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The Spectre of Capitalism.

The author calls his book The Spectre of Capitalism because Karl Marx raised the image of 'The spectre of Communism' as a challenge to the politicians of his time. William Keegan, a veteran writer on economics, has tried the same. In essence it is a boldly sustained challenge to the ideology of the Free Market. After dismissing Communism as an 'inappropriate economic policy', he ends his book by warning that Communists put politics above economics while 'Extreme Free Marketeers' put economics above politics and that Capitalism was indeed a 'dangerous spectre' if people's lives are left to the vagaries of the free market.

In ten forceful chapters he provides convincing evidence that the collapse of the Communist regimes and economies has not produced a triumph and strengthening of present-day capitalism but revealed its inherent, and sometimes new, problems. He traces it back to the adoption of the Free Market as the mechanism for sustaining a long term prosperous society. He shows in detail the victory of that theory, going back to the last war, how the need to defend the West against Stalinist Communism made a rigid Free Market policy appear to be the only safe one and how this led to the virtual elimination of the ideas of John Maynard Keynes, the famous British economist, and of his policies that had proved so successful that they produced the so-called 'Golden Age' of Western Capitalism in the years 1950-73.

He enlightens the reader about the role of planning, discredited by Stalin's Central Command Policy, but essential for the Western democracies if applied flexibly and selectively. He is keen to show that there is not one capitalistic system, but several; there is the Anglo-Saxon based one letting the Free Market rule, there are the German and Japanese systems based on guidance and carefully planned, and negotiated, selective intervention by the state. He shows the fascinating differences between the German and Japanese models. There is the Japanese basic challenge to Anglo-Saxon capitalism. Expanding your sales in the market is given temporary priority over profit.

He shows, and he is not the only one, that the extreme subservience to the Free Market idea that academic economists have forced on the unstable new regimes in what was once the Soviet bloc as aid approved of by Western governments has brought dangerous uncertainty as seen now in Russia. That, he observes, has not helped the image of the West and its economic system. He has touched upon, but not exploited, the fact that since there are several differing capitalist systems there must be also different types of markets. Financial market forces, he observes, are impeding the real market economy to deliver. He mentions, of course, the big trading blocs. Its figures show that the free markets are really controlled ones, that show the strength and weakness of individual countries. The total world output was divided up in 1990: US 36 per cent, EC 34 per cent, Japan 19 per cent. Within the EC Germany has 9 per cent, France 7 per cent, Italy 6 per cent and Britain 5 1/2 per cent.

Keegan passionately and effectively defends Keynesian policies and advocates that they should be applied again as they were in the post war Golden Age. In the 16 leading countries of the Paris OECD (Organisation for Economic Co-operation and Development) spending by the governments rose in the Golden Age from 27 per cent of the GDP (Gross Domestic Product), from 27 to 37 per cent and growth to 3.8 per cent, falling to 1.9 per cent during 1973-1987 when Keynesian measures were largely dropped.

He discusses, of course, the essential links between Free Marketry and Monetarism and what is now called the 'short-termism' of the Anglo-Saxon system. Investments are largely determined by the prospects of quick profit. This touches upon the role of the banks. Those in Germany, and especially Japan, accept suggestions by their government regarding investments in long-term initiatives.

The author produces fascinating, well documented accounts of the ups and downs of economic relations in the last years in his effort to prove that Keynesian type policies are essential. He mentions the German insistence on a 'social safety net' and the so-called 'Troika', the regulated co-operation between government, trade unions, employers and the banks.

He deals with former Soviet bloc countries and their problems country by country and it is fascinating to see the differences. He ends by setting out the problems facing us with pollution and immigration.

Contrary to the usual arguments, the author insists that the survival of market economics depends on careful planning. He sees freedom of competition for producers of goods and of services, the allocation of resources based on the signals of the Market and a supporting framework set up by the public as well as the private sector as the main features of the market. How sensitive the Free Market image is can be seen by the 1990 Japanese trade surplus of 62 billion dollars. In that year 45 per cent of cars and 95 per cent of video recorders sold on world markets were Japanese.

In this tensely written book Keegan has provided arguments for the debate on the reform of present day capitalism as well as the equally contentious debate on the nature and functions of the market that has now started in earnest.
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Author:Muray, Leo
Publication:Contemporary Review
Article Type:Book Review
Date:May 1, 1993
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