Understanding Contemporary Capitalism, Part I

[marmar]

By David Kotz, a professor of economics at the University of Massachusetts-Amherst and the author of [font color="red"]The Rise and Fall of Neoliberal Capitalism[/font] (Harvard University Press, 2015). This is the first installment of a two-part series based on his book. Cross-posted at Triple Crisis.

Part 1: What is Neoliberal Capitalism?

“Neoliberalism,” or more accurately neoliberal capitalism, is a form of capitalism in which market relations and market forces operate relatively freely and play the predominant role in the economy. That is, neoliberalism is not just a set of ideas, or an ideology, as it is typically interpreted by those analysts who doubt the relevance or importance of this concept for explaining contemporary capitalism. Under neoliberalism, non-market institutions – such as the state, trade unions, and corporate bureaucracies – play a limited role. By contrast, in “regulated capitalism” such as prevailed in the post-World War II decades – in the United States and other industrial capitalist economies – states, trade unions, and corporate bureaucracies played a major role in regulating economic activity, confining market forces to a lesser role.

A few clarifications are in order. First, capitalism cannot function without a state. After all, private property is a creation of the state, and market exchange requires contract law and associated enforcement that can only be provided by a state. However, in neoliberal capitalism the state economic role tends to be largely confined to protection of private property and enforcement of contracts. In regulated capitalism the state’s economic role expands significantly beyond those core functions of the capitalist state.

Second, the dominant role of market relations and market forces in neoliberal capitalism is embodied in a set of institutions and reinforced by particular dominant ideas. The transition from regulated capitalism to neoliberal capitalism starting in the 1970s was marked by major changes in economic and political institutions. This will be explored below.

Third, the institutions of neoliberal capitalism, while promoting an expanded role in the economy for market relations and market forces, simultaneously transform the form of the main class relations of capitalism. Most importantly, the capital-labor relation assumes the form of relatively full capitalist domination of labor. This contrasts with the capital-labor compromise that characterized the regulated capitalism of the post-World War II decades. Neoliberalism also brought change in the relation between financial and non-financial capital, as will be considered below.

Economic Developments in the Neoliberal Era

The most talked about economic development in the neoliberal era is rapidly rising inequality. While Thomas Piketty’s now-famous book, Capital in the 21st Century, documented the relentless rise of the income share of the top 1%, he did not provide a convincing explanation of that development. The neoliberal form of capitalism supplies a clear explanation. As neoliberal restructuring undermined labor’s bargaining power, the real wage stagnated while profits rose rapidly. Figure 1 shows the big gap after 1979 between the growth rate of profit and of wages and salaries (which include managerial salaries). That gap jumped sharply upward after 2000. Another feature of neoliberal capitalism, the development of a market in corporate CEOs, drove CEO pay in large corporations up from 29 times that of the average worker in 1978 to 352 times as great in 2007. .............(more)

http://www.nakedcapitalism.com/2015/09/david-kotz-understanding-contemporary-capitalism-part-i.html

[RufusTFirefly]

1. Interesting article. Thanks for posting, marmar!

Perhaps what concerns me most about neo-liberalism is the way it is actually stifling our imaginations. Constrained by Thatcher's mantra, TINA ("There is no alternative&quot , even people who claim that "A better world is possible" struggle to envision that world.

An author who directly addresses the effect that the current brand of capitalism has on our imaginations is Max Haiven in his book Crises of Imagination, Crises of Power: Capitalism, Creativity, and the Commons As an excerpt from the book's synopsis explains:

In this stirring call to arms, Max Haiven argues that capitalism has colonized how we all imagine and express what is valuable. Looking at the decline of the public sphere, the corporatization of education, the privatization of creativity, and the power of finance capital in opposition to the power of the imagination and the growth of contemporary social movements, Haiven provides a powerful argument for creating an anti-capitalist commons. Capitalism is not in crisis, it is the crisis, and moving beyond it is the only key to survival.