posted August 27, 2016
Review of ‘Systemic Fragility in the Global Economy’, by Bob Jessop

Jack Rasmus studied economics at Berkeley, took his doctorate in the University of
Toronto (1977), and worked for many years as a union organizer and labour contract
negotiator. Then, after working as an international economist for global companies
(such as Siemens) and an international strategic analyst for some Silicon Valley start-ups,
he became a full-time independent economic researcher, author, journalist, radio host,
playwright, poet, lyricist, and activist. He also established Kyklos Productions and Jack
Rasmus Productions, which use different media, including stage plays and musicals, to
explain the long run changes in the USA and its future trajectory. He is currently Federal
Reserve Bank chair of the Green Party Shadow Cabinet and economic advisor to Jill
Stein, the party’s presidential candidate. This background is important for understand-
ing the theoretical novelty, persuasive power, political passion, and programmatic signifi-
cance of this book.

Systemic Fragility in the Global Economy (2015) is the fourth in a series that Rasmus
has produced within this broad intellectual and activist project. Each work not only
provides a theoretically-informed, empirically-grounded diagnosis but also offers a
wide-ranging set of policy recommendations aimed at progressive movements. The
first work was a detailed critique of the diverse upward wealth transfer mechanisms
employed in the corporate-government class struggle against subaltern classes and
groups in the Reagan-Bush-Clinton-Bush era (Rasmus 2006). The second, based in
part on major journal articles, was Epic Recession: Prelude to Global Depression (2008).

This also provides the theoretical foundations for his analysis of systemic fragility. Its
two main claims are that, first, the North Atlantic Financial Crisis (my term) is more
comparable to the recessions followed by stagnation that occurred in the USA in 1907-
1914 and 1929-31 than it is to normal cyclical recessions (marked by a brief contrac-
tion followed by a swift return to growth) or a classic depression; and, second, that the
explanation for epic recessions can be found in the interaction of debt-default-defla-
tion dynamics across the corporate, household, and government sectors. This work
was followed by detailed critique of the current and future policy failures of the Obama
Presidency and the presentation of an alternative policy programme and reform agenda
(2012). The fifth is concerned with the Greek crisis and the rise of financial imperial-
ism (2016).

The book reviewed here extends the analysis of epic recession dynamics, with declin-
ing growth, increasing fragility, and worsening instability, to the global economy. In
particular, Rasmus argues that the epic recession has been mutating as the financial crisis
becomes more general and directly weakens the ‘real economy’, generates secular stagna-
tion, and produces ricocheting contagion effects around the world economy exacerbat-
ing weaknesses in each economy and giving rise to distinct crisis symptoms in different
regions. Starting in the neoliberal, finance-dominated US-UK economies in 2007-2008,
in 2010-14 it affected the weak regional links in the advanced economies the Eurozone
and Japan before shaking China and emerging markets. Despite their different forms of
appearance (real estate, stocks, currency markets, government bonds), the underlying
causes remain excessive liquidity that fuel different kinds of speculative financial bubbles
and growing debt. The resulting crises cannot be tamed by fiscal or monetary means.
Indeed central bank liquidity injection and government fiscal policies exacerbate the
crises. Central bank responses have boosted liquidity, which has flowed into further asset
speculation rather than productive investment and is creating the basis for an even bigger
economic crisis. The detailed empirical analysis is backed by a sustained critique of inter-
national financial institutions, Wall Street shills and regulators, economic statistics and
statisticians, and, more importantly, mainstream economics, especially neoclassical econ-
omists and hybrid Keynesians (who seek to integrate Keynesian insights into neoclassical
economics), mechanical Marxists (who invoke the falling rate of profit to explain crises),
and the significant but now outdated contributions of Hyman Minsky to the analysis of
financial instability.

The theoretical novelty in this text compared with the author’s Epic Recession is a more
systematic presentation of systemic fragility. The possibility of recession, crisis, and
depression is given in the price system in general and the dynamics of financial asset
prices in particular, which differ in several ways from those of real asset prices and can
become fundamentally destabilizing under conditions of systemic fragility. For Rasmus,
this phenomenon is rooted in nine key empirical trends: slowing real investment; defla-
tion; an explosive growth in money, credit and liquidity; rising levels of global debt; a
shift to speculative financial investing; the restructuring of financial markets to reward
capital incomes; downward pressure on wages; the failure of Central Bank monetary
policies; and ineffective fiscal policies.

The case studies of the USA, Europe, Japan and China are excellent, typically contrar-
ian, and highly teachable. Many important and provocative arguments and points are
made in passing in these studies and they are strengthened by the more sustained theo-
retical analyses that follow. A major contribution is the analysis of the complexity of
shadow banking, an ill-defined term of art in most of the literature. I have found the
analysis of debt-default-deflation dynamics very helpful in my own research on crises and
the elaboration here is more detailed than in Epic Recession.

Nonetheless there are also three unresolved issues that will interest readers of
Capital & Class and are unlikely to be solved through Rasmus’s promised next iteration
of the analysis. First, perhaps reflecting his economic training and labour activism
in the USA and Canada, the critique of official dogma, orthodox economics and
Keynesianism is well-developed but the presentation and critique of Marxist theories
leads much to be desired, especially the critique of “mechanical Marxism”, and, com-
pared with his biting criticisms of other theorists, his grasp of Marx’s method and
arguments is disappointing. Second, relatedly, while the analysis of financial asset
price formation and debt-default-deflation dynamics is innovative, the articulation of
this analysis with the contradictions and crisis-tendencies in the circuits of productive
capital is weak. This matters insofar as the crisis of Atlantic Fordism in the 1970s and
1980s has a strong bearing on the rise of financialization and finance-dominated
accumulation in the USA and UK. And, third, the institutional mediation of crisis
dynamics in the political system, the influence of neoliberalism broadly considered,
and the specificities of political and ideological struggles that have shaped the rise of
finance-dominated accumulation, all deserve far more attention than they receive in
this text. The analysis seems at times to move uneasily between detailed empirical
description of crisis symptoms and dynamics, a general middle range theory of debt,
liquidity, and financial asset price formation, and a potentially class-reductionist
account of the social forces behind the rise of financialized capitalism. Paradoxically
this makes this book an excellent and cathartic text for teaching and activism but
leaves much unfinished business for those who want to relate this analysis to broader
questions of international political economy and political strategies that look beyond
the labour and green movements.

Bob Jessop, Distinguished Professor of Sociology, Lancaster University, UK
from ‘Capital & Class’, June 2016

Rasmus J (1977) The Political Economy of Wage-Price Controls in the U.S., 1971–74. Ph.D. thesis,
University of Toronto.
Rasmus J (2006) The War At Home: The Corporate Offensive from Ronald Reagan to George W.
Bush. San Ramon, CA: Kyklos Productions.
Rasmus J (2010) Epic Recession: Prelude to Global Depression. London: Pluto.
Rasmus J (2012) Obama’s Economy: A Recovery for the Few’. London: Pluto.
Rasmus J (2012) An Alternative Program for Economic Recovery. San Ramon, CA: Kyklos Productions.
Rasmus J (2016) Systemic Fragility in the Global Economy. Atlanta, GA: Clarity Press.
Rasmus J (2016) Looting Greece: a New Financial Imperialism Emerges. Atlanta, GA: Clarity Press.

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