End of the Neoliberal Era?
I have selected some key points in an article by David Kotz.
[I]f accumulation and profit rates have not been stellar, in some respects neoliberalism was much better for capital than the previous economic regime, in directing a far greater flow of wealth to the capitalist class.
By 2010, neoliberalism had returned in the guise of austerity policy. The misery and insecurity of the Great Recession helped to fuel unexpected political developments— a rise of right-wing nationalism and renewed support for some kind of ‘democratic socialism’.
The current structural crisis has taken the form of stubborn stagnation despite unprecedented monetary stimulus, with slow economic growth, a low rate of capital accumulation, stagnating real wages and worsening economic insecurity for working people— conditions that have helped to produce new political polarizations.
The main features of post-war [WWII] capitalism in the advanced economies are well known. The state actively regulated businesses and market activity, Keynesian policies aimed to maintain a relatively low unemployment rate, trade unions played a significant role in labour markets and workplaces, social programmes expanded and there was large-scale state investment in public goods like education and infrastructure. In the US, all this more or less went into reverse from around 1979. The trilogy of liberalization (that is, deregulation), privatization and stabilization became the watchwords, the latter aimed at low inflation rather than high employment. Trade unions came under attack from corporations and the state, social programmes were cut back or eliminated, education was squeezed and infrastructure investment declined.
The regime of regulated capitalism promoted a rapid growth of demand, as the strong bargaining position of labour led to steadily rising real wages and public spending expanded. Collective-bargaining contracts that often lasted for three years made labour costs more predictable, which encouraged accumulation. The regime also promoted the rapid growth of labour productivity, enabling profits to rise along with wages for several decades.
Regime change
Neoliberal restructuring promised a reversal of the decline in profits. Couched in the language of individual freedom, it would raise profits by undermining the bargaining power of labour, cutting taxes on capital and opening new profit centres through privatization and deregulation.
Big business abandoned its previous compromise with labour and allied with small business, which had never accepted the regime of regulated capitalism, and was able to rapidly push through neoliberal restructuring. This began not with Reagan, but during the last two years of the Carter Administration. The us, supported by the uk, then took the lead in pushing through the neoliberal
restructuring of global economic institutions.
The rate of profit recovered from the early 1980s through to 2007, largely a result of the reversal of the real-wage growth trend of the previous accumulation regime.
The main features of the neoliberal regime that was consolidated in the 1980s—deregulation, privatization, labour casualization, ‘share-holder agenda’—served to direct a growing volume of wealth to the capitalist class.
In the regulatedcapitalist era, manufacturing-capacity utilization rose to a very high rate over the course of the last three business-cycle peaks before the 1970s structural crisis. Under the neoliberal regime, capacity utilization steadily declined to a low rate over the last three business-cycle peaks before the 2008 crisis.
Econometric analysis offers evidence that the usual link between the rate of profit and the rate of accumulation has broken down after 2007. Again, this suggests that neoliberal capitalism is mired in a structural crisis.
A structural crisis begins when the institutions of the regime no longer promote accumulation. The evidence shows that neoliberal capitalism still promotes a high rate of profit, but that alone is not sufficient.
It is of course possible that the current neoliberal regime will persist for some time. Yet that would mean prolonged stagnation, which has a tendency to generate growing political discontents. This can lead to the replacement of the existing regime as occurred in the 1930s and 40s, when an earlier free-market form of capitalism disappeared, replaced by fascism, social democracy/regulated capitalism and an expansion of state socialism.
The emergence of a new regime of accumulation depends upon the balance of forces mobilized by different groups and classes in the context of a structural crisis. At present, the only alternatives on the table appear to be, on the one hand, a business-dominated statist regime, and on the other, a new version of social-democratic capitalism, as promoted by Bernie Sanders.
Nationalism is the ideology that can effectively win support for such a business-dominated regulated capitalism. The programmes of both authoritarian right-wing nationalists and centrist corporate thinkers (such as Lawrence Summers) seem to represent versions of such a direction of regime change.
The political direction promoted by Sanders and others on the left could lead to a green social democracy capable of resolving the current structural crisis by bringing a balanced growth of wages and profits, backed by state investment to create an environmentally sustainable economy, together with expanded social programmes and publicly funded higher education, supported by progressive taxation.
An updated Keynesian ideology, supplemented by a focus on environmental sustainability, would be mobilized to win support for regime change in that direction, which would also require a re-energized labour movement to join the political fray.
