A Crisis of Capitalism (not neoliberalism, “financialized capitalism,” or low wages)
On the Left, a popular view of the underlying causes of the latest economic crisis and slump holds that
(1) there has been a substantial recovery of the rate of profit since the early 1980s;
(2) this recovery has been brought about by “neoliberal” policies and especially by a fall in workers’ real pay and decline in their share of national income;
(3) yet economic growth has been sluggish and the rate of capital accumulation (productive investment as a share of advanced capital) has fallen, because a new regime of “financialized capitalism” has arisen, in which the massive profits have been used to acquire financial assets, not invested in production; and
(4) the latest crisis and slump are rooted in this process of financialization, and in the buildup of debt that papered over the sluggish growth and falling pay.
This paper will show that the first three points are factually incorrect. The rate of profit never recovered. Workers’ real pay has increased and their share of national income has been stable. And the rate of accumulation fell because the rate of profit fell, not because portfolio investment increased at the expense of productive investment. Thus the fall in the rate of profit is a key indirect cause of the sluggish growth, debt buildup, and the crisis.
The paper will also discuss the political implications of this controversy. If the latest economic crisis is the result of neoliberalism and financialized capitalism, we can prevent the recurrence of such crises by returning to one or another form of statist capitalism. It is unnecessary to do away with the capitalist system of production. Yet if the crisis is instead a systemic crisis resulting from the underlying tendency for the rate of profit to fall, a re-embrace of statist forms of capitalism will not solve the problem but, at best, only delay the next crisis.
Click here for the full text of this paper (PDF file).
Andrew Kliman, author of Reclaiming Marx’s “Capital”: A Refutation of the Myth of Inconsistency, teaches economics at Pace University. Many of his writings on the economic crisis are archived at akliman.squarespace.com/crisis-intervention. He recently completed a book manuscript tentatively entitled “This Sucker Could Go Down”: Economic Crisis and the Persistent Frailty of Capitalist Production.