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Back to Subjects - Political Science

Late Capitalism

Late Capitalism Capitalism continues to be a revolutionary form of social organization. Modes of production, the ordering of daily activities, and the material practices and processes of social reproduction have undergone numerous changes since capitalism’s inception. Mapping a history of capitalism’s different stages and forms – both social and institutional – would be an arduous task, complicated by the fact that in each of capitalism’s stages, features and characteristics of past and future stages abound. Nevertheless, the current form of capitalism marks a unique departure from previous stages. Euphemisms and catchphrases concerning late 20th century capitalism have become all too common. "Globalization" has become a catchphrase for academics, journalists, and citizens alike. However, many of the claims about a new, distinguishable form of capitalist organization – a "post-Fordist" or "flexible" system of accumulation – are overstated. Despite the dominance of Neoliberalism following the collapse of Fordism, the current epoch does not occasion an economically, environmentally, or socially sustainable regime of accumulation. In this paper I will explain, drawing from the Regulation School, the shift from Fordism to what many have termed "post-Fordism," and use this analysis to suggest future routes for capitalist organization. Indeed, until a socially reproducible compromise to Neo-liberalism is found, aggressive competition and regulatory undercutting will further amplify destructive business cycles, abject poverty, and environmental destruction. In order to understand the shift away from Fordism it is first necessary to examine the institutional and social features that inform Fordism and its subsequent disintegration. Fordism was organized around a particular regime of accumulation and its corollary mode of social and political regulation. In this sense, a regime of accumulation refers to "the stabilization over a long period of the allocation of the net product between consumption and accumulation; it implies some correspondence between the transformation of both the conditions of production and the conditions of reproductive wage earners." This must entail the formation of a knowable and predictable configuration of "norms, habits, laws, regulating networks and so on that ensure the unity of the process, i.e. the appropriate consistency of individual behaviors with the schema of reproduction." This task of regulating and ensuring the sustainability of the regime of accumulation is the mode of social and political regulation. The regime of accumulation under Fordism relied on the link between mass production and mass consumption. In order to fuel the cycle of economic activity, wages had to be sufficiently high to support mass consumption. This mass consumption drove demand and productive activity for firms, which were afforded profits used to reinvest in productive ventures. This virtuous cycle of cumulative economic activity was thought to perpetuate itself indefinitely once full employment was realized. The purpose of the state under Fordism was to stabilize the free market’s inherent crisis tendencies. The obligations of the state in this form of capitalist organization were numerous. In order to ensure the profitability of mass production, with its high fixed cost of investment, the state had to continually mitigate business cycles through active monetary and fiscal policy aimed at guaranteeing stable aggregate demand: "The process of social regulation under Fordism was anchored in the Keynesian welfare state, under which collective bargaining and monopoly pricing were institutionalized, policy instruments were deployed to maintain and manage aggregate demand, and norms of mass consumption and ‘American ways of life’ were generalized." Additionally, government expenditures covering social security, health care, education, and housing all sought to stabilize the Fordist way of life and regime of accumulation. In effect, the Keynesian/Fordist dynamic centered the regulation of economic activity within the territorial boundaries of the Westphalian nation state, led of course by the United States, which was institutionalized as the world’s global financial hegemon by the Bretton Woods agreement of 1944. However, the evolution of international financial institutions, such as Bretton Woods, served to undermine the efficacy of the Keynesian welfare state and its mode of social regulation. What some have termed the "globalization of finance," or the creation of a liberal financial order, opened state policies and macroeconomic planning mechanisms to destabilizing speculative attacks, complicating the predictable system of exchange rates and trade, as well as undermining state interest rate sovereignty. The globalization of finance was an "unplanned child" of the Bretton Woods order that, ironically, sought to expand international trade but prevent the formation of a liberal financial order. As the US began to realize the potential national gains from an open international trading order – private market actors would prefer to hold dollars over other currencies – support for cooperative initiatives to regulate the international financial environment dwindled. This turnaround in US policy was aided by a momentous shift in US policy away from Keynesianism towards Neoliberalism, advocated by prominent economists of the time (such as Milton Friedman) and put into action by the Reagan and Thatcher governments. Moreover, the increasing internationalization of credit further eroded the power of the welfare state to successfully regulate economic activity. The primary Fordist mechanism for promoting trade, the General Agreement on Tariffs and Trade (GATT), encouraged the growth of transnational corporations (TNCs) which sought credit in the expanding, unregulated "Eurodollar" market. The growth of numerous other financial services, such as futures and derivatives, expanded the range of opportunities to acquire credit and circumvent (declining) Fordist capital controls. As credit became increasingly internationalized and capital controls were slowly liberalized, states relinquished their ability to determine interest rate policy, thereby causing the "erosion of the (political institutional) regulation of the whole Fordist system." This left the Fordist government with a very limited toolbox to combat the exigencies of the market. Another pillar of the global Fordist economic structure, the GATT, undermined in many developed states the cumulative accumulation process. As tariffs and other trade barriers were lifted, imports of cheaper and more technologically refined goods successfully competed with domestic industries, causing widespread political tension