Reader Juan provided a well-argued and provocatively-worded critique of so-called market fundamentalism yesterday that I thought would provide grist for thought and discussion. The main argument in favor of less regulated commerce, both domestically, in the form of deregulation, and internationally, via more liberal trade regimes, is that it generates higher growth. Juan argues that the results have been the reverse.
From Juan, in response to a comment in italics by reader DownSouth:
The one place I might disagree with you is to the question as to what high oil prices represent. Are they a further manifestation of market fundamentalism run amok? Or are they the antithesis of this, a refusal by non-OECD countries to participate in a market system that demands natural resources and agricultural products on the cheap?
If price of oils was determined by cost of production/supply/demand rather than trade in financial instruments, I would place more weight on ‘refusal to participate’. As it’s developed since 1987, it strikes me that the producing nations and major integrated oilcos’ abilities to move price has been substantially diminished.
Neo-liberal market fundamentalisms include financial opening and deregulation which, in different forms, were applied on a world scale right along with the theft of public goods through privatizations, et cet — a ‘grand’ global looting had been unleashed in a (partially directed) effort to overcome systemic crisis.
Here let me repeat something which I wrote elsewhere three months ago:
Between 1965 and 1973, the U.S. manufacturing sector’s rate of profit fell by 40%, a decline that worsened with the 1974-5 recession, was hit again by the severe early 80’s slump, began recovering in the 1990s but peaked in 1997, falling into 2003 since which there has been some rise but – in all cases over the last decades – never to pre-1965-73 levels.
Andrew Glyn considered the world to have been “suddenly projected from boom to crisis” with the first phase of above.
The failure of political Keynesianism, and then monetarist policies to ressurect rate of profit dovetailed with a ‘we don’t know what to do so lets try 19th c laissez-faire on a world scale’ set of policies demanded by the U.S., given voice by Reagan and Thatcher in her famous statement: ‘There Is No Alternative [to a worldwide free market]’, or TINA.
Borders to capital flow in all its manifestations had to be everywhere broken; state owned industries had to be privatized; poor fiscal management had to be tightened and almost everywhere on the backs of the working class and poor as needed social services were cut and cut again. Debt payments, no matter how great a percentage of export earnings, had to be made if a government were to expect future access to IMF and World Bank funds.
Neoclassical economists and their theories provided ideological justification; a sort of ‘we are all neoliberals now’ attitude infected world leaders until, in 1989, John Williamson coined the term ‘Washington Consensus’, which was very much not the consensus of those most subject to the various ‘shock therapies’.
So, how did the world do under this set of misguided fundamentalisms?
“Real global GDP growth averaged 4.9%a year in the Golden Age years from 1950 through 1973, but dropped to 3.4% annually in the unstable period between 1974 and1979. Dissatisfied with the instability, inflation, low profits and falling financial asset prices of the 1970s, advanced country elites pushed hard for a switch to a more business friendly political-economic system; global Neoliberalism was the result. World GDP growth averaged 3.3% a year in the early Neoliberal period of the 1980s, then slowed dramatically to 2.3% from 1990-99 as Neoliberalism strengthened, making the 1990s by far the slowest growth decade of the post war era.” (James Crotty)
As would be expected, the post-1973 annual growth rate of world real gross domestic investment fell substantially through 1996.
With the exception of parts of Asia, economic development throughout the world failed to gain traction, chronic excess capacity on one hand and credit fueled financial exuberance on the other.
Given the system’s inability to create employment so rapidly as required, a glut of labor and an expanding informal sectors as well. All the ‘better’ to intensify the international (and domestic) competition among workers, drive and hold wages down so also make consumer credit increasingly important to retention of living standards, no matter that this has been only another transfer to loan capital.
Average weekly earnings, constant 1982 dollars, for all private nonfarm workers in the U.S. peaked in 1972 at $331.59, falling to $257.95 in 1992 until ‘recovering’ to $277.57 in 2004 and likely having faltered again since then.
It is at least interesting that conditions of surplus labor, lower wages, deficit funding, tech innovations, etc, have not been able to generate another long wave expansionary phase. One might even suspect that finance has been ‘pumping’ too much from the real and that ‘long-felt unease’ is related to this.’
The primary contradictions which I’ve seen developing over the last number of decades have been:
1. the ending of national economies v. what can only be national states, a contradiction between economic mode of organization and national states.
2. progressive expansion of fictitious capital v. the possibility of satisfying such claims, a ‘satisfying’ which depends upon a) global creation of surplus value and b) substitution of credit for a relative insufficiency of realized surplus value (profit). This has provided much of the ‘advanced’ world with what is no more than a superficial prosperity even as it has also helped undermined its real basis. The spectacle of finance hides too much.
3. In combination, the above two have generated greater class, ethnic, international and subnational tensions. The social relations of the world capital system have become quite strained, which is not to say that capitalism is ‘doomed’ but that its present form has become increasingly untenable and a ‘change in state’ is almost certainly unavoidable, in fact seems to be underway.