Phillip Anthony O’HARA, Marx, Veblen, and Contemporary Institutional Political Economy, Principle and Unstable Dynamics of Capitalism, Collection: New Horizons in Institutional and Evolutionary Economics directed par Geoffrey M. Hodgson, Cheltenham, GB et Northampton, MA: Edward Elgar, 2000

The book of Phillip O’Hara, Australian professor and author of an important Encyclopedia of Political Economy (1999), explores the possibilities for developing the institutional analysis of capitalism, starting from the works of Veblen, Marx, and the contemporary schools inspired by these two great thinkers. The aim is also to appreciate the risks of a major crisis affecting the system at the start of the XXIst century, a crisis linked to the minimum state, and giving birth to a new era of capitalism. The first part of the book presents the founding fathers, Marx and Veblen, the second analyses the evolution of the capitalist system since the 1940s.

O’Hara shows first that Marx’s analysis insisted on positive as well as negative aspects of capitalism, and their necessary imbrications for its reproduction. Marx shows how the system is constantly in search of new needs, markets, products, horizons, and so enlarges at the world’s scale. He could not complete his analysis before his death in all the institutional aspects, although they are present in his works. The link with Veblen’s thought takes all its meaning here, because he also, like Marx, has worked over an institutionalist analysis of capitalism, based on an evolutionary, collectivist, and holistic approach. Institutions are defined as a set of values and behaviors intertwined between people, groups and nations. O’Hara considers that Veblen has a softened conception of materialism concerning history, one that takes account of knowledge, cooperation, the socialization of production and the social control of population. He criticizes Marx about his teleological vision of evolution and an underestimation of the social origins of wealth. The possibilities of a revolution seem to him weaker, and he is closer to the reformist social-democrats of his time, like Bernstein or Kautsky. Veblen also shows that the surplus from industry is partly wasted by the elites, in financial or non productive enterprises. An endemic overproduction also explains the depression of the 1880s and 1890s, which goes with the concentrations and a new era in the system, the corporate capitalism, with the rise of oligopoly power, that finally emerges in the period 1890 to 1930. Before that, industrial capitalism had changed from a competitive situation in the beginning (up to 1850), and an intermediary phase, the industrial-corporate capitalism between 1850 and 1930. Veblen’s main book, The Theory of the Leisure Class (1899), is an analysis of wealth, depending on long-term institutional factors, business culture or the capitalist firm themselves, also studied in the book, being part of these factors.

The Marxian and Veblenian traditions among contemporary thinkers, as expressed by the Association for Evolutionary Economics (AFEE) and the Union for Radical Political Economics (URPE), are then presented. Gunnar Myrdal, for instance, introduced the concept of circular and cumulative causation, which means that the institutional relations interact so that changes in the system are reinforced rather than attenuated, exacerbating upward or downward swings in the economy. Kenneth Boulding’s theory of Evolution is also used by O’Hara : knowledge, by the means of specific institutions, explains the nature of change. Finally, Polanyi and his disembedded economy, economic relationships extracted from their cultural and social chains of the past, and works on the social structure of accumulation (SSA) are also analysed by the author.

Chapter 6 studies the relationships between the different forms of capital accumulation, in social capital, human capital, and their negative effects on natural or ecological capital. To O’Hara, who agrees with some simplistic visions of neo-marxist or radical development economists like Samir Amin or André Gunder Frank, inequalities in the world are the consequence of imperialism and the hegemonic domination of rich countries by the means of market economy…

In the last part of the book, O’Hara examines the Schumpeterian theory of innovation, David Gordon’s approach of the social structures of accumulation, and the French regulation school (notably using Alain Lipietz’s works), in order to analyse the long waves in capitalism, from the 1940s to the end of the century. The fordist accumulation system enters in a crisis in the 1970s, without it being clear whether a new system – toyotism or post-fordism, a system with more flexibility and the continuing US hegemony – will be able to solve the problems of capitalism. The new era after 1945 has four pillars, according to Gordon: 1) Pax Americana, 2) Capital-Labor accord, 3) state-citizens accord, 4) a dual economy of oligopoly/competitive firms. O’Hara finds a fifth one, dealt with in a specific chapter, the household, the familial cell, as a working unit, the stability of which is necessary to the pursuit of accumulation. It provides education, sociability, preparation to waged work, population growth, and a reserve army of workers necessary to moderate wages. Its growing disintegration (with domestic stress, more frequent divorces, single-parent family, double day work for women, etc.) partly explains the growing instability of the system after 1970. The Keynesian welfare state and the Bretton Woods system contributed to the stability and expansion of capitalism through the 40s, 50s and 60s, but they give way to final instability, as a decline in capital power and a fall of profits set in, and the end of the international monetary system and more and more severe financial crises. It brought a right-wing backlash in the 80s, with Reagan and Thatcher, a neo-liberal state, supply-side economics, new classical economy, and deregulation at the world scale. Can this constitute a new social system of accumulation, allowing a stabilisation in capitalist growth in the beginning of the XXIst century? O’Hara doubts that it could be possible, because the growth of profits, with the fall of wages and the deterioration of working conditions, is limited by international competition and effective demand stagnation. A severe recession and instability should set in in the first decade of the new millennium, unless three types of reforms should be taken: 1) a Keynesian policy aimed to end the austerity budgets, coordinated at the global scale, 2) the foundation of a Global Central Bank, 3) the promotion of a social and cultural capital able to stimulate sociability and community in order to establish the foundations of a new mode of accumulation.

The institutionalist approach should enable us to understand better the working of society, as O’Hara concludes, “the institutions are the real foundations of political economy, since they constitute the habits, relationships, organisations, ideologies, and rules which channel and condition people’s behaviors and beliefs”. And not only to a better understanding, but also an improvement of the quality on life on Earth, because the institutionalist approach aims to a critic of the system which tends to promote knowledge, participation, and community.

The book is a deep analysis of the capitalist system and its evolution, it belongs to the radical institutionalism, deriving from Marx and the old institutionalism founded by Veblen. It is a magisterial work, but one can regret that no attempt is made to use the analysis of neoclassical institutionalism, the NIE school (New institutional Economics), the works of Williamson, Coase, North, for instance. They are not even cited in the impressive bibliography (about 40 pages, with no less than two for the author himself, more than Marx and Veblen[1]), and one gets the feeling that there is a kind of wall between the different heirs of Thorstein Veblen, whether they come from Karl Marx or Alfred Marshall… The points of view of those very different Veblen’s children seem in fact difficult to reconcile, as their explanations of the inequalities in the world shows…

O’Hara, Phillip Anthony, Encyclopedia of Political Economy, London et New York : Routledge, 2 vol., 1999