Chancellor Rachel Reeves, Labour’s ‘securonomics’ orchestrator (Photo: flickr/HM Treasury)
Thomas Carlyle famously described economics as the “dismal science”. Much writing about economics is indeed boring and inaccessible.
But Jamie Merchant’s Endgame is anything but dismal. He presents a compelling analysis of contemporary capitalism.
We live under an economic system driven by the pursuit of profit. This profit is extracted from the unpaid labour of the working class —those who have no ownership or control over the production process itself.
Neoliberal ideologues argue for dismantling state controls and letting the market rip. But this has been exposed as an illusion.
Over the last few decades, profit rates have fallen and growth rates have slumped. The idea that we need a more active state to promote and protect domestic production has begun to rise again.
Mainstream economists expect to see low growth rates for the foreseeable future. Yet they lack any compelling explanation for this because they lack a fundamental understanding of the factors determining the overall rate of profit.
Merchant’s framework for understanding this is based on Karl Marx’s law of the tendency of the rate of profit to fall.
The pursuit of greater productivity per worker causes bosses to adopt new technology. But technology often displaces workers from the production process.
This causes a problem for capitalists.
The exploitation of those workers, the fact they are paid less than the value of the goods and services they produce, is the source of surplus value and ultimately the source of profit. In other words competition itself, which is integral to the very nature of capitalism, sows the seeds of crises, stagnation and even slump.
Merchant shows how the growth of unregulated financial markets in the neoliberal era is a symptom of the problem, but not its root cause.
The economic analysis of Endgame is very much to be welcomed. But there are inevitably some weaknesses in the book.
Merchant appears to draw too sharp a distinction between the neoliberal era that he claims is now over and a new era of nationalist protectionism.
But, as he acknowledges later on, things are more complicated than this. State involvement in the economy did not disappear with neoliberalism.
“Securonomics” promoted by Labour chancellor Rachel Reeves is based on the idea of a more active state.
But that activity is heavily restricted by having to keep the financial markets happy.
Marx identified forces that counteract the tendency of the rate of profit to fall. Bosses try to keep profit rates up by cutting wages and intensifying work.
Devaluation takes place through crashes in the market and factory closures.
Merchant does not explain why these countervailing factors have not kicked in. In fact, states have individually and collectively tried to prop up the capitalist system.
This took place on a massive scale with quantitative easing after the 2007-8 financial crash. Central banks pumped vast amounts of cash into the hands of the big corporations and financial speculators.
Merchant describes these interventionist policies. But he does not fully explain how this locks the system into perpetually low profit rates.
Merchant nods towards the people who actually produce the wealth of society—the working class.
But it is only a nod on the way to what he calls the “street”, the mass movements we’ve seen in recent years. He does not identify the working class itself as central to system change.
But I would highly recommend the book for anyone interested in gaining a greater understanding of the beast we must overcome before it destroys us.
Endgame: Economic Nationalism and Global Decline by Jamie Merchant, £13.99
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