In the jungle - without a map
WORLD ECONOMY to summarize the different ways that this term can be understood. An initial distinction must be established between periodic and major crises: the first result from the normal functioning of the capitalist cycle which always alternates between phases of prosperity and recession and according to the degree of synchronization between the conjunctures of
THE recent expansive cycle of capitalism has proved longer different countries. But from the theoretical point of view the key principle is that than expected, beginning in the 1980s and finishing at the capitalism emerges from this type of cristart of this decade. However, It was less intense than the sis or recession without appealing to phase of expansion which preceded the present crisis, and it mechanisms other than those arising was marked by strong imbalances and instability.
spontaneously from the cycle.
The great crises, like that of the 1930s,
Moreover, it has not allowed the restoration of rates of profit marking the passage from the long equivalent to those before the crisis.
expansionary wave to the long recession-
Finally, it has led up to a new recession of a previously ary wave, are a more or less sharp turn, whose depth threatens all the elements of unknown gravity. The question we want to address is: despite the mode of growth and which suppose all the above, are we witnessing the creation of the conditions exogenous transformations or the advent for a new long wave of expansion?
of a new framework of functioning, necessary to renew long term growth. But there are two other understandings of the
JESUS ALBARRACIN AND PEDRO MONTES term crisis that must still be contrasted, since the same term simultaneously designates the violent phase of reversal and the long periods where capitalism functions so uncertainly that its legitimacy is questioned.
The crisis of labor is revealed by the inexorable rise of capitalist unemployment, which does not even appear to be significantly reduced in the short or medium term. This rise flows from the slowing down of growth which combines with the progression of productivity to lead to an absolute decline of the number of work hours. Faced with these trends capitalism chooses the solution of unemployment, or in other words expulsion from the sphere of profitable labor.
Decline in status of labor
In all the capitalist countries an overall deterioration of the status of the wage laborer can be noted: undeclared, poorly paid, precarious employment can be seen as occupying a growing part of the economy, amounting in France to one in five
This "Fordism" in reverse signals jobs.
that capitalist rationality, which makes labor time the measure of all value, can no longer progressively regulate the alloof labor. The law of value is cation increasingly in opposition to human progress.
The approach proposed here is perfectly consistent with the central theory of long waves as to the historically dated and non-guaranteed character of the emergence of expansionary periods. But what is happening today does not correspond to a sudden return of the 1940's
(fascism and war).
Today we see a many-pronged rampant offensive taking the form of a process of whittling away, rather than a frontal attack. The idea is to achieve the same end at the price of an
22 accumulation of partial defeats.
International Viewpoint #223 • March 2, 1992
A CCORDING to the traditional
explanation, a substantial acceleration of growth rates is needed to get out of a phase of recession, something that can only be obtained if the class struggle permits it. But some economists consider this criterion false, insofar as very significant changes are taking place inside the system, progressively creating the conditions for capitalism to enter upon a a stage of relative economic and social
According to these economists, we are a transitional period between recessionary and expansionary phases of
The last phase of capitalist expansion on a world scale was long, but its intensity, in terms of growth of Gross Domestic Product (GDP) and accumulation, was lower than that recorded during the phase of expansion which preceded the 1973 crisis. The GDP of the OECD (Organization for Economic Coopera-
We are therefore, in a transitional phase between a long recessionary wave and an expansionary wave, a period that one could qualify as a rampant crisis.
Is capitalism capable of coming out of this period, shaking off the straight jacket and presenting an attractive social model? The preceding analysis leads us to the conclusion that this is not possible. In the first place there will not be a perspective of returning to Fordism defined as a growth of wages proportional to that of production. Wage austerity and social inequalities are solidly at the heart of the model of growth followed since the beginning of the 1980s.
tion and Development) countries grew by 3% per annum in the 1983-1989 period, falling in 1990 and 1991 to 2.6% and 1.1% respectively, while between 1960 and 1973 the average rate for the whole of the OECD had been 4.9% and the same for each of the main imperialist blocs.
