Fictitious Capital and the Neoliberal Mindset
Sections of the Left, as Paul says, always tried to explain the continued vitality of capitalism by exceptional factors, where they have simply not just denied the facts that were staring them in the face. The same approach is taken towards the creation of welfare states, and so on, as variously products of class struggle, and/or fear of workers' revolution as they looked to the example of the USSR. All absolute nonsense, and simply a means of denying the reality that welfare states are simply a reflection of the needs of modern, large-scale, socialised capital, operating within the context of a social-democratic state. To paraphrase Marx, they are as much the product of that capitalist production as the transistor or the assembly line, and similarly, as Aglietta and others have suggested, in the age of neo-Fordism, of the introduction of flexible specialisation, and so on, so too are we likely to see a fundamental change in the nature of these welfare states too. That will be a feature of a new regime of regulation and accumulation, in the current fifth wave, some of the features of which are already becoming apparent. 
Paul notes that, in the post-war boom, first an inflationary spike, followed by gradual, year on year, inflation meant that real interest rates were, on average a negative 1.6%, between 1945-73, in the US. But, the average over the whole of that period is deceptive. In January 1962, the Fed Funds Rate stood at 2.16%. By December 1975, it was 5.20%, and by June 1981, it had soared to 19.10%. In the UK, the real interest hit a low around 1972, but then rose sharply to a peak in the mid 1980's of 6%. A similar picture for the US is seen, in respect of the real interest rate, with it falling to around -2% in the mid 1970's, as inflation spiked, before then rising to 8% around 1980. Moreover, these are figures for official interest rates, whereas, as Marx points out, in comparing actual market rates of interest, it is necessary to examine the rates of interest that businesses have to pay, and at which they lend to each other. In the 1970's, this was a period where businesses complained about “crowding out”, of being unable to borrow even at high rates of interest.
As I've set out before, modest annual inflation is central to Fordism. In the post-war period, UK debt to GDP was around 250%. Similar levels existed across Europe. That, together with the demand for money-capital for reconstruction, for the recapitalisation of core industries, like coal and steel, was able to soak up available money-capital. Inflation meant that fixed incomes from rents and interest were depreciated, whilst profits were boosted. That gave an incentive to use profits for real capital investment rather than to pay out dividends, and so the capitalised values of dividends (share prices), interest (bond prices) and rents (property prices) was constrained.  |
| From 1965 to around 1985, as interest rates rise the Dow Jones falls in inflation adjusted terms. |
As the profits squeeze intensified throughout the 1960's and 70's, whilst the rise in wage share promoted demand for wage goods, and expansion of their production, so nominal interest rates were pushed higher, putting additional pressure on asset prices, first seen in the 1962 stock market crash, and again in the 1974 crash. The consequence was an attempt to claw back excess nominal wage increases by higher prices, made possible by increased money printing by central banks, who, in the 1970's also were required to provide the liquidity for governments using Keynesian demand management to cut short recessions that struck with increasing frequency. The result was rising inflation, rising nominal interest rates, and stagflation. But, it meant there was never the conditions, during this period, where the mentality could develop that wealth was represented by fictitious capital, and a consequent inflation of asset price bubbles. Certainly, the mentality did not develop that the road to wealth came from speculative capital gains.
Paul, I think, has a gut feeling that there is something not right in his awkward extension of the Fourth Wave, to 2008, because he is also led to date the start of the Fifth Wave from the late 1990's. I have already stated what is wrong with Paul's understanding of Marx's law of the falling rate of profit, and its relation to crises of overproduction. I will simply say here, therefore, that the 1970's represent the culmination of a profits squeeze, caused by a rising wage share. The profits squeeze reaches a point whereby crises of overproduction become more likely, more generalised and deeper. It marks a conjuncture, because, in response, capital is led to develop and introduce new labour-saving technologies, which it rolls out, in the subsequent period of intensive accumulation. By raising productivity, and replacing labour, it is this which creates the conditions for the Marxian law of a falling rate of profit. It creates the conditions for the period of relatively lower growth of the downward phase of the long wave, particularly in its stagnation phase. It produces a huge mass of realised profit, which, unlike the period ahead of the postwar boom, goes into financial and property speculation. Some of this is also particularly due to the rise of oil rents, by Gulf states that flows into the petrodollar markets. This creates a wholly different framework for the commencement of the fifth wave, in 1999, than has existed for every previous long wave cycle.
No comments:
Post a Comment