THE GLOBAL FINANCIAL CRISIS Political Economy in the New Millennium University of Wollongong Week 12

AGENDA Harvey’s Usual Suspects:

Bad Apples Institutional Failures False Theory Anglo-Saxon Culture Misguided Policy

Stated Origins: Subprime crisis in the United States

My argument: The differential accumulation of capital is a contradictory

process. Oil shock crisis and the revolt of the 1%. Workers have been disciplined since the 1970s and the

global wage share has plummeted. Consumer credit spreads like wildfire. A Second Oil Shock and the Collapse of Capitalization Birth pangs of a general crisis of social reproduction.

HARVEY’S USUAL SUSPECTS Bad Apples

Not systemic, just a few greedy individuals who inhabited an ethical netherworld (human nature)

Institutional Failures Regulators were asleep at the switch

False Theory Too much Hayek and Rand

Anglo-Saxon Culture Preoccupation with home ownership

Misguided Policy Too much regulation of the wrong kind

STATED ORIGINS: SUBPRIME CRISIS Subprime Primer:

http://www.youtube.com/watch?v=q8hjUei-Nwo&feature=related

Understanding the Financial Crisis: http://www.youtube.com/wa

tch?v=qqUGoVez8xg&feature=related

MY ARGUMENT Differential accumulation is a contradictory process.

Business owners/capitalist/investors have an incentive to pay

workers as less as possible to cut costs and boost profits. The more power business has, the more likely this can be

accomplished (e.g.: capital mobility, busting unions etc…) There are of course some exceptions for ‘skilled’ labour.

But…wages are what people use to consume the goods and

services controlled by business and ultimately the source of profits.

So the problem of ‘effective demand’ or ‘demand backed by ability to pay’ is endemic to the system – nothing to do with ‘bad apples’. Capital is forced to break its envelope: sector, nation, conglomerate,

globe. Spatial dimension to accumulation.

OIL SHOCK CRISIS OF THE 1970S AND THE REVOLT OF THE 1% Stagflation is largely blamed on unions and

greedy workers in the global north, not the increase in the price of oil.

Business lobbies for greater mobility/power.

The debt crisis in the global south facilitates this ‘opening up’ of the global economy through structural adjustment programs.

As we know – neoliberal policies become more popular in the north and south – almost regardless of the political party.

LIBERALIZATION

THE GLOBAL WAVE

DISCIPLINING WORKERS The fall of the Iron Curtain and the Bamboo Curtain

add 1.5 billion extra people to the global labour force. Great mobility through FDI/FPI liberalization allows

business to hire much cheaper and unprotected labour abroad.

Protected workers in the north become more

precarious workers and the wage share of global income declines in the traditional centres of consumption. Unionization and collective bargaining starts to decline as

production shifts offshore or threats are made that production will shift offshore if wages and benefits aren’t bid down.

BIRTH PANGS OF A GENERAL CRISIS OF SOCIAL REPRODUCTION Debt is mounting and we are in an

era of high oil prices…forever

Traditional monetary instruments are not working to stimulate the economy sufficiently

Growth is slowing, making it harder to pay back debt

Workers still face many uncertainties and pressures

Entering the age of plutonomy for some and recession for the rest?