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Having survived the financial meltdown of 2008, corporate
capitalism and the financial masters of the universe have made a triumphant
return to their "business as usual" approach: They are now savoring a
new era of wealth, even as the rest of the population continues to struggle
with income stagnation, job insecurity and unemployment.
This travesty was made possible in large part by the massive US
government bailout plan that essentially rescued major banks and financial
institutions from bankruptcy with taxpayer money (the total commitment on the
part of the government to the bank bailout plan was over $16 trillion). In the
meantime, corporate capitalism has continued running recklessly to the
precipice with regard to the environment, as profits take precedence not only
over people but over the sustainability of the planet itself.
Capitalism has always been a highly irrational socioeconomic
system, but the constant drive for accumulation has especially run amok in the
age of high finance, privatization and globalization.
Today, the question that should haunt progressive-minded and
radical scholars and activists alike is whether capitalism itself is in crisis,
given that the latest trends in the system are working perfectly well for
global corporations and the rich, producing new levels of wealth and increasing
inequality. For insights into the above questions, I interviewed David M. Kotz,
professor of economics at the University of Massachusetts at Amherst and author
of The Rise and Fall of Neoliberal Capitalism (Harvard
University Press, 2015).
C.J. Polychroniou: David, corporate capitalism and the masters of
the universe have bounced back quite nicely from the global financial crisis of
2008. Is this an indication of the system's resilience, or do we need to think
about larger considerations, such as the trajectory of the class struggle in
the contemporary world, the role of ideology and the power of the state?
David M. Kotz: The severe phase of the economic and
financial crisis ended in the summer of 2009. By then the banks had been bailed
out and the Great Recession ended, as production stopped falling and began to
rise in North America and Europe. As you say, since then profits have recovered
quite well. However, normal capitalist economic expansion has not resumed, but
instead, global capitalism has been stuck in stagnation.
Stagnation means no economic growth or very slow economic growth.
Stagnation has afflicted most of the developed countries since 2010, with some
countries, such as Greece, still in a severe depression. US GDP growth has
averaged only 2.1 percent per year since the bottom of the Great Recession in
2009. That is by far the slowest expansion following a recession since the end
of World War II. Even mainstream economists, such as Lawrence Summers and Paul
Krugman, have recognized that the economy is stuck in a severe stagnation.
In the US, the official unemployment rate has fallen to a low
level, but that is due to millions of people being dropped from the official
labor force as a result of giving up looking for work after finding none for a
long period. Most of the new jobs pay low wages and provide little or no job
security. Meanwhile, the rich continue to get still richer.
The long-lasting stagnation has brought stagnating wages and
worsening job opportunities. This creates a severe problem for capitalism, even
with rising corporate profits and growing wealth for the top 1 percent. This
problem has an ideological and a political dimension. While capitalism always
brings a high degree of inequality, it is tolerable for those holding the short
end of the stick as long as living standards are rising and job opportunities
are good for most people. A long period of stagnation delegitimizes the
existing system. As growing numbers of people turn against "the system"
and the elites who run it, a political crisis develops. The bourgeois democracy
that normally acts to stabilize capitalism turns into a source of instability,
as anti-establishment parties and candidates start winning elections.
What do you consider to be the latest and most critical trends in
the workings of capitalism in the 21st century?
Not only has capitalism failed to bring economic progress in this
century, it has brought worsening conditions for the majority. The reason for
this is rooted in the transformation of capitalism around 1980, when the
post-World War II "regulated capitalism" was rapidly replaced by
"neoliberal capitalism." Regulated capitalism arose mainly
because of the serious challenge to capitalism from socialist and communist
movements around the world and from the Communist Party-ruled states after
World War II. The new regulated capitalism was based on capital-labor
compromise. It led to the construction of welfare states, state regulation of
business, and trade union-led rising wages and more stable jobs for working
people.
In the 1970s, regulated capitalism entered a period of economic
crisis indicated by a long decline in the rate of profit in the US and Western
Europe. The capitalist classes of the developed countries responded by
abandoning the capital-labor compromise, attacking the trade union movement,
lifting state regulation of business and banking, and making drastic cuts in
the welfare state and in the various forms of social provision. This gave us
the neoliberal form of capitalism.
The neoliberal transformation resolved the economic crisis of the
1970s from the viewpoint of capital, as profits began to rise again. That
transformation freed the banks from state regulation, setting off the process
of financialization. It rewrote the rules of the global system, promoting an
increasingly globally integrated world economy.
Every form of capitalism
eventually enters a phase of structural crisis, and in 2008 the superficial
stability of neoliberal capitalism gave way to severe economic and financial
crisis.
Neoliberal capitalism gave rise to some 25 years of relatively
stable economic conditions after 1980, although economic growth was slower than
it had been in the preceding period. Capitalists became much richer, but the
promised benefits for the majority never emerged. After 1980, working people's
wages and job conditions steadily worsened through 2007. However, as long as
the economy expanded at a reasonable rate, it was difficult to challenge
neoliberalism. Every form of capitalism eventually enters a phase of
structural crisis, and in 2008 the superficial stability of neoliberal
capitalism gave way to severe economic and financial crisis, followed by
stagnation.
