This book combines a post-Keynesian theory of endogenous fiat money with an attempted orthodox Marxist analysis emphasizing the importance of Karl Marx’s theory of the long-run falling rate of profit. The supposed long-run falling rate of profit (due to technological change and a rise in what Marx termed the “organic composition of capital”) is held to lead to economic stagnation, increased financial speculation, asset bubbles, financial instability, and eventually financial crises. Mouatt claims to be true to Marx’s position, which ultimately grounds the problems of capitalism in the real economy and particularly in the production process itself. Mouatt also argues that there has been a decline in the financial sovereignty of the state, with increasing private control of monies, particularly since the end of the Bretton Woods era. Again, this is held to be somehow caused by the long-run falling rate of profit (p. 212).
It is true, as Mouatt points out, that Marx generally, though not always, assumed a commodity money, and that contemporary Marxist analyses can and must integrate their analyses with current financial developments and institutions. However, Mouatt is on more problematic ground when he attempts to recover Marx’s supposed long-run falling rate of profit as a (or rather, the) key explanatory variable. Following the work of Piero Sraffa, modeling the economy using a series of simultaneous input/output equations, where the prices of the outputs are the same as the prices of the inputs, then with real wages remaining constant, technological change will tend to increase, not decrease, the rate of profit. Indeed, as the Russian mathematical economist Vladimir Dmitriev showed back in 1898, one can even model a fully automated society, with no human workers, which would still have a positive rate of profit and relative prices; not a zero rate of profit, as one would logically conclude from Marx’s labor theory of value (Dmitriev [Reference Dmitriev1898] 1974; for a discussion see Pack Reference Pack1985, pp. 119–125).
Mouatt bases his work on the relatively recent so-called temporal single-system interpretation of Marx (e.g., Kliman Reference Kliman2007). In this reading, there is no transformation problem from Marxian-embodied labor values to prices of production, because they basically change Marx’s conception of value as commensurable abstract embodied labor, by immediately giving every unit of labor a monetary price. Thus, there is no separate calculable value and price of production analysis, and therefore there is nothing to be “transformed.” Moreover, by letting output prices vary from input prices, their models tend to be mathematically underdetermined, thus allowing them to set equal various equivalences and arbitrarily set output prices so that the rate of profit will fall over time. For a trenchant critique of this approach, see Gary Mongiovi (Reference Mongiovi2002).
There are, of course, policy or political implications from Mouatt’s position. If the key problem with capitalism is somehow rooted in the long-run falling rate of profit, the real economy, and the production process itself, then capitalism would seem to be unsustainable in the long run and in need of revolutionary replacement. On the other hand, as Mouatt points out, if the recent crises are purely financially driven, then government reform policies to restrict and tame the financial sector may be all that is required (pp. 194, 205).
Mouatt also argues that since the end of the Bretton Woods era, there has been an erosion of the financial sovereignty of the state, and state regulatory controls over the creation and flows of money, exchange rate determination, and the value of the currency. Since Mouatt generally argues from an orthodox Marxist position that the problems with capitalism are far deeper than mere financial issues generated from borrowing short and lending long, excessive leverage, speculation, asset bubbles and crashes, etc., then it is somewhat of a surprise that Mouatt concludes the book on a distinctly reformist note: “It is perhaps time to reconsider the need for a stronger financial state” (p. 226).
On the other hand, if one takes the Marxist position that the state in capitalist societies is in some sense basically a tool of the ruling class, and its function is to aid in the reproduction of the capitalist system, then the capitalist ruling class seems to have concluded that it does not need a strong financial state, with controls over the international mobility of financial capital, etc., to get its way and maintain the capitalist mode of production. Indeed, periodic national government bailouts of various sectors of the financial services industry, the machinations of international organizations such as the World Bank, International Monetary Fund, World Trade Organization, and European Central Bank (none of which are discussed in Mouatt), combined with the termination of so-called Communism in the former Soviet Union, eastern Europe, and China would, from capital’s point of view, seem to obviate the need for a strong national financial state. The capitalists have decided, at least for the time being, that they do not need or want a strong national financial state limiting their freedom to do what they want with their financial capital, as there was in the post-WWII Cold War era. Hence, from this orthodox Marxist point of view, the decline of the financial state should not be a surprise. It arises from the capitalists’ winning the international class struggle; and they no longer need it.
