CAPITALISM: COMPETITION, CONFLICT, CRISES ANWAR SHAIKH - SciELO
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reseña bibliográfica
CAPITALISM: COMPETITION, CONFLICT, CRISES
ANWAR SHAIKH
by Francisco A. Martínez Hernández
Universidad Anáhuac México
Víctor M. Isidro Luna
Universidad Nacional Autónoma de México
In 1,024 pages, seventeen chapters, and divided in three
books, plus seventeen appendixes, Anwar Shaikh, one
of the leading scholars and a distinguished Professor of
Economics at the New School for Social Research,
presents a path breaking and monumental book which
main objective is the unified study of the logic, history,
dynamics, and crises of the capitalist system. Throughout
this book, the author confronts his own perspective and
method of the classical political economy with major
New York, NY, Oxford schools of economic thought such as neoclassical, mon-
University Press, 2016, etarist, and different branches of the post-Keynesian
979 pp. school.
The main hypothesis of the author is that capitalism
main driver is the constant seeking for higher profits in
a competitive environment that operates through a pro-
cess that the author describes as a ‘real competition’. This
position is completely different from the neoclassical
view of perfect competition and the post-Keynesian
notion of imperfect competition. This basic concept
of real competition that Shaikh adopts throughout
his magnum opus can be traced back to the writings
of Smith, Ricardo, Marx, and Harrod. Essentially, this
approach considers competition as a process of intense
rivalry among firms in the classical sense, where all pro-
http://dx.doi.org/10.22201/fe.01851667p.2020.311.72441
© 2020 Universidad Nacional Autónoma de México, Facultad de
Economía. Este es un artículo Open Access bajo la licencia CC BY-NC-ND IE, 79(311), enero-marzo de 2020 137
(http://creativecommons.org/licenses/by-nc-nd/4.0/).ducers try to get a share of their mar- foundations but also it may create
ket by lowering costs through wage new research avenues in economic
reduction and technological change. analysis, just as Marshall’s Principles
This turbulent process of ferocious of Economics, or Keynes’ General
competition leads to the formation Theory did. For example, in micro-
of a leading (regulating) produc- economics (on its connection with
er-capital which tends to establish macroeconomics), while portraying
the lowest unit cost-price of produc- different working shifts in the labor
tion at which other firms-prices will process, arise different shapes in cost
gravitate. As such, this competition curves that can lead to the identifica-
process as warfare happens within tion of different lowest regions of the
and inter industries, including other average variable cost (avc) according
economic sectors, tending to estab- to the chosen working shift (chapter
lish other regulating prices or key 4, pp. 156-159). Then given the low-
rates such as the general rate of profit, est avc, one can identify a normal
the rate of interest, relative prices, capacity utilization rate at the macro
wages, equities, expected return of level under the process of real com-
capital (investment), and exchange petition (chapter 12, pp. 551-552).
rates. Accordingly, this mechanism At the macro level, most common
of real competition outlines the short models in macroeconomics take for
and long-term patterns of econom- granted that aggregate investment
ic growth, income distribution, and and savings are equal at any point
economic cycles (e.g. Kondratiev). in time, and in general, it is assumed
Thereby, for the author, the search that the saving rate is constant. By
for profits regulates both supply and contrast, Shaikh distinguishes one
demand and could even determine short run cycle of three to five years
the degree of state intervention. as a typology to describe the short-
In our opinion, besides the ex- run adjustment between the demand
haustive and excellent analysis of the and supply, inventories and profit rate
history of economic thought and sev- equalization. Furthermore, by defin-
eral classical macro dynamic models, ing the long run cycle between seven
an outstanding contribution of this to eleven years, Shaikh found that
book to the economic science is the capacity utilization, labor market,
treatment of time within the con- and reposition of capital are the main
cept of real competition. In doing so, determinants of long-term fluctu-
it does not only show the deficien- ations. It is significant to note that
cies in traditional micro and macro these typologies (chapter 3, p. 109)
138 IE, 79(311), enero-marzo de 2020 • http://dx.doi.org/10.22201/fe.01851667p.2020.311.72441emerge from his acute knowledge of variables or equations, which can
of the national income and product be subject to empirical analysis. For
accounts (nipa) in addition to oth- instance, he starts by analyzing eco-
er sources of data, which the author nomics facts in a historical context.
uses thoroughly to construct many Then, he moves on confronting other
economic series and to show different empirical results adopting the classi-
and unique economic patterns. cal perspective in terms of theory as
Another key result of Shaikh’s work well as modeling; subsequently, by
by considering time and his concept narrowing down the subject of study
of real competition is the discovery of to a set of a manageable set of vari-
a new and stable Classical version ables, he conducts empirical analy-
of the Phillips curve which defines sis through the use of mathematical
the patterns between real wages and models, statistical (graphics) and
productivity. Most significantly, it econometric models in addition to
clarifies the links between these fac- mathematical programming. In this
tors with the levels of unemployment way, Shaikh approaches the subject by
intensity, showing the intricate in- considering first the complexity of an
teractions among state intervention, economic system and then attempt-
workers and capitalists in determin- ing to simplify his analysis. In what
ing the rate of unemployment, wages, follows, we discuss the content of the
and profits. The author obtained these book and then we turn to exploring
results through careful analysis of some suggestions for improvement
data and using the classical political for a possible next edition of this fas-
economy framework without relying cinating book.
