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New Left Review 20, March-April 2003
In a landmark engagement with Robert renner!"
acco#nt of the long downt#rn of the world econom$
"ince the %0", &iovanni Arrighi la$" o#t a "ocial and
political econom$ of the role" of labo#r #nre"t, national
liberation and corporate financiali'ation in the cri"i" ofthe po"t-war order, and the pro"pect" for a militari'ed
() hegemon$ toda$*
GIOVANNI ARRIGHI
THE SOCIAL AND POLITICAL
ECONOMY OF GLOBAL
TURBULENCE
Depression, wrote Thorstein Veblen shortly after the end of the Great
Depression of 187396, is priarily a alady of the affe!tions of the
b"siness en# That is the seat of the diffi!"lty# The sta$nation of ind"stry
and the hardship s"ffered by the wor%en and other !lasses are of the
nat"re of syptos and se!ondary effe!ts To be effi!a!io"s reedies
"st, therefore, be s"!h as to rea!h this eotional seat of the tro"ble and
# # # restore profits to a &reasonable' rate# (1) *etween 1873 and 1896
pri!es had fallen "ne+enly b"t ineorably, in what Da+id -andes has !alledthe ost drasti! deflation in the eory of an .lon$ with pri!es, the
rate of interest had dropped to the point where e!onoi! theorists be$an
to !on/"re with the possibility of !apital so ab"ndant as to be a free $ood#
.nd profits shran%, while what was now re!o$ni0ed as periodi! depressions
seeed to dra$ on interinably# The e!onoi! syste appeared to be
r"nnin$ down#()
2n reality, the e!onoi! syste was not r"nnin$ down rod"!tion and
in+estent !ontin"ed to $row not /"st in the newly ind"striali0in$ !o"ntries
of the tie 4ost notably, Gerany and the 5 b"t in *ritain as wellso
"!h so that, writin$ at the sae tie as -andes, another historian !o"ld
de!lare the Great Depression of 187396 nothin$ b"t a yth# (3)e+ertheless, as Veblen s"$$ests, there is no !ontradi!tion in sayin$ that
there was a $reat depression at a tie of !ontin"in$ epansion in
prod"!tion and in+estent# :n the !ontrary; the $reat depression was not
a yth pre!isely becauseprod"!tion and trade, in *ritain and in the worlde!onoy at lar$e, had !ontin"ed to epand too rapidly for profits to be
aintained at what was !onsidered a reasonable rate#
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nineteenth !ent"ry had led to a syste=wide intensifi!ation of !opetiti+e
press"res on the a$en!ies of !apital a!!""lation# .n in!reasin$ n"ber of
b"siness enterprises, fro an in!reasin$ n"ber of lo!ations a!ross the
5>=!entred world e!onoy, were $ettin$ in one anothers way in the
pro!"reent of inp"ts and disposal of o"tp"ts, thereby destroyin$ one
anothers pre+io"s onopoliesthat is, their ore=or=less e!l"si+e
!ontrol o+er parti!"lar ar%et ni!hes#
This shift fro onopoly to !opetition was probably the ost
iportant sin$le fa!tor in settin$ the ood for ?"ropean ind"strial
and !oer!ial enterprise# ?!onoi! $rowth was now also e!onoi!
str"$$lestr"$$le that ser+ed to separate the stron$ fro the wea%,
to dis!o"ra$e soe and to"$hen others, to fa+o"r the new # # #
nations at the epense of the old# :ptiis abo"t the f"t"re of
indefinite pro$ress $a+e way to "n!ertainty and a sense of a$ony#(@)
*"t then, all of a s"dden, as if by a$i!,
the wheel t"rned# 2n the last years of the !ent"ry, pri!es be$an to
rise and profits with the# .s b"siness ipro+ed, !onfiden!e
ret"rnednot the spotty, e+anes!ent !onfiden!e of the brief boosthat had p"n!t"ated the $loo of the pre!edin$ de!ades, b"t a
$eneral e"phoria s"!h as had not pre+ailed sin!e # # # the early
187As# ?+erythin$ seeed ri$ht a$ainin spite of rattlin$s of ars
and onitory
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de+elopent did entail the relative de!line of the 5 doesti!e!onoy # # # it was also a pre!ondition for the !ontin"ed +itality of the
doinant for!es within the 5 politi!al e!onoy;
5 "ltinational !orporations and international ban%s, aiin$ to
epand o+erseas, needed profitable o"tlets for their forei$n dire!t
in+estent# Doesti!ally based an"fa!t"rers, needin$ to in!rease
eports, reC"ired fast=$rowin$ o+erseas deand for their $oods# .n
iperial 5 state, bent on !ontainin$ !o"nis and %eepin$ the
world safe for free enterprise, so"$ht e!onoi! s"!!ess for its allies
and !opetitors as the fo"ndation for the politi!al !onsolidation of
the post=war !apitalist order # # # .ll these for!es th"s depended "pon
the e!onoi! dynais of ?"rope and Hapan for the reali0ation of
their own $oals#(11)
2n short, "p to the early 196As, "ne+en de+elopent was a positi+e=s"
$ae, whi!h b"ttressed a sybiosis, if a hi$hly !onfli!t"al and "nstable
one, of leader and followers, of early and later de+elopers, and of he$eon
and he$eoni0ed# (1) To paraphrase -andess a!!o"nt of the $reat
depression of 187396, it had not yet be!oe e!onoi! str"$$lea 0ero=or e+en ne$ati+e=s" $ae that wo"ld benefit soe at the epense of
others# 2n *renners own a!!o"nt of the onset of the lon$ downt"rn of
197393, this is pre!isely what "ne+en de+elopent be!ae between
196B and 1973# *y then Gerany and Hapan had not /"st !a"$ht "p b"t
had for$e(d) ahead of the 5 leader # # # in one %ey ind"stry after another
tetiles, steel, a"toobiles, a!hine tools, !ons"er ele!troni!s
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in their doesti! e!onoies by the eport=led prod"!tion boo with a
repression of doesti! deand, whi!h f"rther in!reased both their trade
s"rpl"ses and spe!"lati+e deand for their !"rren!ies#(1B) .t the end of
Hohnsons adinistration and at the be$innin$ of ions, the 5
$o+ernent did attept to t"rn the tide of $rowin$ international onetary
instability, thro"$h fis!al a"sterity and ti$ht onetary poli!ies# oon,
howe+er,
the politi!al !osts of s"stainin$ a serio"s anti=inflationary poli!ynot
to ention the alarin$ fall in the sto!% ar%et # # # pro+ed
"na!!eptable to the ion .dinistration# ell before the defeat of
the Fep"bli!ans in the !on$ressional ele!tions of o+eber 197A,
and as hi$h interest rates threatened to !ho%e off the re!o+ery, the
$o+ernent t"rned on!e a$ain to fis!al sti"l"s and the Eed
a!!oodated with a poli!y of easy !redit# .s ion was to p"t it
se+eral onths later, e are all >eynesians now#(16)
The 5 t"rn to a!roe!onoi! epansionary poli!ies in id=197A so"nded
the death %nell for the $olddollar standard# .s interest rates fell in the
5nited tates, while reainin$ hi$h or in!reasin$ in ?"rope and Hapan,short=ter spe!"lati+e oney fled the dollar, sendin$ the 5 balan!e=of=
payents defi!it 4short and lon$ ter thro"$h the roof# The half=hearted
attept of the ithsonian .$reeent of De!eber 1971 to preser+e fied
e!han$e rates thro"$h a 7#9 per !ent de+al"ation of the dollar a$ainst
$old, and a re+al"ation of the ar% by 13#B per !ent and of the yen by
16#9 per !ent a$ainst the dollar, failed to !ontain the renewed downward
press"re that the ion adinistration p"t on the 5 !"rren!y thro"$h yet
another ro"nd of e!onoi! sti"l"s# *y 1973, the press"re be!ae
"nbearable, res"ltin$ in a f"rther a/or de+al"ation of the dollar and the
foral abandonent of the fied=rate syste of e!han$e in fa+o"r of the
float#(17)
The assi+e de+al"ation of the dollar a$ainst the ar% 4by a total of BA per
!ent, between 1969 and 1973 and the yen 4by a total 8# per !ent, fro
1971 to 1973*renner !laisse!"red the %ind of t"rnaro"nd in relati+e
!osts that (the 5 an"fa!t"rin$ se!tor) had been "nable to a!hie+e by
way of prod"!ti+ity $rowth and wa$e restraint The t"rnaro"nd had a
$al+ani0in$ effe!t on the 5 e!onoy# rofitability, in+estent $rowth and
labo"r prod"!ti+ity in an"fa!t"rin$ sta$ed a !oeba!%, and the 5 trade
balan!e was restored to a s"rpl"s# The ipa!t on the Geran and
Hapanese e!onoies was /"st the opposite# The !opetiti+eness of their
an"fa!t"rers was sharply !"rtailed, a%in$ it their t"rn to fore$o their
hi$h rates of ret"rn if they wished to aintain their sales The world !risis
of profitability had not been o+er!oe# *"t its b"rden was now ore
e+enly shared aon$ the !hief !apitalist !o"ntries#(18)
2n s", "ne+en e!onoi! de+elopent"nderstood as a pro!ess of
s"!!essf"l !at!hin$ "p of la$$ard with leadin$ e!onoi! powersprod"!ed
both the lon$ postwar boo and the !risis of profitability of the late 196As
and early 197As# .s lon$ as the !at!hin$ "p was $oin$ on, it s"stained a
worldwide +irt"o"s !ir!le of hi$h profits, hi$h in+estents and in!reasin$
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prod"!ti+ity# *"t on!e the la$$ardsor at least two of the ost si0eable
oneshad a!t"ally !a"$ht "p with the forer leader, the res"lt was a
worldwide $l"t of prod"!ti+e !apa!ity and a !onseC"ent downward press"re
on rates of profit# oon, howe+er, a assi+e, $o+ernent=s"pported
de+al"ation of the dollar a$ainst the ar% and the yen distrib"ted the fall in
profitability ore e+enly aon$ the three ain !apitalist powers#
+ 1ver-.apacit$ and er"i"tent )tagnation
5ne+en de+elopent $enerated the e!ess !apa!ity that pro+o%ed the
$eneral fall in the rate of profit between 196B and 1973# *"t it was the
fail"re of !apitalist enterprises and $o+ernents to restore profitability to
its pre+io"s le+els thro"$h the eliination of e!ess !apa!ity that was
priarily responsible for the persisten!e of !oparati+e sta$nation o+er the
two de!ades fro 1973 to 1993# 2n *renners !on!ept"ali0ation, there is
o+er=!apa!ity and o+er=prod"!tion 4two ters he always "ses to$ether
when there is ins"ffi!ient deand to allow hi$her=!ost firs to aintain
their forer rates of profit# These firs are th"s obli$ed to !ease "sin$
soe of their eans of prod"!tion and !an a%e "se of the rest only bylowerin$ their pri!es and th"s their profitability# There is o+er=!apa!ity and
o+er=prod"!tion, with respect to the hitherto-eistin! profit rate# (19)?ither the o+er=s"pply of prod"!ti+e !apa!ity is eliinated, or the rate of
