Most Helpful Customer Reviews
38 of 38 people found the following review helpful:
5.0 out of 5 stars
remarkably clear and thorough analysis of the financial crisis, January 18, 2009
This review is from: The Great Financial Crisis: Causes and Consequences (Paperback)
I've been teaching the financialization of the US economy for some years now. It's not been easy to find a clear, thorough and convincing analysis of the tendency of the economy to shift from industrial production to financial speculation and other forms of debt as a source of business profits. The onset of the current financial crisis makes it more urgent to have available to both students and the general public a lucid and detailed explanation of what's happening and why. In my opinion, this book fits the bill. There's nothing else quite like it.
Foster and Magdoff's book makes the economic and political issues crystal clear without undue simplification. So, for those who suffer from "economics anxiety" this book is an oasis in a desert of dry, incomprehensible and often ideologically obfuscating economicspeak. The authors discuss the financialization of what was previously an industrial economy, the explosion of debt and speculation which followed the deindustrialization of America, the household debt bubble and how all this came to a head in the present meltdown.
The book is helpfully divided into two parts, the first discussing the causes of the meltdown, and the second describing and analyzing the consequences. Key terms such as securitization and derivatives are defined, the views of major economists from Milton Friedman to J.M. Keynes and Hyman Minsky are explained and, perhaps most importantly, there is an extensive analysis of the relation between the financial and the real, i.e. tangible-goods-and-services-producing, economies.
The authors demonstrate that the real economy is afflicted with a built-in tendency toward mounting underutilization of its technological and human resources, so that the gap between actual and potential production tends to get wider and wider. This manifests itself as growing unused productive capacity (what economists call "capacity overhang"), unemployment and wasteful production. As this problem grew in severity and profitable industrial investment opportunities withered, investment-seeking capital moved toward financial means of generating "profits." The scare quotes indicate that what this process of financialization produces is phantom, spurious "wealth," which must eventually dissipate in popped bubbles, recession or depression and the liquidation of real wealth as the widget-producing economy disintegrates in escalating unemployment and widespread business failures.
A brief review cannot do justice to this very helpful and insightful book. I have come across no better analysis of what will probably turn out to be the most severe crisis to beset modern capitalism, bar none, including the Great Depression.
Help other customers find the most helpful reviews
Was this review helpful to you? Yes
No
30 of 31 people found the following review helpful:
5.0 out of 5 stars
saved me money; might save us., March 8, 2009
THE GREAT FINANCIAL CRISIS is a very important book. But before I get into detail, I should say that the lead essay on the emerging housing bubble--written in early 2006--convinced me, in conjunction with the MR team's analysis of the coemerging eco/energy crisis, that the future for capitalism was not bright and so I took a chunk (spring of 2007) of retirement money and paid off my house --against the advice of financial advisors and in-laws, etc, who claimed that my interest rate on the money invested would continue to exceed my mortgage rate so that it was foolish to pay off the house merely to feel more secure. Well: the money that went to pay off our house would have lost over half of its value. Booya to the financial advisors and well meaning relatives! John Bellamy Foster saved me over 25 grand and gave me some security: were I to lose my job, at least they couldn't take the house!
Okay: the best way to understand this book is to contrast it with a book like Dean Baker's recent PLUNDER AND BLUNDER. Baker's is a very useful book on the stock market and housing bubbles, but despite a host of superficial similarities between the two books, they really offer rival causal analyses of the crisis.
For Magdoff and Foster, financialization, with its attendant speculation, bubbles, and debt driven consumption, is a necessary consequence of intrinsic stagnationist tendencies in the capitalist economy. These tendencies themselves emerge from the contradictions of capitalism. There is on the one hand the contradiction between capital and labor, with the structural domination of capital over labor giving rise to growing EXTREME inequality and thus the effective demand problem that arises when the workers don't have the funds to buy back more than a small share of what they produce, and capitalists are faced with diminishing profit expectations on new investment. One way to overcome this problem under capitalism is debt driven consumption, which encourages the formation of bubbles. Thus, in the era of late neoliberal capitalism, itself responding to the contradictions and stagnationist tendencies in u.s. capitalism's golden age, workers who owned houses with inflating prices could finance consumption with their appreciating equity--until the bubble burst.