The restoration of the rate of profit has been carried through in favourable circumstances that cannot be repeated in the coming years. First of all, the world economy was able to count on dynamic expansion in the USA, which, thanks to a huge domestic budget deficit, exports from other countries and thus an
The US current account balance has gone from a surplus of $7bn to a deficit of $160bn in 1987 — that is, 3.7% of GDP. This external deficit reflected in an substantial increase in the public deficit which remained throughout 1982 to 1988 above 3% of GDP. Then, the fall in raw material prices between
It is impossible today to perceive a progressive solution to the problem of unemployment in the framework of capitalism. Contemporary capitalism has had its victories: it has brought about revolutionary technological innovations, reestablished profit and contained wages, but it can only function on a narrower and narrower basis. Its current logic implies a consolidation of inequality and exclusion within the imperialist countries as a well as on the scale of the world economy. On all these points the superiority of the Marxist analysis over that of the believers in spontaneous harmony seems to us to have been confirmed. *
1982 and 1986 and that of oil in 1985 (going from an average of $27.4 a barrel in 1985 to $15 in 1986 for oil imported by OECD countries), brought about a substantial transfer of income from the producer towards the consumer countries, contributing to prolonging the upturn.
Finally, and even if this fact does not above, following the stock market crash of October 1987, goverments took short term expansionary monetary measures to avoid a collapse of financial markets in the face of the expected recession.
Together these factors played an important role both in the intensity growth in the 1980s and its duration, and this means that it is difficult to see how such growth can be repeated.
This point of view is reinforced if we look at another feature of recent economic development. The high level of indebtedness in all economic sectors of most countries led to a rise in demand and shored up economic activity, while limiting the opportunities for future expan-
Continuing rise in public sector debt
Public sector deficits have built up progressively, and, at the start of the 1990s, all countries have a higher public sector debt/GDP ratio than before the upturn. In the EEC, the ratio has risen by 15 points, going from 45 to 60%, with spectacular rises in some countries such as Belgium, the Netherlands and Italy. A 15 point rise has also been seen in the USA. The public deficit in most of these countries is continuing to mount and the charges on the deficit have also risen significantly in many, constituting a significant brake on their fiscal policy. The margin of manoeuvre for most countries to adopt an expansionary fiscal policy has been
The same is true for the enterprises, where the ratio between their own and external resources on the one hand, and indebtedness in relation to GDP on the other, has been getting worse throughout the decade, despite the recovery in terms
Finally, the same can be said for household economies whose indebtedness in relation to disposable income has significantly increased. Thus, for example, between 1980 and 1990 household debt increased from 77% to 96% of disposable income in the USA; from 58 to 92% in Japan; from 76 to 87% in Germany; and in Britain from 48 to 105%. Any prospect for an upturn must take account of this increase in indebtedness of all economic sectors and its restrictive effects.
The increase in indebtedness has been accompanied by a perceptible fall in national savings, which is lower than that recorded in the long expansionary wave. For the Group of 7 countries, the savings rate was 10% in the 1980s, while in the 1960s and 70s it was 13.5% of GDP. For Вава.
Sitting
firms, the savings rate in the USA fell from 7.3 to 4.3%; 14.3%; in France 17.6 to 12%; in Italy from 21.6 to 15.6% and so on, except for
The decline in savings has been accompanied by a fall investments in GDP, which reduced growth. After an annual rise of 3.8% in the 1960-73 period OECD countries, the rate fell to 2% between 1983 and 1990. In the private sector, it did not rise above 1.5% between 1973 and 1990, as opposed 4.1% in 1960-73. This phenomenon is seen in all countries whatever the differ-
Weaker productivity growth is an important feature of the past period but here the pattern is not uniform for all economic sectors. In industry, the core of value production, productivity has been stronger than in services; but this growth, contrary to the past, has essentially due to a reduction in jobs. The new, highly insecure jobs have come in the service sector — and productivity in this sector has thus only slightly
High rates of permanent unemployment
Furthermore, while unemployment has dropped in the past few years - or at least up until recently, when it has begun once again to rise due to the recession in some countries - it remains very high, confirming a trend for each cyclical upturn to begin with a higher level of unemployment in both absolute and rela-
The last upturn was accompanied by strong international economic imbalances. In contrast to the big American trade deficit, the balance of payments of Japan and Germany showed big surpluses. The gap has closed somewhat in recent years, but the financial flows that are needed to regulate the current account balance have not diminished, since, to the financing required for each new deficit must be added the cost of refinancing previous accounts, insofar as these were not covered by reliable sources of income.
payments lie behind the significant growth in international financial flows, but the complexity and the dimensions assumed by the financial sphere go beyond the importance of these imbalances. The interna-
WORLD ECONOMY tionalization of capital markets and the deregulation of markets have created an enormous financial bubble forming a swollen and abnormal growth in the body of the real economy, fed above all by speculation.
