Tuesday, September 20, 2011

Maybe the End IS Nigh... for Neoliberalism!

See you all on the other side of the Revolution!
Neoliberalism: A market-driven approach to economic and social policy based on neoclassical theories of economics that stresses the efficiency of private enterprise, liberalized trade and relatively open markets, and therefore seeks to maximize the role of the private sector in determining the political and economic priorities of the state. The term is typically used by opponents of the policy and rarely by supporters.

Neoliberalism is the bastard child of Ronald Reagan and Milton Friedman.  It's on life-support now and it's time to remove the feeding tube and shut down the ventilator.  "It's dead, Jim."

We have reached the structural limits of neoliberal capitalism's ability to manage the inherent contradictions of the capital accumulation system. Can Karl Marx help us understand?  He was (and in ways still is) the foremost scholar on the nature of capitalism and his analysis of the system is still invaluable

We should remember that there were two Karl Marx's. The first, a revolutionary and radical who penned, along with English colleague Freidrich Engels, The Communist Manifesto, his plan for global revolution at a time when "Marxism" and "Communism" were not considered pejorative.

But the more interesting Karl Marx was the one who was the analyst of political economy. Studying the ebb and flow of the capitalist system, Marx teased out the inherent contradictions in the capitalist system and identified the form and nature of crisis. You don't have to be a dyed-in-the-wool Red to recognize the quality and value of his analysis.

In a 2009 paper, David Kotz of UMass Amherst looked at the current economic crisis with a set of Karl Marx Ray-Bans and found some troubling developments.
Marxist analysts generally agree that capitalism produces two qualitatively different kinds of economic crisis. One is the periodic business cycle recession, which is resolved after a relatively short period by the normal mechanisms of a capitalist economy, although since World War II government monetary and fiscal policy have often been employed to speed the end of the recession. The second is a long-lasting economic crisis that requires significant restructuring -- that is, institutional change -- if the crisis is to be resolved within capitalism and the capital accumulation process restored. Despite the widespread recognition that these are two different types of crisis, there is not an agreed-upon terminology to distinguish them. Here the term "structural crisis of accumulation" will be used for the second type of economic crisis and "business cycle recession" for the first type.
What we're experiencing isn't the normal business cycle, but rather a structural shift due to the change away from a "fairer" form of capitalism post-WWII which was destroyed by the neoliberal "Reagan Revolution" of 1980.  The growth of obscene inequality in our society is pushing the capitalist system to the brink of collapse.  People can now see how unfair the system has become and that presents a significant problem to the powers-that-be.
Rapidly rising inequality tends to create a realization problem -- that is, an insufficiency of aggregate demand relative to output. Rising profits stimulate rapid accumulation and growing output, but stagnating or falling wages limit demand growth. Increasing concentration of income at the very top also limits demand growth, since the very rich do not spend a large share of their vast income on consumption.
These three developments -- rising inequality, big asset bubbles, and a speculative, risk- seeking financial sector -- are not inherent features of capitalism-in-general. For example, in the US during the period of a regulated [social structure of accumulation] in 1948-73, wages rose at approximately the same rate as labor productivity, while the distribution of household income became slightly less unequal (Kotz, 2009a). During that period there were no asset bubbles, and the major financial institutions engaged mainly in the traditional financial activities of making and holding loans, selling stock and bonds, and offering conventional insurance. There were no major bank failures or financial panics in that period.

Those three developments are features of the liberal institutional form of capitalism. The weak bargaining position of labor in a liberal form of capitalism tends to cause wages to stagnate or fall while profits rise rapidly. The limited state intervention in the market allows the strong to grab, and keep, a rising share of social output.
So the shift away from a more "managed" form of capitalism to one that is unregulated and uncontroled resulted in a catastrophic, systemic failure.  Now where have I read that before... Hmmmmm....
The major capitalist states appear at this time to be trying to resuscitate neoliberal capitalism, but the analysis presented here suggests that it cannot be resuscitated as a viable based for renewed capital accumulation at this time. A new state regulated capitalism could form the basis for renewed accumulation, but it would require a lengthy period to construct such a new form of capitalism. This crisis presents an opportunity, which may last for some years, for the left to organize for a real alternative to capitalism.
 Time to put neoliberalism in the ground and return to an economic infrastructure that works.

1 comment:

  1. Great Post! pls note that Friedrich Engels was born on 28 November 1820 in Barmen, Prussia (now Wuppertal, Germany) & was the eldest son of a wealthy German cotton textile manufacturer; ie. he was a bona fide kraut - not a pom.