and dissent. The international failure of Fordist industries with relatively high wages, combined with increased attention to exports as a source of foreign exchange and a stabilizer of the balance of payments, caused wages to be seen less a contributor to the cumulative economic cycle and more as an impediment to competitiveness. The focus on sustaining national aggregate demand via social wage policy was overwhelmed by the drive for competitiveness and export growth. Perhaps the single biggest failure of Fordism was its inability to contain capitalism’s inherent push to overcome Fordist rigidities. Fordist regimes of production and consumption are inherently inflexible. The long-term and large-scale fixed capital investments in mass-production systems, as well as long-term labor contracts, collective bargaining, and state commitments to aggregate demand management all presumed stable consumer demand and growth over a long period of time. As global finance and international trade began to circulate at a greater speed across more diverse spaces, rigid Fordist economic structures began to topple. Instead of attracting capital to finance production and consumption, unwieldy state, corporate, and labor relations gave way to Neoliberalism’s "race to the bottom" logic of cost-minimizing behavior, effectively annihilating the predictable virtuous cycle of growth that had maintained itself since the end of World War II. Thus Fordism was undermined by two inherent contradictions. First, the tension between the globalizing forces of accumulation, aided by the emergence of an unregulated credit and trade system, and the Keynesian welfare state undercut the basis of the Fordist mode of social and political regulation. Second, and connected to the first, the rigid Fordist mode of accumulation was overwhelmed by the breakout of capitalism’s inherent "bottom-line logic" and the increasingly narrow focus on short-term production techniques and transitory consumption patterns. Two regulationist interpretations of the post-Fordist era thus arise. The first, espoused by many Neoclassicists and policymakers, is that Neoliberalism itself – the primacy of the disembedded free market – constitutes a new, distinct, and indeed global regime of accumulation. In this formulation, social concerns are adjunct to the stable, competitive functioning of the market. At the same time, the market’s corresponding laws dictate the mode of social and political regulation. Peck and Tickell cogently outline the features of what many tout as the emerging "institutional fix": o The wage relation: a recomposition of the collective laborer and a resegmentation of the labor market, involving skill polarization, flexibilization in internal and external labor markets, decentralized pay bargaining, new forms of social wage. o The enterprise system: a shift towards flatter, leaner and more flexible forms of corporate organization, involving increased contracting out of functions, greater intra-corporate competition, emphasis on continual innovation, a search for economies of scope, non-price based competition. o The money form: dominated by private, globalized bank credit, involving the emergence of more flexible forms of credit, innovation in financial services, subordination of state credit to imperatives of international money and credit markets. o The consumption sphere: emphasis on differentiation and niche marketing, combination of global sourcing with customized production for elite markets. o The state form: displacement of Keynesian welfare statism with Schumpeterian workfare statism, involving the promotion of competition and supply-side innovation (at all levels of the production system and between social institutions), use of social policy instruments not to generalize norms of mass consumption but to encourage flexibility, ‘hollowing out’ of the nation state as powers are displaced upwards and downwards. Despite the common-sense appeal of this regime of accumulation to libertarian social theorists and economists, it is rife with contradictions and inadequacies. Arising out of this fact, the second interpretation of the post-Fordist recognizes the ascendancy of Neoliberalism, but conceives of it more as a temporary regulatory vacuum, or "the absence of a new institutional fix." Because Neoliberalism represents capitalism’s "jungle law," social regulatory structures are incompatible with the laws of the market. This is a damning paradox for Neoliberalism because of its inherent destructive tendencies. It would be a mistake to label Neoliberalism’s collection of regulatory laws as a mode of social regulation since it is internally crisis prone and inherently unstable. Neoliberalism guarantees social dislocation and polarization, the exaggeration rather than minimization of macroeconomically destabilizing business cycles, structural imbalances in international trade and finance, and rampant environmental degradation. "As long as Neoliberalism prevails – with its emphasis on competitive relations, individualism, and the fast buck – socially, economically, and ecologically sustainable growth will be difficult to attain." In other words, Neoliberalism will never be able to be institutionalized as a sustainable regime of production due to its immense annihilative capacity. Therefore, as Peck and Tickell note, it is too early to champion a post-Fordist regime of accumulation since a coherent, sustainable form of social regulation has yet to stabilize. Neoliberalism is a bankrupt and potentially ruinous alternative. Regulation Theory holds that the apparent lack of a sustainable accumulation regime threatens social reproduction in numerous ways. This creates an imperative for a new set of regulatory practices which, unlike Fordism’s discredited model of accumulation, must be tuned to the current status of the market. Global strategies and regulatory structures must become more prevalent and powerful, operating not within the laws dictated by Neoliberalism, but providing protection to nations, regions, and people from excessive fluctuations in trade and financial activity. "The essence of the after-Fordist regulatory problem is the age-old one of countering the destructive effects of competition." Accumulation must also resolve problems of environmental sustainability, as natural resources continue to dwindle at ever-increasing rates. Indeed, it would be foolish to predict how a global capitalist organization and mode of accumulation will look in twenty years – capitalism continues to transform itself in surprising ways – nevertheless, Regulation Theory is useful is in cautioning against the further ascendancy of Neoliberalism. Indeed, changes to the international regime of accumulation and mode of social protection must occur to realize a sustainable existence for all. Bibliography:

Word Count: 1947