Furthermore, the problem of the Third World debt is far from being resolved, even if the risks it posed for banking systems have been defused. It has now been made worse by the bankruptcy of the East European countries and the former USSR.
This characteristic of the financial markets may spread to the exchange markets, another arena for speculation. During the 1980s, there was great instability here. The last decade began with a significant revaluation of the US dollar, pushed up by high US interest rates aimed at financing the balance of payments deficit, then saw a sharp fall in the dollar which could not maintain its value at the same time as the deficit on current accounts grew and persisted.
Speculation and monetary instability
The external imbalances are aggravated by speculation and the absence of a stable currency on which the international monetary system can rest. This also contributes to and encourages a climate of international economic insecurity which is hardly favourable to a stable and solid development of capital accumulation.
As we have tried to show, capitalism is ridden with serious problems which throw a shadow on the results obtained in the past decade and which are so many obstacles to a future upturn. In considering the possibility that this upturn will turn out to be the beginning of a new wave of expansion, it is necessary to emphasize that the successes in restoring rates of profit have been quite limited. If profit in the EEC countries we can see March 2, 1992• #223 International Viewpoint
WORLD ECONOMY
Countries must cut wages to stay competitive on the world market... that the upturn of the 1980s has not been enough to reestablish the levels of the
This upturn has been supported by a growth in profits derived from the economic expansion itself and above all from the effects of the redistribution of income imposed by austerity policies. In consequence, indirect and deferred wages (the "social wage") have been hard hit as a result of the general campaign against the Welfare State. However neither direct wages nor the Welfare State have been cut back sufficiently to allow a restoration of profits to their level of before the crisis of the 1970s. For the EEC countries, public expenditure grew by 12.7 points between 1970 and 1982 in relation to GDP. Subsequently it has only been reduced by 1 point.
Since the mid-1970s, some French authors have used a new approach to analyze the crisis. While totally or partially adopting (or claiming to adopt) a Marxist reference point, some Keynesian contributions have been added. The contributions of this current are disparate, but they can be classified as belonging to what is known as the Regulation School.! Recently, the debate has been enriched by other economists who work within the analytical field of long waves (see box on p. 19) and who underline the importance of external factors in the passage from the recessionary to the expansionary phase, while taking on board a significant part of the schemas of the Regulationists.
According to the latter, a sustained recovery in profit rates is not a sufficient criterion allowing us to know if the capitalist economy is coming out of its crisis; it is also necessary to know if it has attained a certain social stability, whatever the rates of profit or of economic growth, through the creation of new regularities that allow the reconciliation of contradictions with sufficient social consensus and economic efficiency. In their view, throughout the past decade there have been important changes in this sense 24 that can be summarized as:
Firstly, changes have taken place in the International Viewpoint #223 • March 2, 1992 regulation of wages and this can, in the medium term, play the same role as the working class defeats that took place during other long recessionary waves. Previously it was readily admitted that real wages should grow in line with productivity so that their share of income would be maintained. Now, a new principle has been established: that wages should merely maintain their purchasing power. A decline in the share of wages in national income has thus been accepted, which amounts to accepting a rise in the rate of exploitation.
A crisis of labour has occurred in connection with this. During the expansionary wave, employment rose because production was growing more than productivity, and, furthermore, working time was reduced. Today, the growth in productivity is taking place at the of employment and with no reduction in working time.
Creation of divided working
The crisis of employment in the proinsecure jobs and marginalization show that a "dualization" of the workers is taking place. The internal division in the working class is not new, but during the expansionary phase there was a tendency homogenization, notably in wages, while the trend today is the opposite. This implies a considerable change in the behaviour of the wage workers. This is not a decisive victory for the bourgeoisie, but it is a step forward for its interests.
