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Capitalism Unleashed
Capitalism Unleashed
By Andrew Glyn
Oxford University Press, 2006, £16.99
Since the early 1980s, world capitalism has
followed a trajectory based on globalisation and neo-liberal policies.
In Capitalism Unleashed, Andrew Glyn analyses this turn to
fundamentalist, free-market policies and examines its impact on economic
growth and stability, and on the distribution of wealth between the
super-rich and the working class. Reviewed by LYNN WALSH.
CAPITALISM UNLEASHED BEGINS with a succinct analysis
of the capitalist crisis that followed the end of the long post-war
upswing in 1973. Productivity growth slowed, corporate profits were
squeezed, inflation took off. Organised workers, strengthened by boom
conditions, challenged the bosses’ power in the workplaces. The
capitalist system itself was shaken by waves of militant industrial
struggles, and left-reformist leaders put forward radical policies to
extend public ownership and improve the ‘welfare state’.
After a period of turmoil (1973-79), 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. Under Reagan in the US and Thatcher in
Britain in the 1980s this offensive went under the banner of
‘monetarism’. Subsequently, monetarism was broadened into a generalised
programme of free-market fundamentalism, or ‘neo-liberalism’.
Andrew Glyn’s excellent book follows on from an
earlier study of post-war capitalism (Armstrong, Glyn and Harris,
Capitalism since 1945, published in 1991). 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. Andrew’s analysis is
based on very useful, carefully compiled statistics.
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. The neo-liberal/technological changes of the
1980s were of course accelerated in the 1990s after the collapse of
Stalinism, after which the bourgeoisie felt it had a completely free
hand to move against the working class.
Two chapters recount the impact of the
counter-revolution on the working class. Labour’s Retreats deals with
the effect of new technology and policy changes on wages, conditions,
unemployment, and especially the effect of new technology on the
unskilled sections of the working class in the advanced capitalist
countries.
Welfare and Income Equality deals with the growth of
inequality (wealth and income inequality, wage differentials, etc),
especially in the US and other economies following the ‘Anglo-Saxon
model’. The picture of taxation and welfare spending is complex, as it
is affected by demographics (especially the ‘ageing’ of some societies)
and the effect of income distribution on tax revenues. One thing is
clear, however. Everywhere, the wealthy elite, who resent paying taxes
and don’t need state education, healthcare, etc, are engaged in a
ruthless struggle against state provision for the majority of society.
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.
Globalisation & the US-China axis
ONE OF THE most significant trends since the 1990s
has been the enormously increased role of finance capital, most dramatic
in the US and other ‘Anglo-Saxon’ economies. In the US aggregate profits
of financial corporations were about one-fifth as big as non-financial
profits in the 1970s and 1980s. By 2000 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 1990s returned to
the peak levels of the 1960s. Yet the growth of fixed capital stock was
only half the level of the 1960s. 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.
This is dressed up as the search for so-called
‘shareholder value’. 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. Not only are they paid huge salaries and bonuses, they make
huge gains from stock options – allocations of their companies’ shares,
which they can trade for huge gains on the stock exchange. Many of the
recent business scandals in the US and Europe have been linked to
‘insider trading’ by corporate executives, who in many cases manipulated
the price of their companies’ shares to their own advantage. No wonder
that in the top 500 US companies the ratio of CEO pay to production
worker earnings rose from 30 in 1970 to 570 in 2000. (p58)
The increase in international economic integration
is analysed in Globalisation, as well as the crucial relationship
between the US and China. Deregulated financial markets have virtually
become a single global casino. World trade has also dramatically
increased, with the ratio of world exports to GDP doubling since 1960 to
around 25% of world GDP (p97). Andrew notes that, for both the US and
Europe, the ratio of exports to GDP in 1913 was only exceeded at the end
of the 1960s. 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 (p153). 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 1990s. More
recently, there has been an increase in more volatile ‘portfolio
investment’ (mainly via mutual and hedge funds, commercial banks, etc)
into ‘emerging markets’ (stocks, currencies, property, commodities,
etc). These investment flows have become increasingly speculative.
During the second half of the 1990s 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 has resulted in an
unsustainable trade deficit now around 7% of GDP. This is financed by
the surplus countries, mainly China, Japan and South Korea, buying up US
government stocks and other assets.
In 1980 China accounted for only 0.8% of world
exports of manufacturers. By 2003 it accounted for 7.3%. This massive
export boom was based on the huge flow of capital into China, as well as
increased internal investment. The new industries have been able to draw
on vast reserves of workers willing to work 80 hours a week for around
$80 a month. It is estimated that there are 150 to 300 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.
