No more Social and Economic Progress
According to Kotz(2008) Figure 1 the growth rate of the real average hourly earnings of nonsupervisory workers in the nonagricultural private sector in the US was -0.04% over the period 1979-2007, while the growth rate of output for these workers was +1.91% - the calculations are based on data from the US Bureau of Labor Statistics.
This is roughly Capitalism’s neoliberal period and the results at a first glance may be conceived as a formidable succes - for capital, as profits capture the total productivity increase.
The emergence of the neoliberal period have to be understood on the background of problems of the 1960s and early 1970s. The Vietnam war somehow exhausted the US economy while at the same time social unrest and race conflicts were prevalent. When the OPEC took control of oil prices the capitalist accumulation stagnated while at the same time inflation blew up - the stagflation period.
The neoliberal agenda was a strategic program to discipline workers, bring down inflation and restart capital accumulation. During this period we also see the core of the system shifting from corporate industrial capital to financial capital as concentration increases.
However, the taming of the labour force brought down effective demand. This was compensated by Wall Street’s clever engineering of new sources of credit. Household debts as percentage of disposable income in the US grew steadily from around 60% around 1980 to close to 130% in 2008 (see Kotz(2008) above,figure 4). So capital not only managed to put a lid on wage increases, it also achieved to extract steadily increased interest from mortgaging peoples homes.
When the crisis struck in 2008 Wall Street and the FED orchestrated the salvation of the system by means of trillions of taxpayers money - and introduced the zero-rent policy and additional fancy unconventional monetary policy measures. This has managed to keep the system alive on ‘artifical breathing’. Cheap money has blown up the stock market and raised indebtedness to even higher records.
Today this policy is up against the wall - the problem being to find a way to deflate the bubble and ‘normalise’ interest without a new crash. At the moment (Summer 2017) no one has got such a recipe - the policy more or less continues just to buy time.
In the Nordic Countries we experienced the entry of neoliberal policies as a conscious step by the social democrats in power. As profits waned in the early 1980s social democratic governments in a way panicked: the capitalists had stopped investing, workplaces were threatened.
In a way capitalists broke the social contract or class compromise of the 1950s and 1960s - the understanding that labour unions kept wage increases at moderate level as long as capitalist reinvested profits to ensure jobs growth.
As this contract was broken in the early 1980s social democratic governments only response was to increase the profit share. In a way they said - ‘My God, The Capitalists have stopped investing, we have to give them more money!’. How to better reveal the social democrats are not socialists! The socialist response would be: ‘They do not reinvest their profits according to contract - we have to take hold of their profits and ensure the reinvestment and job creation takes place. Social needs have to replace profitability as investment criteria’.
The ‘Social Contract’ worked as long as Capitalists found domestic investment opportunities. These waned in the 1980s. As globalisation took off Capitalists found investment opportunities abroad. The domestic workers were ‘left behind’ - betrayed by social democracy’s incapabilities - now flocking to populist right-wing parties.
Globally the picture differs - wage earners in low-income countries have benefitted from the FDI of western companies. For more on this check out Branko Milanovic’s Elephant Graph and Critics of Elephant Graph
So what is the status of Capitalism in the Western Countries by summer 2017?
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Secular Stagnation?
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Return of Socialism?