising inequality focused on developed countries,”

Fair enough….although I’ve long been arguing (without much evidence of course, but then that’s just how I am) that the rising inequality within developed countries and the reduction in absolute poverty globally, have the same cause: globalisation.

Tackling the one that is seen as being undesirable thus has the possibility of damaging the progress in the other, more desirable, outcome.


JoB 06.29.09 at 9:47 am


Even if they would have the same cause, that wouldn’t entail that you cannot devise a system in which the good effect remains and the bad one disappears.

For instance by foregoing the unleashing of capitalism.

Also, I do not see why globalization would stand or fall with financial deregulation. The benefits for the developing world have come because they were able to export into developed countries. This is a matter of trade (with consequences on developed country labour conditions) and not a matter of finance. I think you would be right that developing countries would be sure to suffer if from one day to the other there would be world-wide labour and other rules, but I don’t see why they would suffer if there would be minimal rules (as in fact there are). Let alone they would be suffering at all from world-wide financial regulations (which in fact are inexistant to the point it is damaging non-BRIC developing countries with a vengeance).


Tim Worstall 06.30.09 at 8:03 am

“The benefits for the developing world have come because they were able to export into developed countries.”

Not really, the benefits of trade are the imports. Exports are the boring stuff you do to pay for them.


JoB 06.30.09 at 11:40 am

Tim, that’s a daringly ridiculous remark. Do exports from come before imports in those ctries? But yes, the benefit of trade utlimately is everybody can import goodies invented anywhere.


Henri Vieuxtemps 06.30.09 at 12:54 pm

Tell me: these much-trumpeted benefits of international trade – are they real?

Suppose I am a Chinese citizen – which mean that I can freely trade with 1.3 billion Chinese citizens. This is probably equal to the entire world’s population 100 years ago. This seems like way more trade opportunities than I could ever need or manage; and so, why would I need more of them?

Sure – exotic stuff, species; oil these days – sure, I understand. But these are anomalies. Hypothetically, if all the natural resources were distributed equally, all other things equal, why would a group of 1.3 billion people (or 300 million people for that matter) benefit – significantly – from trading with the outside world? I just don’t see it.


JoB 06.30.09 at 1:28 pm

Because the other 5.7 billion (or whatever) have interesting other ways of doing, fornicating?


Henri Vieuxtemps 06.30.09 at 1:50 pm

What, fornicating? How many ways do you need, is 1.3 billion not enough? How long do you intend to live?


JoB 06.30.09 at 1:55 pm

I’m open for surprises. That doesn’t mean I’m complaining ;-)


Henri Vieuxtemps 06.30.09 at 4:02 pm

Thanks for that JoB, but I was looking for more, like, academic explanation. A little more smart-sounding, if you know what I mean.


JoB 06.30.09 at 6:17 pm

Well what can I say? I meant it. If you have larger group of people to exchange ideas, you’ll get better ideas. But it’s not so much the absolute numbers that matter, it’s just a case of not withholding from some group of people the good stuff created by others.



Henri Vieuxtemps 07.01.09 at 6:10 am

Yes, and it’s smart of you to talk about ideas; sure, people like Copernicus and Confucius produce a very rare commodity.

But that’s not what “free trade” people are usually talking about. What is the benefit of trading Chinese-made toys for American-produced soda pop? Is division of labor on this high level beneficial to anyone and if so, to what extent? I find it very doubtful; I can’t see any value in 1.3 billion people specializing in some area.


lemuel pitkin 07.01.09 at 6:37 am

Andrew Glyn was the ideal of an intellectual: thoughtful, lucid and committed to social justice.

As someone who snipes probably too often at John Q.’s posts, I’d just like to register my complete agreement with him here.


JoB 07.01.09 at 7:33 am

Yeah, Henri, but as John Holbo sometimes shows here there’s a connection between the trivial and the exalted. Unless you’re willing to form an ‘idea’ police you’ll have to be happy to allow a certain consumption pattern to be a way to express ideas.

On the production side you’re right of course; there’s no reason why one group of people would be better at innovation and another at mass production. That’ s a temporary thing which helped developing countries to develop but which will slowly disappear once they’re developed.