profit "st fall, with all the dire !onseC"en!es that s"!h a fall entails in a
!apitalist e!onoy, fro drops in the rates of in+estent and prod"!ti+ity
$rowth to the de!line of real wa$es and le+els of eployent# *renners
!ontention is that, at least "p to 1993, the o+er=s"pply of prod"!ti+e
!apa!ity that "nderlay the !risis of profitability of 196B73, far fro bein$
eliinated, if anythin$ in!reased f"rther, !ontin"ally depressin$
profitability#
The !ontention is based on two lines of ar$"ent, one !on!ernin$ !apitalist
enterprises and one !on!ernin$ $o+ernents# 2n *renners
!on!ept"ali0ation of world !apitalis, there is no spontaneo"s ar%et
e!hanis that will pre+ent o+er=!apa!ity fro de+elopin$ in a lar$e
n"ber of ind"stries, or fro be!oin$ a !hroni! feat"re of the world
e!onoy on!e it has de+eloped# Ji$her=!ost in!"bent firs ha+e both the
eans and the in!enti+e to resist eit fro o+er!rowded ind"stries, while
o+er=!apa!ity and fallin$ profits do not ne!essarily dis!o"ra$e new entry#
Ji$her=!ost in!"bents resist eit be!a"se any of their tan$ible and
intan$ible assets !an be reali0ed only in their established lines of
prod"!tion and wo"ld be lost were (the in!"bents) to swit!h lines#
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to a!!elerate te!hni!al !han$e thesel+es, f"rther worsenin$ the already
eistin$ o+er=!apa!ity and o+er=prod"!tion#(A)
.t the sae tie, the a$$ra+ation of o+er=!apa!ity does not deter new
entry and a !onseC"ent f"rther downward press"re on the rate of profit#
:n the !ontrary# The initial fall in profitability # # # !an be epe!ted to
intensify the world=wide dri+e for e+en lower prod"!tion !osts, thro"$h the!obination of e+en !heaper labo"r with e+en hi$her le+els of te!hniC"es
in still later=de+elopin$ re$ions# (1) The ost !onspi!"o"s instan!e of
s"!h new entry d"rin$ the lon$ downt"rn were prod"!ers based in so=
!alled -ess De+eloped Ko"ntriesespe!ially in ?ast .sia, b"t also
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poli!y had enabled the ad+an!ed !apitalist e!onoies to trans!end the oil
!risis re!ession of 197@B and to !ontin"e to epand d"rin$ the reainder
of the de!ade# e+ertheless, in their effe!ts >eynesian sti"li pro+ed to be
profo"ndly abi+alent# hile s"stainin$ the $rowth of deand
doesti!ally and internationally, >eynesian reedies helped to perpet"ate
o+er=!apa!ity and o+er=prod"!tion, pre+entin$ the harsh edi!ine of
sha%eo"t, indeed depression, that histori!ally had !leared the way for new
"pt"rns (in profitability) Fed"!ed profitability, in t"rn, ade firs "nable
and "nwillin$ # # # to brin$ abo"t as $reat an in!rease in s"pply as in the
past when profit rates were hi$her # # with the res"lt that the e+er=
in!reasin$ p"bli! defi!its of the 197As bro"$ht abo"t not so "!h in!reases
in output as rises in prices The es!alation in inflationary press"res wasa!!opanied by re!ord=brea%in$ defi!its in the 5 balan!e of payents# *y
197778 these defi!its pre!ipitated a de+astatin$ r"n on the 5 !"rren!y
that threatened the dollars position as an international reser+e !"rren!y,
(!learin$ the path) for a a/or !han$e of perspe!ti+e#(3)
The !han$e !ae with the Fea$anThat!her onetarist re+ol"tion of
19798A# .!!ordin$ to *renner, its ain ob/e!ti+e was to re+i+e
profitability, not /"st or e+en priarily in an"fa!t"rin$, b"t in the low=
prod"!ti+ity ser+i!e se!tor and, espe!ially, in the doesti! and international
finan!ial se!tors, thro"$h red"!ed !orporate taation, in!reased
"neployent and the eliination of !apital !ontrols# 5nli%e earlier,
>eynesian sol"tions, howe+er, onetarist reedies so"$ht to restore
profitability by adinisterin$ the harsh edi!ine of sha%eo"t#
5npre!edentedly ti$ht !redit pro+o%ed a p"r$e of that $reat led$e of hi$h=
!ost, low=profit an"fa!t"rin$ firs that had been s"stained by the
>eynesian epansion of !redit .ltho"$h inflationary press"res were rapidly
bro"$ht "nder !ontrol, re!ord=hi$h 5 real interest rates and the risin$
dollar asso!iated with the threatened to pre!ipitate a worldwide !rash,startin$ in the 5#(@)
The !rash was a+oided by the fort"ito"s ret"rn of >eynesianiswith a
+en$ean!e# Fea$ans on"ental pro$rae of ilitary spendin$ and ta
red"!tion for the ri!h # # # partly offset the ra+a$es of onetarist ti$ht
!redit and %ept the e!onoy ti!%in$ o+er# Fea$anite poli!ies did, of !o"rse,
brin$ ba!% !"rrent=a!!o"nt defi!its, also with a +en$ean!e, espe!ially
sin!e, fro this point onward, ost of the rest of the world in!reasin$ly
es!hewed >eynesian p"bli! defi!its# .s in the 197As, "npre!edented
defi!its pro+ided the in/e!tions of deand that were needed # # # to p"ll the
world e!onoy o"t of the re!ession of 19798# 2n !ontrast to the 197As,
howe+er, e+en lar$er 5 defi!its did not now pro+o%e a r"n on the dollar#:n the !ontrary, the p"ll of etreely hi$h real interest rates and a p"sh
fro the Hapanese
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assi+e inflows of !apital and a risin$ dollar was in %eepin$ with the
Fea$an adinistrations ob/e!ti+e of stren$thenin$ 5 finan!e !apital# 2t
nonetheless pro+ed !atastrophi! for lar$e se!tions of 5 an"fa!t"rin$#
5nder stron$ press"re fro Kon$ress and any of the !o"ntrys leadin$
!orporate ee!"ti+es, the Fea$an adinistration had little !hoi!e b"t to
"nderta%e an epo!h=a%in$ re+ersal of dire!tion# The !entrepie!e of this
re+ersal was the la0a .!!ord of epteber , 198B, whereby the G=B
powers, "nder 5 press"re, a$reed to ta%e /oint a!tion to help .eri!an
an"fa!t"rers by red"!in$ the e!han$e rate of the dollar# The +ery net
day, the .!!ord was !opleented by stepped="p 5 den"n!iations of the
"nfair tradin$ pra!ti!es of other !o"ntries# The den"n!iations soon
es!alated into threats, s"pported by new le$islationost notably, the
:nib"s Trade and Kopetition .!t of 1988 and the tr"!t"ral
2pedients .!t of 1989to !lose off the 5 ar%et to leadin$ 4ostly
?ast .sian forei$n !opetitors# This was a bl"d$eon both to liit their
iportsthro"$h +ol"ntary eport restraintsand to for!e the openin$
of their ar%ets to 5 eports and forei$n dire!t in+estent#(6)
2n see%in$ a radi!al de+al"ation of the dollar while si"ltaneo"sly steppin$
"p prote!tionist and ar%et=openin$ eas"res, the Fea$an adinistration
was followin$ in the footsteps of ion, Eord and Karter# The o"t!oe of
these initiati+es in the 198As and early 199As was nonetheless C"ite
different to that of the 197As#
The la0a .!!ord, and its seC"els, pro+ed to be the t"rnin$ point in
the 5 an"fa!t"rin$ t"rnaro"nd, and a a/or watershed for the
world e!onoy as a whole# 2t set off ten years of ore or less
!ontin"o"s, and a/or, de+al"ation of the dollar with respe!t to the
yen and the ar%, whi!h was a!!opanied by a de!ade=lon$ free0e
on real wa$e $rowth# 2t thereby opened the way si"ltaneo"sly for
the re!o+ery of !opetiti+eness, alon$ with the speed="p of eport$rowth, of 5 an"fa!t"rin$ a se!"lar !risis of Geran and
Hapanese ind"stry and an "npre!edented eplosion of eport=based
an"fa!t"rin$ epansion thro"$ho"t ?ast .sia, where e!onoies for
the ost part tied their !"rren!ies to the dollar and thereby se!"red
for their an"fa!t"rin$ eporters a a/or !opetiti+e ad+anta$e +is=
I=+is their Hapanese ri+als when the dollar fell between 198B and
199B#(7)
*y 1993, the tenden!ies set off by the la0a .!!ord, alon$ with the prior
sha%eo"t of the 5 ind"strial str"!t"re pro+o%ed by the "npre!edentedly
ti$ht !redit of the early 198As, res"lted in a re+i+al of 5 profitability,
in+estent and prod"!tion# (8) To paraphrase Veblen, the reedies
!on!o!ted by the $o+ernent to !"re the alady of the affe!tions of 5b"siness seeed, at lon$ last, to ha+e rea!hed the eotional seat of the
tro"ble and restored profits to a reasonable rate# The !"re, howe+er, had
soe serio"s side effe!ts#
2n *renners +iew, the ain proble was that the 5 re+i+al had o!!"rred
priarily at the epense of its Hapanese and estern ?"ropean ri+als and
had done little to o+er!oe the "nderlyin$ o+er=!apa!ity and o+er=
prod"!tion in an"fa!t"rin$ whi!h ha"nted the $lobal e!onoy# This 0ero=
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s" nat"re of the re+i+al was probleati! for the 5nited tates itself# Eor
one thin$, the e+er slower $rowth of world deand, and in parti!"lar the
related intensifi!ation of international !opetition in an"fa!t"rin$ liited
the re+i+al there, too#
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sta$nation fro 1973 to 1993# The diffi!"lty arises fro the presen!e of
two o+erlappin$ ar$"ents; one in+ol+in$ the nat"re of the re+i+al, before
the f"ll dilation of the new e!onoy b"bble and the other, the ipa!t of
the b"bble on the re+i+al# -et "s eaine ea!h ar$"ent in t"rn#
2n his ?!onoi!s of Global T"rb"len!e, written before eC"ity pri!es went
thro"$h the roof at the end of the 199As, *renner epressed serio"sdo"bts abo"t whether the on$oin$ re+i+als of the 5 and world e!onoies
!onstit"ted a definiti+e trans!enden!e of the lon$ downt"rn# Je fo"nd little
e+iden!e of the %ind of syste=wide re!o+ery of profitability that wo"ld
ha+e si$nalled the o+er!oin$ of the se!"lar proble of an"fa!t"rin$
o+er=!apa!ity and o+er=prod"!tion# Je did a!%nowled$e that, in the wa%e
of the re+erse la0a .!!ord, the 5nited tates had eperien!ed an eport=
led boo whi!h !ontrib"ted s"bstantially to settin$ off ore rob"st eport
$rowth in both ?"rope and Hapan# This tenden!y held o"t the possibility
that the ad+an!ed !apitalist e!onoies are finally ready to follow a
ithian re!ipe of "t"ally self=reinfor!in$ $rowth thro"$h spe!iali0ation
and the $ains fro trade Je nonetheless went on to ar$"e that the
o"tbrea% of the ?ast .sian !risis of 199798 deonstrated the persisten!e,
or e+en a stren$thenin$, of the tenden!y towards o+er=prod"!tion and
o+er=!apa!ity#(33)
*renner also entioned the possible eer$en!e of another optiisti!