on the assumption of rational expec- The whole volume is comprised
tations like other economists such as of three books. Part 1 “Foundations of
Friedman and Phelps. Finally, another the Analysis” contents six chapters
path breaking result is that in chap- (1-6). Chapter 1 is a detailed and
ter 3 there is a derivation of a down- well-documented introduction of
ward negative sloping demand curve the whole book where the key con-
without using the neoclassical famous cepts are defined. Chapter 2 is a neat
assumptions of hyper-rationality, op- empirical description of how a capi-
timization, perfect information, and talist economy behaves (unemploy-
representative agents. ment, productivity, price levels, profit
Shaikh’s methodological approach rate, growth, etc.). Growth as well as
focuses on boiling down complex short-and long-term fluctuations are
real problems into a manageable set considered by Shaikh to be inward
Reseña bibliográfica 139characteristics of the capitalist sys- Chapter 5 advances two approach-
tem. Finally, chapter 2 underscored es in the conceptualization of money
the difference between incremen- and exchange. First of all, Shaikh ex-
tal and average rates of profitability plains that exchange is an economic
which, according to the author, only institution that gives rise to money.
the former is relevant to new capital, He reckons that while the emergence
so “they should be equalized by the of a state is significant to understand
mobility of (new) capital across sec- the origins of fiat money at a later
tors” (p. 73). Chapter 3 will appeal stage, he does not believe in Chartal-
to young and old scholars because of ists theories, which posit that the state
its abandonment of unrealistic mi- was responsible to create money from
croeconomics foundations. In this early times. Chapter 6 is dedicated
chapter, Shaikh rejects almost the to show that profits are the engine
whole set of neoclassical assump- of the capitalist system. Shaikh de-
tions to derive the demand curve. fines capital as a “thing” that produc-
Through simulation of a different es profits, and he distinguishes two
micro model, Shaikh concludes that types of profit: On production and
social aggregates are very different upon alienation. Finally, he presents
from individual behaviors. different empirical measures of the
In chapter 4, Shaikh critiques evolution of the rate of profit.
neoclassical and post-Keynesian cost Part 2 “Real Competition” is dedi-
curves. First, he argues that neoclas- cated to the analysis of real competi-
sical cost-curves do not have any tion with five chapters (7-11). Chap-
reason to include average profit as ter 7 encompasses “the theory of real
a cost because a firm’s cost is repre- competition”. In this chapter, Shaikh
sented by labor, machinery, and de- asserts that firms compete with each
preciation. Additionally, in his view other using three mechanisms of cut-
post-Keynesians are mi taken to think ting costs: Technical change, wage
that the markup is the source of prof- reduction, and the increase in the
its. Second, for Shaikh it is quite im- length or intensity of the working
portant to recognize that there is a day. These mechanisms in one way
time dimension behind any process or another are usually glossed over
of production, whereby the cost- or disregarded by other schools of
curves modify their shape because thought in general. If new investment
of the total duration of the working has a higher expected rate of prof-
day and the consideration of different it in some specific industries, then
working shifts. capital will move to these areas of
140 IE, 79(311), enero-marzo de 2020 • http://dx.doi.org/10.22201/fe.01851667p.2020.311.72441higher profitability. Thus, capitalists ital-labor ratios among industries.
collide each other in the search for Chapter 10 explains the determi-
profits. “This is real competition.” nation of the money rate of interest
(p. 259). According to Shaikh, even and equity. According to Shaikh, the
though competition is a destructive money rate of interest should, by and
process, ordered patterns in key eco- large, be lower than the general rate of
nomic variables can emerge from it. profit (r > i), arguing that the general
In chapter 8, the author hypothesizes rate of profit must have the same level
that competition leads to the world for bank loans and bonds for equiv-
economies to exhibit orderly patterns alent terms. Moreover, in Shaikh’s
where wage rate, profit rate, and pric- view the money rate of interest is
es gravitate to a normal gravitational determined by competition among
level. In this chapter, he rejects the different banks and not by institution-
theories of perfect competition or al factors. According to his analysis,
imperfect competition as proposed equity must receive the same profit
by economists such as Walras, Kalec- rate as the general rate of profit on
ki, and those economists identified new investment.