Henri Vieuxtemps 07.01.09 at 9:04 am

No, I certainly don’t want any idea police, I’m talking specifically about production, exports and imports, as per your discussion with Tim earlier.

So, you’re saying that developing countries are now temporarily exporting products of manual labor while importing know-how, until they somehow become developed and start producing enough of their own know-how, right? At which point, I imagine, the developed countries become underdeveloped (since they don’t produce any tangible stuff and have nothing to trade for it) and they will have do hard labor again. It oscillates for a while and eventually evens out with everybody doing some labor and some know-how.

And at that point international trade becomes largely unnecessary, at least between large enough countries; occasional German eating prosciutto di Parma and occasional Italian driving an Audi notwithstanding. Because there are dozens of Italian car models and dozens of German varieties of ham.

Correct? Is this how modern economic thought goes? Because I get the impression that they tend to glamorize international trade, as opposed to describing it as a necessary evil.


JoB 07.01.09 at 10:04 am

Well, I’m not modern economic though. I’m not even capable of economic thought maybe but, pejorative adjectives aside, this is how it would work, yes.

But hard labour will never completely exit developed countries (& it hasn’t or GM wouldn’t be a big thing over there). And international trade will remain necessary because I don’t see reasons why the fascination with prosciutto would be limited to Parma.

In a sense, international trade really should be glamorized for non-economic reasons. It gives a potential for everybody to live in the world rather than in a province of it. There’s no denying, I think, that we have a better view of things since we started to trade a couple of centuries ago.

Now I think this through: maybe the one basis on which international trade should NOT be at all glamourized would be for economic reasons. We should temper the good thing economically as it clearly, when unhampered, creates economic oscillations which lead to woes bigger than non-economic good that comes from it.

So, economically: protectionism can be good; morally, protectionism is always bad; in reality, it is a matter of weighing. Maybe that’s indeed why all this globalization discussion is so moronic – & I wouldn’t have appreciated that if I wouldn’t have mentioned fornication ;-)


Henri Vieuxtemps 07.01.09 at 11:01 am

Fascination with prosciutto from Parma is eccentricity that, in my opinion, can and should be ignored by economic models. Some people want exotic things that are hard to get, and when it’s sold in every supermarket they will stop buying it.

What is this “better view of things” that comes from the actual trade, mass-exchange of commodities between large societies?

Why is protectionism always morally bad?
Oh, forget “always bad”, that’s clearly not the case; why would it even be sometimes morally bad? For example: if I build my own furniture, or grow my own chickens – what moral tenet am I violating?


JoB 07.01.09 at 11:24 am

Henri, you force my tongue firmly out of my cheek but I resist. No appetite for a stroll through nitpick-lane, sorry. After all, I am Belgian and there will be enough compatriots over there with which satisfactory exchange can be made ;-) (sorry about that, tongue stuck)

I am not saying we should forcefully ship a minimum percentage of goods made in the world on big ships or planes. I am saying it should be possible and it is good for many that it is, more and more, possible (except for Birma and North Korea maybe).


Henri Vieuxtemps 07.01.09 at 11:35 am

Ah, a fellow Belgian. Salut!


Henri Vieuxtemps 07.01.09 at 11:50 am

…or, rather (after reading your link) – Hallo!


J Bowden 07.01.09 at 12:10 pm


Without the movement to deregulate existing regulation, and without the opposition to new regulation of the “shadow banking industry,” you wouldn’t have had the environment for the bubble

But then would have recovered from the failure of Keynesianism in the late 1960s and the collapse of social democracy in the 1970s?


JoB 07.01.09 at 1:42 pm

You don’t say! I thought the reference to Belgian beer was coincidental.


rapier 07.03.09 at 10:49 pm

Few are cognizant that the entire structure that is modern financial capitalism is based upon debt. The accumulation of debt far beyond anything in history by many orders of magnitude. Even as it defaults in the trillions there is no understanding that there was something out of the ordinary going on. Attributing what has happened to some changes in attitudes or rules about trade or markets is missing the forest for the trees.

The structure of debt fueled markets and economies begat our cultures of consumption, speculation and excess. It all isn’t just going to be put right, set back upon the rails with some bookeeping and money printing. An entire age is ending.

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