Too Much Stuff: Capitalism in Crisis
by Kozo Yamamura
(Policy Press, £7.99)

KOZO YAMAMURA’S starting point in this short book is the parallel existence of two seemingly contradictory realities of modern economic life in the developed world.

Low growth rates since 1980 evidence what he calls the “sickness” of these economies, especially since the “great recession” of 2008. This low growth, he argues, has created stagnant wages, frequent recessions which drive up unemployment, a reduction in the capital available for socially necessary investment and a growing inequality which is threatening political stability and even democracy itself.

Yet, at the same time, “since the 1980s a majority of citizens [in the developed world] have enjoyed the highest living standard known in human history... one that even the greatest kings of 200 years ago and the wealthiest people of the 19th century would envy.”
 

Their basic needs sated, Western consumers are spending more and more of their income on what are termed “necessary luxuries” such as smartphones and microwaves which, once considered luxuries, are increasingly viewed — and marketed — as necessities.

But, the author argues, the failure to recognise this new world of necessary luxuries has led to wrongheaded economic policies that have not only failed to produce the intended growth but are also leading to environmental and political breakdown.

Consumer spending, the basic driver of economic growth in the developed world, accounts for around two-thirds of the total, but an increasing proportion of this spending is on necessary luxuries.

Demand for them, argues Yamamura, can never grow rapidly enough to drive high levels of growth because wages are stagnating and consumers are slow to be convinced that new luxuries are, indeed, necessary.

The result is excess productive capacity in most industries, which have utilised an average of only 80-85 per cent of their capacity across the G7 since the 1980s. Yamamura gives the example that the world’s automobile plant had the capacity to make 26 million more cars than were actually produced in 2014.

In this context, the so-called supply-side policies of cuts to taxes and regulation, pursued across the G7 for 30 years, make no sense whatsoever. However low their taxes, businesses will never be incentivised to invest when their existing investments are not being utilised.
 

As Yamamura points out, “There is no need to reduce taxes on firms and the rich because there is no shortage of investment capital in the new world.” What is needed to reinvigorate the economy is not more money for firms to invest “but more demand for products and services.”

These arguments will be familiar to Marxists, who have analysed the overproduction driven by a lack of demand as the phenomenon at the heart of capitalist crisis for a century and a half.

But where Marx and Yamamura part company is whether the contradictions underlying this crisis are actually resolvable within the framework of capitalism. For Marx, “demand” in capitalism can never be high enough to create a sustainable economy for the simple reason that the working class as a whole is not paid enough to sustain it.
 

Yet Yamamura believes that a combination of increased taxes plus some political reforms should do the trick.

He is one of a growing number of academics — common in economic crises — who grasp the systemic failings of the capitalist system yet shy away from its revolutionary implications.