Book review: Geoffrey Ingham's 'Capitalism'
Geoffrey Ingham's Capitalism - reviewed by Ann Pettifor
Ingham is a Reader in Sociology at Cambridge, and his books build on the work of other fine sociologists: Georg Simmel (The Philosophy of Money, 1907); Max Weber (The Protestant Ethic and the Spirit of Capitalism, 1905) and Charles Wright Mills (The Power Elite, 1956).
Ingham’s understanding of capitalism as a monetary production economy makes a refreshing change from more typical characterisations of capitalism. While the creation of private or indeed public credit-money ‘out of thin air’ is fundamental to capitalism, it is not widely understood as such by the general public.
Geoffrey Ingham is one of a handful of academics not blinded by the smoke and mirrors of today’s monetary ‘alchemists’. His excellent The Nature of Money reveals a sounder grasp of credit-money than many contemporary heterodox economists and almost all orthodox, monetarist economists. Just as with The Nature of Money, Ingham’s Capitalism adds a great deal to our understanding of the systemic nature of capitalism. Like the distinguished sociologists on whose shoulders he stands, Ingham draws on those theorists whose work he “found to be most valuable”. They are Adam Smith, Marx and Weber, but also Joseph Schumpeter and John Maynard Keynes – who are included he writes,
“not only for their seminal heterodox contributions to the economic analysis of capitalism, but because this heterodoxy is implicitly ‘sociological’ ”.
This book is therefore a must-read for both sociologists and economists; indeed for anyone wanting to deepen their understanding of the systemic nature of today’s global financial crisis. However, while Ingham’s review of heterodox analyses is illuminating, it is, by his own admission, not comprehensive and, I will argue, includes a number of flawed analyses which are the subject of current debate, and discussed in some detail in this review.
First while acknowledging that capitalism’s hallmark is the “elastic production of money” he then retracts, and suggests that private credit-creation is constrained by the practice of ‘fractional reserve banking’ – a form of commercial banking probably not practised since the founding of the Bank of England in 1694. Again this is the subject of heated debate within the economics sphere, so more on the subject below. Second Ingham, like many economists, blames the inflation of the 1970s on the ‘the power of monopoly capital and their labour forces to mark up their respective prices’. This analysis appears to discount the role played by the City of London in creating excessive credit - ‘too much money chasing too few goods and services’ - after Chancellor Anthony Barber’s assault on banking regulation in 1971. Third, by his own admission, Ingham arbitrarily excludes from his list of heterodox theorists a number of twentieth century thinkers who have greatly illuminated our understanding of both the systemic nature of capitalism but also its dutiful hand-maiden, neoliberal economic theory. While I respect his right to choose the most influential, the inclusion of progressive twentieth century thinkers would have added considerable value to this study of capitalism.
These disagreements are not new, and I am not the first to raise them. However given the extent to which society, political parties and progressives have a ‘blind spot’ for the admittedly opaque role played by private bankers in the economic life of nations, I believe it important to raise further discussion about ‘fractional reserve banking’ and the causality of inflation. My high regard for Ingham’s work meant that these disagreements provoked a response in the form of this long review essay - to stimulate debate on the issues he has illuminated so clearly in his study of contemporary capitalism... Read more:
