It would be wrong to simply characterize this global economic crisis as only cyclical in nature. In a typical cyclical crisis, workers are idled, wages are lowered, excess capacity is destroyed, inefficient competitors are eliminated, inventories are reduced, and debt is drawn down. And in so doing the conditions are created for a vigorous recovery, that is, a fresh round of accumulation of capital (investment and growth) on a broader scale.
In the post-World-War II period this is precisely what happened in the core capitalist countries. Full recovery followed retrenchment.
But so far this crisis is different. True, it follows old patterns, but only up to a point. No revival and recovery has followed.
Growth rates are no longer negative, but they are not robust either. And there is little reason to think it will be much different going forward.
All of which suggests that this crisis is structural and systemic as well as cyclical.
Over the course of the last century, the country has experienced four structural crises.
The first was in the 1890s and out of it came the rise of finance and finance capital (the first financial hegemony), which lasted to the Great Depression.
The second was the Great Depression of 1929-1940 and out of it came the Keynesian (class) compromise of reforms and concessions to the working class, and an era of vigorous growth.
The third began in the 1970s and lasted for nearly a decade and out of it came neoliberalism (the second financial hegemony).
And the final and most recent began in 2007/2008 and its outcome is still to be decided.
None of these crises were self-correcting. They were longer lasting and deeper in character. And their resolution was bound up with the outcome of a bitter class struggle in which the victor – the working class and its allies or the capitalist class and its allies – was able to restructure the economy, politics, and conventional wisdom in its interests.
Crisis of neoliberalism
Neoliberalism, as mentioned, emerged in the wake of the structural crisis of capitalism of the 1970s. It was the result of the economic contradictions of capitalism and the class struggle at that time.
It rested on the emergence of global-scale flexible production networks, union-busting, deregulation, low-wage labor, inflation-suppression, the hollowing out of the welfare state, tax redistribution, and, above all, the rise of finance.
The state didn’t withdraw from the economy as much as it restructured its role and functions to suit the objectives of the top fractions of the capitalist class and particularly finance capital: the restoration of class power, income, and privilege.
Giving a necessary and heavy assist to this process was the Reagan administration. Much like Margaret Thatcher in the United Kingdom, Reagan employed state power to crush the opposition to neoliberal policies, reframe popular thinking, and grease the skids and shape the contours of neoliberal financialization and globalization. In doing so he set into motion three decades of neoliberalism in a right-wing political skin.
In other words the morphing of capitalism into its neoliberal form was a contested process in which the working class and its allies found themselves on the defensive, fending off blows and unable to mount a sustained and sufficiently strong counteroffensive.
What is more, the neoliberal expansion beginning in the early 1990s, resting on debt-driven bubble economics, temporarily hid the conflicting interests and contradictions of this structure of capital accumulation.
But all this changed in the fall of 2008 when the collapse of the housing market triggered a near meltdown of financial markets and a long-term crisis of overproduction and stagnation in the economy as a whole.
Looking ahead, the exact contours and content of the recovery will depend on which class and its allies are able to leave their imprint on the political and economic process.
This is not a struggle between capitalism and socialism in the near and medium term, but over whether the working class and its allies are able to set into motion a process of reforms, including radical reforms, within the framework of capitalism.
So far financial capital and right-wing extremism has the initiative. But the battle and final outcome is far from settled.
What is encouraging is that millions, thanks in part to the Occupy movement, are coming to the conclusion that there is a divergence between neoliberalism and the needs of the working class and society.
And if neoliberalism is being challenged at the national level, it is under siege at the global level. In nearly every region of the world neoliberalism finds itself discredited.
It was undone by its own contradictions. It promised growth and rising incomes, but brought hardship.
The rebellion against neoliberal globalization and financialization in some regions of the world, namely Latin American and Asia, has progressed from protest to the development of alternative growth models. They offer new pathways and promise.
Photo: Neoliberal ax-and-slashers British Prime Minister Margaret Thatcher and President Ronald Reagan yuck it up. roberthuffstutter // CC 2.0