The ABCs of Economic Crisis: What Working People Need to Know (review)

In the preface to their book, Magdoff and Yates write that they aim to “describe and explain the ‘The Great Recession’ … in straightforward and easy to understand language.” Another aim of their book is to provide labour and other activists with an understanding of economic crises that helps labour activists to organize against employer and government efforts to let working classes pay the bill for capitalist crises. Regarding this goal, the book could not be timelier. Written and published in the midst of the recession, 2009, the fallout from it, including lay-offs, cuts in social spending and slashing of labour rights, is just coming down. Though there were massive mobilizations, from Greece to England, Ireland and Wisconsin, against this latest wave of anti-labour policies, effective responses are still lacking. What do Magdoff and Yates provide to the development of such strategies?

In the first chapter of their book, they remind readers of how complacent the public was before the crisis hit. The networks of corporate media, government spokespersons and business-friendly economists spread the word of ever-lasting prosperity while the small number of left-leaning economists who warned of the dangers of escalating debt and speculative bubbles were either completely ignored or considered cranks. As a result, most people, no matter how rich or poor, educated or uneducated, were taken by complete surprise when the Wall Street crash of 2008 sent the world economy into a tailspin, with increasing numbers of people losing their jobs, homes, and pensions. While the crisis was still unfolding, a surge of crisis-literature filled the bookstores. Most of these publications, often written by the same folks who had denied the possibility of a crisis just a few months earlier, focused on financial markets and government regulations. Without showing much, if any, interest in the effect the crisis had on ordinary people, they argued about the question whether the crisis was caused by too much government intervention or too little. At the most, they considered the ‘irrational exuberance’ of financial markets, supposedly caused by greed and misinformation among investors, as a problem for the otherwise smooth functioning of markets for consumer goods, services, and labour.

Magdoff and Yates take a different route. In subsequent chapters they explain how the production of goods and services is organized, how income is distributed in capitalist economies, how such economies develop, and why these developments led to an explosion of debt and speculation. Along the way, they stress the impact of conflicting social interests and politics on capitalist development and put forward political alternatives that, instead of worsening the working and living conditions for many, could help to make the world better for them. The suggestions they advance in this respect are very similar to the ones that were on the agendas of reformist labour movements and social democratic parties before these groups turned to neoliberalism, and they include job creation, progressive taxation and public health care. Among the authors’ more controversial suggestions, at least from the point of view of classical labour reformism, is a non-imperialist government and an ecologically sustainable overhaul of the entire economy. Magdoff and Yates invite their readers to discuss and extend their suggested wish list for progressive change as an exercise to free their minds from the profits over people mentality that the above mentioned business-media-government complex relentlessly propagates.

Yet, and this distinguishes them from the labour reformism that seeks to reach a compromise with the rich and powerful, Magdoff and Yates also point to the fierce opposition that attempts to achieve social reforms of any kind will meet and historically has met. Such opposition does not result from lack of persuasion, as social democrats often argue, but from the social interests of wealth-owners and bosses in capitalist economies that are torn by the imperative to accumulate capital, imposed by competition between companies, and diminishing investment opportunities that lead to stagnation and squeeze profits...