We live in the age of the financialization of the planet, in which
financial institutions and markets are expanding. In what ways does
financialization increase capitalism's inherent tendencies toward economic
dependence, inequality and exploitation?
Starting in the late 1980s, a trend of financialization began,
meaning a growing role for financial markets, financial institutions and
financial motives in the economy. This is not the first period of
financialization in capitalist history -- financialization also developed in
the late 19th century and in the 1920s. It is an inherent tendency in capitalism,
which is released in periods of loose regulation of the financial sector, but
it has been halted and even reversed when the state or other institutions have
intervened to block or reverse it, as occurred after 1900 and again after the
1930s. Contemporary financialization is a product of deregulation of the
financial sector along with the effects of neoliberal ideology and other
features of neoliberalism.
Since 2008 the trend in financialization has been mixed. There is
an ongoing political struggle over financial regulation in the US. The giant
banks have so far faced some restrictions on their ability to engage in highly
risky and predatory activities, although other financial institutions continue
to pursue such activities. Some major nonfinancial corporations, such as
General Electric, have abandoned their financial divisions to concentrate on
manufacturing and other non-financial activities.
Whether financialized or not, capitalism itself brings rising
exploitation and worsening inequality, unless it is restrained by states, trade
unions and other institutions. The financialization of capitalism accentuates
the tendency toward rising inequality by promoting new forms of profit-making
and generating huge fortunes for unproductive actors, as we have seen in recent
decades. The most important determinant of the trend in inequality is the
relative power of capital versus labor. The neoliberal transformation of
capitalism empowered capital and weakened labor, which has enabled employers to
drive down wages while CEO salaries skyrocketed.
If the degree of financialization stops growing or even declines,
inequality would not decline as long as capitalism retains its neoliberal form.
Only in a closely regulated form of capitalism, based on capital-labor compromise,
has inequality actually declined, as in the post-World War II decades.
Do you think that income and wealth inequality levels pose a
legitimization crisis for capitalism in the 21st century? I ask this question
in light of the rise and decline of the Occupy movement and other recent
efforts to steer contemporary societies toward a more rational and humane
social order.
Growing oppression and
suffering has made millions of people receptive to the socialist critique of
capitalism.
There is indeed a legitimization crisis for the dominant
world system at this time, as discussed above. However, there is a political
and ideological struggle over how to define the dominant system and the
direction of change that is needed. Leftists and socialists understand that the
dominant world system is capitalism, and they have targeted the 1 percent, that
is, the capitalists. This was evident in the Occupy Movement and other
left-wing upsurges around the world since 2010-2011. The growing oppression
and suffering has made millions of people, especially the young, receptive
to the socialist critique of capitalism.
However, various extreme right-wing groups have also ridden the
wave of anger at the discredited ruling class, with greater success than the
left at this time. The right-wing response has taken the form of right-wing
repressive nationalism, which targets an ill-defined "elite," which
it promises to replace. Right-wing nationalism blames the problems of ordinary
people on religious, ethnic and national minorities…. It portrays the ruling
elite as weak-kneed "liberals" who are afraid to confront the
scapegoated groups. It offers a strongman ruler who will vanquish the
scapegoated groups and restore an imagined past glory of the nation.
The recent trend of political polarization is not surprising in a
period of long-lasting structural crisis of capitalism that takes the form of
stagnation. Such a crisis can be resolved in only three ways: One, the
emergence of a right-wing nationalist statist regime; two, a period of
progressive reform of capitalism based on capital-labor compromise; three, a
transition beyond capitalism to socialism.
The last stagnation of capitalism, in the 1920s, gave rise to all
three directions of change. Right wing nationalist regimes in the form of
fascism arose in Germany, Italy, Spain and Japan. Progressive reform of
capitalism took place in France, Scandinavia and the US -- and after World War
II throughout Western Europe. And a state socialist regime was consolidated in
the USSR and new ones arose in East-Central Europe and Asia.
Today, the labor and socialist movements are historically weak.
This increases the likelihood of the rise of right-wing nationalist regimes.
The Trump presidency is an example. Some view the Trump presidency as one more
neoliberal, finance-backed regime, but in my view, this is not the case….
If the labor and socialist movements can grow sufficiently --
which is possible under the current conditions of delegitimized capitalism --
then the other two directions of change become possible. The growing mass
support for Jeremy Corbyn in Britain and for Bernie Sanders in the US
illustrates the possibility of a shift toward at least progressive reform of
capitalism in the short run and, in the longer run, for socialist transition to
eventually move onto the political agenda. Thus, this period holds great
dangers, as well as great opportunities, for the left and for social and
economic progress.
