Ozlem Onaran article excerpts Three dimensions to the current unprecedented global crisis of capitalism economic ecological and political 1 Economic Capitalism is facing a major realization crisisan inability to sell the output produced ie to realize in the form of ID: 388080
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Slide1
Prof.
Ozlem
Onaran
(article excerpts)
Three
dimensions to the current, unprecedented global crisis of capitalism: economic
, ecological
, and
political.
1. Economic: Capitalism is facing a major realization crisis—an inability to sell the output produced, i.e., to realize, in the form of
profits, the surplus value extracted from workers’ labor.
How is Neoliberalism used to solve the stagflation crisis of the 1970s ?
Abandoned the “Keynesian consensus” of the “golden age” of capitalism (relatively high social welfare spending, strong unions, and labor management cooperation).
Reduced the power of labor.
It succeeded
- profit rates eventually recovered in the major capitalist economies by the 1990s.Slide2
Prof.
Ozlem
Onaran
Dismisses Peter Schiff's 'Job Creator' BS With Empirical
Resea
http
://www.youtube.com/watch?v=
lTKQVSz4U6kSlide3
System’s
success, partially due to neoliberalism, in reviving profits
But engendered a potential
realization crisis, due to low wages and
investment
Dramatic deterioration in wages
Limited consumption, forcing workers to resort to increased borrowing.
Growth
of a casino
economy
Profits
were
funneled into
speculation in financial assetsSlide4
US economy:
Rapid
financialization
led to increased
demand through various wealth effects and debt-credit stimuli, despite
the weakening
of the underlying economy
.
Debt
-led growth could not be
sustained and led to the systemic crisis
Unprecedented state
intervention moderating the visible dimensions of the
downturn.
But, the financial
mechanisms
that created the debt collapsed.
Now, how can State
policies
overcome the
realization
crisis (get profits by selling goods and reaping
labour’s
surplus value) .Slide5
2. Ecological
limits to growth
(
scientifically
proven)
Recovery
efforts have been centered on
maintaining GDP growth
and employment through high consumption. It is assumed that we can go on consuming
as before
, by means of magical
technological innovationsSlide6
The Crisis of
Accumulation under Neoliberalism:
World
economy
1980s on:
Deregulation
in labor, goods, and
financial markets.
Communism in Soviet
Union
and Eastern Europe fall apart Opened
up new
markets
Unleashed
a large reserve army of cheap
labor
This freed the Western capitalist welfare states from maintaining
decent living
wages
for
labour
Decline
in
labor union and bargaining
power
Slide7
C
risis
has
disproven the usefulness of neoliberalism
.
Unemployment
and inequality
rose after
the crisis in Western
Europe (similar
to the transition crisis of
20 years ago
in Eastern
Europe)
Political discontent in Europe is challenging the system by questioning the validity of current system of capitalism. Slide8
Labour’s
share of national income across the globe has declined as has workers’ power
Sharper differences
between classes
in
i
ncome
Profit rates and profit’s share of national income increased.
Neoliberal
era
generated
higher global profits for multinational
firms(esp. in the
financial
sector)
Financial sector profits
displaced
profits from actual productionSlide9
Market Bias:
Remuneration
schemes, based on short-term profitability, shifted the orientation
of management
toward shareholders’ objectives.
Unregulated
financial markets and the pressure
of financial
market investors created a bias in favor of asset purchases, as opposed to asset creation. Slide10
Financial innovations seemed to offer a short-term solution to any realization crisis: debt-led consumption growth.
To avert a crisis for a while, the state did something to moderate the growing inequality in income and wealth that would eventually stifle aggregate demandSlide11
In emerging
economies: China, S. Korea, Asia and L Am
A
policy of accumulation of foreign reserves as a hedge
against speculative
capital outflows.
Threatened
by the free mobility and volatility of short-term international financial flows
, they invested
their current account surpluses in U.S. government bonds instead of financing their
domestic development
plans
.
Western European countries
to weather
the shock better than developing countriesSlide12
US & Western Europe:
U.S
. GDP fell by
2.6 % (2009)
Euro area by 4%
United
Kingdom by
4.9% (because
of the housing bubble and household
debt).
German
and Italian GDP declined by 5
% (2009)
France GDP shrunk by 2.6%Slide13
Chronic balance of payment deficits in Greece
, Portugal, Spain, and
Italy
Euro zone: Real
wages began to turn down decisively in 2010Slide14
Alternative
1. Fiscal
policy has to be centered around a public employment program and a distributional policy.
Public expenditures in labor-intensive
services, e.g. education
, child
care, etc.
Public
infrastructure and green
investments, private
-sector
employment
Avoid
“socialization of the
costs” i.e., working
people and the unemployed should not have to pay the costs of the irresponsible behavior
of global
capital
.
The stimulus, employment packages, and green recovery plans should be financed from
progressive income
and wealth taxes, higher corporate tax rates, inheritance taxes, and taxes on
financial transactions
.Slide15
2. Redesign the
financial sector
- Regulation
is
required but financial
institutions have an amazing capacity to avoid regulations through new
innovations
3. Critical economic
sectors
must not be left to the
private sector.
Energy, finance
and housing
must be in public ownershipSlide16Slide17
Real wages began to turn down decisively in 2010 in the United Kingdom, Ireland, Germany, and Italy,
following wage cuts arising with the onset of the crisis in practically all European countries. Greece,
Portugal, and Spain, in particular, are under the ax of the EU and financial markets, and are being
compelled to increase their competitiveness via deep real wage cuts, as part of a more general shock
therapy in these countries. Sharp and long-lasting increases in unemployment, augmenting the
industrial reserve army, are likely to make the wage losses much
stronger
In
Japan, for example, the wage share declined by 8.9
percent between 1992 and in 2007.Slide18
Germany is suffering from the curse of its neo-mercantilist strategy—growth based on export
markets via stagnant or declining wages, which had led to decades of stagnant domestic demand. The
chronic current account deficits of Greece, Portugal, Spain, and Italy—the outcome of the historical
failure of the European Union and its single currency to provide for regional convergence—are now
proving to be detrimental, as financial investors are asking for much higher interest rates in return for
the government bonds of these deficit countriesSlide19
The Eastern European
Slowdown
excessive dependence on foreign capital
flows
severely affected by the credit crash, capital outflows, and the currency
crises accompanying the banking
crisis
FDI is still more robust than other capital flows, but in the first quarter of 2009, FDI inflows
fell by 20-80
percent
FDI not only finances but also creates current account deficits; the average profit
repatriation rate has been 70 percent in the region, and FDI has been about equal or less than the
repatriated profits in Hungary, Slovakia, and the Czech Republic.Slide20
Overall, their greater fiscal capacity has helped many Western European countries to
weather the shock better than developing countriesSlide21
The most important obstacle today to initiating a progressive economic policy in Europe is the
speculation on public debt and the governments’ commitment to satisfy the financiers. Public finance
has to be unchained via debt default in both the periphery and the core. Alternative policies must
involve public investment programs with a focus on regional development. EU-level public investments,
financed by EU-level progressive taxes, must play an active role in economic reconstructionSlide22
what is missing is any grasp of the underlying causes of the crisis. There is an overemphasis
on low interest rates in the United States and very little debate about the liberalization of financial
markets
.
Policies to address a major root of the crisis, the dramatic pro-capital shift in income
distribution, are nowhere to be found. With regard to global imbalances, much of the emphasis is on
the overconsumption of the United States or low wages and an undervalued currency of China, rather
than wage dumping and stagnant domestic consumption in Germany.