New Left Review 20, March-April 2003

In a landmark engagement with Robert renner!"

acco#nt of the long downt#rn of the world econom$
"ince the %0", &iovanni Arrighi la$" o#t a "ocial and
political econom$ of the role" of labo#r #nre"t, national
liberation and corporate financiali'ation in the cri"i" of
the po"t-war order, and the pro"pect" for a militari'ed
() hegemon$ toda$*
GIOVANNI ARRIGHI
THE SOCIAL AND POLI TICAL
ECONOMY OF GLOBAL
TURBULENCE
Depression, wrote Thorstein Veblen shortly after the end of the Great
Depression of 187396, is priarily a alady of the affe!tions of the
b"siness en# That is the seat of the diffi!"lty# The sta$nation of ind"stry
and the hardship s"ffered by the wor%en and other !lasses are of the
nat"re of syptos and se!ondary effe!ts To be effi!a!io"s reedies
"st, therefore, be s"!h as to rea!h this eotional seat of the tro"ble
and # # # restore profits to a &reasonable' rate# (1) *etween 1873 and 1896
pri!es had fallen "ne+enly b"t ine,orably, in what Da+id -andes has !alled
the ost drasti! deflation in the eory of an .lon$ with pri!es, the
rate of interest had dropped to the point where e!onoi! theorists be$an
to !on/"re with the possibility of !apital so ab"ndant as to be a free $ood#
.nd profits shran%, while what was now re!o$ni0ed as periodi! depressions
seeed to dra$ on interinably# The e!onoi! syste appeared to be
r"nnin$ down# (1)
2n reality, the e!onoi! syste was not r"nnin$ down 3rod"!tion and
in+estent !ontin"ed to $row not /"st in the newly ind"striali0in$ !o"ntries
of the tie 4ost notably, Gerany and the 567 b"t in *ritain as well8so
"!h so that, writin$ at the sae tie as -andes, another historian !o"ld
de!lare the Great Depression of 187396 nothin$ b"t a yth# (3)
9e+ertheless, as Veblen s"$$ests, there is no !ontradi!tion in sayin$ that
there was a $reat depression at a tie of !ontin"in$ e,pansion in
prod"!tion and in+estent# :n the !ontrary; the $reat depression was not
a yth pre!isely because prod"!tion and trade, in *ritain and in the world
e!onoy at lar$e, had !ontin"ed to e,pand too rapidly for profits to be
aintained at what was !onsidered a reasonable rate#
<ore spe!ifi!ally, the $reat e,pansion of world trade fro the iddle of the

nineteenth !ent"ry had led to a syste=wide intensifi!ation of !opetiti+e
press"res on the a$en!ies of !apital a!!""lation# .n in!reasin$ n"ber of
b"siness enterprises, fro an in!reasin$ n"ber of lo!ations a!ross the
5>=!entred world e!onoy, were $ettin$ in one anothers way in the
pro!"reent of inp"ts and disposal of o"tp"ts, thereby destroyin$ one
anothers pre+io"s onopolies8that is, their ore=or=less e,!l"si+e
!ontrol o+er parti!"lar ar%et ni!hes#
This shift fro onopoly to !opetition was probably the ost
iportant sin$le fa!tor in settin$ the ood for ?"ropean ind"strial
and !oer!ial enterprise# ?!onoi! $rowth was now also e!onoi!