s!enario, whereby
the flood of low=pri!ed $oods !oin$ fro Hapan and the rest of .sia
wo"ld ainly ser+e # # # not so "!h to for!e down 5 prod"!ers
pri!es and profits as to red"!e their prod"!tion !osts, enhan!in$ their
!opetiti+eness, in!reasin$ their ar%"ps and sti"latin$ f"rther
!apital a!!""lation# They wo"ld, by the sae to%en, re+i+e the lo!al
e!onoies, a%in$ possible the $reater absorption of 5 iports#
Kopleentarity wo"ld, in other words, o+erride !opetition, settin$off a +irt"o"s "pward spiral, with the 5 p"llin$ alon$ the world
e!onoy toward a new boo#(3@)
:n balan!e, howe+er, *renner was s!epti!al abo"t the li%elihood that this
alternati+e s!enario !o"ld a!t"ally ateriali0e# Father, he epe!ted world
eports to $row ore rapidly than world ar%ets, perpet"atin$ and
ea!erbatin$ the lon$er=ter trend towards o+er=!apa!ity and o+er=
prod"!tion# 2n parti!"lar, he fo"nd it hard to belie+e that the radi!al
de+al"ation of .sian !"rren!iesespe!ially that of the yen, by soe @A per
!ent sin!e 199Bwo"ld not eer!ise an e!r"!iatin$ downward press"re on
5 an"fa!t"rers pri!es and profits#
2n this ore probable s!enario, red"ndant prod"!tion wo"ld yeta$ain "nderine the $ains fro trade and competition would end uptrumpin! complementarity# The a!!eleratin$ s"pply of world eportsin the fa!e of shrin%in$ ar%ets, far fro f"ellin$ 5 profits and
s"stainin$ the boo, wo"ld "nder!"t the and thereby the re!o+ery,
in this way !"ttin$ short a syste=wide se!"lar "pt"rn and ris%in$ a
serio"s new t"rn downward of the world e!onoy#(3B)
2n the two years followin$ the p"bli!ation of Global T"rb"len!e,
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s%yro!%etin$ 5 eC"ity pri!es and a propt re!o+ery of the world e!onoy
fro the ?ast .sian !risis i$ht ha+e seeed to in+alidate this pessiisti!
!on!l"sion# .ltho"$h the new e!onoy b"bble had already b"rst and
"!h of the hype s"rro"ndin$ the sharp 5 e!onoi! "pt"rn of the 199As
had waned before The Boom and the Bubblewas !opleted, two C"estionsreained open; first, how did the b"bble fit in the s!hee of thin$s laid o"t
in Global T"rb"len!eN .nd se!ond, how did its o!!"rren!e affe!t *renners
epe!tations for the f"t"re of the 5 and world e!onoiesN
2n answer to the first C"estion, *renner has no diffi!"lty in eplainin$ the
b"bble in ters of the "nintended, b"t !ertainly not "nwel!oe, effe!ts of
the re+erse la0a .!!ord on the one side, and the Eederal Feser+es
p"rposef"l n"rt"rin$ of risin$ eC"ity pri!es on the other# ?+en before 199B,
the re!o+ery of profitability in 5 an"fa!t"rin$ had translated into an
in!rease in sto!% pri!es# The re+erse la0a .!!ord aplified this in!rease
for forei$n in+estors by p"shin$ "p the +al"e of the dollar#
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also sensible and benefi!ial#(37)
The inr"sh of !apital "nleashed by the re+erse la0a .!!ord and the Eeds
easy !redit re$ie were ne!essary !onditions of the eC"ity=ar%et b"bble#
*"t the ain a!ti+e for!e in its dilation were 5 non=finan!ial
!orporations, whi!h eploited these !onditions to rat!het "p their
borrowin$ for the p"rpose of b"yin$ shares in !olossal C"antitieseither to
a!!oplish er$ers and a!C"isitions or to siply re=p"r!hase 4retire their
own o"tstandin$ eC"ities ?nterin$ "pon the $reatest wa+e of a!!""lation
of debt in their history, 5 !orporations p"ped "p share +al"es at
"npre!edented rates# in!e risin$ eC"ity pri!es, by pro+idin$ $rowin$
paper assets and thereby in!reased !ollateral, fa!ilitated still f"rther
borrowin$, the b"bble was enabled to s"stain itself, as well as to f"el the
stron$ !y!li!al "pt"rn already in pro$ress#(38)
Impact of the b#bble
This brin$s "s to o"r se!ond C"estion# Jow did the b"bble affe!t the re+i+al
already in pro$ressN Did it !han$e the !onditions of the "pt"rn to render
ore probable the eer$en!e of one of the optiisti! s!enarios abo"t
whi!h *renner had been so s!epti!al in Global T"rb"len!eN *renners
answer is that, by f"rther in!reasin$ international o+er=!apa!ity and o+er=
prod"!tion, the b"bble ade any s"!h o"t!oe e+en less li%ely# The
inflation of the paper +al"e of their assets, and the b"bble=ind"!ed wealth
effe!t on !ons"er deand, led !orporations to in+est well abo+e what
was warranted by their a!t"ally reali0ed profits# .s a res"lt, as soon as the
wealth effe!t !eased to s"bsidi0e prod"!ti+ity $rowth, in+estent and
!ons"er deand, firs # # # were bo"nd to s"ffer tr"ly e!r"!iatin$
downward press"re on their rates of ret"rn# 2ndeed, writin$ in id=AA1,
*renner already obser+ed the initial ipa!t on the 5 and world e!onoies
of the b"rst b"bble and the h"$e $l"t of prod"!ti+e !apa!ity left in itswa%eost notably, a disastro"s de!line in the non=finan!ial !orporate
profit rate, whi!h wiped o"t +irt"ally all of the $ains in profitability
a!hie+ed in the epansion of the 199As and a sharp !ontra!tion in !apital
a!!""lation#(39)
2n spe!"latin$ on how serio"s the ens"in$ downt"rn wo"ld be, *renner
rea!hes essentially the sae !on!l"sions he had !oe to fo"r years earlier
in Global T"rb"len!e# Je points o"t that the "nderlyin$ C"estion is still
whether the bi$ re!essions and !rises # # # that had p"n!t"ated the 199As,
as well as the rise of new ind"stries all a!ross the ad+an!ed !apitalist
world, had finally rid international an"fa!t"rin$ of its tenden!y to
red"ndant prod"!tion and ade for the # # # in!rease in !opleentaritythat was reC"ired to finally s"pport a dynai! international epansion :n
balan!e, he a$ain finds that no s"!h sha%eo"t had a!t"ally o!!"rred# :n
the !ontrary, in his /"d$eent the b"rstin$ of the b"bble left the 5
e!onoy wei$hed down by any of the sae sta$nationist for!es that
held ba!% the Hapanese e!onoy at the end of its b"bblethat is, boththe downward spiral set off by the b"bble=in=re+erse and an internationalan"fa!t"rin$ se!tor still !onstrained by o+er=!apa!ity and o+er=
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prod"!tion# .ltho"$h the 5 ay be in a position to a+oid the ban%in$
!risis that has !rippled Hapan, it nonetheless la!%s the enoro"s sa+in$s
and !"rrent=a!!o"nt s"rpl"ses that ha+e enabled Hapanso farto "ddle
thro"$h# 2t is therefore +"lnerable, not /"st to the destr"!ti+e red"!tions in
deand that wo"ld ens"e fro attepts to red"!e the h"$e indebtedness
of 5 !orporations and ho"seholds, b"t also to the possibility of
withdrawals of forei$n in+estent and !onseC"ent r"ns on the dollar#(@A)
5nder these !ir!"stan!es, the 5nited tates is ore li%ely to lead the
world e!onoy into a self=reinfor!in$ re!ession than a re!o+ery# 2n a sense,
s"!h a re!ession wo"ld !onstit"te a !ontin"ation of the international !risis
of 199798, whi!h was teporarily postponed by the last phase of the 5
sto!% ar%et r"n="p b"t ne+er f"lly resol+ed# .s in that earlier !risis, ?ast
.sia will on!e a$ain pro+e the worlds powder %e$, with assi+e o+er=
!apa!ity in Hapan and elsewhere in the re$ion eer!isin$ a stron$
downward press"re on profitability, lo!ally and $lobally# (@1) r"dently,
*renner does not !oit hiself to any parti!"lar s!enario# *"t the
o+erwhelin$ ipression with whi!h we are left is that the lon$ downt"rn
is far fro o+er indeed, that the worst is yet to !oe#
II. LONG DOWNTURN IN WORLD-HISTORICAL
PERSPECTIVE
e are all in debt to *renner for pro+idin$ a systeati! analysis of $lobal
t"rb"len!e whi!h !ontrasts sharply with the pre+ailin$ iedia!y and
s"perfi!iality of eistin$ a!!o"nts of the relationship between the 5nited
tates and the world e!onoy o+er the past half=!ent"ry# 2 !annot thin% of
a better startin$ point fro whi!h to "nra+el the !opleities of that
relationship# .t the sae tie, we sho"ld not be s"rprised if an analysis ofthis s!ope raises ore C"estions than it !an resol+e# -et "s see what these
C"estions are and in whi!h dire!tions we sho"ld loo% in order to pro+ide
soe answers#
The !entral thesis "nderlyin$ all *renners !ontentions is that the
persisten!e of relati+e sta$nation in the world e!onoy at lar$e o+er the
last thirty years has been d"e to too little eit and too "!h entrytoo
little and too "!h, that is, relati+e to what wo"ld be reC"ired in order to
restore profitability in an"fa!t"rin$ to the le+el it had attained d"rin$ the
lon$ boo of the 19BAs and 196As# .s we ha+e seen, *renner tra!es this
tenden!y to the "t"ally reinfor!in$ a!tion of the beha+io"r of hi$her=!ost
in!"bent firs and the poli!ies of the $o+ernents of the worlds threelar$est e!onoies# .s a res"lt of this !obination, ea!h of these three, and
the world e!onoy at lar$e, were pre+ented fro p"r$in$ s"perfl"o"s,
hi$h=!ost eans of prod"!tion by the standard capitalist methods ofban%r"pt!y, downsi0in$, and layoffs#
Ji$her !ostOlower profit firs were th"s able to lon$ o!!"py
e!onoi! positions that !o"ld, in the abstra!t, e+ent"ally ha+e been
ass"ed by ore prod"!ti+e, hi$her profit, and ore dynai!
