The huge growth of deregulated finance has been associated to a new financial regime and great transformations in the pattern of economic growth. Looking back, there has been a narrow relationship between the crisis of the post-war accumulation pattern, the evolution of the international monetary system and the process of financial deregulation. In fact, as Bello (2006) warned, in the 1980s, Reaganism and structural adjustment were not successful attempts to overcome the post-war accumulation crisis. One decade later, the Clinton administration embraced globalization as an American strategy. First, this strategy aimed to accelerate the integration of production and markets by transnational corporations. Secondly, it aimed to create a multilateral system of global governance centred on the World Trade Organization, the International Monetary Fund and the World Bank.
In the last decades, financial capital exercised control over the structural forms necessary for the continuing cycles of valorisation of productive capital, thanks to the centralized money at disposal. Different growth models overwhelmed this global scenario: while some countries have presented a consumption-driven growth model fuelled by credit, generally followed by current account deficits, other countries have shown an export-driven growth model, mainly characterized by modest consumption growth and large current account surpluses (Stockhammer, 2009). The growth of financial assets, generated by the new debt cycle, included growing and sophisticated risk management practices. Besides, the financial expansion also proved to subordinate the pace of investment to financial commitments. The overall changes strengthened private and public debt and further social inequalities.
The idea of autonomous monetary management has collapsed under the 2008 global financial crisis and the tensions that emerged within the markets have been shifted to the political sphere. In truth, the financial crisis and the erratic movements of key-currencies have shown that central banks do not have control on the complexity of global, innovative and speculative markets. Otherwise, central banks´ actions are not independent from private and public pressures.
In addition, macroeconomic policies that currently privilege fiscal austerity and further labour market flexibility can be socially costly. Considering the labour markets, employability seems to be conditioned to private strategies that aim cost reductions, labour flexibility and efficiency targets. Longer working hours, job destruction, turnover, outsourcing, workforce displacement and loss of rights have also been part of the spectrum of management alternatives aimed at cost reduction. Indeed, the current dynamics of labour markets favoured the vulnerability of workers, mainly young people, and precarious jobs.
The apprehension of this political and social reality is decisive in the attempt to reformulate the economics curriculum in order to include a deep reflection on current labor challenges that coudl take into account the changing employment relationship. Students must be increasingly aware that, considering the current investment scenario and its outcomes in terms of labour challenges, that in the near future workers will be increasingly polarized into two forces: on one side, an elite that controls and manages the high-tech and financial global economy; and on the other side, a growing number of displaced workers who have few prospects for meaningful job opportunities.
References
Bello, W. (2006) “The capitalist conjuncture: over-accumulation, financial crises, and the retreat from Globalization”’,Third World Quarterly, 27:8, pp. 1345 — 1367.
Minsky, H.P (1986), Stabilizing an Unstable Economy. New Haven, Connecticut: Yale University Press.
Stockhammer, E. (2009), “The finance-dominated accumulation regime, income distribution and the present crisis”, Department of Economics Working Paper Series, Vienna: Vienna University of Economics & B.A.
WEA Pedagogy Blog 
Two questions. 1) What kind of insanity would cause anyone to believe such a world as you describe is necessary or beneficial for humanity. 2) How can human welfare, democracy, and equality survive the world you describe?
I) Please read Karl Polanyi’s The Great Transformation where he develops the idea of capitalism as a “satanic mill”. In his view, the survival of society depends on a counter-movement. It is also worth remebering Fullbrook’s words
“So long as the country’s university economics departments are allowed to be operated as political propaganda centres and one-paradigm closed-shops, successive generations of citizens, including journalists and politicians, will be indoctrinated in the Neoclassical-Neoliberal creed. This situation is not compatible with normal ideas of democracy. Alas, I do not sense within Labour circles a willingness to confront the problem. But not until it is can the madness of Neoliberalism, like Soviet Marxism, be laid to rest.”
