Review: an explanation of capitalism's limits

Published: 21/09/2009

Written by: Ben Hillier
Originally listed under: Edition 146 - October 2009

Chris Harman, Zombie Capitalism: Global Crisis and the Relevance of Marx, Bookmarks (available from Socialist Alternative,

Chris Harman has been waging an argument for over 30 years. In one book, numerous articles, and countless public discussions he has returned to his central contention again and again - that the classical Marxist tradition can explain the workings of the capitalist economy better than any other school of thought.

His latest contribution, Zombie Capitalism, is sweeping in its scope; it is both an outline and defence of Marx's key insights into capitalism, and a survey of over 100 years of changes in the global economy and economic ideology.


Harman's analysis

The general argument which underpins Harman's analysis runs as follows:

There is a contradiction within the capitalist accumulation process, which leads to diminishing returns on investment over time. Diminishing profitability leads to instability and breakdown in the accumulation cycle.

There are counter-factors that can restore or reduce this decline in profitability, but these counter-factors are inhibited in their operation as the system ages. This basic tendency asserts itself more forcefully as a result.

In particular, prior to the 20th century, economic crises played a positive role in restoring the rate of return to the system by clearing out inefficient firms. However, the concentration and centralisation of capital (i.e. the growth of ever-larger corporations) over time led to the structural interdependence of the nation-state and capital.

One result of this process was that victory in economic/business competition came to be determined not simply by being able to out-compete rivals through having a better price per product. Increasingly, power became the key to economic competition both at the level of the firm and at state level. Power itself was determined by size and influence rather than simply economic innovation. Military competition thus became the logical extension of economic competition.

For an entire period beginning in the 1930s, calculations of profitability were secondary to the basic goal of economic growth. Rival economic blocs accumulated massive means of destruction to cement their economic positions. One consequence of this was the permanent arms economy, which contributed for 25 years after World War II to sustaining what became known as the golden age of capitalism.

However, the other result of concentration and centralisation was that the corporations in each nation state grew to such a size that their failure now threatened total national economic collapse. Major firms don't just go bust; they pull other firms down with them. So since the Great Depression, states have needed to intervene to rescue giant national firms in an attempt to prevent crises. Not doing so would risk the entire national economy being dragged down into a vortex.

Yet this inability of crisis to act as a mechanism to clear out the economy (or the unwillingness of states to risk the carnage of a full-blown crisis) in the age of imperialism means that the tendency to general stagnation in the system is strengthened. The contradiction is that there is more of a trajectory toward crisis as a result.

So while it appears that particularly severe economic crises are averted as a result of concerted state action, the definitive crunch is simply postponed. Instability increases, accumulation slows and crisis will return in a more acute form in the future.


Extending this analysis to Zombie Capitalism

All of this has relevance to the current crisis. In a nutshell, Harman argues that global growth and accumulation rates have been slowing since the 1970s due to an initial decline in the rate of profit and the subsequent failure of the advanced economies to increase profitability in the real economy to previous levels. There have been severe attacks on the working class to compensate for this, and a massive economic restructuring in the advanced economies. Yet none of this was enough to fully restore the rate of return.

This is the backdrop to the current world crisis. The booming "new economy" of the 1990s and the boom of the 21st century were achievable only because the failing permanent arms economy morphed into a debt driven expansion.

Because returns in the real economy were not adequate to spur mass waves of accumulation, the mass of business profit seeking reinvestment in the 1980s and 90s gradually found its way into speculative endeavours and the financial system. Here the risk-return trade-off was offering better results. Things seemed to be booming, but underneath the surface the core problem of profitability lay unresolved.

Because financial profits ultimately rest on real industrial profit, all the economic hype of endless boom was actually enthusiasm over a financial house of cards. When it came crashing down in 2007-08 the real problems in the world economy were laid bare.

By Harman's account, now that the debt-driven expansion has come to an end, there will be a painful process ahead. It took the Great Depression and a world war to fully clean out and kick start the system the last time the world was in such a state. By his analysis, even a severe recession will not be enough to return capitalism to a healthy growth path - only a mass clearout of capital unlike anything we have seen in generations will provide the impetus for a new generation of accumulation.

The distinguishing feature of Harman's account of the world is that, unlike almost everything else that is being produced today, it is not simply a narrow work of economics. Building on the theories and insights of Marx, Bukharin, Grossman, Cliff and Kidron, Harman's is a classic work of political economy where, as Lenin noted, politics is "concentrated economics" and where imperialism is the defining feature of world economy.

The key strength of the book is this overall sweep and scope and the fact that Harman's general argument is always in the background. However, the breadth is a double-edged sword. The argument he is pursuing has to be digestible without getting drowned out in a sea of data, but the more that is covered, the less empirical evidence can be mustered at each point for brevity's sake. That is not to say there is a lack of evidence in Zombie Capitalism, but space is clearly the enemy of a work covering so much.

Yet some things needed to be covered more systematically: on one hand the role of the credit system and the role of debt, but also the rise of China as an economic power. Harman spends only nine of 350 pages here - they are a decent nine pages, which argue that China's economy is beset by real problems. It can't be capitalism's saviour, he argues, because it can't possibly raise domestic consumption fast enough to compensate for any corresponding drop in the US and Europe (this is true on the output side as well, where China still represents only a small portion of the world total). But Harman doesn't delve deeply enough into the question of how Chinese labour has impacted the balance of the world economy over time.

By integrating into the global economy, the labour force of China has become accessible to the world market in a dramatic way - the labour of Chinese workers is now being compared with global labour on the world market through the exchange of Chinese products. The greater the size and share of Chinese exports as a portion of world trade, the more Chinese labour is equalised with labour from other regions. With China now the largest exporting nation on the planet, moving $US1.2 trillion dollars in commodities annually, the effect of this integration needs considerable attention.

Various accounts attribute the integration of China, India, Brazil and the former Soviet Union to a 16 per cent increase, a doubling or even an effective quadrupling of the global labour force over the last quarter century. Harman disputes the significance of this process, and the methods used to generate the "effective quadrupling" figure in a footnote. He may well be right in this regard, but judging by the weighting he gives it in page terms, the impact of China in the world economy is understated in his account.

In the final sections of the book, Harman looks at the new limits to capitalism: environmental crisis as a dimension of capitalist crisis and the limits of global labour. The world working class - potentially more powerful now than at any time in history - is shown as the agent capable of transforming the world and overcoming the limits placed on humanity by the capitalist system. The fact of crisis means that ever more pressure is being placed on workers everywhere. The system cannot provide for the majority, nor can it live up to their expectations.

This is a crucial point. Economic crisis can and will flow into political crises as millions of people express their humanity through struggle. Harman (unlike the mainstream commentators who tremble at the possibility of social upheaval) positively welcomes the prospect of increasing class struggle across the world. He looks to the struggle of workers as the real movement that can turn a zombie system of crisis, war and exploitation on its head.

For all these reasons, Zombie Capitalism is a work to be taken seriously. Some in the socialist movement seem to have dismissed Harman's arguments - none, though, have come up with such a coherent and penetrating analysis of the economics of imperialism and the world system. For those wanting to understand the world, this is a must read.