In the 1950s, Keynesianism was designed to save capitalism from its internal contradictions. The wealthy allowed government to tax the rich and use the revenue to pump-prime the economy, e.g. spending big on public infrastructure, thus creating jobs, and providing improved access to social services and state welfare benefits. Banks were regulated to keep the financial markets from spinning out of control. Labor unions were encouraged in order to pacify the working class, giving them a stake in the status quo while immunizing them from embracing socialism as an alternative system.
In the 1970s, the capitalist crisis of overproduction reached a new nodal point when partial recovery resulted not in the usual “boom” but in an entirely new phenomenon, and thus a new addition to the English language—“stagflation”–stagnation accompanied by inflation.
By the 1980s Keynesianism was discarded and replaced by neoliberalism as the favored economic doctrine. It was resorted to in order to (1) break down the national barriers and regulations that restrict the flow of goods, allowing the expansion of markets and the exploitation of cheap labor, (2) make more funds available to finance capitalists from social service funds, subsidies and other government social expenditures, and (3) remove the barriers and regulations that restrict the flow of capital, especially speculative capital, thereby allowing finance capitalists to reap immense profits from non-productive investments.
“Neoliberal globalization” was pushed by the economic gurus of universities and think tanks, international multilateral bodies like the World Bank/IMF and the World Trade Organization, multinational corporations, the governments of the advanced capitalist countries and their dependent and client states. Neoliberalism became conventional wisdom and was reified as the free flow of goods, information, money as well as democratic ideals and practices that would lead to global peace and prosperity.
By the 1990s “globalization” was exposed by the dramatically catastrophic train of events such as the Asian financial crisis that reverberated on to Russia, Brazil and recoiled as well on Europe and the US causing further misery for developing countries and the world’s peoples. This was followed closely by the bursting of the Japanese bubble and stagnation in Europe, while the US was flaunting its “New Economy”. But by 2000, the US could not escape the crisis of overproduction, with its manufacturing sector slowing down, unemployment and household debt rising, national debt, trade and budget deficits soaring.
The US resorted to the “war on terror” to stimulate production and pump-prime the flagging economy. The illusion of recovery was thus conjured, the basic problem of overproduction papered over. Finance capitalists made a killing with mortgage and investment schemes that added to the illusion of prosperity and growth. The profit-making schemes were so lucrative, because unregulated and frenzied, that the biggest investment houses and banks worldwide cut into the action. Until the bubble burst.
In conclusion, the capitalist dilemma cannot be resolved by mere enlightenment on the part of capitalists, i.e. how they moderate their greed. As a system, capitalism is founded on the appropriation by an elite few of the major part of the wealth created by the mass of working people.
Ever wondered how come the pioneering captains of industry and the new financial oligarchy ended up gorging on the feast at the table while the rest of society must make do with their leftovers? Ever wondered why the advanced capitalist countries especially the US appeared to be on an endless road to superprofits and superpower domination while the rest of the world seemed doomed to poverty, misery and abject dependence?
It’s not just greed but the way the system works! (Business World / Posted by Bulatlat)
*Published in Business World
16-17 October 2008