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enterprises# *"t allowin$ the less prod"!ti+e, less profitable firs to
$o o"t of b"siness by lettin! the business cycle ta"e its naturalcourse wo"ld +ery li%ely ha+e t"rned the lon$ downt"rn, with itsrelati+ely serio"s b"t nonetheless liited re!essions, into outri!htdepressioniply p"t, the pre!ondition for restorin$ the syste tohealth was a debt=deflation, leadin$ to what in$do for the 5nited tates as the leadin$
!o"ntry, and the 5 and Gerany for Gerany and Hapan as the la$$ards,
*renners interpretation of the late=twentieth=!ent"ry lon$ downt"rn !an
eC"ally well be applied to that of the late nineteenth !ent"ry#
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Differen!es between the two lon$ downt"rns were, in %ey respe!ts, e+en
ore iportant than siilarities, as we shall see# Pet, fa!ed with a
sit"ation of intensifyin$ !opetition !oparable to that of the late
twentieth !ent"ry, world !apitalis in the late nineteenth !ent"ry
eperien!ed relati+e sta$nation for ore than twenty yearswith plenty of
lo!al or short=li+ed !rises and re!essions, b"t witho"t the %ind of syste=
wide sha%eo"t whi!h, a!!ordin$ to *renner, is the standard !apitalist
ethod of restorin$ profitability# 2n an"fa!t"rin$, in parti!"lar, there
!ontin"ed to be too "!h entry and too little eit, as well as a/or
te!hnolo$i!al and or$ani0ational inno+ations whi!h intensified rather than
alle+iated !opetiti+e press"res syste=wide#(@B) .nd yet, in spite of the
absen!e of a syste=wide sha%eo"t, in the !losin$ years of the !ent"ry
profitability was restored, $eneratin$ the "pt"rn of the ?dwardian bellepoque#
.s ar$"ed in detail elsewhere, and f"rther spe!ified in a later se!tion of this
arti!le, this "pt"rn !an be tra!ed to a response to syste=wide
intensifi!ations of !opetition that has !hara!teri0ed world !apitalis fro
its earliest, pre=ind"strial be$innin$s ri$ht "p to the present# This response
!onsists of a syste=wide tenden!y, !entred on the leadin$ !apitalist
e!onoy of the epo!h, towards the finan!iali0ation of pro!esses of !apital
a!!""lation# 2nte$ral to the transforation of inter=!apitalist !opetition
fro a positi+e= into a ne$ati+e=s" $ae, this tenden!y has also a!ted as
a %ey e!hanis for restorin$ profitability, at least teporarily, in the
de!linin$ b"t still he$eoni! !entres of world !apitalis# Ero this
standpoint we !an dete!t reseblan!es, not /"st between the $reat
depression of 187396 and the lon$ downt"rn of 197393, b"t also
between the ?dwardian belle poque and the 5 e!onoi! re+i+al and$reat e"phoria of the 199As#(@6)
hile a +erdi!t on the e+ent"al o"t!oe of the 199As re+i+al i$ht be
preat"re, we %now that the ?dwardian belle poque ended in the!atastrophes of two world wars and the inter+enin$ $lobal e!onoi! !rash
of the 193As# This !ollapse is, in fa!t, the only o!!"rren!e of the last
!ent"ry and a half that !orresponds to *renners ia$e of a syste=wide
sha%eo"t or o"tri$ht depression# 2f this is indeed what is si$nified by
*renners ia$e, we "st !on!l"de that s"!h a sha%eo"t appears to ha+e
been an e!eptional o!!"rren!e rather than the standard or nat"ral
!apitalist ethod of restorin$ profitability# hat has re!"rred th"s far is the
tenden!y for "ne+en de+elopent, in *renners sense, to $enerate a lon$
boo, followed by a lon$ period of intensifyin$ !opetition, red"!ed
profitability and !oparati+e sta$nation itself followed by an "pt"rn ofprofitability, based on a finan!ial epansion !entred on the epo!hs leadin$
e!onoy# The one and only systei! brea%down of the last 1BA years has
o!!"rred in the transition fro the first to the se!ond ro"nd of "ne+en
de+elopent#
.ontra"ted tra4ectorie"
The C"estion then arises of whether a !oparable brea%down is now in the
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a%in$, and whether s"!h an o!!"rren!e is as f"ndaental a !ondition for
the re+itali0ation of the $lobal e!onoy as *renner sees to thin%# 2n
order to answer this C"estion, we "st hi$hli$ht not /"st the siilarities
b"t also the differen!es between the two lon$ downt"rnswhi!h are,
indeed, eC"ally stri%in$# .ltho"$h both downt"rns were !hara!teri0ed by an
es!alation of !opetiti+e str"$$les, these "nfolded alon$ radi!ally different
paths# .s pre+io"sly noted, in 187396 the ain for of inter=enterprise
!opetition was a pri!e war, res"ltin$ in the ost drasti! deflation in the
eory of an# Klosely related to this tenden!y, the $o+ernents of the
ain !apitalist !o"ntries s"b/e!ted their !"rren!ies to the self=re$"latin$
e!haniss of a etalli! standard, thereby s"rrenderin$ de+al"ation and
re+al"ation as a eans of !opetiti+e str"$$le#
2n!reasin$ly, howe+er, $o+ernents be!ae a!ti+e s"pporters of their
doesti! ind"stries thro"$h prote!tionist and er!antilist pra!ti!es,
in!l"din$ the !onstr"!tion of o+erseas !olonial epiresthereby
"nderinin$ the "nity of the world ar%et# .ltho"$h *ritain !ontin"ed to
pra!ti!e free trade "nilaterally, it also reained in the +an$"ard of
territorial epansion and epire b"ildin$ o+erseas# Ero the 188As, this
tra/e!tory of intensifyin$ interstate !opetition in o+erseas=epire b"ildin$
translated into the es!alation of the araents ra!e aon$ risin$ and
de!linin$ !apitalist powers, whi!h e+ent"ally !ae to a head in the Eirst
orld ar# .ltho"$h *ritain was an a!ti+e parti!ipant in this s!rable, it
!ontin"ed to pro+ide the world e!onoy with !apital thro"$h two a/or
wa+es of o+erseas in+estentin the 188As and in the 19AAswhi!h
in!l"ded po"rin$ si$nifi!ant f"nds into the 5nited tates#
2n all these respe!ts, the !opetiti+e str"$$le d"rin$ the late twentieth
!ent"rys lon$ downt"rn "nfolded alon$ a radi!ally different path# D"rin$
the 197As, in parti!"lar, !oodity pri!es $enerally rose rather than fell, in
what was probably one of the $reatest syste=wide inflations in a tie of
pea!e# .ltho"$h inflationary press"res were !ontained in the 198As and
199As, pri!es !ontin"ed to rise thro"$ho"t the downt"rn# .t its o"tset, the
last ten"o"s lin% between onetary !ir!"lation and a etalli! standard
the $olddollar e!han$e rate established at *retton oodswas se+ered
and ne+er a$ain restored# .s *renner "nders!ores, the $o+ernents of the
ain !apitalist !o"ntries were th"s in a position to "se the de+al"ation and
re+al"ation of !"rren!ies as a eans of !opetiti+e str"$$le# .nd while
they did so systeati!ally, they nonetheless !ontin"ed to proote the
inte$ration of the world ar%et thro"$h a series of ne$otiations whi!h
f"rther liberali0ed $lobal trade and in+estent, e+ent"ally res"ltin$ in the
foration of the orld Trade :r$ani0ation#
Ear fro bein$ "nderined, the "nity of the world ar%et was th"s f"rther
!onsolidated d"rin$ this period# or was there any si$n of an araent
ra!e aon$ risin$ and de!linin$ !apitalist powers# :n the !ontrary, after
the final es!alation of the Kold ar ars b"ild="p in the 198As, $lobal
ilitary !apabilities be!ae e+en ore !entrali0ed in the hands of the
5nited tates than they had been pre+io"sly# .t the sae tie, instead of
pro+idin$ !apital to the rest of the world e!onoy, as *ritain had
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thro"$ho"t the nineteenth=!ent"ry downt"rn and finan!ial epansion, sin!e
the 198As the 5nited tates has been absorbin$ !apital at histori!ally
"npre!edented rates, as *renner hiself notes#
2n all these respe!ts, the tra/e!tory of the !opetiti+e str"$$le in the latest
lon$ downt"rn differs radi!ally fro the pre+io"s one# Jow !an we a!!o"nt
for this !obination of siilarities and differen!es between the two, andwhat new li$ht does this %ind of !oparison throw on *renners analysis of
$lobal t"rb"len!e o+er the last thirty yearsN 2n dealin$ with these iss"es, 2
will fo!"s on the three ain short!oin$s of *renners ar$"ent# The first
!on!erns labo"r!apital relations the se!ond, so=!alled ortho"th
relations and the third, inter=!apitalist !opetition itself# -et e deal with
ea!h in t"rn#
A+ 1#tflanking Labo#r Re"i"tance
2n Global T"rb"len!e and, to a lesser etent, The Boom and the Bubble,*renner presents his a!!o"nt of the lon$ downt"rn as a !ritiC"e of what he
!alls s"pply=side theories of !apitalist !rises# .d+an!ed in +ario"s fors by
-eft and Fi$ht ali%e, these !ontend that, by the 196As, labo"r had a!C"ired
a le+era$e in the wealthier !apitalist !o"ntries s"ffi!ient to sC"ee0e profits
and thereby "nderine the e!haniss of !apitalist a!!""lation# hile
a!%nowled$in$ that labo"r ay indeed be in s"!h a position lo!ally and
teporarily, *renner finds it in!on!ei+able that it !an wield the power
ne!essary to pro+o%e a lon$=ter, syste=wide downt"rn#
-abo"r !annot, as a r"le, brin$ abo"t a teporally etended,
systei! downt"rn be!a"se, as a r"le, what i$ht be !alled the
potential sphere of in+estent for !apital in any line of prod"!tion
$enerally etends beyond the labo"r ar%et that is affe!ted by
"nions andOor politi!al parties or is re$"lated by nors, +al"es, and
instit"tions s"pported by the state# o firs !an $enerally !ir!"+entand thereby "nderine the instit"tionali0ed stren$th of wor%ers at
any $i+en point by in+estin$ where wor%ers la!% the !apa!ity to
resist# 2ndeed, they "st do so, or they will find thesel+es
o"tflan%ed and !opetiti+ely defeated by other !apitalists who will#
(@7)
2t follows that, as *renner p"ts it, +erti!al press"re on !apital, fro below
that is, fro labo"r!o"ld not and did not brin$ abo"t the spatially
$enerali0ed and teporally etended sC"ee0e on profits that "nderlies the
lon$ downt"rn# :nly hori0ontal press"re fro inter=!apitalist !opetition
!o"ld do so#(@8)
This hypothesis is based on the ass"ption that there is in fa!t !heaperlabo"r that !an be !obined with eans of prod"!tion ebodyin$
soethin$ li%e the !"rrent le+el of te!hnolo$y witho"t loss of effi!ien!y
4that is, at lower "nit !ost .!!ordin$ to *renner, this ass"ption is
/"stified for two reasons# Eirst, labo"r for!es in re$ions with lon$ histories
of e!onoi! de+elopent tend to re!ei+e wa$es that are s"bstantially
hi$her than !an be eplained siply by referen!e to their relati+e le+el of
prod"!ti+eness and se!ond, o+er siilarly etended tie periods,
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te!hni!al !han$e tends to red"!e the s%ill reC"ired to prod"!e any $i+en
array of prod"!ts, with the res"lt that the labo"r for!e that !an a%e those
