Andrew Glyn - Capitalism Unleashed

252 Pages·2012·1.87 MB·English

CAPITALISM UNLEASHED
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Capitalism
Unleashed
finance globalization and
welfare
Andrew Glyn
1
3
Great Clarendon Street, Oxford OX26dp
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© Andrew Glyn, 2006
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First published 2006
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ISBN 0–19–929199–3 978–0–19–929199–1
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To Miles, Lucy, Tessa and Jonathan
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Preface
Low inflation, quiescent industrial relations, freedom for capital to
chase profitable opportunities without restraint and the domination
of market-based solutions have become familiar features of the
economic landscape of the rich economies. When such a pattern
becomes firmly established it soon acquires the status of business as
usual. Yet 30 years ago inflation was rising, profits were squeezed,
trades unions were bargaining aggressively and parties of the left
were actively discussing ideas for deeper state intervention in indus-
try. A huge shift in economic policies and behaviour was needed to
launch our economies on their new trajectory. This book provides a
short history of how this transformation was achieved and examines
the impact on growth, stability and equality of letting free enterprise
off the leash.
Authors of books like this one always hope that it will be widely
accessible, in this case to anybody interested in the current debates on
economics and economic policy. Some acquaintance with economic
terminology and ideas is helpful, though I have tried to explain the
less familiar concepts. I trust that it will be useful to students in a
wide range of social sciences, not just economics, who would like to
get a feel for the ‘big picture’ of how the economic system has been
developing.
The focus is on the rich countries—Western Europe, North America,
Japan and Australasia. The rest of the world features only when and
where its economic development has a major effect on the most
developed economies. Thus Africa barely figures, whilst China
receives considerable attention. Those primarily interested in the
‘South’ should still find the book of interest. After all, economic
trends in the rich ‘North’ have such important effects on the rest of
the world that they are far from irrelevant to those whose primary
viii PREFACE
concerns are with the poorer countries. Moreover, as Marx pointed
out in 1867, ‘[T]he country that is more developed industrially only
shows, to the less developed, the image of its own future’ (Preface to
first German edition of Capital, volume 1).
In previous work with co-authors1 I have analysed the develop-
ment of the rich economies from 1945through the 1980s. The main
focus was on profitability, growth and the labour market. The post-
war story unfolds around a central theme of the relations between
capital and labour, with the balance of economic power betweeen
the USA, Europe and Japan an important sub-plot. It is often
assumed that the great ‘Golden Age’ boom of the 1950s and 1960s
only required the helping hand of Marshall Aid to emerge smoothly
out of post-World War II devastation. This was far from the case. The
period of reconstruction was one of social and political turmoil,
illustrated in the following quotations from The Economist during
the late 1940s2
The [French] bourgeoisie are not reconciled to the passing of a large measure
of political and even economic power to the organised working class...Cold
War in Italian Industry...With hoarse democratic shouts of ‘Down with
Communism’ Japanese employers are rushing to...knock out the tottering
Japanese trade union movement.
The boom only emerged after the restoration of employer authority
in the factories and macroeconomic discipline—with government
budgets balanced, modest increases in the money supply and low
inflation.
The boom in turn brought a strengthening of labour, the weakening
of the previously dominant position of the USA and the economic
turmoil of the 1960s and 1970s—rising inflation, profits squeeze,
unstable exchange rates, heightened industrial conflict. This turmoil
posed severe challenges to the functioning of capitalism, as Chapter 1
of the present book recounts. The next two chapters deal with the
response of governments—in terms of restoring macroeconomic
discipline, privatization and the encouragement of market forces
and the focus of business on ‘shareholder value’.
Taking the story through from the 1970s up to the present day
necessarily involves a widening of the perspective. Distributional
PREFACE ix
conflict between capital and labour in the rich economies is for now
not the most problematic element in their functioning. Thus
The Economist, as ever the reliable weathervane for assessing the
concerns of business, published 61 articles with a focus on trade
unions, labour relations and industrial disputes in the period
April–June1979and only ten in the corresponding months of 2005.
What then are the most significant new developments which have
to be interwoven with the continuing themes of the position of the
unions, the standing of the dollar, macroeconomic policy and the
behaviour of profitability and capital accumulation? One has been
the growth of the financial sector, in terms of its rising profitability,
its widening sphere of operation and its growing influence on many
aspects of economic life. This has important implications for the
dynamism and stability of the advanced economies. Secondly, the
expansion of manufacturing capacity by low wage producers in
the South has undermined the competitive position of traditional
industries in the North whilst bolstering the living standards of
workers in other sectors. Thirdly, new technology is believed to be
undermining the position of the less qualified workers in the rich
countries. Thus the chapters which follow cover such issues as the
drive for shareholder value, corporate scandals, the growth of
China’s exports, the New Economy boom in the USA, the impact of
globalization on the welfare state, inequality and declining demand
for unskilled labour.
Providing a coherent interpretation of such a wide range of issues
posed a considerable challenge. Fortunately there is a mass of
research now available on most contemporary economic trends and
issues. Important surveys appear regularly in the Journal of
Economic Perspectives, the Oxford Review of Economic Policyand
the working papers of the National Bureau of Economic Research,
for example. The references in the back of the book show how much
I have drawn on all this work, which the internet makes instantly
and freely available to those fortunate enough to have access to a
good university library system. I have used endnotes collected after
the text mainly to indicate sources used and in some cases to explain
a calculation or to amplify a point. In constructing an argument from
this material I have used direct quotations more often than is usual;