Full article is available on the New Left Review, September-October 2018
I have selected some key points in an article by David Kotz.
[I]f accumulation and profit rates have not been stellar, in some respects neoliberalism was much better for capital than the previous economic regime, in directing a far greater flow of wealth to the capitalist class.
By 2010, neoliberalism had returned in the guise of austerity policy. The misery and insecurity of the Great Recession helped to fuel unexpected political developments— a rise of right-wing nationalism and renewed support for some kind of ‘democratic socialism’.
The current structural crisis has taken the form of stubborn stagnation despite unprecedented monetary stimulus, with slow economic growth, a low rate of capital accumulation, stagnating real wages and worsening economic insecurity for working people— conditions that have helped to produce new political polarizations.
The main features of post-war [WWII] capitalism in the advanced economies are well known. The state actively regulated businesses and market activity, Keynesian policies aimed to maintain a relatively low unemployment rate, trade unions played a significant role in labour markets and workplaces, social programmes expanded and there was large-scale state investment in public goods like education and infrastructure. In the US, all this more or less went into reverse from around 1979. The trilogy of liberalization (that is, deregulation), privatization and stabilization became the watchwords, the latter aimed at low inflation rather than high employment. Trade unions came under attack from corporations and the state, social programmes were cut back or eliminated, education was squeezed and infrastructure investment declined.
The regime of regulated capitalism promoted a rapid growth of demand, as the strong bargaining position of labour led to steadily rising real wages and public spending expanded. Collective-bargaining contracts that often lasted for three years made labour costs more predictable, which encouraged accumulation. The regime also promoted the rapid growth of labour productivity, enabling profits to rise along with wages for several decades.
Regime change
Neoliberal restructuring promised a reversal of the decline in profits. Couched in the language of individual freedom, it would raise profits by undermining the bargaining power of labour, cutting taxes on capital and opening new profit centres through privatization and deregulation.
Big business abandoned its previous compromise with labour and allied with small business, which had never accepted the regime of regulated capitalism, and was able to rapidly push through neoliberal restructuring. This began not with Reagan, but during the last two years of the Carter Administration. The us, supported by the uk, then took the lead in pushing through the neoliberal
restructuring of global economic institutions.
The rate of profit recovered from the early 1980s through to 2007, largely a result of the reversal of the real-wage growth trend of the previous accumulation regime.
The main features of the neoliberal regime that was consolidated in the 1980s—deregulation, privatization, labour casualization, ‘share-holder agenda’—served to direct a growing volume of wealth to the capitalist class.
In the regulatedcapitalist era, manufacturing-capacity utilization rose to a very high rate over the course of the last three business-cycle peaks before the 1970s structural crisis. Under the neoliberal regime, capacity utilization steadily declined to a low rate over the last three business-cycle peaks before the 2008 crisis.
Econometric analysis offers evidence that the usual link between the rate of profit and the rate of accumulation has broken down after 2007. Again, this suggests that neoliberal capitalism is mired in a structural crisis.
A structural crisis begins when the institutions of the regime no longer promote accumulation. The evidence shows that neoliberal capitalism still promotes a high rate of profit, but that alone is not sufficient.
It is of course possible that the current neoliberal regime will persist for some time. Yet that would mean prolonged stagnation, which has a tendency to generate growing political discontents. This can lead to the replacement of the existing regime as occurred in the 1930s and 40s, when an earlier free-market form of capitalism disappeared, replaced by fascism, social democracy/regulated capitalism and an expansion of state socialism.
The emergence of a new regime of accumulation depends upon the balance of forces mobilized by different groups and classes in the context of a structural crisis. At present, the only alternatives on the table appear to be, on the one hand, a business-dominated statist regime, and on the other, a new version of social-democratic capitalism, as promoted by Bernie Sanders.
Nationalism is the ideology that can effectively win support for such a business-dominated regulated capitalism. The programmes of both authoritarian right-wing nationalists and centrist corporate thinkers (such as Lawrence Summers) seem to represent versions of such a direction of regime change.
The political direction promoted by Sanders and others on the left could lead to a green social democracy capable of resolving the current structural crisis by bringing a balanced growth of wages and profits, backed by state investment to create an environmentally sustainable economy, together with expanded social programmes and publicly funded higher education, supported by progressive taxation.
An updated Keynesian ideology, supplemented by a focus on environmental sustainability, would be mobilized to win support for regime change in that direction, which would also require a re-energized labour movement to join the political fray.
Full article is available on the New Left Review, September-October 2018
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