The Making of Capitalism

In their latest book, Leo Panitch (the editor of Socialist Register) and Sam Gindin take us on a journey that looks at how the US empire has established itself since the Second World War. It is a very accessible book and well worth recommending to anyone trying to unpick the underlying structures of the American state.

Its primary aim is to challenge the widespread notion that globalisation has led to the retreat of the state and the disappearance of state sovereignty. The authors rightly argue that we must transcend the false dichotomy between states and markets and the idea, reinforced by capitalism, that politics and economics are separate spheres.

As Marx wrote, capitalism has the capacity to “nestle everywhere and settle everywhere”. But there is nothing inevitable in the development and expansion of the system. According to Panitch and Gindin there have been four transformations which reconstituted the material base of the American empire: the new age of finance, the restructuring of manufacturing, the explosion of high tech and the weakening of working class organisation.

They vigorously criticise those who, building on the ideas of Karl Polanyi, characterise the post-war era as “embedded liberalism” under which financial markets were supposedly heavily regulated. In reality, it was the internationalisation of American finance which was key to the expansion of finance domestically.

Through the New Deal and the Bretton Woods framework, the American model was applied to the remaking of capitalist states after the Second World War, with the US dollar becoming the central currency for reconstruction. It was in that period that the American state took responsibility for creating the political and juridical conditions for the general extension and reproduction of capitalism internationally. But it did not dictate or impose its will on other states; rather “it has set the parameters within which the others determined their course of action”.

With the collapse of the Bretton Woods system of fixed exchange rates in 1973-74, the financial system became increasingly volatile. Markets began to require more, not less, state intervention.

The state has always played and continues to play an important role in creating markets, but also in shaping its relationship to them. In order to make markets “freer”, old rules need to be reformulated and new ones created.

According to Panitch and Gindin, the first global crisis of capitalism in the 21st century is rooted not in production (the so-called “real economy”) but in the volatility of capitalist finance. With the “democratisation of finance” under US president Clinton it became possible for working class Americans to become home owners. It was through their major asset – the family home – that American workers were to be drawn into the logic of asset inflation.

As the placard held by a woman during a demonstration stated, “The trouble with the American dream is that you have to be asleep to believe it: Wake up!”

The Making of Capitalism is published by Verso, £20