Secondly, according to these authors, the restoration of profit rates has been insufficient because productivity growth has been very low in relation to existing technologies and new forms of organization of work, but, in their view, there are some factors that render the verdict about low productivity growth less clearcut.
First of all, the last phase of expansion was based on services, where productivity is weaker, pushing down the overall growth in productivity — which does not mean that in industry it is not rising. Then, while, there has been no thoroughgoing implementation of technological change, owing to the inability of capitalism to incorporate new technology — these methods are more costly and more difficult to generalize, they involve a slower rate of introduction and so on — the potential is nonetheless there. Moreover, the substantial change that has taken place in the area of wages compensates for lower rates of growth of productivity.
In the third place, the way in which demand has been sustained despite the weak growth in wages implies a significant change. During the phase of expanestablished in which the share of wages in the national income was maintained, and demand and production grew harmoniously, encouraged by household con-
Today, at a time when there is growth, it is profits rather than wages that are rising. Consumption based on wages is not rising, but the financial system channels a part of the surplus created in the factories towards non wage-based consumption. In fact, the difficulties in finding profitable outlets for productive investments push significant flows of capital towards the financial system, which is considerably
But, via high interest rates, a part of the benefits of this fall to rich families whose consumption increases. The growing role of finance in the economy facilitates conby cushioning the negative effects of income distribution to the detriment of wages on the realization of surplus value in the absence of demand.
Finally, according to these authors, one can discern a "new dualism", that is to say a tendency towards the fragmentation of economies into two sectors: on the one side, modern industry and some computerized or computerizable services characterized by high rates of productivity growth, with relatively high wages but industries with low productivity, sheltered from competition, and creating jobs which are, however, often insecure and poorly paid. This dualism is required for the reproduction of given the changes indicated
In fact, during the last phase of expansion the contradiction between the recovery of profit rates and the maintenance of growth in demand has been dealt with by the replacement of wage-based by non wage-based consumption.
But this cannot provide a permanent solution, for, in the long term, the contradiction remains and the only solution consists in disconnecting the determination of profit rates from the maintenance of demand by a new dualism: on the one hand, a competitive sector with high productivity growth and high profit rates; and on the other, a sector not subjected to the demands of capitalist profitability or which compensates for low productivity lower wages, but which
A prolonged intermediary phase
In conclusion, for these writers, the recessionary phase has been characterized by a less sharp fall than in previous waves; and we are now in a prolonged intermediary phase in which the growing dualism can play the same role as fascism, for example, in the previous wave.
The new wave of expansion will involve a degradation of the living conditions of a large part of the workers, meaning that capitalism will not be "more progressive". But there can be a way out
from the recessionary phase without a big leap in accumulation and growth if capitalism can find a form of social stability different from that of the 1950s and 60s (when it was based on rising wages for all, the Welfare State and so on).
Sustained growth, even if it is weak, can allow the system to maintain a certain amount of social support, stabilize social relations and obtain a certain consensus and legitimacy, in spite of the dualism. Furthermore, in the last resort coercion can always be used. In any case these bases are not yet finally established: they require the working class to be far more thoroughly squeezed, to a point where people will accept any job they can find. This will not be easy for capitalism, but this is the way in which it will try to get out of its crisis.
Thus, the USA cuts wages to compete with Japan, Japan does the same to compete with Korea and so on...
Opinions on the situation - the modest results obtained by capitalism during the last upturn, the special features of the latter, the growing "financialization", the social dualism, the insufficient upturn in rates of profit, the elements of instability - based on an examination of the prevailing economic and social conditions in most countries — constitute a substratum common to the entire left.
It also appears to be common ground that the conditions do not yet exist that would allow capitalism to experience a vigorous upturn as a prelude to the start of a new phase of expansion.