prod"!ts witho"t loss of effi!ien!y is !ontin"ally enlar$ed, and the wa$e
reC"ired to pay it !orrespondin$ly red"!ed#(@9)
2n short, for histori!al reasons whi!h *renner does not eplore, labo"r
for!es in ad+an!ed !apitalist !o"ntries ha+e se!"red rewards for effort farhi$her than warranted by their prod"!ti+ity# This in itself a%es the
+"lnerable to the !opetition of labo"r for!es thatfor eC"ally "neplored
histori!al reasonswor% for wa$es lower than their a!t"al or potential
prod"!ti+ity i$ht warrant# .t the sae tie, te!hni!al !han$e !ontin"ally
enlar$es this $lobal pool of "nderpaid wor%ers, or wo"ld=be wor%ers, who
!an be obili0ed to o"tflan% the press"re on profitability !oin$ fro
o+erpaid labo"r# The only press"re on profitability that !apitalists !annot
o"tflan% is that whi!h !oes fro the !opetition of other !apitalists#
There are two ain probles with this ar$"ent# Eirstly, it wo"ld appear to
be lo$i!ally in!onsistent sin!e it !lais that, in the past, wor%ers in the
ad+an!ed !apitalist !o"ntries had been able to $ain $reater rewards thanwarranted by their prod"!ti+ity, in !ontradi!tion to the theoreti!al !lai
that any attept to do so wo"ld pri!e the o"t of the world ar%et# 2n
addition, the ar$"ent o+erestiates the ease with whi!h, in the present
no less than in the past, !heaper labo"r s"pplies !an be obili0ed to
o"tflan% ore epensi+e ones# -et "s !larify these probles by loo%in$
on!e a$ain at the histori!al re!ord#
5ori'ontal v" vertical6
.n analysis of the lon$ downt"rn of 187396 pro+ides stron$ e+iden!e both
for and a$ainst *renners thesis on the predoinan!e of hori0ontal 4inter=
!apitalist o+er +erti!al 4labo"r=!apital relations, in brin$in$ abo"t a lon$=
ter and $enerali0ed sC"ee0e on profits# 2n s"pport of *renners ar$"ent,
it !o"ld be pointed o"t that intense labo"r!apital !onfli!tseither in the
for of s"stained stri%e a!ti+ity, as in *ritain and the 5nited tates, or in
the for of wor%in$=!lass party foration, as in Gerany and elsewhere
followed rather than pre!eded the onset of the lon$ downt"rn inprofitability# There !an be little do"bt that intense inter=!apitalist
!opetition, in the for of a relentless pri!e war, was the ain, and prior,
dri+in$ for!e for the s"bstantial in!rease in real wa$es that o!!"rred d"rin$
the lon$ downt"rn, espe!ially in *ritain# 2t is also pla"sible to ass"e that
risin$ real wa$es at hoe were at least in part responsible for the eplosi+e
$rowth of *ritish o+erseas in+estent in the 188As# *renners ar$"ent for
the late twentieth !ent"ry th"s fits %ey feat"res of the late=nineteenth=
!ent"ry eperien!e# The fit, howe+er, is far fro perfe!t#
.ltho"$h inter=!apitalist !opetition was "ndo"btedly the priary for!e
sC"ee0in$ profitability and p"shin$ "p real wa$es thro"$h drasti! pri!e
deflation, did not wor%ers resistan!e in the for of in!reasin$ stri%e
a!ti+ity and !lass=based or$ani0ation !ontrib"te in a a/or way to that
o"t!oe, by pre+entin$ noinal wa$es fro de!reasin$ as rapidly as
pri!esN .nd did not this resistan!e itself affe!t the tra/e!tory of inter=
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!apitalist !opetition by stren$thenin$ the tenden!y, not /"st towards the
eport of !apital fro *ritain and the iport of labo"r to the 5nited tates,
b"t also towards the politi!i0ation of that !opetition, thro"$h a re+i+al of
neo=er!antilist pra!ti!es and o+erseas epire=b"ildin$ on an
"npre!edented s!aleN hate+er the ea!t answer to these C"estions,
*renners hard and fast distin!tion between hori0ontal and +erti!al !onfli!ts,
and his a priorie!l"sion of the latter as a possible !ontrib"tin$ fa!tor to$eneral and persistent downt"rns in profitability, are ill=s"ited to "nra+el
the !ople histori!al intera!tion between the two %inds of !onfli!ts#(BA)
iilarly, *renners !ontention !on!ernin$ the ine+itable o"tflan%in$ of
wor%ers le+era$e in !ore !apitalist !o"ntries thro"$h international fa!tor
obility i$nores %ey aspe!ts of how that obility a!t"ally f"n!tioned d"rin$
the earlier lon$ downt"rn#
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ind"striali0ation and oderni0ation of the states that fell "nder their
!ontrol# This ori$inated in Kontinental ?"rope, ost notably in Gerany,
b"t ass"ed its ideal=typi!al for in the 5F#(B3)
The !o"rse of str"$$le alon$ both paths was f"ndaentally shaped by the
two world wars# ?a!h of these was !hara!teri0ed by a siilar pattern; o+ert
labo"r ilitan!y rose on the e+e of both wars, de!lined teporarily d"rin$the !onfli!ts thesel+es, and then eploded in their afterath# The F"ssian
Fe+ol"tion too% pla!e d"rin$ the Eirst orld ars wa+e of labo"r ilitan!y,
while that of the e!ond orld ar saw the spread of Ko"nist re$ies
to ?astern ?"rope, Khina, orth >orea and Vietna# 2t was in this !ontet
of es!alatin$ labo"r ilitan!y in the !ore, and ad+an!in$ re+ol"tion in
peripheral and sei=peripheral re$ions, that the so!ial paraeters of the
5 post=war world order were established#(B@) Th"s the for and intensity
of inter=!apitalist !opetitionthat is, inter=iperialist ri+alries and world
warsshaped the for and intensity of wor%ers str"$$les d"rin$ this
period# e+ertheless, the feedba!% of these str"$$les on the tra/e!tory of
inter=!apitalist !onfli!ts was e+en ore powerf"l in the first half of the
twentieth !ent"ry than it had been d"rin$ the lon$ downt"rn of 187396#
2ndeed, witho"t s"!h intera!tion, the establishent at the end of the
e!ond orld ar of what .ristide Qolber$ has !alled a labo"r friendly
international re$ie wo"ld be hard to eplain#(BB)
.lon$ with the 5=sponsored re!onstit"tion of the world ar%et on new
and ore solid fo"ndations, this re$ie !reated the instit"tional !onditions
for the syste=wide re+i+al of profitability that "nderlay the lon$ boo of
the 19BAs and 196As# 2 ha+e no parti!"lar disa$reeent with *renners
!ontention that "ne+en de+elopent, in his sense of the ter, was a %ey
deterinant of the boo and of the lon$ downt"rn that followed# *"t his
insisten!e that labo"r!apital !onfli!ts played no si$nifi!ant role in the
etent, len$th and shape of this downt"rn sees e+en less warranted than
for earlier !oparable periods#
.la"" conflict"
-et "s be$in by notin$ that, in the late twentieth !ent"ry, wor%ers
str"$$les played a far ore pro=a!ti+e role +is=I=+is inter=!apitalist
!opetition than they did in the late nineteenth !ent"ry# hereas in the
earlier period the intensifi!ation of labo"r!apital !onfli!ts, and the ost
si$nifi!ant in!reases in real wa$es, followed the onset of the downt"rn, inthe se!ond half of the twentieth !ent"ry they preceded it# 2n ar$"in$ his!ase a$ainst the role of wor%ers le+era$e in brin$in$ abo"t a syste=wide
and persistent sC"ee0e on profits, *renner fo!"ses alost e!l"si+ely on
the !ontainent of wor%ers power in the 5nited tates in the late 19BAs
and early 196As; sin!e this o!!"rred before the !risis of profitability, he
ar$"es, the !risis !o"ld not be d"e to wor%ers press"res# (B6)
5nfort"nately, this narrow fo!"s on the sin$le tree of a short=ter and
lo!al episode of !lass !onfli!t pre+ents *renner fro seein$ the forest of
the multinational risin$ tide of !onfli!ts o+er wa$es and wor%in$ !onditionswhi!h, between 1968 and 1973, !"linated in what ?# J# helps *rown
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aptly !alled the pay eplosion#(B7) Koin$ in the wa%e of twenty years of
risin$ real wa$es in the !ore re$ions of the world e!onoy, and at a tie of
intensifyin$ inter=!apitalist !opetition worldwide, this pay eplosion did
not erely eer!ise a syste=wide downward press"re on profitability, as
any ha+e ephasi0ed# (B8)
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lar$ely had been at the onset of the late=nineteenth=!ent"ry downt"rn#
(6) :n the !ontrary, it was si$nifi!ant eno"$h to a%e its own
independent !ontrib"tion, not /"st to the sC"ee0e of profitability that
"nderlay the transition, b"t also towards la"n!hin$ the downt"rn alon$ an
inflationary rather than deflationary path# This does not ean that inter=
!apitalist !opetition was not also at wor% in sC"ee0in$ profits, nor that
wor%ers and their so!ial power benefited fro the inflationary nat"re of the
downt"rnthey !learly did not# .ll it eans is that *renners odelnear=
absol"te predoinan!e of inter=!apitalist !opetition o+er labo"r!apital
!onfli!tsfits the latest lon$ downt"rn e+en less than it did the pre+io"s
one#
Limit" to capital migration
. !loser eaination of the effe!ts of !apital obility on labo"r le+era$e
pro+ides f"rther e+iden!e for s"!h an assessent# 2n the 197As, in
parti!"lar, there was indeed a stron$ tenden!y for !apital, in!l"din$
ind"strial !apital, to i$rate to lower=in!oe, lower=wa$e !o"ntries#
e+ertheless, as *e+erly il+er has do!"ented in $reat detail, therelo!ation of ind"strial a!ti+ities fro ri!her to poorer !o"ntries has ore
often than not led to the eer$en!e of stron$, new labo"r o+eents in
the lower=wa$e sites of in+estent, rather than an "nabi$"o"s ra!e to
the botto .ltho"$h !orporations were initially attra!ted to Third orld
sites*ra0il, o"th .fri!a, o"th >oreabe!a"se they appeared to offer a
!heap and do!ile labo"r for!e, the s"bseC"ent epansion of !apital
intensi+e, ass=prod"!tion ind"stries !reated new and ilitant wor%in$
!lasses with si$nifi!ant disr"pti+e power# This tenden!y was already in
e+iden!e in the late nineteenth and early twentieth !ent"ries in tetiles, the
!hief ind"stry of *ritish !apitalis# *"t it has been far stron$er in the
leadin$ ind"stries of 5 !apitalis, s"!h as a"toobiles#(63)
Th"s, !apitalist attepts to o"tflan% labo"r press"res on profitability
thro"$h ind"strial relo!ation tended to depri+e !apital of the !onsiderable
benefits asso!iated with prod"!in$ !lose to the wealthier ar%ets and in
safer politi!al en+ironents, witho"t a!t"ally pro+idin$ any of the
epe!ted benefits of ab"ndant low=wa$ed and easy=to=dis!ipline labo"r
s"pplies# .!tin$ in !on/"n!tion with other fa!tors that will be dis!"ssed in
the net two se!tions, this tenden!y ade its own !ontrib"tion to the
assi+e redire!tion of transnational !apital flows in the 198As, fro low=
and iddle=in!oe destinations to the 5nited tates# .$ain, 2 a not
denyin$ that ind"strial relo!ation helped to "nderine wor%ers le+era$e in
the !o"ntries that eperien!ed the $reatest net o"tflow of !apital# 2 asiply sayin$ that, $enerally spea%in$, it tended to ba!%fire on profitability