within the post-Keynesian school. Finally, chapter 11 deals with in-
Shaikh criticizes Walras for thinking ternational competition where Shaikh
that markets clear instantaneously presents one of the most original the-
without any consideration given to ories of real exchange rate behavior
the time dimension. Shaikh then in the economics literature. In this
rejects Kalecki’s price equation be- chapter, he links terms of trade (de-
cause it uses restrictive markup coef- fined by relative real unit labor costs),
ficients. Finally, the author considers the rate of profit, interest rates, and
that post-Keynesians usually err by capital movements to determine
not taking into account that prices the behavior of real exchange rates,
are equalized through a competition and thus, the degree of international
process. competitiveness of each country and
Chapter 9 addresses the relation- their trade balance. For example, if
ship among commodity labor ratios, a country has a higher general cost
prices of production, and market pri- of production, it will tend to under-
ces: The first determines the second, go trade deficits, incur less profits,
and the second determines the third. and will be forced to import capital
Discrepancies between value and through a higher interest rate. Con-
price can exist, but these discrepan- versely, most productive countries
cies are the result of different cap- can export capital and will tend to
Reseña bibliográfica 141have a higher rate of profit and a low the profit rate of enterprise goes up,
rate of interest. The final lesson in this and, then, firms may increase their
chapter is that “free trade will lead to investments. For this reason, current
persistent trade surpluses for coun- policy-makers in the developed world
tries whose capitals have lower costs are trying to cut down the rate of in-
and persistent trade deficits for those terest as a measure to spur economic
whose capitals have higher costs” (p. growth. Along these lines, the rate of
514) so that the only way for the latter accumulation depends on the average
countries to be more competitive in profit rate of enterprise but also on
the short-term is via lowering the the amount of surplus that is rein-
cost of production through lower vested. In this respect, the maximum
real wages, or via better techniques guaranteed growth is based on the
of production in the long-term. surplus value previously achieved by
Part 3 “Turbulent Macro Dynam- the economy.
ics” includes five chapters (12-16) in In chapter 14, Shaikh rediscovers
addition to the conclusion (17). a Classical Phillips curve which en-
In chapter 12, Shaikh analyzes the compasses the relationship between
changes in the macroeconomic the- the wage share, the unemployment
ory before and after Keynes, and also intensity and the effects of the state
evaluates other different macroeco- intervention in the last 60 years.
nomics perspectives and models. Chapter 15 describes Shaikh’s nov-
Two important results arise from elty theory of inflation, which reflects
this chapter: 1) That “Classical mac- his observation of the behavior of the
roeconomics is neither supply-side price-levels since 1940. According to
nor demand-side: It is ‘profit-side’” this theory, the inflation rate behavior
(p. 616) and 2) that the savings rate responds positively to new purchas-
is endogenous, as firms collectively ing power, negatively to net profitabil-
choose to finance investment only ity and positively to the growth-uti-
partially by business savings, which lization rate; in the last part of the
implies that the expenditure multi- chapter the empirical evidence of this
plier would be lower than it is usually theory is presented.
assumed. Chapter 13 distinguishes Chapter 16 reminds us that prof-
the profit rate of enterprise (r – i; itability is the key variable in world
where r is the money rate of profit economies, which determines short-
and i is the money rate of interest) as and-long-term fluctuations as well
an engine for economic growth. Every as the evolution of the wage share
time the rate of interest goes down and the magnitude of the capacity
142 IE, 79(311), enero-marzo de 2020 • http://dx.doi.org/10.22201/fe.01851667p.2020.311.72441utilization. In other words, profits runs only from 1960 to 1989 (chap-
regulate supply and demand, along- ter 2, p. 68), so we think that a more
side the degree of state intervention. powerful proof of this equalization
The final chapter presents the major of the incremental profit rates within
conclusions and key observations, the manufacturing sectors should
including above all: That basic neo- include until the most recent data
classical assumptions are not ade- available. In addition to this extension
quate to portray economic reality; of data, we think a formal analysis of
the importance of recognizing the this equalization should be carried
turbulent process of equalization out through econometric panel data,
of different prices and rates in the which could show if this equaliza-
economy through a real competition tion tends to gravitate towards zero
process; and that real competition or another level.
tends to build up an unequal world Needless to say that the foregoing
with unsustainable levels of inequal- suggestions do not necessarily need to
ity which the state should cope with be carried out by the author, since this
through a better correlation of forces tremendous work has paved the way
in favor of the working class. for a needed realistic and intuitive
Lastly, we identify two suggestions economic analysis of the capitalist
for improvement in future editions of system for developed and develop-
this fascinating book. These sugges- ing countries. We hope that Shaikh’s
tions are related to the equalization students and other scholars that feel
of the incremental profit rate of the inspired by this tradition could con-
US manufacturing sectors, which tinue strengthening this renewal and
is the core of the author’s argument vibrant classical political economy
about the dynamics of the econom- project. ◀
ic system. The span of Shaikh’s data
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