China has "the potential to carry this process a
great deal further" (p92), writes Andrew. 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 IS ANDREW Glyn’s assessment of the world
economy under the neo-liberal regime? 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 2001 were
major convulsions. On the other side, however, in terms of output growth
he shows that "the period after 1993 has been the most stable post-war
decade, with the output of both advanced and less developed economies
being around one third less volatile than during the 1950s and 1960s".
(p149) This relative stability, he comments, is "somewhat paradoxical".
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. Faced with potential crisis (the
2001 dotcom crash and the 9/11 shock), the central banks (led by the US
Federal Reserve) injected massive liquidity into the world economy,
producing new bubbles. 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 1990 than
even during the 1973-79 period of stagflation. The annual per capita
growth rate of the major OECD economies has been about 2% compared to 4%
during the 1960s and early 1970s. Japanese capitalism stagnated, while
Europe enjoyed only very feeble growth. Capital accumulation has also
been weak. Fixed capital stock in industrial countries grew by 3.3% per
annum in the 1990s compared with 5% per annum in the 1960s. 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
1997, Argentina in 2000-03).
"But [asks Andrew Glyn] does this constitute a
‘crisis’ for capitalism in the rich countries? Only by diluting the
original meaning of the term which refers to ‘the point in the progress
of a disease when an important development or change takes place which
is decisive of recovery or death’ (Oxford English Dictionary)…" (p151)
Although lower than the ‘golden age’ period of
1950-73, productivity per hour has grown in the range of 1% to 2.5% a
year, which is in line with the growth typical of the most developed
capitalist economies since 1970 (with the exception of the golden age).
"Nor does there seem compelling evidence for presuming that there will
be a decisive shift in productivity growth from the long-run norms over
the next decade or two". (p151)
So what are the prospects for capitalism? The
capitalist system has not reached the ‘end of history’, says Andrew
Glyn, and growth and stability are not assured. Nevertheless, his
assessment appears to be that capitalism is far more resilient than many
on the left might have expected.
Clearly, according to the dictionary definition of a
recovery/death conjuncture, there is not currently a crisis in the world
economy. 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. "Trying to work out more or less
likely long-term scenarios is just peering into a highly uncertain
future", says Andrew. 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? Should we not
try to identify those trends that, through their "most astounding
contradictions" (Marx), will give rise to a new conjuncture, most likely
one of dislocation and crisis? Precise scenarios are of course not
possible. But projection of current trends, with possible variant
developments, is possible – and necessary, unless we simply resign
ourselves to ‘wait and see’.
Analysing the development of the economic and
political crisis of the 1970s (p2), Andrew writes that "the very success
of the golden age seems to have undermined its basis". The neo-liberal
period undoubtedly has very different characteristics from the ‘golden
age’. 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. "The US economy,
and thus the world economy as a whole, is very vulnerable to a sudden
reversal of the US consumption boom". (p137) "Current macroeconomic
stability is highly vulnerable to financial crises" (p150) – and many
similar comments. Nevertheless, in my view, Capitalism Unleashed does
not give sufficient weight to the catalytic elements of future crises.
At a basic level, the cutting back of the working
class’s share of the wealth will further restrict the market for
capitalism (in spite of more rapid growth in countries like China,
India, etc). 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. At the
same time, China, Japan, South Korea, Taiwan, etc, finance the US
external deficit by buying up US government bonds and other US assets.
China’s phenomenal growth of output and investment
is also driven by multiple bubbles: massive inflows of capital,
over-investment in industrial capacity, a speculative housing boom, and
colossal, debt-financed investment in infrastructure projects in the
industrial regions. While the US dollar is overvalued, despite US
capitalism’s unprecedented external deficit, the Chinese currency (yuan
or rmb) is undervalued (at least in relation to China’s industrial
regions). Andrew, however, tends to stress the phenomenal growth and its
impact on the advanced economies, while paying little attention to the
uneven, contradictory character of China’s growth. 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. The only real question is when there will be a
‘realignment’ of currencies and adjustment of the imbalances, and how
rapidly and painfully it will occur. One thing is certain: the longer
the ‘correction’ is postponed, the more severe it will be.
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. Recent conflicts in the Eurasian
‘arc of crisis’ have dramatically increased world tensions. 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 1914, 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.