However, the assertion that there is a clear way ahead for capitalism, paved by some of the changes currently underway, is also questionable. The Regulationists think that such a way exists and see in it a predictable future. For our part, while it would be rash to say that such a future is totally impossible, we hold that the changes underway do not have this significance and are in fact not all that different from what has been seen in other phases of capitalist crisis. We do
Many reason to say that we can expect a stabilization of the system. As at other comparable historical moments, the outcome will be the product of turmoil and wil be tied to social and political events of great scope, in which the class struggle will play a decisive role.
One of the problems with Regulationism is its tendency to see elements present in any crisis as specific characteristics of a particular period. This leads to unfounded generalizations and gives certain phenomena a centre stage role. This is the case with "neo-dualism", which is not a new phenomenon in capitalist crises and cannot be considered as a mechanism for the regulation of the current
Unemployment, as the first expression of this dualism, has been equally high at other moments in history and its sequel, in terms of the weakening and splitting up of the working class, the super-exploitation of some sectors of the latter or the deterioration of working conditions are the normal signs of any crisis. Social dualism tends to increase in times of stagnation and decline in times of expansion. Historically, this has not been the means by which the rate of exploitation has been raised sufficiently to permit an upturn in the rate of profit. Maintenance of purchasing
In the same way, the Regulationists underline the importance of the new "wage norms", in which the maintenance of existing purchasing power becomes a minimum objective as opposed to wage rises equivalent to rises in productivity. Besides the fact that "wage norm" is a problematic Regulationist concept, it is hardly a novelty that in times of crisis the workers should be in less favourable conditions for wage thermore, in the present period, it is neccertain facts that restrict the weight of the gains obtained
During the 1980s, wages rose by less than productivity in most countries, but this situation has been reversed in recent years in many countries — the line taken by governments, to the effect that the best way to hasten an upturn and halt unemployment was to moderate wage demands, has lost its force. Furthermore, while wage rises slowed in the 1980s, so did the rise in productivity and the difference obtained by capital, of around 1%, can hardly be considered as a great victory. It is not the regulation of wages, then, that will give a minimum underpinning
The problem ot weak productivity growth is more important in the develop ment oi the system than the Regulationists suggest. If one takes the "dominant wage rule" it might seem harmless, but, as we have already said, this norm is not stabilized and does not offer great advantages in the distribution of income.
Finally, it is necessary to take into account the fact that the rate of profit is not independent of productivity. The for-
WORLD ECONOMY in proportion to the latter when there is a distribution of income in favour of profits, and declines when capiadvances also have a bearing on demand; for a given difference between productivity growth and wages the level of the two variables is not the same. The political ignored; the system will appear more progressive if it is more productive.
The positions of the Regulationists on the abnormal over-development of the financial sector have to be modified at two levels. First of all, we cannot accept the importance they give to this as a new way of resolving the demand problem. Then, it is necessary to take into account the instability that it introduces into the system, which is far from being neutral-
In phases of prolonged stagnation -and this is a feature of the history of capitalism - in the absence of sufficient capitalist profitability in production, speculative activities develop exploiting the workers. This is not new, even if it is remains useful to underline the fact that this form of exploitation has never served as a means to go beyond 1. See Michel Aglietta, A Theory of Capitalist Regulation: The US Experience, London, 1979 and Robert Boyer, La Théorie de la Régulation; Une Analyse Critique, Paris, 1986 and "Technical Change and the Theory of 'Regulation'' in G. Dosi et al., eds., Technical Change and Economic Theory, London 1988. 2. Some phenomena of the present crisis, such as the creation of insecure jobs, low wages in certain sectors and the sectoralization of the working class may seem new, but are in fact not. In the 1930s, for example, piece workers did not know in the morning if they were going to ear anything or not and wage inequalities were just as big • such as between those on weekly and monthly wages, between piece workers and those on a fixed wage or between public and private sector workers. In a period of price deflation the immediate interests of different layers of the workers often diverged. Thus, for example, piece workers would see their wages fall with lower prices but this was not the case for white collar workers who saw their purchasing power rise month by month.
...with the result that workers everywhere no longer earn enough to buy what they produce!
25
WORLD ECONOMY
A new long wave without a cleaning out of all this seems impossible to us.
Some Regulationists suggest that capitalism is passing through a transitional phase between a long wave of recession and another expansionary wave, meaning a powerful move out of its crisis. We do not believe this to be the case.
