Finance, Globalization, and Welfare The Late Andrew Glyn Bestselling author Andrew Glyn presents his unique view of the rise of Capitalism and its implications for the future Challenges the view that economic growth and the welfare state are incompatible Provides a valuable and concise history of the economies of Europe, Japan, and the USA since the s Capitalism Unleashed The Late Andrew Glyn Description Free enterprise is off the leash and chasing new opportunities for profit making across the globe. After a turbulent century of unprecedented social and technological change, Capitalism has emerged as the dominant ideology and model for economic growth in the richest, most developed countries. But only thirty years ago economic growth was faltering, inflation rising and the Left were arguing for greater state intervention in industry. How did this remarkable transformation happen?
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December 18, Since the early s, world capitalism has followed a trajectory based on globalisation and neo-liberal policies. Capitalism Unleashed begins with a succinct analysis of the capitalist crisis that followed the end of the long post-war upswing in Productivity growth slowed, corporate profits were squeezed, inflation took off.
After a period of turmoil , the capitalist ruling class launched a counter-offensive against the working class. Their aim was to claw back many of the economic concessions of the Keynesian era, to discipline the workers through higher unemployment, and attack trade union rights. Austerity, Privatisation and Deregulation provides an overview of the neo-liberal counter-revolution. It recounts the dramatic free-market shift in government policy, the retreat from state intervention, the growing power of finance capital, and the intensified drive for short-term profits.
One weakness of his analysis of the neo-liberal turn, in my view, is neglect of the role of technological change. Andrew refers to the exhaustion of Fordism p14 , the mass production system associated with big concentrations of strongly organised workers.
But there is no analysis of the interaction of rapid technological change especially information and communications technology based on microprocessors that facilitated the global dispersal of production with changes in corporate management techniques and government policy. There is no doubt that the neo-liberal counter-revolution was carried through on the basis of an intense ideological and political struggle on the part of the ruling class, but it was not just a question of political action that would be a voluntarist explanation.
The changed policy was based on changed relations of production that arose from qualitative changes in techniques of production. The policy reinforced new trends in the interests of big business. Two chapters recount the impact of the counter-revolution on the working class.
One thing is clear, however. At the heart of the book are the chapters on Finance and Ownership, Globalisation, and Growth and Stability which analyse the structure and dynamic of the contemporary world capitalist economy. In the US aggregate profits of financial corporations were about one-fifth as big as non-financial profits in the s and s. By they were more than half as big. This development reflects one of the basic trends of the neo-liberal phase.
On the one side, there was a restoration of profitability through intensified exploitation of workers ; on the other, a stagnation of global accumulation with notable exceptions such as China.
Profit levels in major OECD economies in the s returned to the peak levels of the s. Yet the growth of fixed capital stock was only half the level of the s. More and more profits have been channelled into financial speculation rather than productive investment. The international, short-term capital flows associated with speculation are extremely volatile, and increasingly threaten to destabilise economies The finance houses, of course, channel some of their investments into manufacturing, construction, and infrastructure developments.
But their drive for the maximisation of profits, often judging results on a quarter-to-quarter basis, puts intense pressure on corporate managers to squeeze as much as possible from their workers, as quickly as possible.
Short-termism reigns. But share ownership is in fact highly concentrated and financial institutions investment banks, insurance companies, mutual funds, hedge funds, etc wield immense power over corporate bosses and governments. Their drive for short-term gain reinforces the underlying polarisation of wealth within society.
Top corporate managers are embroiled in this process. No wonder that in the top US companies the ratio of CEO pay to production worker earnings rose from 30 in to in Deregulated financial markets have virtually become a single global casino.
Andrew notes that, for both the US and Europe, the ratio of exports to GDP in was only exceeded at the end of the s. However, the relocation of corporate production facilities from the advanced capitalist countries to a number of developing countries especially China has dramatically changed the structure of the world economy. Over half world output is now produced outside the old OECD economies p Moreover, the threat of relocation to cheap-labour countries is increasingly being used as a threat against workers in the advanced economies to cut wages and jobs.
Foreign direct investment FDI , used to build factories and purchase overseas companies, surged during the s. These investment flows have become increasingly speculative. During the second half of the s capital flooded in to both the US and China. It was attracted to US markets by the surge in profitability. Inflows pushed up the dollar, depressing US exports but bringing a steady increase in imports. This is financed by the surplus countries, mainly China, Japan and South Korea, buying up US government stocks and other assets.
In China accounted for only 0. By it accounted for 7. This massive export boom was based on the huge flow of capital into China, as well as increased internal investment. It is estimated that there are to million rural workers who could potentially be drawn into industry. This would not only stimulate further growth in China, but continue to exert downward pressure on wages in the advanced economies.
