David Harvey has long been known as a gifted communicator of Marxist analyses of capitalist crisis and has a very successful website that offers a course in Marx's Capital that has had over a million downloads since mid-2008. His Brief History of Neoliberalism, 2005, offered a wonderfully detailed economic history of the consequences of neoliberal state politics.
Now he has provided us with a book about capital flow, the life blood of the capitalist system, as it moves around the global economic system. He traces the conditions over the last thirty years that led up to the biggest financial crash the world has ever seen. And just as blood flowing around the human body is essential for health, if the flow of capital falters, gets interrupted, or stopped, capitalism enters crisis.
By understanding how and where capital flows, we can get a better understanding of the dynamics of the system that at times plunges entire communities, even entire countries into poverty. But, of course, there is a subtle difference between the circulation of the blood and the circulations of capital: capital is circulated to provide the owners of the means of production with a surplus they can extract as profit. But using the biological analogy, it is as if the blood is circulating in order to feed an army of leeches on the one hand ("international institutions and peddlers of credit") at the same time as another group are desperately trying to increase the volume of blood ("central bankers flooding their economies with excess liquidity").
Harvey takes us through an edifying account of economic history over the last thirty years. Until the mid-70s, US real wages kept pace pretty well with rising productivity. The extra goods produced were bought by the extra demand provided by increasing wages. Growth was consistently good. But then the growing power of the corporations enabled them to squeeze real wages whilst productivity continued to rise.
That produced two related problems. One was that with increased productivity, there was a growing surplus of goods which were not being bought. Supply was outstripping demand. The other problem was that with wages held down, there was insufficient aggregate demand to mop up the excess products. Reducing prices would cause a drop in profits — that flow of capital would produce less and less return.
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