and, in so far as the 5nited tates was !on!erned, the net o"tflow soon
t"rned into a h"$e net inflow# 2f labo"rs le+era$e de!lined in the !o"rse of
the lon$ downt"rn, as it !ertainly did, !apital obility is not a +ery
!on+in!in$ eplanation#
-abo"r i$ration does not pro+ide a +ery pla"sible eplanation either# 2t is
tr"e that labo"r i$ration o+er the last thirty years has !oe
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predoinantly fro poor !o"ntries, to a far $reater etent than in the late
nineteenth !ent"rythereby !onstit"tin$ a $reater !opetiti+e threat for
wor%ers in the wealthier ind"strial !entres# e+ertheless, in the late
twentieth !ent"ry the !apa!ity of wor%ers in the ri!her !o"ntries to forestall
!opetition fro ii$rant labo"r for!es 4often thro"$h adheren!e to
ra!ist ideolo$ies and pra!ti!es has been far $reater#(6@)
2n s", *renners ar$"ent for the absol"te predoinan!e of inter=
!apitalist !opetition o+er labo"r!apital str"$$les in deterinin$ syste=
wide and persistent !ontra!tions in profitability isses the !ople
histori!al intera!tion between hori0ontal and +erti!al !onfli!ts# .ltho"$h,
world histori!ally, inter=!apitalist !opetition has indeed been the
predoinant infl"en!epro+ided that we in!l"de inter=!apitalist wars
aon$ the ost iportant fors of that !opetitionlabo"r!apital
!onfli!ts were ne+er erely a dependent +ariable, abo+e all on the e+e
and in the early sta$es of the latest lon$ downt"rn# (6B) ot only did
!onfli!ts o+er wa$es and wor%in$ !onditions in !ore re$ions !ontrib"te to
the initial sC"ee0e on profitability in the !r"!ial 196873 period ore
iportantly, they for!ed the r"lin$ $ro"ps of !ore !apitalist !o"ntries to
!hoose an inflationary rather than a deflationary strate$y of !risis
ana$eent#
To p"t it bl"ntly; by the end of the lon$ post=war boo, the le+era$e of
labo"r in !ore re$ions was s"ffi!ient to a%e any attept to roll it ba!%
thro"$h a serio"s deflation far too ris%y, in so!ial and politi!al ters# .n
inflationary strate$y, in !ontrast, proised to o"tflan% wor%ers power far
ore effe!ti+ely than international fa!tor obility !o"ld# 2t was, indeed, the
$reat sta$nation=!"=inflation of the 197Assta$flation as it was !alled at
the tieand its effe!ts on inter=!apitalist !opetition and labo"r!apital
relations, that effe!ti+ely wore down wor%ers power in the !ore, openin$
the way for its !ollapse "nder the ipa!t of the Fea$anThat!her
!o"nterre+ol"tion# 2n order to !apt"re the f"ll si$nifi!an!e of this
de+elopent and its ipa!t on the s"bseC"ent tra/e!tory of the lon$
downt"rn, howe+er, it is not eno"$h to fo!"s on labo"r!apital relations#
?+en ore iportant were ortho"th relations, to whi!h we now t"rn#
+ )o#thern /7po"#re
2n his !ritiC"e of s"pply=side theorists, *renner !ontrasts their disposition
to +iew the world e!onoy as the ere s" of its national !oponents
with his own attept to see systei! pro!esses as ha+in$ a lo$i! of their
own#
(T)he ephasis of the s"pply=side theorists on instit"tions, poli!y and
power has led the to frae their analyses too hea+ily on a !o"ntry=
by=!o"ntry basis, in ters of national states and national e!onoies
to +iew the international e!onoy as a sort of spill=o+er of national
ones and to see systei! e!onoi! probles as stein$ fro an
a$$loeration of lo!al ones# 2n !ontrast, 2 shall ta%e the international
e!onoythe capital accumulation and profitability of the system asa wholeas a theoreti!al +anta$e point fro whi!h to analyse its
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!rises and those of its national !oponents#(66)
-a"dable as this intent is, *renners analysis falls short of its proise# 2n
The Boom and the Bubble, as in Global T"rb"len!e, he fo!"ses aloste!l"si+ely on three national statesOe!onoies 4the 5nited tates, Hapan
and Gerany and their "t"al relations, with o!!asional referen!es to
other estern ?"ropean !o"ntries and the ira!le e!onoies of ?ast .sia#
Khina appears only fleetin$ly towards the end of Global T"rb"len!e and in
little ore detail in the !losin$ pa$es of The Boom and the Bubble# The +asta/ority of the worlds states and the b"l% of its pop"lation ha+e,
apparently, no bearin$ on the f"n!tionin$ of *renners world e!onoy#
*renner adits that !on!entratin$ on three !o"ntries does introd"!e
distortions *"t witho"t spe!ifyin$ what these distortions are, he $oes on to
/"stify his narrow fo!"s on three $ro"nds# Eirst, in 19BA, the 5, Geran
and Hapanese e!onoies ta%en to$ether a!!o"nted for 6A per !ent of the
o"tp"t 4in ters of p"r!hasin$ power parities of the se+enteen leadin$
!apitalist e!onoies and by 199@ that fi$"re had risen to 66 per !ent#
e!ond, ea!h of the three e!onoies stood # # # at the h"b of $reatre$ional blo!s, whi!h they effe!ti+ely dynai0ed and doinated# .nd
finally, the intera!tion aon$ these three e!onoies was # # # one of the
%eys to the e+ol"tion of the ad+an!ed !apitalist world thro"$ho"t the
postwar period#(67)
These preises are C"estionable on two $ro"nds# The !obined wei$ht of
the three e!onoies in C"estion is indeed !onsiderable, tho"$h soewhat
less than *renners so"r!es s"$$est# (68) e+ertheless, their !obined
share of +al"e added in an"fa!t"rin$the bran!h of a!ti+ities on whi!h
*renner !on!entrateshas de!lined si$nifi!antly in the !o"rse of the lon$
downt"rn# The fall has been lar$ely d"e to the rapid ind"striali0ation of
any !o"ntries of the worlds o"thwhat .li!e .sden has !alled TheFise of the &Fest'#(69)
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and Khina# The !risis of profitability that ar%ed the transition fro the
lon$ boo to the lon$ downt"rn, as well as the $reat sta$flation of the
197As, were thesel+es deeply affe!ted by the parallel !risis of .eri!an
he$eony whi!h ens"ed fro the es!alation of the Vietna war and the
e+ent"al 5 defeat# .s for the Fea$anThat!her neoliberal
!o"nterre+ol"tion, it was not /"st, or e+en priarily, a response to the
"nsol+ed !risis of profitability, b"t alsoand espe!iallya response to the
deepenin$ !risis of he$eony# .ll alon$, the tra/e!tories of inter=!apitalist
!opetition and the intera!tion aon$ the worlds three lar$est e!onoies
were shaped by the broader politi!al !ontet# The alost !oplete absen!e
of world politi!s fro *renners story prod"!es not only distortions b"t
indeterinateness as well#
Konsider the !onneion between the !risis of profitability of the late 196As
and early 197As and the !onteporaneo"s brea%down of the $olddollar
e!han$e standard# .s we ha+e seen, *renner ipli!itly a!%nowled$es that
politi!al !osts played a role in the abandonent of $old, b"t nonetheless
"pholds the thesis that its priary deterinant was the !opetiti+e
str"$$le between .eri!an an"fa!t"rers and their Geran and Hapanese
ri+als# e ha+e already !riti!i0ed this ar$"ent for i$norin$ the relati+ely
a"tonoo"s role that wor%ers le+era$e played in the !risis# e+ertheless,
the ost iportant deterinant was neither inter=!apitalist !opetition nor
labo"r!apital relations b"t the dire!t and, espe!ially, the indire!t effe!ts of
the es!alation of the Vietna ar on the 5 balan!e of payents#
.ltho"$h Vietna is !onspi!"o"s for its absen!e in *renners story, these
effe!ts do !reep in on a few o!!asions# Th"s, stepped="p Vietna ar
spendin$ is said to be the reason for the s"dden a!!eleration of pri!e
inflation in the 5nited tates whi!h, between 196B and 1973, slowed down
b"t did not stop the $rowth of real wa$es# This a!!eleration of inflation, in
t"rn, is held responsible for the wea%enin$ of the !opetiti+e position of.eri!an an"fa!t"rers, both at hoe and abroad, +is=I=+is their Geran
and Hapanese ri+als in the sae period#(71)
These !as"al obser+ations show that e+en *renner is for!ed to
a!%nowled$e that, behind the intensifi!ation of !opetition between 5
and forei$n an"fa!t"rers, and the +a$aries of labo"r!apital !onfli!ts in
the 5nited tates and elsewhere, there l"r%s an einently systei! b"t
politi!al +ariable, whi!h his resear!h desi$n has r"led o"t of !onsideration#
This l"r%in$ +ariable is the power str"$$le in whi!h the 5 $o+ernent
so"$ht to !ontain, thro"$h the "se of for!e, the /oint !hallen$e of
nationalis and !o"nis in the Third orld# .s the es!alation of the
war in Vietna failed to brea% the ba!% of Vietnaese resistan!e, andpro+o%ed instead widespread opposition to the war in the 5nited tates
itself, this str"$$le rea!hed its !lia in the sae years as the !risis of
profitability# .s 2 ha+e ar$"ed elsewhere, the !osts of the warin!l"din$
those pro$raes aied at stein$ the tide of doesti! oppositionnot
only !ontrib"ted to the profit sC"ee0e, b"t were the ost f"ndaental
!a"se of the !ollapse of the *retton oods re$ie of fied e!han$e rates
and the assi+e de+al"ation of the 5 dollar that ens"ed#(7)
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Nadir of () hegemon$
.s *renner aintains, the dollar de+al"ation of 196973 did help the
5nited tates to foist the b"rden of the profitability !risis onto Gerany
and Hapan and !he!% the press"re of risin$ oney wa$es on profits at
hoe# *"t 2 wo"ld ar$"e that this redistrib"tion of the b"rden was lar$ely a
by=prod"!t of poli!ies aied priarily at freein$ the 5 $o+ernentsstr"$$le for doinan!e in the Third orld fro onetary !onstraints# .t
least initially, the liC"idation of the $olddollar e!han$e standard did see
to endow the 5 $o+ernent with an "npre!edented freedo of a!tion in
tappin$ the reso"r!es of the rest of the world siply by iss"in$ its own
!"rren!y#(73) Jowe+er, this free hand !o"ld not pre+ent the defeat of the
5nited tates in Vietna nor stop the pre!ipito"s de!line of .eri!an
presti$e in its wa%e# 2ndeed, if anythin$, it worsened that de!line by
pro+o%in$ a worldwide inflationary spiral whi!h threatened to destroy the
entire 5 !redit str"!t"re and the worldwide networ%s of !apital
a!!""lation on whi!h .eri!an wealth and power had be!oe ore
dependent than e+er before#(7@)The de!line of 5 power and presti$e rea!hed its nadir in the late 197As
with the 2ranian Fe+ol"tion, a new hi%e in oil pri!es, the o+iet in+asion of
.f$hanistan and another serio"s !risis of !onfiden!e in the 5 dollar#
*renner hardly entions this deepenin$ !risis of 5 he$eony as the
!ontet in whi!h, between 1979 and 198, the onetary poli!ies of the 5
$o+ernent !han$ed fro "ltra laity to etree ti$htness# Je does tra!e
