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This chapter demonstrates that Hobson's radicalism was not inherited, but something he had to learn after he came to London in the mid-1880s and began writing ‘A London Letter’ for his father's newspaper in Derby. During this period, he wrote his books, The Physiology of Industry and Evolution of Modern Capitalism. The chapter also investigates the links between Hobson's New Liberal stance and traditional radical thinking from Paine onwards, with special reference to the way that he developed the concept of unearned income as handed down from John Stuart Mill. His famous doctrines of underconsumption and oversaving were directly linked to his concern with the ‘unearned increment’, a concern that reached its climax in the Edwardian period with his most elaborate statement of the concept of surplus in the Industrial System.

This chapter shows that Hobson's conversion into a radical critic of imperialism and of imperial expansion was even more prolonged than his transformation into a New Liberal. It also shows how his critique of imperialism was an important moment in a long-standing but evolving radical discourse. It was not until 1898 that Hobson successfully merged his radical stance on domestic issues with his growing hostility to imperial expansion. In ‘Free Trade and Foreign Policy’, he brought his theory of underconsumption and oversaving together with his new aversion to imperialism when he claimed that oversaving led to foreign investment and that the need to find more outlets for the latter was the key to understanding modern imperial expansion. His chief concern in 1898 was the scramble for China rather than the storm brewing in South Africa.

China's development has been darkened by an increasing imbalance between consumption and investment and the subsequent accumulation of non-performing loans, and such imbalance originates from the social political institutions underlying the China boom. China's economic imbalance is a source of the global economic imbalance that eventually fostered a global financial collapse in 2008. China is far from a solution to the global economic turmoil.

This chapter demonstrates how policy goals at the aggregate macro policy level are translated to trade flows (exports and imports) and at the analytical level. The different patterns of trade policy—which will bring balanced trade with the Pacific Rim—will also create international trade risk. The key question in international economics today is how the United States and the world will adjust to the inevitable reversal of America's mammoth trade deficit. That is how the “overconsuming” United States and its “underconsuming” trade partners will rapidly transform their economies so as to convert America's recent trade.

Chapter 4 presents a brief overview of the existing theories in the heterodox economics tradition, which study the linkages between income inequalities and growth trajectories. It includes a review of the Kalecki-Steindl tradition in its original avatar as well as its contemporary interpretations. Steindl had argued that with increase in income inequalities and business concentration, a tendency towards stagnation sets in under capitalism because workers have a higher propensity to consume out of their wages as compared to the capitalist class, a process which was named underconsumption. However, contemporary Steindlian models have studied this relationship in the context of possibilities of debt-financed consumption, wealth and financialisation and found that these could run counter to the stagnationist tendency. One important component that most of these explanations miss is Steindl’s argument on underinvestment which results from an increase in business concentration as the need to build capacity decreases with a decline in competitiveness.

This chapter resumes a discussion about food poverty and hunger, topics which have generated policy action throughout the 20th century. It focuses on how food policy, informed by an ecological public health perspective, might interpret the problem. For the present purposes, famine is used to refer to extreme events and food poverty to persistent underconsumption. There is hunger and injustice in both. Both reflect challenges and failings of contemporary food systems.

Between 1921 and 1929, there were no depressions, but prosperity was accompanied by substantial unemployment, especially for farm laborers and blue-collar workers. Unions were weak and business influence strong. Income inequalities widened. The late ’20s saw an explosive combination: unregulated stock markets and mass underconsumption. The ’20s boom led to the Great Depression. Herbert Hoover’s neo-laissez-faire response failed, but it cleared the decks. President Franklin Roosevelt and other New Dealers acted to expand government functions to aid those in distress and to jump-start economic growth. The CCC, the CWA, the WPA, and the PWA are each evaluated for wage levels, job creation, and treatment of women and African Americans. Economic recovery added millions of jobs, but unemployment stayed high until World War II.

This chapter stresses social reproduction at the level of not just the nation-state but also the world system, stressing that the dynamics of the current crisis come largely from underconsumption. Absent major government interventions, there is no guarantee that capitalists will invest in forms of production that serve the everyday needs of majority populations (let alone the very poor). And in the last several decades, governments have not counteracted capitalist tendencies to inequality but exacerbated them in the name of neoliberal freedom from regulation and constraint. Not surprisingly, the distributions of wealth and income have become much more unequal. The chapter argues that failure to expand consumption is one of the reasons for overreliance on financial sources of profit. The current crisis is an opportunity for social democracy to regain the initiative after neoliberalism has so strikingly faltered, though this is hardly guaranteed.

Chapter 11 assesses the growth prospects of the world economy. The history of global economic doomsaying is traced briefly, a frequently reasonable position that has not done well with the facts for the past hundred years. Capitalism has been adept at escaping from the pit and pendulum. A set of global imbalances is then reviewed that are seen as posing a severe threat to global economic stability and certainly to the prospects for sustainable and equitable growth. The Great Recession following the Crash of 2007–8 might be “different this time.” Historical and contemporary fears of “secular stagnation” are discussed but the speculative nature of stagnationist assessments is acknowledged.

The world economy is in a bad shape, largely because of misguided policies in the United States and Europe in response to the crisis. The crisis is taking too long to resolve, leading to unnecessary losses of income and jobs. Recovery has been sluggish and unbalanced between labour and capital, and between industry and finance. This is mainly because governments have been unwilling to remove the debt overhang through timely, orderly, and comprehensive restructuring, and fiscal policy has acted to restrain recovery, resulting in excessive reliance on unconventional monetary policy. The ultra-easy monetary policy has led to speculation and asset bubbles and created a global debt trap rather than stimulating consumption and productive investment. This policy approach has not only failed to boost growth, but also aggravated global systemic problems, including financial fragility in both advanced and developing economies, and inequality, underconsumption and structural demand gap.

The theory of the monetary circuit, as represented in the work of Augusto Graziani, appears as a ‘natural’ complement to the monetary theory of Kalecki because both share a focus on the circulation of money rather than monetary aggregates. However, the ‘circuitist’ theory differs in assuming that capitalists have no money and therefore need ‘initial finance’. Graziani has credit used as means of payment, with the credit of workers as claims on indebted capitalists. ‘Neo-Kaleckian’ financialization theory has capitalists’ credit as claims on indebted workers. Both exaggerate the importance of inter-class debt, at the expense of the intra-class debt whose circulation among capitalists is the foundation of Kalecki’s monetary macroeconomics.