2) This is the main concern because in current times the proliferation of financial assets, with economic growth limited and sporadic, has given way to widespread unemployment, income gaps and weaker welfare programs. The same policies that have obliterated social services and kept labour cheap have supported the expansion of new global business models and financial deepening. Besides, the onset of the new millennium represents a new political age where the social, economic and political setting significantly violates democratic ideals of political equality and social peace. Indeed, politicians and policy makers have given priority to their sponsors instead of to society challenges and political decisions have been influenced by the top 1% who favours policies of increasing inequality. A counter-movement is urgently required to restate the ideals of democracy. The forthcoming WEA Book Conference Capital and Justice is aimed to address these challenges
Thanks for your responses. I worked in the TX legislature from 1974 to 1980, and then on Capitol Hill from 1980 to 1988. I can’t agree with your answers, based on those experiences. First, most Senators and Representative have never heard of Karl Polanyi, and would likely find his ideas unappealing if explained to them. In the view of most of them Polanyi would be just another crazy socialist. The only difference here between so called American conservatives and liberals about Polanyi is liberals would at least be willing to listen to you explain Polanyi’s views. Most members of government and their constituents believe in free markets and every person his own boss. History shows that was different before the Civil War. A counter movement would I believe also be looked upon as a socialist movement. Socialism has a long and proud history in the US. It stumbled after the Civil War when it promised too much and delivered too little. But it didn’t die. In many ways FDR, Truman, and even Eisenhower were socialists. Even Nixon spoke socialist ideas at times (remember wage and price freezes). But as a guide for national policy Reagan put the nails in socialism’s coffin. But strangely a form of socialism lives on in the millennials. Which Sanders in this election tapped into. But socialism must change if its going to counter neo-capitalism. It has to be democratic, flexible in working with all groups and political persuasions, and above all accommodate an open business setting that allows price setting via markets that are well designed and regulated. Polling shows most Americans (65%) support such a government, economic, and social structure. Now, to get their a lot of obstacles must be removed. Not all removals will be peaceful. We up for that?
Zimmerman, i’m concerned that your response was wanting, especially in the context of this article/Madi’s response to you as well as in the validity of some of your suggestions. To start,
No one said socialist. Labor was spoken about, but we reside in a capitalist world economy to which there are two fundamental actors interacting with one another. Labor and capital. The discussion of labor is not intrinsically socialist nor is it intrinsically anti-capital. Furthermore the assertion that this conversation is based around socialist ideals is your own and seemingly an attempt to delegitimize the article as well as the comment addressing your questions.
“Most members of government and their constituents believe in free market and every person his own boss” – This is misleading. When people are polled, using ideologically charged wording, they tend to agree with your statement. However, when people are asked the questions independent of that wording most disagree with many market based policies. Furthermore this statement is disingenuous, as most people whether they agree or disagree, have very little understanding of “free market” policies and what they mean. This is due in part to the quote by Fullbrook from earlier. Also… obviously everyone wants to be their own boss, that statement implies independence and being kept away from the oppressiveness of the workplace(for an interesting read, check out Fear: History of an Idea by Corey Robin. He takes a very interesting look at political fear in America and how it manifests itself in the workplace). Even outside any consideration about the workplace, the idea of “being your own boss” is deeply rooted in America’s national story (on purpose). That(being one’s own boss), i’m sure, is possible under another economic system beyond the current form of Neoliberalism.
” Socialism has a long and proud history in the US. It stumbled after the Civil War when it promised too much and delivered too little. But it didn’t die. In many ways FDR, Truman, and even Eisenhower were socialists. Even Nixon spoke socialist ideas at times (remember wage and price freezes).”