But there are many potential obstacles to uninterrupted growth. There is the decisive dependence on the US consumer market. Any slowing of export growth will mean that China can no longer meet its rising bill for imported food, materials, fuel, semi-finished manufactures, capital goods, etc. Within China, social instability could lead to a political breakdown that could cut across economic growth. A breakdown on either side of the US-China axis would have a devastating effect on the world economy.
Prospects for capitalism? What are the prospects for capitalism? In Growth and Stability, he shows, on the one side, that the increased weight of the financial sector has promoted volatility, including a series of unstable bubbles. The Asian currency crisis followed by the collapse of the Russian rouble and bankruptcy of the US hedge fund, LTCM and the worldwide stock exchange crash of were major convulsions.
The main explanation, suggests Andrew, is that central banks, no longer fearing an explosion of inflation, have not felt compelled to resort to credit squeezes during the recent period.
The weakened bargaining position of workers and the deflation of prices through globalisation, worked against inflationary pressures, at least in most advanced capitalist countries.
These fed through to consumer demand, but at the same time produced an even higher mountain of debt. Despite this relative stability of output growth, however, output per head has been growing more slowly since than even during the period of stagflation.
Japanese capitalism stagnated, while Europe enjoyed only very feeble growth. Capital accumulation has also been weak. Fixed capital stock in industrial countries grew by 3. It may also be added that the aggregate figures presented by Andrew tend to smooth out major regional and local upheavals for example, Southeast Asia in , Argentina in Nevertheless, his assessment appears to be that capitalism is far more resilient than many on the left might have expected.
Financial markets are still buoyant despite some recent tremors. GDP growth in China continues to race ahead, with relatively robust but erratic growth in the US and weaker but continuing growth in Europe and Japan.
So things are not so bad for capitalism? But we have to look beneath the surface to forces that will propel change in the future. Yet surely we have to look beyond the present conjuncture, recognising that the current system of politico-economic relations the prevailing neo-liberal regime will not last indefinitely, and is in fact preparing its own downfall?
Precise scenarios are of course not possible. Nevertheless, there are internal contradictions which will just as surely undermine its basis and provoke crises. Economically, all the conditions of crisis are being prepared. Besides, neo-liberal economic policies are generating social crisis throughout the capitalist world, which will create the explosive materials for political upheavals.
All the ingredients of future crisis can be found in Capitalism Unleashed. The expanded role of finance capital, the short-sighted search for short-term profit. Debt dependency. Reliance on a series of bubbles overvalued shares, houses, currency trading, commodities, emerging markets, etc to sustain growth. Nevertheless, in my view, Capitalism Unleashed does not give sufficient weight to the catalytic elements of future crises. Global growth, moreover, has come to depend more and more on the US-China axis.
The US provides a massive credit-fuelled market for consumer goods, while China supplies ever-cheaper products. The regime itself recognises that its stability is threatened by massive corruption and lawlessness, as well as frequent protests which in many cases take on an almost insurrectionary character. These bubbles and the associated imbalances in the world economy are unsustainable, as most serious capitalist economists admit. Some of the most alarmist commentaries, for instance, come from market analysts like Stephen Roach of the investment bankers, Morgan Stanley.
Geopolitical shocks Capitalism Unleashed is an excellent anatomy of the world capitalist economy. Its main weakness, in my view, is that it does not sufficiently link economic trends to social and political developments, from which economics cannot realistically be separated. Sharpening inter-capitalist tensions reflect underlying economic competition and pose a threat to the neo-liberal economic regime. Steady world economic growth — together with the demise of a rival social-economic bloc in the form of the Stalinist Soviet Union and the transition of China to a form of capitalism — has not produced harmony in world relations.
There is a scramble for control of oil and gas reserves, pipelines, and strategic transportation routes. The Doha round of WTO negotiations are stalled, and agreement appears doubtful.
The US and the EU have continually wrangled over agricultural subsidies, aircraft production Airbus v Boeing , cross-border mergers and acquisitions, regulatory powers, and so on. So far, most of these disputes have been smoothed over or postponed — but they reflect underlying national antagonisms which are likely to become much sharper in the event of a world economic downturn.
The US-China symbiosis is the core of current global growth, yet the Bush administration has designated China as its main strategic rival and is manoeuvring against China in Asia. These tensions, together with increased rivalry between regional powers, recall the situation before the first world war. Then, a period of accelerated globalisation and sustained growth in the world economy came to a catastrophic end in , with the eruption of the first world war.
Today, world war between the major powers is ruled out by the possession of nuclear weapons. But economic conflicts and pursuit of rival interests through proxies engaged in regional and civil wars are likely to multiply. At the same time, cuts in welfare benefits and pensions, and the trimming of social spending, especially in relation to the needs of an ageing population, have reinforced the growth of inequality.
There are symptoms of growing social crisis in all the advanced capitalist countries. In Britain and France, for instance, attention has been focused on urban riots associated with Muslim communities, but essentially rooted in the poverty and alienation of the inner cities Bradford, etc and the French banlieue outer-city ghettos.