Capitalism: With a New Postscript on the Financial Crisis and Its Aftermath

441 Pages·2008·1.39 MB·English

by  Geoffrey Ingham

Table of Contents
Cover
Title page
Copyright page
Introduction
Part I: Classical theories of capitalism
1 Smith, Marx and Weber
Adam Smith (1723–1790): the market as a harmonizing
‘invisible hand’
Karl Marx (1818–1883): exploitation and the fatal
contradictions of the capitalist mode of production
Max Weber (1864–1920) and the historical specificity of
capitalism: rationality, calculation and domination
Conclusion
2 Schumpeter and Keynes
Joseph Schumpeter (1883–1950): money markets as the
‘headquarters of capitalism’
John Maynard Keynes (1883–1946): making capitalism work
better
Conclusion
3 The basic elements of capitalism
A. Monetary system and bank-credit money
B. Market exchange
C. Private enterprise production of commodities
The state
Culture and capitalism
Part II: The institutions
4 Money
What is money?
Capitalist credit-money
The money market and the production of credit-money
Monetary disorder in capitalism
Conclusion
5 Market exchange
The competitive market
Monopolistic competition and mass consumption
Conflict and contradictions
Conclusion
6 The enterprise
Theories of the capitalist enterprise
A short history of the development of the capitalist enterprise
The struggle for the enterprise’s surplus
Conclusion
7 Capital and financial markets
Stock markets and the investment bank oligopoly
The enterprise as a commodity: mergers and acquisitions
Financial risk management and speculation
The Enron affair
Conclusion
8 The state
The two logics of power
Social peace: coercion and legitimacy
Capitalist social relations and liberal democracy
The state in the economy
Conclusion
9 Conclusions
Globalization
‘Varieties’ of capitalism
Will capitalism endure?
References
Index

Copyright © Geoffrey Ingham 2008
The right of Geoffrey Ingham to be identified as Author of this Work has been
asserted in accordance with the UK Copyright, Designs and Patents Act 1988.
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Introduction
Given the enormous accumulation of sociological literature on capitalism, it
might well be thought that there is little need for another introductory text.
Indeed, there have been a number of excellent recent additions to the genre, most
notably Fulcher (2004) and Triglia (2002) and, at a more advanced level, Nee
and Swedberg (2005). None the less, I believe that there is room for one more
that attempts to do something a little different.
However, part of what I propose is, in the first place, rather old-fashioned. One
of my aims has been to refocus attention on the classical sociological concern
with the systemic nature of capitalism. By this is meant the fundamental
elements, and their linkages, that characterize capitalism as a whole. Of course,
this is precisely what Marx and Weber set out to do, but I believe that this aspect
of their work has suffered some neglect in the recent past. For example, it has
been surely a distortion of Weber’s analysis of capitalism to devote so much
attention to the Protestant Ethic. On the other hand, I have argued that the classic
nineteenth-century sociological texts have very little to say about the monetary
and financial side of capitalism, which has assumed a more obviously central
role during the twentieth century. In this respect we get more guidance from the
great economists such as Schumpeter and Keynes. But they and other
economists concerned with the systemic structure of capitalism are,
unfortunately, not likely to be encountered in an undergraduate sociology course.
The book is in two parts, the first of which deals with those theorists whose
work I have found to be most valuable. It opens with a very brief outline of
Adam Smith’s analysis of ‘commercial society’ in The Wealth of Nations (1776).
Apart from this book’s intrinsic significance as one of the first systematic
accounts of the modern market economy, the classical social theory of the next
two thinkers on my list – Marx and Weber – is unintelligible without reference to
Smith. Two other economists – Joseph Schumpeter and John Maynard Keynes –
make up my list. They are included not only for their seminal heterodox
contributions to the economic analysis of capitalism, but because this heterodoxy
is implicitly ‘sociological’. That is to say, they focus on the particular
institutional structure of capitalism as a distinctive type of economy, rather than
on the abstract mathematical models of decision-making and exchange to be
found in mainstream economics. Schumpeter’s economics provides a fascinating
insight into the process by which the social science disciplines became separated
in the early twentieth century – arguably to the detriment of both. But,
unfortunately, this issue cannot be pursued here. However, it is my firm belief
that students of sociology should have some basic understanding of Keynes as
one of the towering figures in twentieth-century social and economic science.
His economics might now be unfashionable, but his impact and influence on the
modern world can scarcely be overestimated. However, this brief treatment of
Keynes also aims to show that his critique of the orthodox economic analysis of
the operation of capitalism, derived from Adam Smith, is unwittingly
sociological in its understanding of the relationships between employment,
money and capital.
The fact that my list of classical theorists of capitalism ends with Keynes, who
died in 1946, might possibly be taken to reflect my outdated conception of the
social sciences and rather old-fashioned concerns. In reflecting on this possible
interpretation, I have reached the outrageous conclusion that no social scientist
over the past half century has added anything that is fundamentally new to our
understanding of the capitalist economic system. Indeed, some of those who
might be thought to qualify for such a list have merely distorted and obscured
much of the legacy of Smith, Marx, Weber, Schumpeter and Keynes.
After the somewhat crude extraction from their work of the basic elements that
make up the capitalist system, part II looks at these more substantively – money,
markets, the enterprise, capital and financial asset markets. However, the
sociological literature on which to draw is very patchy in this respect. Reflecting
classic sociological concerns, there is copious work on labour and the firm, but
very little on money and finance. Consequently, I have relied on heterodox
economic traditions and have made liberal use of material from the most
valuable source on the operation of contemporary capitalism – the elite capitalist
press. In the pages of the Financial Times and The Economist one finds the most
expert reportage on what Schumpeter referred to as the inner workings of the
capitalist engine, including the representation and disclosure of the capitalist
elites’ beliefs, their most pressing anxieties and the continuous evolution of
capitalist ideology.
Finally, I should point out that this book lacks a thorough treatment of the very
important question of the origins of capitalism. Given the constraints of an
introductory text, I decided rather to concentrate on contemporary issues. For
filling this gap I recommend two sociological histories of capitalism – one short
and elementary (Fulcher 2004) and the other longer and more complex (Arrighi
1
1994). Both make much use of Braudel’s history of capitalism, which, in turn,
was guided by one of the major influences on my own work – Joseph
Schumpeter.
Note
1 Over the past decade or so the question of the Western origins of capitalism
has become the focus of a heated debate in history and sociology. On the one
hand, the classic nineteenth-century accounts of Smith, Marx and Weber have
been labelled ‘Eurocentric’ for their neglect of the oriental contribution to the
development of capitalism as a world system (Frank 1998; Goody 2004). On
the other hand, a ‘California School’ of economic historians has identified a
‘great divergence’ in the sixteenth century, when China’s earlier economic
superiority was overtaken by the West (Pomeranz 2000; Vries 2003; Faure
2006; Arrighi 2008). This fascinating question cannot be pursued here, but the
understanding of capitalism presented in this book gives clues to my own view
of this debate. As the following account strongly implies, I support the view
that capitalism originated in the West and that the overtaking of China was
largely due to the emergence in the early modern period in Italy, the
Netherlands and Britain of banking systems that linked the state and the
nascent mercantile bourgeoisie in the production of credit-money for the
finance of production and exchange. This development was conspicuously
absent in China.