On the other hand, there is of course the contradiction between capitals at all levels that lead to profitability crises of various sorts that in turn render speculation and financialization both attractive and necessary, even if both not only fail to solve but eventually intensify the contradictions of capitalism to which they were a response. Foster and Magdoff are very good on how our debt driven consumption works up to a point to "grow the economy," but past that point, begins to backfire, turning the economy toward stagnation once again.
In contrast, Baker's book is about how we can avoid bubbles in the future by getting back to precisely that golden age of productive capitalism that presumably did not need bubbles to "work for America." Both books critique the growing inequality under capitalism but Foster and Magdoff see it as a contradiction-laden solution to profitability crises whereas Baker sees it as the one off result of bad policy by neoliberal elites and hopes that the aforementioned contradiction free productive capitalism can transcend for good the boom and the bubble.
It should also be noted that Baker never questions the growth imperative under capitalism whereas such questioning has been central to Foster and Magdoff's work.
So read Foster and Magdoff. It's too late to save you money but it might help save our future.
Help other customers find the most helpful reviews
Was this review helpful to you? Yes
No
16 of 16 people found the following review helpful:
5.0 out of 5 stars
Cogent and timely analysis, March 14, 2009
This review is from: The Great Financial Crisis: Causes and Consequences (Paperback)
"The Great Financial Crisis" by John Bellamy Foster and Fred Magdoff offers one of the most cogent and timely analyses of the current economic meltdown available in print. Composed of a series of articles first published in Monthly Review magazine between May 2006 and December 2008, with additional material including a Preface, Introduction and References, the authors amply demonstrate the usefullness of the Marxist tradition in explaining the root causes of this latest crisis of capitalism. Importantly, the authors rescue economics from the bondage of abstraction and science by showing us that power and politics define the dynamics of the capitalist system, making the crucial point that it is the working class who both supplies the source of wealth and bears the greatest burden in times of economic distress.
Drawing heavily on the groundbreaking work of Paul Sweezy and Harry Magdoff, the authors contend that stagnation (slow growth and high unemployment) is the normal state of affairs in mature economies where monopoly capital has come to control the means of production. High levels of profitability has the effect of diminishing the purchasing power of the working class, leading to decreased investment in real productive ventures and increased financial speculation. At some point, finance is almost completely decoupled from the real economy and becomes a driving force on its own, leading to ever increasing indebtedness, inequality and systemic instability.
Foster and Magdoff convincingly demonstrate the prescience of Sweezy and Magdoff's work, which was written in the 1960's, arguing that today we are witnessing the unfolding of precisely the kind of crisis that had been predicted. We also come to understand how the government's response thus far has remained insufficient to the task inasmuch as policy decisions are made by key decision makers such as Ben Bernanke, who remains wedded to neoliberal orthodoxy. In that light, the administration's attempts to bailout the private sector with public money can be seen as a twisted yet peculiarly logical response by the powerful to fix a broken system that nonetheless heaps further insult upon an overexploited working class. Through their thoughful writing and analysis, Foster and Magdoff help us recognize the real problem as one of financial insolvency wrought by a system that serves only to satiate the wealthy, and implores the rest of us to demand a more sustainable and just system of economics that privilges people before profits.
I highly recommend this outstanding book to everyone.
Help other customers find the most helpful reviews
Was this review helpful to you? Yes
No
|
![[Start the discussion]](http://g-ecx.images-amazon.com/images/G/01/x-locale/communities/discussion_boards/start-new-discussion-sec._V192250339_.gif){kind=small}