the swit!h to a de+astatin$ r"n on the 5 !"rren!y that threatened the
dollars position as an international reser+e !"rren!y# *"t he has no
satisfa!tory eplanation for the fli$ht and pays no attention to the .rab
fears o+er .f$hanistan and 2ran whi!h, a!!ordin$ to Business Wee"# were
behind the s"r$e in the pri!e of $old to an all=tie hi$h of M87B in Han"ary198A# (7B) .s in the !ase of the liC"idation of the $olddollar e!han$e
standard ten years earlier, war and re+ol"tion in the o"th, rather than
inter=!apitalist !opetition aon$ the worlds three lar$est e!onoies,
were the priary dri+in$ for!e of the onetarist re+ol"tion of 19798#
E"ndaental !han$e in the onetary sphere on!e a$ain had a/or
ipli!ations both for inter=!apitalist and !lass str"$$les in !ore re$ions# *"t
the stron$est sti"l"s for the !han$e !ae fro the "nsol+ed !risis of 5
he$eony in the Third orld rather than the !risis of profitability as s"!h#
Jere too, the pe!"liarities of the late=twentieth=!ent"ry lon$ downt"rn ay
be "sef"lly hi$hli$hted thro"$h a !oparison with that of 187396# Tho"$h
seldo rear%ed "pon, differen!es in ortho"th relations between thetwo lon$ downt"rns are e+en ore si$nifi!ant than those of labo"r and
!apital#
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be$innin$ of an entirely new era;
e+er before in the whole of h"an history had so re+ol"tionary a
re+ersal o!!"rred with s"!h rapidity# The !han$e in the position of the
peoples of .sia and .fri!a and in their relations with ?"rope was the
s"rest si$n of the ad+ent of a new era, and when the history of the
first half of the twentieth !ent"rywhi!h, for ost historians, is still
doinated by ?"ropean wars and ?"ropean probles # # # !oes tobe written in a lon$er perspe!ti+e, there is little do"bt that no sin$le
thee will pro+e to be of $reater iportan!e than the re+olt a$ainst
the west#(77)
The oent for the lon$er perspe!ti+e ad+o!ated by *arra!lo"$h has
ob+io"sly not yet !oe# e li+e instead in a tie when the tri"ph, the
seein$ly "nliited power of the est, a%es the earlier o"thern re+olt
loo% insi$nifi!ant, if not f"tile# Pet the f"ndaental differen!e between
ortho"th relations d"rin$ the two lon$ downt"rns reains, and neither
the ori$ins, nor the tra/e!tory, nor the !onseC"en!es of the latest !an be
a!!"rately de!iphered e!ept in its li$ht# To ill"strate the point 2 shall fo!"s
on!e a$ain on the onetary aspe!ts of the two lon$ downt"rns#
India!" contrib#tion
2n the pre!edin$ se!tion we tra!ed the inflationary !hara!ter of the latest
lon$ downt"rn to the so!ial and politi!al ipossibility of s"b/e!tin$ labo"r
!apital relations in !ore re$ions to the dis!ipline of a etalli! standard, as
they had been d"rin$ the late nineteenth !ent"ry# The nat"re and stren$th
of this so!ial !onstraint within !ore re$ions, howe+er, thesel+es depend
!riti!ally on the parti!"lar politi!al arran$eents that lin% the !ore to the
peripheries# othin$ ill"strates this better than the !lose !onneion
between *ritains adheren!e to the $old standard and its etra!tion of
trib"te fro the "b!ontinent# *ritains 2ndian epire was !r"!ial in two
ain respe!ts# Eirst, ilitarily; in -ord alisb"rys words, 2ndia was an
?n$lish barra!% in the :riental eas fro whi!h we ay draw any n"ber
of troops witho"t payin$ for the# (78) E"nded entirely by the 2ndian
tapayer, these for!es were or$ani0ed in a ?"ropean=style !olonial ary
and "sed re$"larly in the endless series of wars thro"$h whi!h *ritain
opened "p .sia and .fri!a to estern trade, in+estent and infl"en!e#(79)
They were the iron fist in the +el+et $lo+e of Vi!torian epansionis # # #
the a/or !oer!i+e for!e behind the internationali0ation of ind"strial
!apitalis#(8A)
e!ond, and eC"ally iportant, the infao"s Joe Khar$es and the *an%
of ?n$lands !ontrol o+er 2ndias forei$n=e!han$e reser+es /ointly t"rned
2ndia into the pi+ot of *ritains $lobal finan!ial and !oer!ial s"prea!y#
2ndias balan!e=of=payents defi!it with *ritain, and s"rpl"s with all other
!o"ntries, enabled *ritain to settle its defi!it on !"rrent a!!o"nt with the
rest of the world# itho"t 2ndias for!ible !ontrib"tion to the balan!e of
payents of iperial *ritain, it wo"ld ha+e been ipossible for the latter
to "se the in!oe fro her o+erseas in+estent for f"rther in+estent
abroad, and to $i+e ba!% to the international onetary syste the liC"idity
she absorbed as in+estent in!oe#
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pro+ided a lar$e masse de manoeuvre whi!h *ritish onetary a"thorities!o"ld "se to s"ppleent their own reser+es and to %eep -ondon the !entre
of the international onetary syste#(81)
2n enfor!in$ onetary dis!ipline at hoe on wor%ers and !apitalists ali%e,
*ritains r"lin$ elite th"s fa!ed an alto$ether different sit"ation to that of
5 leaders a !ent"ry later# Eor one thin$, the eer!ise of world=he$eoni!f"n!tionsin!l"din$ the endless series of wars fo"$ht in the worlds o"th
did not in+ol+e the %ind of inflationary press"res that the Vietna ar
en$endered in the 5nited tates# ot only were the wars finan!ed by
2ndian oney b"t, fo"$ht by 2ndian and other !olonial troops, they did not
reC"ire the %ind of so!ial ependit"re the 5 $o+ernent had to in!"r in
order to !ontain doesti! opposition to es!alatin$ !as"alties#
Kosts of war aside, "nli%e the 5nited tates in the late twentieth !ent"ry,
*ritain !o"ld internali0e the benefits 4for its etropolitan s"b/e!ts and
eternali0e the !osts 4on its !olonial s"b/e!ts of the !easeless str"!t"ral
ad/"stents in+ol+ed in the s"b/e!tion of its !"rren!y to a etalli!
standard# Koer!i+e !ontrol o+er the s"rpl"s of 2ndias balan!e of payentsenabled *ritain to shift the b"rdens of its own persistent trade defi!its onto
2ndian tapayers, wor%ers and !apitalists#(8) 2n a post=!olonial world, in
!ontrast, no s"!h blatant !oer!ion was a+ailable# The 5nited tates fa!ed
the star% !hoi!e of either balan!in$ its trade and !"rrent=a!!o"nts defi!it
thro"$h a drasti! downsi0in$ of its national e!onoy and ependit"res
abroad, or alienatin$ a $rowin$ share of its f"t"re in!oe to forei$n
lenders# The !hoi!e of an inflationary strate$y of !risis ana$eent was
not di!tated solely by the so!ial and politi!al ipossibility of s"b/e!tin$ the
.eri!an national e!onoy to a drasti! downsi0in$, or by the relief fro
forei$n !opetiti+e press"res that the strate$y !o"ld brin$ to 5
an"fa!t"rers# 2t was also a ore or less !ons!io"s attept not to !hoosebetween the two eC"ally "npalatable alternati+es# The deepenin$ !risis of
5 he$eony of the late 197As and the de+astatin$ r"n on the dollar it
pro+o%ed were a sho!%in$ reinder that the !hoi!e !o"ld no lon$er be
postponed#
The onetary !o"nterre+ol"tion initiated in the !losin$ year of the Karter
adinistration and p"rs"ed with $reater for!e "nder Fea$an was a
pra$ati! response to this sit"ation# .s *renner notes, the t"rnaro"nd
deepened rather than alle+iated the !risis of profitability# *"t as he does
not note, it did re+ersebeyond the rosiest epe!tations of its perpetrators
the pre!ipito"s de!line in 5 world power of the pre!edin$ fifteen years#
(83) 2n order to "nderstand this "nepe!ted re+ersal, we "st on!e a$ain
shift fo!"s to reeaine the pro!esses of inter=!apitalist !opetition that
are at the !entre of *renners analysis#
.+ 9inancial (nderpinning" of the () Revival
*renner, as we ha+e seen, attrib"tes the persisten!e of o+erprod"!tion and
o+er!apa!ity after 1973 partly to the beha+io"r of hi$her=!ost in!"bent
firswhi!h had e+ery reason to defend their ar%ets and !o"nteratta!%
by speedin$ "p the pro!ess of inno+ation and in+estent in additional fied
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!apitaland partly to the a!tions of the 5, Hapanese and Geran
$o+ernents, whi!h a$$ra+ated rather than alle+iated the "nderlyin$
tenden!y towards too little eit and too "!h entry# e also noted that,
while $o+ernental a!tion o!!"pies !entre=sta$e in *renners histori!al
narrati+e, the theoreti!ally ore !r"!ial ar$"ent abo"t firs is for the
ost part de+eloped ded"!ti+ely, on the basis of !ir!"stantial e+iden!e#
. first proble with this !entral thesis is that it is alost e!l"si+ely
fo!"sed on an"fa!t"rin$# *renner does not $i+e an epli!it /"stifi!ation for
this, as he does for his fo!"s on the .eri!an, Hapanese and Geran
e!onoies# The theoreti!al and histori!al identifi!ation of !apitalis with
industrial !apitalis appears to be for hias for ost so!ial s!ientists,
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relati+e to that earned fro prod"!ti+e a!ti+ities# arti!"larly si$nifi!ant is
>rippners findin$ that an"fa!t"rin$ not only doinates b"t leads thistrend towards the finan!iali0ation of the non=finan!ial e!onoy#(87)
*renner does not pro+ide any indi!ator for his o+er=!apa!ity and o+er=
prod"!tion odel !oparable to >rippners "ltiple indi!ators for the
finan!iali0ation of the non=finan!ial e!onoy# e+ertheless, .nwar hai%hdoes pro+ide two indi!ators for !apa!ity "tili0ation in 5 an"fa!t"rin$
one based on his own eas"re, and one on that of the Eederal Feser+e
*oardwhi!h we ay ta%e as iperfe!t inverse indi!ators of o+er=!apa!ity#(88) .!ross the entire period 19@79B, both indi!ators show a $reat deal of
fl"!t"ation in !apa!ity "tili0ation b"t no !lear lon$=ter trend# rippners "nabi$"o"s findin$s throw serio"s do"bts on *renners a prioriass"ptions !on!ernin$ the beha+io"r of in!"bent, hi$her=!ost
an"fa!t"rers# The predoinant response of these firs to the irr"ption in
their ar%ets of lower=!ost !opetitors does not appear to ha+e been a
stren"o"s defen!e of their s"n% !apital, and a !o"nteratta!% thro"$h
additional in+estent in fied !apital that f"rther in!reased o+er=!apa!ity#
.ltho"$h this %ind of response was !ertainly present, the predoinant
response was, in !apitalist ters, far ore rational# Konfronted with
hei$htened international !opetition 4espe!ially in trade=intensi+e se!tors
li%e an"fa!t"rin$, hi$her=!ost in!"bent firs responded to fallin$
ret"rns by di+ertin$ a $rowin$ proportion of their in!oin$ !ash flows fro
in+estent in fied !apital and !oodities to liC"idity and a!!""lation
thro"$h finan!ial !hannels#
This is what >rippner obser+es epiri!ally# *"t this is also what we sho"ld
epe!t theoreti!ally, whene+er ret"rns to !apital in+ested in trade and
prod"!tion fall below a !ertain threshold and inter=!apitalist !opetition