In discussions among economists today, the economic and social devastation
experienced by so many communities here and around the world is attributed
either to automation or trade policy and their impact on employment. Is
automation or trade policy the real issue, or capitalism itself?
Neither automation nor trade policy is by itself the root of the
trends that have wreaked so much destruction on working people and their
communities. Capitalism always brings technological change, and the long-run
trend in capitalism has been toward increasing global economic interactions.
However, in some periods the regulation of capitalism has held the most
destructive tendencies at bay by limiting inequality and creating new good jobs
that replace those lost to automation and trade. Labor productivity rose faster
under postwar regulated capitalism and global trade and investment grew
rapidly, but at the same time, a large part of the working class held stable
jobs with rising wages in that period, resulting from the power of labor in
that form of capitalism.
Under neoliberal capitalism, so far technological change has been
slower than it was under regulated capitalism, measured by the growth in labor
productivity, while global economic integration has accelerated. The negative
results for working people come from the overwhelming power of capital in this
period, which has enabled the capitalists to seize all of the benefits of
increased labor productivity, while the largely unregulated global marketplace
forces workers of all countries to compete with one another.
Thus, the real cause of the current high level of suffering is
neoliberal capitalism. While regulated capitalism is less oppressive to working
people, it is a highly contradictory form of capitalism that is bound to be
eventually dismantled by the capitalists. Like every form of capitalism, it is
based on exploitation of labor, as well as generating many related problems,
such as imperialism and the destruction of the natural environment.
Do you foresee capitalism's unquestionable ingenuity eventually
providing a solution to climate change, or is the planet doomed without a
transition to an economic system that is based on sustainable growth and
socialist economics?
There is a sharp debate on the left about whether irreversible
global climate change can be averted within capitalism or only through a
transition to a post-capitalist system. Those arguing for the former position
stress the likelihood that capitalism will not be superseded in time to avert
disastrous consequences from rising temperatures, while claiming that strong state
action based on popular mobilization can do the job through some combination of
incentives and penalties for corporations. They further argue that the
promotion of investment in sustainable technologies within capitalism can
provide a path to economic progress for working people while containing the
rise in global temperatures.
Those who believe climate disaster cannot be averted under
capitalism argue that the profitability of the very technologies that are
causing global climate change is bound to prevent timely action, as capital
uses its power to protect its profits. They claim that neither incentives nor
penalties can be effective when confronted with the huge profits to be made by
capitalist firms from the use of the atmosphere as a free waste disposal
system.
The advantages of a socialist planned economy for overcoming the
threat of disastrous global climate change are undeniable. Socially owned
enterprises operating in a planned economy could be instructed to pursue
climate sustainability as the number one priority, which would be far more
effective than trying to restrain profit-seeking enterprises from doing what is
most profitable for them.
Stopping the rise in temperatures short of a tipping point
requires a rapid restructuring of the transportation, power and productions
systems of the world economy, and economic planning is the best way, and
possibly the only way, to carry out such a task. Few economists remember that
after the Japanese bombed Pearl Harbor in 1941, the US government, facing the
need to rapidly restructure the peace-time economy to a war economy, suspended
the market for the duration and set up a system of central planning. The
results were highly successful, soon producing the ships, planes, tanks and
other weapons -- and food and clothing -- needed to win the war, while
incidentally finally bringing the Great Depression to an end.
The serious threat to
civilization from looming global climate change gives one more reason for the
need to replace capitalism with socialism.
Socialism has many advantages over any form of capitalism. I
believe the serious threat to civilization from looming global climate
change gives one more reason for the need to replace capitalism with socialism.
The building of a strong socialist movement, in this time of opportunity for
the left, is an urgent priority. It is essential if we are to defeat the threat
of right wing nationalism. It is the only way to build a sustainable economy
for the long run.
At the same time, socialists are obligated to contribute to the
solution of urgent social problems while we are working for the replacement of
capitalism. It is primarily through the process of mass struggles for reform
that people are radicalized and come to realize the need for system change. We
should support all reforms that can slow the rise in global temperatures, even
if only for a time. It is possible to build a movement to replace capitalism
and at the same time engage in the struggle to pull capitalism away from the
global temperature tipping point.
Copyright, Truthout. May
not be reprinted without permission.
C.J. Polychroniou is a
political economist/political scientist who has taught and worked in
universities and research centers in Europe and the United States. His main
research interests are in European economic integration, globalization, the
political economy of the United States and the deconstruction of
neoliberalism's politico-economic project. He is a regular contributor to
Truthout as well as a member of Truthout's Public Intellectual Project. He has
published several books and his articles have appeared in a variety of
journals, magazines, newspapers and popular news websites. Many of his
publications have been translated into several foreign languages, including
Croatian, French, Greek, Italian, Portuguese, Spanish and Turkish. He is the
author of Optimism Over Despair: Noam Chomsky
On Capitalism, Empire, and Social Change, an anthology of
interviews with Chomsky originally published at Truthout and collected by
Haymarket Books.
