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Mainstream economics invariably sees capitalism as an isolated and closed system. In this path-breaking book, authors Utsa Patnaik and Prabhat Patnaik argue that this is both historically false and logically untenable. An essentially money-using economy like capitalism is inconceivable unless placed within a pre-capitalist setting which it dominates and modifies for its own purposes.

Colonialism created such a setting. Metropolitan capitalism transferred massive resources from colonies gratis fuelling industrial revolution, and later found external markets, thus avoiding domestic stagnation, by displacing craft producers in tropical colonies. The exhaustion of colonial markets was an important factor behind the Great Depression of the 1930s.

The authors argue that post-war state intervention to boost demand now played the role of colonial markets; but metropolitan inability to extract resources from newly decolonized tropical colonies precipitated the inflationary crisis bringing the post-war boom to an end. Neoliberalism, replacing post-war dirigisme, keeps inflation in check by imposing income compression on third world populations; but it also prevents state intervention for expanding demand, thus engulfing world capitalism in a protracted crisis. Overcoming this crisis requires transcending the hegemony of globalized finance, which will be the first step towards a transcendence of capitalism itself.

Utsa Patnaik and Prabhat Patnaik are both Emeritus Professors at Jawaharlal Nehru University, New Delhi, India. Utsa’s books include Peasant Class Differentiation, The Long Transition and The Republic of Hunger and Other Essays. Prabhat’s books include Accumulation and Stability under Capitalism, The Value of Money and Re-Envisioning Socialism. Their last book was co-authored under the title A Theory of Imperialism.

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