be!oes a 0ero= or ne$ati+e=s" $ae# 5nder these !onditionspre!isely
those whi!h, a!!ordin$ to *renner, ha+e !hara!teri0ed the lon$ downt"rn
the ris%s and "n!ertainties in+ol+ed in rein+estin$ in!oin$ !ash flows into
trade and prod"!tion are hi$h, and it a%es $ood b"siness sense to "se
the to in!rease the liC"idity of assets as a defensi+e or offensi+e weapon
in the es!alatin$ !opetiti+e str"$$le, both within the parti!"lar ind"stry or
sphere of e!onoi! a!ti+ity in whi!h the fir had pre+io"sly spe!iali0ed and
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o"tside it# Eor liC"idity enables enterprises not /"st to es!ape the
sla"$hterin$ of !apital +al"es whi!h, sooner or later, ens"es fro the
o+er=a!!""lation of !apital and the intensifi!ation of !opetition in old
and new lines of b"siness, b"t also to ta%e o+er at bar$ain pri!es the
assets, !"stoers and s"ppliers of the less pr"dent and irrationally
e"berant enterprises that !ontin"ed to sin% their in!oin$ !ash flows into
fied !apital and !oodities#(89)
9inance the la"t ref#ge
2n a sense, this !opetiti+e strate$y is nothin$ b"t the !ontin"ation by
other eans of the lo$i! of the prod"!t !y!le that *renner hiself in+o%es
in another !ontet# Eor the leadin$ !apitalist or$ani0ations of a $i+en
epo!h, this lo$i! in+ol+es shiftin$ reso"r!es !easelessly, thro"$h one %ind
of inno+ation or another, fro ar%et ni!hes that ha+e be!oe
o+er!rowded 4and therefore less profitable to those that are less !rowded
4and therefore ore profitable# hen es!alatin$ !opetition red"!es the
a+ailability of relati+ely epty, profitable ni!hes in the !oodity ar%ets,
the leadin$ !apitalist or$ani0ations ha+e one last ref"$e, to whi!h they !anretreat and shift !opetiti+e press"res onto others# This final ref"$e is the
oney ar%etin !h"peters words, always, as it were, the
headC"arters of the !apitalist syste, fro whi!h orders $o o"t to its
indi+id"al di+isions#(9A)
2n this respe!t, as pre+io"sly noted, 5 !apital in the late twentieth !ent"ry
was followin$ a tra/e!tory analo$o"s to that of *ritish !apital a !ent"ry
before, whi!h had also responded to the intensifi!ation of !opetition in
an"fa!t"rin$ thro"$h finan!iali0ation# .s Jalford
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this order are s"stainable in the lon$ r"n# e+ertheless, for twenty years
now an es!alatin$ forei$n debt has enabled the 5nited tates to t"rn the
deterioratin$ !risis of the 197As into a belle poque wholly !oparable to,and in soe respe!ts far ore spe!ta!"lar, than *ritains ?dwardian era#
2t has, first of all, allowed the 5nited tates to a!hie+e thro"$h finan!ial
eans what it !o"ld not a!hie+e by for!e of arsto defeat the 5F inthe Kold ar and tae the rebellio"s o"th# eynesianis with a +en$ean!e that res!"ed the 5 and world e!onoies
fro the deep re!ession pro+o%ed by the swit!h fro etreely la to +ery
ti$ht onetary poli!ies# This re!ession, and the ideolo$i!al and pra!ti!al
liC"idation of the welfare state that a!!opanied it, was the tr"e t"rnin$
point in the !ollapse of wor%ers le+era$e in the 5 and other !ore re$ions#
To be s"re, the sta$flation of the 197As had already worn down wor%ers
resistan!e a$ainst attepts to shift the b"rden of intensifyin$ !opetition
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onto their sho"lders# *"t it was only in the 198As that, in !ore !o"ntries in
$eneral and the 5nited tates in parti!"lar, press"re fro below on oney
wa$es s"bsided, and wor%ers !ae to rely on $o+ernental !ontrol of pri!e
inflation as their best !han!e of prote!tin$ their standards of li+in$#
.s *renner aintains, the wea%enin$ of labo"rs le+era$e was $reater in
the 5nited tates than in other !ore re$ions and thereby !ontrib"ted to there+i+al of 5 profitability in the 199As# Pet altho"$h this was "ndo"btedly a
fa!tor in the re+i+al, *renners narrow fo!"s on inter=!apitalist !opetition
in an"fa!t"rin$ is a$ain isleadin$# Eor the t"rnaro"nd was priarily
d"e, not to the !oparati+ely slower $rowth of 5 real wa$es, b"t to the
o+erall re=orientation of the .eri!an e!onoy to ta%e f"ll ad+anta$e of
finan!iali0ation, both at hoe and in the world at lar$e# Ero this point of
+iew, the de=ind"striali0ation of the 5nited tates and other !ore re$ions
!ertainly had ne$ati+e !onnotations for the wor%ers ost dire!tly affe!ted
by it b"t it had no s"!h dire eanin$ for the 5 e!onoy as a whole, and
espe!ially its wealthier strata# Father, it was a ne!essary !ondition of the
$reat re+i+al of 5 wealth, power and presti$e of the 199As, whento
paraphrase -andess !hara!teri0ation of the ?dwardian erain spite of
rattlin$s of ars in the o"th and forer ?ast or onitory referen!es to a
!oin$ !lash of !i+ili0ations, e+erythin$ seeed ri$ht a$ain#
III. A SOCIAL AND POLITICAL PERSPECTIVE
Fadi!al as the fore$oin$ !riti!iss ay appear and, in soe respe!ts,
a!t"ally are, they do not in+ol+e a ref"tation so "!h as a re!astin$ of
*renners ar$"ent within a broader so!ial and politi!al perspe!ti+e# 2n the
!on!l"din$ part of this arti!le, 2 shall a%e s"!h re!astin$ epli!it by
drawin$ fro and addin$ to *renners a!!o"nt of the lon$ downt"rn andy own !ritiC"e of it# .s in the first se!tion, 2 shall deal s"!!essi+ely with
the ori$ins, dynai!s and prospe!ti+e o"t!oes of the lon$ downt"rn#
2n "nders!orin$ the diffi!"lties in+ol+ed in attrib"tin$ !a"sal priority to any
of the intera!tin$ eleents that ha+e propelled the e!onoi! epansion of
?ast .sia in the 197As and 198As, Fobert ade has in+ited "s to thin%
ore in ters of openin$ a !obination lo!% than a padlo!%#(98) hat is
tr"e of ?ast .sia is a fortioritr"e of the world=e!onoi! epansion of the19BAs and 196As and of the lon$ downt"rn that followed# *renners "ne+en
de+elopent is "ndo"btedly an eleent of the !obination b"t it is by no
eans the %ey that "nlo!%s the e!haniss of !apital a!!""lation on a
world s!ale, fro boo thro"$h !risis to relati+e sta$nation#
A+ 1rigin" of the ownt#rn
The parti!"lar for that "ne+en de+elopent ass"ed after the e!ond
orld aras opposed to the fors that it too%, let "s say, in the
nineteenth !ent"ry, or in the first half of the twentiethwas thoro"$hly
ebedded in, and shaped by, the foration and e+ol"tion of 5 world
he$eony in the Kold ar era# 5 he$eony, in t"rn, had a pe!"liar so!ial
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!hara!ter, refle!ted in syste=wide instit"tional arran$eents C"ite
different fro those that "nderlay the nineteenth=!ent"ry 5>=!entred world
e!onoy# 2t follows that the operation of "ne+en de+elopent in
$eneratin$ both the postwar boo and the s"bseC"ent lon$ downt"rn !an
only be "nderstood in !on/"n!tion with the foration and e+ol"tion of the
parti!"lar instit"tional arran$eents of 5 he$eony#
These arran$eents were einently politi!al in ori$in and so!ial in
orientation# They were based on the widespread belief aon$ 5
$o+ernent offi!ials that a new world order was the only $"arantee
a$ainst !haos followed by re+ol"tion and that se!"rity for the world had to
be based on .eri!an power eer!ised thro"$h international systes#(99)
?C"ally widespread was the belief that the lessons of the ew Deal were
rele+ant to the international sphere#
H"st as the ew Deal $o+ernent in!reasin$ly too% a!ti+e
responsibility for the welfare of the nation, 5 forei$n poli!y planners
too% in!reasin$ responsibility for the welfare of the world # # # 2t !o"ld
not ins"late itself fro the worlds probles# .s at hoe, oreo+er,
it !o"ld not neatly pi!% and !hoose aon$ those probles,
distin$"ishin$ politi!s fro e!onoi!s, se!"rity fro prosperity,
defen!e fro welfare# 2n the lei!on of the ew Deal, ta%in$
responsibility eant $o+ernent inter+ention on a $rand s!ale#(1AA)
2n Eran%lin Foose+elts ori$inal +ision, the ew Deal wo"ld be $lobali0ed
thro"$h the 5nited ations, and the 5F wo"ld be in!l"ded aon$ the
poor nations of the world to be in!orporated into the e+ol+in$ a
.eri!ana, for the benefit and se!"rity of all# 2n the shoddier b"t ore
realisti! politi!al pro/e!t that ateriali0ed "nder Tr"an, in !ontrast, the
!ontainent of o+iet power be!ae the ain or$ani0in$ prin!iple of 5
he$eony, and .eri!an !ontrol o+er world oney and ilitary power
be!ae the priary eans of that !ontainent#(1A1) This ore realisti!odel was not so "!h a ne$ation of the ori$inal notion of !reatin$ a
$lobal welfare state, as its transforation into a pro/e!t of a warfare=
welfare state on a world s!ale, in !opetition and opposition to the o+iet
syste of !o"nist states#(1A)
The speed and etent of the pro!ess of "ne+en de+elopent, to whi!h
*renner tra!es both the postwar boo and the s"bseC"ent downt"rn, !an
only be "nderstood with referen!e to the s"!!esses and fail"res of this
pro/e!t# The odel was, indeed, hi$hly s"!!essf"l in la"n!hin$ one of the
$reatest syste=wide epansions in !apitalist history# 2n its absen!e, world
!apitalis i$ht well ha+e $one thro"$h a lon$ period of sta$nation, if not
o"tri$ht depression, !oparable to that whi!h etended fro the initialestablishent of *ritish he$eony at the end of the apoleoni! ars to the
ta%e=off of the id=nineteenth=!ent"ry lon$ boo at the end of the 18@As#
5nder 5 he$eony, in !ontrast, s"!h a !ontra!tion was a+oided alto$ether
thro"$h the /oint operation of both ilitary and so!ial >eynesianis on a
world s!ale# eynesianisthat is, assi+e ependit"res on the
rearaent of the 5nited tates and its allies and the deployent of a far=
fl"n$ networ% of C"asi=peranent ilitary baseswas "ndo"btedly the
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ost dynai! and !onspi!"o"s eleent of the !obination# *"t the 5=
sponsored spread of so!ial >eynesianisthat is, the $o+ernental p"rs"it
of f"ll eployent and hi$h ass !ons"ption in the est or orth, and
of de+elopent in the o"thwas also an essential fa!tor#(1A3)
The re!onstr"!tion and "p$radin$ of the Geran and Hapanese ind"strial
apparat"sesthe !entrepie!e of *renners "ne+en de+elopentwereinte$ral aspe!ts of the internationali0ation of the 5 warfare=welfare state#
.s *r"!e K"in$s notes, !oentin$ spe!ifi!ally on the .eri!an
approa!h to Hapanese reind"striali0ation, Geor$e >ennans poli!y of
!ontainent was always liited and parsionio"s, based on the idea that
fo"r or fi+e ind"strial str"!t"res eisted in the world; the o+iets had one
and the 5nited tates had fo"r, and thin$s sho"ld be %ept this way#
>ennans idea was translated into 5 $o+ernent sponsorsh