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The Spectre at the Feast: Capitalist Crisis and the Politics of Recession

Periodic deep crisis is fundamental to capitalism. And until we recognise that creative destruction

Andrew Gamble is our most formidable exponent of the classical tradition of political economy that goes back to Mill, Marx and Adam Smith. He has a sure grasp of theory but, unlike many academic political scientists, he never allows it to overwhelm him. He writes with exemplary clarity in limpid English, enlivened with flashes of dry humour. He has an astonishingly wide range and an exhilarating capacity to think for himself. His study of the Thatcher era, The Free Economy and the Strong State, was first published in 1988, but it still holds the field. His study of Hayek, hauntingly subtitled The Iron Cage of Liberty, rescued that complex and subtle thinker from the dogmatic simplifications of the new right and the traditional left. The brief and brilliant Politics and Fate ended with a passionate insistence on the possibilities of politics against the nihilistic quietism of our time. I have learned more from him than from any other political analyst of our generation.

The Spectre at the Feast is Gamble at his best. There has been a lot of good writing on last year’s financial crash and its sequel, but most of it has come from economists with little grasp of, or
interest in, the global political context. Gamble redresses the balance. For him, politics and economics are intertwined. Sometimes economics drives politics, but at times like the present, politics drives economics. The result is a book that should be compulsory reading in every finance ministry and central bank. The spectre of the title is the spectre of crisis – the ever-present ghost in the machine of capitalism that leaders usually ignore, but only at their (and our) peril.

It’s an odd sort of ghost, however. Gamble’s argument crucially hinges on the idea that crises are different from crashes. The history of capitalism has been studded with crashes. The bubbles blown by the greedy and credulous during the good times always burst in the end. The crashes can be exceedingly painful for those affected by them, but they do not last and they have few long-term consequences. Before long, the system picks itself up and proceeds merrily on its pre-crash way. (The bursting of the dotcom bubble a few years ago is the most recent example.) Crises, by contrast, are rare. In the 100 years before the autumn and winter of 2008, Gamble thinks, there were only two: the Great Depression of the 1930s and the crisis of “stagflation” in the 1970s. Yet, despite being rare, they are fundamental to capitalism. The notion of a crisis-free, stable-state capitalism that lay at the heart of Keynes’s economic vision, and permeated economic policymaking for a generation after the Second World War, is an oxymoron. Crises are to capitalism what fleas are to dogs.

For Gamble, as for Marx at one end of the ideological spectrum and for the great Austrian economist Joseph Schumpeter at the other, capitalism is like “a force of nature”. The restless, unceasing search for profit which lies at its heart, and which batters down what Marx and Engels called the “Chinese walls” of national economies, is at one and the same time dynamic, creative – and destructive. The destruction is part and parcel of the creativity. Without it, there would be no creation. The astonishing dynamism that has transformed the world, and which differentiates capitalism from all previous economic systems, would peter out.

For crisis makes the unthinkable thinkable. It sweeps away the assumptions and practices that grew up in the boom years, and that now threaten to choke the springs of creativity. It forces economic and political leaders to think and act in new ways, to pursue new visions and construct new narratives. Only through a painful and usually protracted process of reconstruction, ideological and practical, can the crisis be resolved – as, in the end, it must be. This means that crises are inherently political. As Gamble puts it, they “create the conditions for new forms of politics” and for the “rebalancing of power” between states.

The eventual resolution is political, too. It emerges from contestation between interpretations and opposing narratives, whose outcome is always uncertain. Once the resolution has taken place, it is apt to seem inevitable. After the event, the American New Deal, and the Keynesian social democracy of postwar Europe, looked like predestined sequels to the Great Depression. Until a few months ago, the 30-year-long neoliberal hegemony that followed the crisis of the 1970s looked similarly predestined. But this is an illusion. The Keynesian victory of the 1940s and 1950s and the Hayekian victory of the 1980s and 1990s were not set in the stars. They were the products of political skill, rhetorical force, narrative power and – most of all, perhaps – the captivating elan and guile of leaders who found themselves in the right place at the right time. Without Roosevelt, there would have been no New Deal; without Thatcher, no Thatcherism.

Looking at our troubles against that background, the only certainty about the present crisis is that the slightly furtive glee with which the leftist commentariat greeted it was premature at best, and dangerously misconceived at worst. Some left responses are valid. It is true that the crisis was the product of deep flaws in the global governing philosophy that followed the bankrupt Keynesianism of the 1970s, and underpinned the neoliberal hegemony of the past 30 years. It is also true that the crisis has shown once again that markets depend, and have always depended, on states.

But this is not saying much. There is nothing intrinsically leftist about the state. States can pursue right-wing agendas as easily as left-wing agendas, and have often done so. Equally, it is not at all clear that the left is better placed than the right to win the battle of ideas which will determine the shape of the new order that seems certain to emerge, sooner or later, from the neoliberal debris that now surrounds us.

As Gamble points out, no one has yet offered a compelling alternative to the busted flush of neoliberalism. “Back to Keynes”, the new mantra of most social democrats, is less an alternative than a piece of escapist nostalgia. Keynes was a great man and, in his day, a great economist. But, unlike Marx and Schumpeter, he wrote only for his own time. His theories were static, not dynamic. He wanted to reconstruct the bland and stable liberal economic order of his youth, and he did not reckon with the relentless, unpredictable waves of creative destruction which are of capitalism’s terrifying essence. The left has no hope of winning the battle of ideas if it has nothing better to offer than a spruced-up Keynesianism. To win, it will have to jump out of the Keynesian box in which it has been trapped for too long, admit that there was substance to the neoliberal critique of the postwar Keynesian order, and think new thoughts in new ways.

It is too soon to tell what those new thoughts might be. But three things are reasonably clear. The first is that there is more to be learned from Schumpeter and Marx than from any of the other great names of the past. The second is that what Gamble calls the “anti-capitalist” (in effect, green) critique of neoliberalism cuts closer to the bone than any other on offer. The third is that the best starting point for the long road to reconstruction that the left now has to take is Gamble’s new book.

David Marquand is the author of “Britain Since 1918: the Strange Career of British Democracy” (Weidenfeld & Nicolson)

This article first appeared in the 15 June 2009 issue of the New Statesman, Tragedy!