Geoffrey Ingham - Capitalism: With a New Postscript on the Financial Crisis and Its Aftermath

Introduction

Given the enormous accumulation of sociological literature on capitalism, it might well be thought that there is little need for another introductory text. Indeed, there have been a number of excellent recent additions to the genre, most notably Fulcher (2004) and Triglia (2002) and, at a more advanced level, Nee and Swedberg (2005). None the less, I believe that there is room for one more that attempts to do something a little different.

However, part of what I propose is, in the first place, rather old-fashioned. One of my aims has been to refocus attention on the classical sociological concern with the systemic nature of capitalism. By this is meant the fundamental elements, and their linkages, that characterize capitalism as a whole. Of course, this is precisely what Marx and Weber set out to do, but I believe that this aspect of their work has suffered some neglect in the recent past. For example, it has been surely a distortion of Webers analysis of capitalism to devote so much attention to the Protestant Ethic. On the other hand, I have argued that the classic nineteenth-century sociological texts have very little to say about the monetary and financial side of capitalism, which has assumed a more obviously central role during the twentieth century. In this respect we get more guidance from the great economists such as Schumpeter and Keynes. But they and other economists concerned with the systemic structure of capitalism are, unfortunately, not likely to be encountered in an undergraduate sociology course.

The book is in two parts, the first of which deals with those theorists whose work I have found to be most valuable. It opens with a very brief outline of Adam Smiths analysis of commercial society in The Wealth of Nations (1776). Apart from this books intrinsic significance as one of the first systematic accounts of the modern market economy, the classical social theory of the next two thinkers on my list Marx and Weber is unintelligible without reference to Smith. Two other economists Joseph Schumpeter and John Maynard Keynes make up my list. They are included not only for their seminal heterodox contributions to the economic analysis of capitalism, but because this heterodoxy is implicitly sociological. That is to say, they focus on the particular institutional structure of capitalism as a distinctive type of economy, rather than on the abstract mathematical models of decision-making and exchange to be found in mainstream economics. Schumpeters economics provides a fascinating insight into the process by which the social science disciplines became separated in the early twentieth century arguably to the detriment of both. But, unfortunately, this issue cannot be pursued here. However, it is my firm belief that students of sociology should have some basic understanding of Keynes as one of the towering figures in twentieth-century social and economic science. His economics might now be unfashionable, but his impact and influence on the modern world can scarcely be overestimated. However, this brief treatment of Keynes also aims to show that his critique of the orthodox economic analysis of the operation of capitalism, derived from Adam Smith, is unwittingly sociological in its understanding of the relationships between employment, money and capital.

The fact that my list of classical theorists of capitalism ends with Keynes, who died in 1946, might possibly be taken to reflect my outdated conception of the social sciences and rather old-fashioned concerns. In reflecting on this possible interpretation, I have reached the outrageous conclusion that no social scientist over the past half century has added anything that is fundamentally new to our understanding of the capitalist economic system. Indeed, some of those who might be thought to qualify for such a list have merely distorted and obscured much of the legacy of Smith, Marx, Weber, Schumpeter and Keynes.

After the somewhat crude extraction from their work of the basic elements that make up the capitalist system, part II looks at these more substantively money, markets, the enterprise, capital and financial asset markets. However, the sociological literature on which to draw is very patchy in this respect. Reflecting classic sociological concerns, there is copious work on labour and the firm, but very little on money and finance. Consequently, I have relied on heterodox economic traditions and have made liberal use of material from the most valuable source on the operation of contemporary capitalism the elite capitalist press. In the pages of the Financial Times and The Economist one finds the most expert reportage on what Schumpeter referred to as the inner workings of the capitalist engine, including the representation and disclosure of the capitalist elites beliefs, their most pressing anxieties and the continuous evolution of capitalist ideology.

Finally, I should point out that this book lacks a thorough treatment of the very important question of the origins of capitalism. Given the constraints of an introductory text, I decided rather to concentrate on contemporary issues. For filling this gap I recommend two sociological histories of capitalism one short and elementary (Fulcher 2004) and the other longer and more complex (Arrighi 1994). Both make much use of Braudels history of capitalism, which, in turn, was guided by one of the major influences on my own work Joseph Schumpeter.

Note

Over the past decade or so the question of the Western origins of capitalism has become the focus of a heated debate in history and sociology. On the one hand, the classic nineteenth-century accounts of Smith, Marx and Weber have been labelled Eurocentric for their neglect of the oriental contribution to the development of capitalism as a world system (Frank 1998; Goody 2004). On the other hand, a California School of economic historians has identified a great divergence in the sixteenth century, when Chinas earlier economic superiority was overtaken by the West (Pomeranz 2000; Vries 2003; Faure 2006; Arrighi 2008). This fascinating question cannot be pursued here, but the understanding of capitalism presented in this book gives clues to my own view of this debate. As the following account strongly implies, I support the view that capitalism originated in the West and that the overtaking of China was largely due to the emergence in the early modern period in Italy, the Netherlands and Britain of banking systems that linked the state and the nascent mercantile bourgeoisie in the production of credit-money for the finance of production and exchange. This development was conspicuously absent in China.