str"$$le8str"$$le that ser+ed to separate the stron$ fro the wea%,
to dis!o"ra$e soe and to"$hen others, to fa+o"r the new # # #
nations at the e,pense of the old# :ptiis abo"t the f"t"re of
indefinite pro$ress $a+e way to "n!ertainty and a sense of a$ony# (@)
*"t then, all of a s"dden, as if by a$i!,
the wheel t"rned# 2n the last years of the !ent"ry, pri!es be$an to
rise and profits with the# .s b"siness ipro+ed, !onfiden!e
ret"rned8not the spotty, e+anes!ent !onfiden!e of the brief boos
that had p"n!t"ated the $loo of the pre!edin$ de!ades, b"t a
$eneral e"phoria s"!h as had not pre+ailed sin!e # # # the early
187As# ?+erythin$ seeed ri$ht a$ain8in spite of rattlin$s of ars
and onitory <ar,ist referen!es to the last sta$e of !apitalis# 2n
all of western ?"rope, these years li+e on in eory as the $ood old
days8the ?dwardian era, la belle poque# (B)
.s we shall see, there was nothin$ a$i!al abo"t the s"dden restoration of
profits to a ore reasonable le+el, and the !onseC"ent re!o+ery of the
*ritish and Destern bo"r$eoisies fro the alady pro+o%ed by e,!essi+e
!opetition# Eor now, let "s siply note that not e+eryone benefited fro
the bea"tif"l ties of 1896191@# 2nternationally, the ain benefi!iary of
the re!o+ery was *ritain# .s its ind"strial s"prea!y waned, its finan!e
tri"phed and its ser+i!es as shipper, trader, ins"ran!e bro%er and
interediary in the worlds syste of payents be!ae ore indispensable
than e+er# (6) *"t e+en within *ritain not e+erybody prospered# 3arti!"larly
noteworthy was the o+erall de!line of *ritish real wa$es after the id=
189As, whi!h re+ersed the rapidly risin$ trend of the pre+io"s half=!ent"ry#
(7) Eor the wor%in$ !lass of the then he$eoni! power, the belle poque
was th"s a tie of !ontainent after the pre!edin$ half=!ent"ry of
ipro+eent in its e!onoi! !ondition# This no do"bt $a+e an additional
boost to the renewed e"phoria of the *ritish bo"r$eoisie# 6oon, howe+er,
the rattlin$ of ars $ot o"t of hand, pre!ipitatin$ a !risis fro whi!h the
*ritish=!entred world=!apitalist syste wo"ld ne+er re!o+er#
Fobert *renners ti$htly ar$"ed and ri!hly do!"ented boo%, The Boom
and the Bubble: The US and the World Economy, does not refer to world
!apitaliss late=nineteenth=!ent"ry e,perien!e of depression, re+i+al and
!risis# (8) The !entral ar$"ent of the boo%, howe+er, !ontin"ally in+ites a
!oparison between that earlier period and what *renner !alls the
persistent sta$nation of 197393, followed by the re+i+al of the 56 and
world e!onoies# The p"rpose of this arti!le is not so "!h to de+elop s"!h
a !oparison as to "se the earlier e,perien!e as a foil in assessin$ the
+alidity and liits of *renners ar$"ent# 2n the first part of what follows, 2
shall re!onstr"!t as best 2 !an *renners analysis, fo!"sin$ on its ost
interestin$ and essential aspe!ts# 2n the se!ond se!tion, 2 re=e,aine the
ar$"ent !riti!ally, fo!"sin$ on its wea%nesses and liits# 2 will !on!l"de by
in!orporatin$ y !ritiC"es into a re+ised +ersion of *renners ar$"ent#
I. THE ECONOMICS OF GLOBAL TURBULENCE
*renners ob/e!ti+e in The Boom and the Bubble, as in his earlier
?!onoi!s of Global T"rb"len!e, is to pro+ide e+iden!e in s"pport of three
!losely related propositions# The first is that the transformation of the lon$
e,pansion of the 19BAs and 196As into the !oparati+e sta$nation of the
197As and 198As was ins!ribed in the for!es that dro+e the e,pansion# The
se!ond is that the persistence of !oparati+e sta$nation, fro 1973 to
1993, was d"e priarily to the ways in whi!h the b"siness and