-This statement, is incorrect. The first statement of it “stumbling”, is absurd. The post civil war period, commonly known as the Gilded Age, was an incredibly violent period of industrialization, often cited as the most violent period of industrialization in the now developed countries (OECD states for example). There existed within the United States a government that ignored and often actively sought to destroy labor protections and labor rights. The re-enslavement of blacks through “Sharecropping”, destruction of labor organizations, and concentration of wealth into societies few (Vanderbilt, Rockefeller, Morgan, Carnegie, and others) was not simply the failure of socialism, but rather the success of concerted efforts put forth by capital against labor. Then there’s your statement of ” In many ways FDR, Truman, and even Eisenhower were socialists.” For one Truman was an active participant in the “Second Red Scare” or “McCarthyism” inside the united states. He developed a “loyalty” test in order to make sure no “communist subversives” were within the executive government. He instituted an oath that all government employees were required to say. He also was acting president during the time that the House Un-Americans Activities Committee (HUAC) began ramping up their “investigations and hearing”. The institutions that essentially DESTROYED american socialism and communism and lead to the stank and fear enshrined in the word socialism, to which you use to this effect many many times, developed and cemented during this period. The HUAC essentially worked with private interest to destroy a political ideology in a free democracy. Nixon sat on this committee during his time in congress and was very active as well. Also wage and price freezes are not socialist, those are simply ways to control the economy. I would also hazard to say that control over the economy is not socialist either. Especially when you consider the massive controls that the United States implements in its economy despite the ideological notion that government must refrain from interfering. Yet billions go to corn subsidies, Energy subsidies and tax breaks for corporations, but if a small foreign nation decides to interact with their economy, through subsidies or tariffs, corporations have the legal ability(and they often use it) to SUE governments and demand their “right to free trade”.
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“But strangely a form of socialism lives on in the millennials. Which Sanders in this election tapped into. But socialism must change if its going to counter Neocapitalism. It has to be democratic, flexible in working with all groups and political persuasions, It has to be democratic, flexible in working with all groups and political persuasions, and above all accommodate an open business setting that allows price setting via markets that are well designed and regulated.”
I’m going to translate the above piece.
Liberalism is our founding ideology and we maintain it to this day. “Strangely” the youth want its nation to uphold the values that it boasts and that our soldiers protect, both foreign and domestic. Liberalism rests its laurels on human rights and prosperity. Capitalism, which is different, rests on profit and never ending wealth accumulation(whether it is the individual, corporation, or the state). Strangely.
When considering the final point I agree entirely, albeit without the final statement — “and above all accommodate an open business setting that allows price setting via markets that are well designed and regulated.”. Firstly Socialism does need to be democratic, which it can be(social-democrats), because Neoliberalism/Neocapitalism(an oxymoron considering that this is capitalism as described by Adam smith and the original thinkers minus their concerns about human rights and labor rights) have shown themselves to be shockingly undemocratic. We can see this in the modern understanding of “voter fraud” and how, despite it being very uncommon and if it occurs statistically irrelevant to most elections, it is an evil that must be defended against. Primarily by restrictions on the ability to vote such as ID’s and other documents that poor individuals are unlikely to have. I believe that socialism, if it is to respond in any meaningful way to Neocapialism, does need to work with other political ideologies. This is because Neocapitalism has sought to destroy and marginalize the development, support, or distribution of any ideology beyond itself. It has done this through the privatization of media, the vilification of other ideologies such as socialism, the assertion that “there is nothing else” beyond Neoliberalism, and the destruction of educational institutions(hey bush, i know this school is failing… but if you take all the money away how is it going to get better?). Not to mention “working with all groups”, considering that the position that minorities are in today, being harassed constantly, a development of outwardly expressed racism, high likelihood of incarceration(don’t forget private prisons and the war on drugs) , and police institutionalized racism(not new but being utilized more and more often) it would again appear that the reason socialism must change, as you put it, is because Neoliberalism is the antithesis of that change you require.
Finally for the last statement… it is absolutely shocking to me that you, an individual who worked in politics and civil service, CIVIL SERVICE, would possibly consider the economy in any way more important or pressing than the health and ability of your citizens. While yes, economic development is an important factor in the living standard and health of a state’s citizens, economic development can be very misleading. When looking at the United States over the last 30 years it is very clear to see that our country has been growing, mostly, despite some small blips such as 1980-82, 1990-91,2001,2008-’09. Though when you look at the numbers closely the majority of this wealth has been accumulated in the top 1%. Even more so has been accumulated in the top .1%. While the average american wage has stagnated, prices have increased, social programs have been cut, environmental regulations have stagnated or been rolled back, jobs have deunionized, the country has begun deindustrializing, and most new jobs are service based (which are lower paying and less stable). So the market is important, however the distribution of the wealth, IE not $100 for me, and 50cents for you 10, is as well. I understand that you stated “a well designed market”, and that you may believe that a market that is well designed will provide for everyone’s necessities at some level, the reality is much different.
