Bonfire of Illusions: The Twin Crises of the Liberal World Review

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Bonfire of Illusions: The Twin Crises of the Liberal World ReviewAfter the end of the Cold War, Alex Callinicos suggests, there was a short period where it appeared that we had reached 'The End of History' in the sense that:
'liberal capitalism was the only rationally acceptable socio-economic framework for a modern society and that a widening circle of liberal democracies could offer the world benign global governance.' (P2)
The general assumption is that the belief that 'history had ended' was shattered with the attacks of 9/11. Callinicos questions this assumption, pointing out that:
'[o]n the contrary, in its response to the attacks, the administration of George W Bush sought strenuously to reaffirm and reinforce US hegemony'. (P2)
Instead, Callinicos situates the break in 2008. The financial crash and its continuing aftermath clearly shows the falsity of a 'benign capitalism', and the war between Russia and Georgia, Callinicos suggests, also demonstrates the end of a 'widening circle of liberal democracies'.
The book is basically divided into two sections, with a conclusion at the end. The first, and longest, is titled 'Finance Humbled', the second 'Empire Confined'.
In 'Finance Humbled', Callinicos takes a long view of the current crisis, comparing it with the Great Depression, but also offering a fairly in-depth analysis in Marxist terms. There are some very interesting discussions on 'financialisation', emphasising how increasingly the financial institutions have become divorced from lending money to businesses and productive activities in favour of simply making money out of money - mortgages, fees, 'predatory lending', the 'shadow banking system' including hedge funds and the now notorious credit default swaps, collateralised debt obligations and so on. Manufacturing companies wishing to raise capital no longer approach banks but instead issue their own corporate bonds. This predatory capitalism thrives, as David Harvey would say, on 'accumulation by dispossession'.
Callinicos offers 'three perspectives on financial crises' - Keynsian, classical-liberal and Marxist (P35). These three approaches are expanded with reference to Hyman Minsky, Hayek and David Harvey respectively. He goes on to point out that the current crisis is clearly more than simply a problem with sub-prime mortgages and the credit crunch but has:
'morphed into something that extends well beyond the financial markets, as it has generated a world economic slump.' (P50)
This is, he suggests (along with David Harvey) 'a long term crisis of overaccumulation and profitability.' (P50) It is not simply a question of a simple cycle of boom and bust, but a growing crisis in capitalism itself.
However, in chapter two, he suggests that the role of the state has been greatly underestimated. Not only are most states heavily involved to a greater or lesser extent in the economy, but also they still have power to influence and control the 'globalised' financial system:
'But as the banking system crumbled and the world slipped into recession, it was the state that came to the rescue with nationalisations, bailouts and fiscal stimulus.' (P96)
Starting from this position, Callinicos goes on to provide a really interesting and thought-provoking analysis of geopolitics in the light of the current financial crises. To take just two points - Europe's (and in particular Germany's) reliance on supplies of energy from a resurgent Russia and the interdependence of the US and China - suggests that, although the US is likely to maintain its overall hegemonic position for decades to come, we have moved into a far more 'multipolar' and dangerous world:
'The trouble is that [the] world economy is organised within the framework of a constitutively unstable capitalist economic system AND a political system of sovereign states. Despite the real forms of transnational cooperation that exist, anarchy continues to reign, both economically and politically.' (P105)
In conclusion, Callinicos considers whether we are seeing the end of neoliberalism, a return of 'state capitalism' (which never went away in countries like China and South Korea), and whether there are any realistic alternatives to capitalism generally. He considers, for example, a return to some form of state planning. One key aim, he suggests, is to drastically weaken 'the power of the capitalist labour market, which today rules our lives.' (P141)
For me, the most interesting section of the book was the discussion of the financial crisis from a geopolitical perspective. This added a dimension that I hadn't really come across in this form elsewhere and provided some really interesting insights and much food for thought. Finally, he ends on an upbeat note but whether this is justifiable or not, you'll have to judge for yourself.Bonfire of Illusions: The Twin Crises of the Liberal World Overview

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