Paul Krugman and Joseph Stiglitz may be celebrity economists, but it is an economic historian whose earlier work focused on the origins of capitalism in late feudal Europe who has turned out the most compelling and comprehensive account of the crisis gripping contemporary global capitalism.
UCLA Professor Robert Brenner’s recent work is a solidly argued and empirically impeccable restatement of the centrality of overproduction in capitalism–a problem that has preoccupied thinkers as diverse as Marx, Joseph Schumpeter, Joan Robinson, Ernest Mandel, Paul Baran and Paul Sweezy. Brenner’s distinctive contribution is to sketch out the specific dynamics and consequences of overproduction or underconsumption in the era of integrated, globalized production and markets. The picture he draws is not one of corporations denationalized by economic integration and states whose powers have been eroded, as in much current writing on globalization. In Brenner’s global economy, state elites battle to gain a competitive edge for their corporate elites. But if national competition is central, so is the common interest among the competing elites of the central economies to expand the global economy. The trajectory of the US economy is largely determined by this volatile relationship of competition with and dependence on the other global capitalist centers of Europe, Japan and–though to a much lesser degree–East Asia.
In Brenner’s view, the post-World War II era is divided into a period of dynamic global economic expansion from the late 1940s to the early 1970s and one marked by persistent crises and uneven growth since then–a relatively dismal period broken only by the seven-year US boom in the 1990s. Whereas in the first phase, the United States, Europe and Japan derived mutual benefit from global expansion, from the early 1970s on, economic growth became largely a zero-sum game, in which one center economy’s advance was purchased with stagnation or recession in its neighbors.
Since the 1970s, the key problem for the center economies has been a chronic tendency toward overcapacity and thus a steady decline in profitability. Disposing of old capital stock, increasing productivity and regaining profitability has been an urgent need of each center economy, but achieving it has run into opposition from established monopolies, organized labor and powerful rival center economies.
By delinking the dollar from the gold standard and effectively devaluing it, the Nixon Administration hoped to steal a march on its rivals. It was, however, left to the Reagan Administration to decisively restore the American economy’s edge, and this it did via three mechanisms: breaking organized labor to hold down wages; maintaining high interest rates to attract capital to the United States; and engineering the infamous “Plaza Accord” in 1985, which drastically pushed up the value of the yen and set the stage for the “relentless rise” of the mark to make the Japanese and German manufacturing sectors bear the lion’s share of adjustment. In a global economy marked by overcapacity, the result was eventually to push both Japan and Germany into recession and lay the ground for greater US competitiveness and profitability in the late 1980s and early 1990s.