The Rise and Fall of Capitalism.

The scope of this book is very broad. It covers the period from the end of European feudalism to the 1990s. The author, Professor of Economics at the University of Utrecht, provides us with a broad theory of how capitalism grows. Around his theory of growth, he skillfully weaves a whole series of explanations of social, political, religious, and intellectual changes. He concludes his history of capitalist development by arguing that capitalism has reached a crossroads. To resume growth in the 1990s and beyond, either capitalism must develop an egalitarian democracy in which social responsibility and public rationality can curb individual avarice, or capitalism must revive the fear of poverty and use the legal coercion of the state to impose a new form of economic discipline.

According to Professor Brenner's theory of capitalist growth, to continue growing capitalism requires two sets of elements. One set of elements is economic and political in nature, while the other set is social and moral in nature. Economically and politically, the bourgeoisie need both the ability to save and invest plus the wish to save and invest. The ability to save depends on the generation of an economic surplus. Such a surplus is necessary but not sufficient. More important and more difficult to maintain is the wish to save and invest. The wish to do so depends on brisk competition for market share at the micro level and sufficient growth in aggregate demand - consumer spending - at the macro level. Without state interference, growth in consumer spending is generated by competition between firms that passes on productivity increases to consumers through lower prices. Barring lower consumer prices that create the needed increases in consumer real income, competition between capital and labor can still maintain the needed growth in consumer spending if it results in the appropriate increases in wages. If competition between firms or between capital and labor does not generate the needed growth in consumer spending, then the state must intervene to redistribute income and maintain sufficient growth in aggregate demand. Without sufficient growth in aggregate demand, primarily consumer spending, the bourgeoisie's wish to save and invest will falter in the face of falling opportunities for profitable investment. Growth will end, even though the ability to save and invest continues.

For growth to continue, Brenner argues that not only must the economic and political elements that maintain the ability and the wish to save/invest be maintained, but continued growth also requires a set of social and moral elements tht keep the bourgeoisie from "killing the goose that lays the golden eggs." That is, since capitalism is based on individualistic and materialistic competition, some kind of constraints must be placed on the competition lest it evolve into a Hobbesian war of all against all. The overwhelming desire to acquire goods and capital must be channeled into productive economic channels and away from degenerating into corruption and conquest. As feudalism evolved into capitalism, the needed social control of early capitalism was provided by the slowly fading Judeo-Christian ethical system. For several centuries this moral residue of feudalism kept the rising capitalists from "killing the goose that lays the golden eggs." The restraint continued in spite of the fact that the individualistic, materialistic, competitive ethic of capitalism was steadily eroding away the social constraints essential to its growth. Only recently, Brenner argues, have the social constraints eroded away completely. Beginning in the 1980s, the capitalist drive for productive growth is degenerating into destabilizing conflict. We are now in danger of "killing the goose that lays the golden eggs."

Brenner also argues that beginning in the 1960s, the competitive pressures that maintained the wish to save/invest have also broken down. The rise of huge multinational oligopolies with the power to keep prices up has meant that consumers no longer receive increases in their real incomes from rising productivity passing through to lower consumer prices. The fall of labor unions has meant that workers no longer receive increases in their wages to fuel the required increase in consumer spending. The result of the dual decline in competition - the decline in price competition between firms and the decline in competition between capital and labor - has been an inadequate growth in aggregate demand, primarily a stagnation of consumer spending. Insufficient growth in aggregate demand has eroded the prospects for profitable investment, weakening the essential wish to save/invest. Growth is coming to a halt.

Under the current circumstances, Brenner argues, the state needs to intervene by taxing away the surplus accumulating in the multinational oligopolies and spend it on new infrastructure. This would provide the needed growth in aggregate demand. But, influenced by conservative elites, most states lack the foresight to do so. Furthermore, most states also lack the democratic vitality to implement a new form of democratic social control to guide capitalism back into productive channels. Brenner doubts that the democratic social control needed to replace the old moral residue of feudalism can be constructed. He also doubts that the state can restore the needed growth in consumer spending. In short, he doubts that the mechanisms supporting traditional capitalist growth can be reconstructed, under the present circumstances. So do I.