If anyone actually read this i’m going to be floored… but I just want to say one more thing,
My personal feelings hope that there can be a form of capitalism that corrects the wrongs in the relationship of Labor and Capital. I would not consider myself a socialist. I wouldn’t tie myself to any ideology as they disallow for exploration.
First, I did not call Polanyi a socialist. Only that many US residents and politicians would consider him such. What precisely they understand as “being socialist” is not clear. As to labor and capital the US has been the site of numerous arrangements that mix parts of capitalism with socialist/cooperative ideas. Such as cooperatives, mutual benefit unions, civic clubs, credit unions, etc. And please don’t lay it on my doorstep to move this site in a socialist direction. Not a bad idea, but not one that comes from me.
Most immigrants came to the US to find a better life or run away from a troubled life elsewhere. The various groups often did not know one another well and often mistrusted one another. They were welded into one nation finally by the events of the Great Depression and WWII. What united Americans was doing business. They may not have attended one another’s churches, lodges, or neighborhood parties, or ate the same food, or spoke the same language, but they economically dealt with one another. The other greater unifier was the public-school systems. They taught a common history and a common language. Even today ethnic divisions still exist in the US and many newer ethnic immigrants live in self-enclosed communities seeking to be “left alone.” Socialization will, if history repeats bring them into the mainstream of economic and political life, even if culturally they remain somewhat apart. Working in markets for Americans was pragmatic since these are what existed. They were not “free” markets in the sense many economists use that term, since politics, religion, ethnic expectations, and space arrangements often shaped these markets. Today economists are more successful at “selling” their version of free markets. The markets still and will always remain not free, however.
I am referring to the reactions to the overreach of rabid capitalism called the “Gilded Age,” as my comments note. Socialism (farmer populism, labor unions, city socialist leagues, the rise of strong cities, etc.) was a response to the excesses of the Gilded Age. Americans’ understanding of socialism has always been fragmentary at best. Socialist ideas inspire cooperatives and credit unions, as well as employee-owned businesses. These still exist in large numbers today. About 40% of the US population are members of one or more such institutions. Truman, Eisenhower, etc. were clearly anti-Communist. But does that mean Eisenhower, a farm boy would oppose the local Grange? Stalin and Mao Zedong are communists and thus totalitarian dictators. The local Grange or electric cooperative is just folks taking care of themselves. That’s the division that was made, right or wrong. You are correct that control of the economy has become increasingly more centralized since the 1960s. But that movement seems to not please lot of people today, per the election on Donald Trump.
I talk with many millennials. They seem not to trust either major political party. And have little use for what is normally labeled “Liberalism.” I’d call them Communitarians. Attempting to organize government directly based on civic values they find important. Many of which you list. But let’s be clear here. The US promised its citizens the right to pursue life, liberty, and happiness. It did not promise them the pursuit would be successful. Socialism does promise this. That’s why many millennials prefer socialist ideas. And many accept the reality of capitalism, but do not agree with it.
I agree with what you say about neoliberalism, or neo-capitalism. It is, in this form or the originals inherently anti-democratic. Just like the military.
I did not intend to indicate in any way that the economy is more important or pressing than the health, safety, or happiness of all citizens. The economy can help achieve these things, if its properly arranged and managed. Right now, it is neither of these. Consequently, people are not just suffering, but are actively being subordinated to the wants and desires of the rich and large corporations. We live in a plutocracy, period. The founders of the nation feared two things above all others – plutocracy and populist government. Today we have both. If that’s not a threat to the nation, I don’t know what is.