From International Socialism, No.78, May 1975, pp.31-32.
Transcribed & marked up by by Einde O’Callaghan for ETOL.
The Second Great Crash
Frances Cairncross and Hamish McRae
Methuen Paperback, 50p.
THE SECOND Great Crash is an excellent book if you want the facts of the current oil crisis documented in an easily accessible form. It is short (94 pages) and written in a readable journalistic style.
It takes up the story with inflation in the 1960s and shows how by the beginning of the 1970s the trade cycles of the major industrial countries coincided and in the upturn of 1971-73 produced shortages and the commodity boom. It outlines the collapse of the international monetary system based on fixed exchange rates and the dollar pegged to gold and describes the present chaos of floating exchange rates and an inconvertible dollar. In so doing the authors show that the current crisis was well underway before the oil price explosion, but this made a bad situation catastrophic.
They argue lucidly that oil price increases have a deflationary effect on the world economy, the increased prices acting as a sort of tax on consumer nations. The reason for this is that many of the oil producing countries have very small populations and have at present no way of spending their revenue. If the producers spent their money on goods from the West, so the theory goes, this would result in less goods for home consumption, but would allow the industrial countries to run their economies at full capacity and grow. Since, however, the money can’t be spent it means permanent debt for the consumers (in particular France, Britain, Japan, Italy and the Third World) and a fall in demand for their goods. This produces the conditions of a world wide recession. Equally precarious is the position of the banks since at the moment large sums of unspendable oil revenue are deposited with them.
The predictable fault of the book is its lack of analysis. The authors have no explanation of post-war stability nor its collapse. As a result although the book is Informative it leaves the reader puzzled about the real problems and more impressed by the need for a marxist analysis.
For example, the reasons the authors give for the inability of the smaller Arab states to industrialise hinge on their backwardness and the smallness of their populations. Although they do note the conservative nature of these regimes, they never ask whether capitalism as a system can expand, indeed they show little appreciation of how the system works at all. This lack of analysis flaws the book at every level. They continually talk about countries’ standards of living falling (a quaint notion) and ignore wages and profit.
Last updated on 2.3.2008