Under the neo-liberal regime, there has been a shift
in the distribution of wealth and income in favour of the capitalist
class (reversing the mild levelling trend of the ‘golden age’). GDP
growth no longer ‘lifts all the boats in the harbour’. Throughout the
advanced capitalist countries, and especially in the USA and other
economies based on the ‘Anglo-Saxon model’, output growth has produced
increased inequality and in some cases an absolute increase in the
numbers living in poverty. 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). The intensification of exploitation at work, increased
insecurity, and the reduction of job opportunities for the least skilled
section of workers (described and quantified in the book), have all
contributed to the increase in alienation and social tension and, in
some cases, violent conflict.
Socialism: a serious competitor?
ALL THE CONDITIONS of a deep social-economic crisis
are being prepared. This will not be a repetition of past crises. It
will undoubtedly be very different from the 1973-79 ‘crisis of
capitalism’. Challenged by mass workers’ struggles, "the very stability
of the capitalist system seemed to be under serious threat". Then (as
Andrew rightly comments), "the apparent viability of planned economies
[the Soviet Union and its satellites] also made more credible a range of
proposals from the labour movements of the rich countries for radical
constraints on free-market capitalism". (p2)
Today, in contrast, "the collapse of central
planning and the political system which supported it" means that
"demands for greater state intervention, let alone for transformation in
a socialist direction, have been beaten back… Capitalism as a system in
the rich countries is not at present threatened by serious competitors".
(p151)
This is so. The collapse of the Stalinist system
(centrally planned economies ruled by a totalitarian bureaucracy) had a
devastating impact on workers internationally. As Andrew says, it
appeared to shatter the idea of the viable alternative to the capitalist
market. The collapse led to ideological disarray in labour movements
throughout the world. The disappearance of Stalinism as a counterweight
to capitalism undermined the social and political basis of reformism.
The capitalist ruling class no longer felt the need to make concessions
to the working class over wages, trade union rights, and social
provision.
The leaders of the traditional workers’ parties
(social democratic, labour, and communist) rapidly moved to the right,
embracing the market as the only possible system. Changes in the
structure of production and globalisation undermined the strength of
many of the ‘big battalions’ of the working class in manufacturing
industry. The hollowing out of the traditional workers’ parties
effectively undermined the political representation of the working
class.
This process was exemplified by recent events in
France. The upsurge of mass struggle in March and April 2006 against
renewed attacks by the Chirac-Villepin government in many ways resembled
the May events of 1968. Bold action by students led to clashes with the
police, five days of action, one of them involving over three million.
Villepin was forced to retreat, withdrawing his new youth labour law.
Yet there was also a sharp contrast with May 1968.
Then, there was a powerful ideological alternative to capitalism, with
millions of workers supporting the idea of socialist change or even
revolution. Recent struggles were defensive, lacking mass support for an
alternative to capitalism. Indeed, the feature of recent struggles
sweeping both the advanced capitalist countries and the neo-colonial
lands has been mass opposition to the effects of neo-liberal capitalism,
but a political vacuum in terms of an alternative.
Yet the fact that the capitalist system is not
currently facing an ideological challenge as it did in the 1960s and
early 1970s, that it is "not at present threatened by serious
competitors", does not mean that it is not facing the prospect of
profound social and economic crisis. True, the weakness of the workers’
movement, especially the weakness of class consciousness, has allowed
the ruling class to take free-market policies much further than they
dreamed they could in the early 1980s. But this extreme "reassertion of
the fundamental workings of the capitalist economy" is already
undermining the basis of the global neo-liberal order. The bourgeoisie’s
lack of restraint will rebound on them with a vengeance.
It is impossible, of course, to say exactly when and
where, but capitalist fundamentalism will assuredly provoke political
explosions. The events in France, the revolutionary movement in
Indonesia triggered by the 1997 Asian crisis, and recent mass struggles
against privatisation of gas and water in several Latin American
countries are overtures to even bigger events to come.
Andrew Glyn quotes the Japanese Marxist economist,
Makoto Itoh, as commenting that "capitalism seems to be running the film
of history backwards by ‘melting down’ the sustained trend of a century,
and returning to an older stage of liberalism". (p23)
It is a return, in fact, to a more brutal form of
capitalism, shorn of more and more of the reformist cushioning of the
post-war upswing. Under continuous assault by the capitalist class and
disarmed by its own mass leaders, the working class has undoubtedly
suffered setbacks and been weakened in terms of organisation and
especially class consciousness. Nevertheless, the proletariat remains a
powerful social force internationally and is actually being strengthened
in some of the developing countries. Under the impact of the neo-liberal
counter-revolution, the working class will reorganise, rearm itself
politically, and reassert its power as a decisive political force.