We do not see decisive changes underway that would allow us to say that the conditions for capitalism to enter into a new expansionist phase have been created or are in preparation - which is what the Regulationists mean when they talk about a transitional
FIRST LAW OF
MOTION - WHEN
THE OBVIOUS phase; furthermore the internal regularities are not even able to assure a stable phase of moderate growth. The near
"Why, yes! A recession! I believe a recession is indeed a possibility!" long depressive waves. Such exploitation does not offer any stability to the system and indeed robs it of a part of the legitimacy it obtains by the sterilized exploitation effected through the "neutral and efficient market", including the labour market.
The "financialization" of the economy is more complex than a method of regulation. The extraordinary development of financial activity which took place during the last phase of expansion and the speculative rises in the equities markets and the property sector, which have not yet entirely deflated, are a time bomb fixed on to the system which can explode at any moment and provoke a crisis with unforeseeable consequences.
The casino of modern capitalism
A multitude of new financial instruments, new markets, new institutions and new forms of transaction have turned capitalism into a huge casino where mind-boggling amounts of floating capital, which have almost no relation with the real flows whose value they multiply hundredfold, look for financial killings through speculative gambles every second of every hour of the day.
The intrinsic instability of this entire contraption is beyond all question, and, finally the financial commotions we have seen, such as the stock market collapse of 1987, and its repeat in 1989, or the panic provoked by the outbreak of the Gulf conflict, the fall of more than 30% on the Tokyo stock market since 1990 must be interpreted as signs of something that must eventually happen — the bursting 26 of the financial bubble.
It is true that the sheer size of today's International Viewpoint #223 • March 2, 1992 financial sphere is historically unprecedented, even in the years before 1929. The level of quotations on the main stock markets, with the exception of Tokyo, is even higher than on the eve of the 1987 crash, after having recovered from that test and several that have followed it. Such levels mean that yields from dividends are lower than those from interest rates on the financial markets, although investment in the latter does not produce surplus value owing to its speculative character; this along with various capital movements means that new financial convulsions are not to be ruled out.
Before entering on a new cycle of expansion such as that of the 1980s, and above all before entering on a long wave of expansion, a cleaning out of the system is needed to destroy a proportion of financial capital. No sustained upturn can take place until the obstacle of financial hypertrophy is overcome.
Thus, without neglecting the role that "financialization" has played in these last years as an economic regulator, as a way of closing the gap between production and demand under certain conditions of income distribution, its effect has not been as significant as has been suggested and cannot hide the insane dimensions attained by the financial sphere.
The development of the latter as a support mechanism for economic expansion is a repetition of other moments in the history of capitalism, but its size and its characteristics reflect conditions specific to the current period, with the internationalization of capital, the breakdown of the international monetary system and the deregulation of markets, which make even more unstable and dangerous the house of cards built up by financial expansion and the development of credit.
future will be strongly marked by instability both on the surface — with weak growth, risinter-imperialist frictions, protectionist tendencies and financial turmoil — and in the depths of the system, with the possibility of a generalized recession, deterioration of the social situation, and financial crises.
There is no mechanism that can guarantee sustained reproduction and accumulation, even at a slower rhythm than during the long waves of expansion, but, at the same time, there is no reason to think that this situation can be indefinitely pro-
Towards a two-tier society
The moves towards a two-tier society to which so much weight is given tend towards class confrontation. The bourgeoisie will try to use the weakening of the position of the workers to impose the policy it needs to get out the crisis. For this it needs a drastic recovery in the rate of profit, and thus a significant rise in the rate of exploitation, and this in its turn requires that the workers be politically defeated. The corrosive effects of the crisis is weakening the working class, but defeat is not inevitable.
The workers, faced with a constant deterioration of their situation and without prospects of improvement, may put up a fierce resistance including wage struggles of sufficient intensity that they force the bourgeoisie to suspend its projects for fear of putting the system itself in danger.
In this case, there will be a turn in economic orientation of which liberalism as a doctrine and the market as a panacea will be the victims. This would open the way to an interventionist policy by the state and support for demand, and a rehabilitation of the Keynesian tradition. *
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