The Political Economy Of Predatory Capitalism

The Political Economy Of Predatory Capitalism
Vulture Capitalists

AFRICANGLOBE – The world is returning to the predatory laissez-faire capitalism that immiserated millions in the early 20th century and is predicated on neoliberal “wicca economics,” void of empirical reference.

Since the late 1970s, most capitalist economies have been marching to the tunes of neoliberalism – a term originally coined in the 1930s as a moderate alternative to classical liberalism but used in our own times to signify preference for a set of economic policies favoring privatization, deregulation and a “minimal” state. This is the version of neoliberalism developed by Milton Friedman and the so-called Chicago School and is usually associated with the Pinochet regime in Chile and later on with the so-called “free-market” policies of Margaret Thatcher and Ronald Reagan. In more popular usage, it can simply be referred to as predatory capitalism.

The neoliberal transition is associated with financial capital’s rise to dominance and sharp changes in the social structure of capital accumulation, with developments in the US economy leading the way among advanced capitalist economies. The economic slowdown in the 1970s and the inflationary pressures that went along with the first major postwar systemic capitalist crisis created a window of opportunity for anti-statist economic thinking, which had been around since the 1920s but was spending most of its time hibernating because it lacked support among government and policy-making circles and had very few followers among the members of the chattering classes. The postwar capitalist era was dominated by the belief that the government had a crucial role to play in economic and societal development. It was the Keynesian legacy, even though Keynesian economics was never fully and consistently applied in any capitalist country.

Industrial capitalism, the production of real goods and services for the benefit of most members of a society, required extensive government intervention, both as a means to sustain capital accumulation and as a way to ensure that the toiling population improved its standards of living so it could purchase the goods and services that its own members produced in the great factories of the western industrial corporations. The rise of the middle class in the West takes place predominantly in the first few decades after World War II, and it is an outcome brought about by the combination of a thriving western capitalist industrial economic base and interventionist government policies. Governments and the industrial capitalist classes understood only too well that economic growth and social prosperity went hand in hand if the system of industrial capitalism was to survive. Maintaining “social peace,” a long sought after objective of governments and economic elites throughout the world, mandated that the wealth of a nation actually trickle down to the members of the toiling population. The improvement of the standards of living for the working class was essential to the further growth of industrial capital accumulation.

To be sure, it took at least a couple of centuries before industrial capitalism reached a stage where its own survival and future growth was predicated on a steady increase of the standards of living among a nation’s general population. In postwar capitalist economies, providing the working classes with the means for their reproduction meant constantly improving their economic purchasing power and providing them with access to educational opportunities so they could make a substantially greater contribution to productivity as well as become potential consumers. In all this, the government had a key role to play, as it was the only agent with the capability of providing the opportunities and the resources needed for the materialization of a society of plenty, where the fruits of labor were not the exclusive domain of the class that owned the means of production.

All this comes to a rather abrupt end sometime around the mid-to-late 1970s, when advanced capitalism finds itself in the grip of a major systemic crisis brought about by new technological innovations, declining rates of profit, and the dissolution of the social structures of accumulation that had emerged after the Second World War.

The Rise Of Global Capitalism In Late 20th Century

The new world order initiated in the aftermath of the 1973 crisis takes the form of a new wave of globalization, actually not very dissimilar to what had taken place from the 1870s up to the start of World War I: a cycle of upswing in the movement toward the global integration of national economies enforced by the market liberalization policies of leading and ascending states.

The difference in this new era of globalization is that it is finance capital that has now gained the upper hand in spite of the fact that the sector represents a very small share of the GDP. With the “financialization” of the economy and the adoption of neoliberalism as the preferred model of economic governance, financial markets begin to dominate economic decision making processes and the financial elite exercise enormous influence on government policies. In the United States, the adoption of neoliberalism as an economic model coincides with the deindustrialization period, which undermined the economy’s industrial base and undercut the power and influence of the labor movement. Thus, the “financialization” of the economy is directly related to developments in the real economy. In the 1970s, it reflected the crisis that industrial capitalism had entered after nearly 25 years of continuous growth and expansion.

In this sense, the much-talked about globalization phenomenon of the 1980s and 1990s is neither a novel nor a progressive development. It had its roots in the restructuring of the process of capitalist accumulation due to inevitable crises in the workings of the capitalist economy and the squeeze in the rate of profit. But it is not the “logic of the market” nor the new technologies that provided the impetus for the new wave of globalization. The push toward globalization came from domestic institutions (core and ascending capitalist states), powerful economic players (industry and finance) and international organizations (International Monetary Fund, World Bank). The new information technologies have facilitated the drive toward globalization. Decisions about the future direction of the economy are political in nature and highly antidemocratic. Labor’s voice is totally ignored. But that should not be surprising. Capitalism is antithetical to economic democracy.

In fact, the expansion of capitalism takes place with the financial (and even political and military) support of the state through subsidies and the facilitation of internal exploitation, which includes the transfer of valuable resources from domestic society for the reproduction of capitalist accumulation abroad. Opening new markets and creating investment sites has always been a key role of the capitalist state – and this has been no less true under the global neoliberal order initiated after the 1973 crisis. Far from being anti-government, big business and finance capital demand an interventionist state – but one that rolls back the standard of living for the working populations and dismantles the welfare state in favor of market liberalization and globalization. Policies that increase the upward flows of income and the availability of public property for private exploitation rest at the core of the global neoliberal project, where predatory capitalism reigns supreme. So does privatizing profits and socializing losses.

Contrary to neoliberal discourse, the state has not disappeared under the process of globalization; nor has it become weaker. It has merely been refocused so it can perform activities more amenable to the needs and demands of the global financial elite. The state, as a social institution, does retain a certain degree of relative autonomy, and thus it can be recaptured by progressive forces determined enough to work toward the realization of a just and decent society, instead of standing idly by and watching elected public officials squander the common good (officials often eager to get into office to serve big business interests so they can later pursue lucrative private-sector roles). But that is another story. The point underlined here is that the spread of neoliberal capitalism is deeply rooted in changes in the correlation of class forces. The near collapse of industrial labor and the subsequent weakening of trade unions ensured the success of the transition from managed capitalism to global neoliberalism. So did the shift to the right of the Democratic Party in the United States and of the social democratic parties in Europe.

Part Two