Freedom from the bureaucratic fetters and perverted ‘Marxism’ of
Stalinism will be an advantage.
Socialist ideas are already attracting many freshly
politicised young people, and they will win wider support in the next
few years. Socialism – specifically Marxism – will become a ‘serious
competitor’ to capitalism. Why? Because Marxism is the only ideology
capable of consistently expressing the interests of workers and other
exploited and oppressed classes. It provides the theoretical tools for a
fundamental critique of capitalism. Above all, it offers a programme for
the abolition of capitalism and the establishment of a higher form of
society based on international solidarity, planned production, social
equality, and radical democracy based on workers and other exploited
strata.
Room for reforms?
IN THE LAST chapter (Welfare and Income Inequality),
Andrew Glyn asks "whether we have much choice left in the economic and
social policies which our governments can implement? Are the economies
of the rich countries rapidly converging under pressure from
globalisation on the US model with an increasingly inegalitarian income
distribution, minimal welfare state and long working hours? Within the
confines of capitalism are there still real choices about who gets what
and who does what?". (p155)
While his analysis of economic trends is clear,
Andrew’s answers to these questions are very tentative. Of course, he
favours defending the welfare state and fighting to improve it. He shows
that economic performance (productivity growth, output growth,
employment levels, etc) are certainly no worse in ‘welfare’ economies
(like the Nordic states) than in those following the US-led ‘Anglo-Saxon
model’.
But he misses two crucial points. First, the
capitalist class is not concerned with "good economic performance" in
general. They are determined, even in the Nordic countries, to cut back
the public sector, to curb egalitarian tax-and-spend policies, and to
enlarge the social sphere open to corporate profit-making. Yes, they
want productivity growth, higher GDP output, but above all they want a
healthy ‘bottom line’ – maximum profits.
The second point is that the Nordic governments have
already abandoned defence of the social democratic ‘welfare state’ in
favour of free-market measures. In this respect, Andrew’s analysis is
lagging behind recent developments.
Sweden is a clear example. The social democratic
government of Persson carried through sweeping privatisation measures
and big cuts in welfare provision, especially pensions. Neo-liberal
conditions imposed on the labour market have created massive insecurity
among workers. These changes account for the defeat of Persson’s
government in the recent general election (see Socialism Today No.104).
A majority voted against Persson’s neo-liberal policies, but in the
absence of a viable left alternative, mainly voted for the
(conservative) Moderates. The new government, of course, will now carry
neo-liberal policies much further, and will become equally unpopular in
time.
A specific proposal put forward by Andrew is for a
Basic Income (p180). "Under a Basic Income scheme each person would
receive a regular and unconditional cash grant from the state. It would
be… received by everyone irrespective of other income or whether they
were in work or not, and it could be spent on whatever the recipient
wished". (p181) This would end many means-tested benefits, getting rid
of the poverty trap for low-paid workers. Unemployed workers would be
able to work part time without losing benefit. Tax rates for higher paid
workers would have to increase to pay for the Basic Income. Andrew
describes it as a "recasting of elements of the welfare state in an
egalitarian direction…" The scheme would also allow some workers to
reduce their working hours to achieve a better work-life balance. Andrew
recognises that there could be widespread opposition to the idea on the
grounds that benefits would be paid to employed workers who "do not
really need them". "For reasons of political acceptability, Basic Income
would probably have to be introduced at a relatively austere level".
But "where will the money come from?" (p183) Big
business is pressing for further reductions of corporate taxation. The
majority of wage earners are understandably resistant to any increase in
their tax burden. This ‘fundamental question’ is raised in the last
paragraph of Capitalism Unleashed – and left unanswered.
We should fight to defend all past gains and for new
reforms – which can only be achieved through struggle in this period.
Nevertheless, it has to be recognised that the era of a stable,
expanding welfare state and of comprehensive trade union and civil
rights has gone for good. It was a phase of capitalism that arose during
a particular historical conjuncture. It rested on relations of
production and a particular balance of class forces that have completely
changed. We are operating within a new, regressive phase of capitalism
which will not readily concede an increased share of the wealth to the
working class. There is no scope for lasting reforms within unleashed
capitalism – which is why the fight to defend living standards and
rights has to be linked to the need for a fundamental reorganisation of
society.
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