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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.

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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 ownershipSlide16
Slide17

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.