$o+ernental or$ani0ations of the leadin$ !apitalist states responded to the
sharp and $enerali0ed fall in profitability that ar%ed the initial
transforation of e,pansion into sta$nation# .nd the third !ontention is
that the revival of the 56 e!onoy after 1993 was not based on a
resol"tion of the probles "nderlyin$ the lon$ downt"rnG indeed, it ay
a!t"ally ha+e a$$ra+ated the, as witness the world=e!onoi! !risis of
199798 and the potentially e+en ore serio"s !risis that the 56 and world
e!onoies ha+e e,perien!ed sin!e the b"rstin$ of the new e!onoy
b"bble#
A+ (neven ,evelopment- from oom to .ri"i"
.s ar$"ed in detail in Global T"rb"len!e, and briefly s"ari0ed at the
o"tset of The Boom and the Bubble, *renner sees both the lon$ boo of
the 19BAs and 196As and the !risis of profitability between 196B and 1973,
whi!h bro"$ht the boo to an end, as rooted in what he !alls "ne+en
de+elopent# 2n *renners definition, this is the pro!ess whereby la$$ards
in !apitalist de+elopent see% to and e+ent"ally s"!!eed in !at!hin$ "p
with the world=e!onoi! leaders# (9)
Eo!"sin$ on Gerany and Hapan as the ost s"!!essf"l aon$ the
la$$ards who, after the 6e!ond Dorld Dar, attepted to !at!h "p with prior
de+elopental a!hie+eents of the 56, *renner ar$"es that it was the
!apa!ity of these two !o"ntries to !obine the hi$h=prod"!ti+ity
te!hnolo$ies, pioneered by the 5nited 6tates, with the lar$e, low=wa$e
labo"r s"pplies !rowdin$ their !oparati+ely ba!%ward and r"ral sall=
b"siness se!tors, that p"shed "p their rates of profit and in+estent#
Thro"$h the early 196As this tenden!y did not ne$ati+ely affe!t 56
prod"!tion and profit, be!a"se $oods prod"!ed abroad reained for the
ost part "nable to !opete in the 56 ar%et and be!a"se 56 prod"!ers
depended to only a sall e,tent on o+erseas sales# 2n this !r"!ial respe!t,
therefore, "ne+en de+elopent was # # # still to a s"rprisin$ e,tent
separate de+elopent# (1A) 2ndeed, altho"$h "ne+en e!onoi!
de+elopent did entail the relative de!line of the 56 doesti! e!onoy # # #
it was also a pre!ondition for the !ontin"ed +itality of the doinant for!es
within the 56 politi!al e!onoy;
56 "ltinational !orporations and international ban%s, aiin$ to
e,pand o+erseas, needed profitable o"tlets for their forei$n dire!t
in+estent# Doesti!ally based an"fa!t"rers, needin$ to in!rease
e,ports, reC"ired fast=$rowin$ o+erseas deand for their $oods# .n
iperial 56 state, bent on !ontainin$ !o"nis and %eepin$ the
world safe for free enterprise, so"$ht e!onoi! s"!!ess for its allies
and !opetitors as the fo"ndation for the politi!al !onsolidation of
the post=war !apitalist order # # # .ll these for!es th"s depended "pon
the e!onoi! dynais of ?"rope and Hapan for the reali0ation of
their own $oals# (11)
2n short, "p to the early 196As, "ne+en de+elopent was a positi+e=s"
$ae, whi!h b"ttressed a sybiosis, if a hi$hly !onfli!t"al and "nstable
one, of leader and followers, of early and later de+elopers, and of he$eon
and he$eoni0ed# (11) To paraphrase -andess a!!o"nt of the $reat
depression of 187396, it had not yet be!oe e!onoi! str"$$le8a 0ero=
or e+en ne$ati+e=s" $ae that wo"ld benefit soe at the e,pense of
others# 2n *renners own a!!o"nt of the onset of the lon$ downt"rn of
197393, this is pre!isely what "ne+en de+elopent be!ae between 196B
and 1973# *y then Gerany and Hapan had not /"st !a"$ht "p b"t had
for$e(d) ahead of the 56 leader # # # in one %ey ind"stry after another8
te,tiles, steel, a"toobiles, a!hine tools, !ons"er ele!troni!s <ore
iportant, the newer, lower=!ost prod"!ers based in these and other
follower !o"ntries be$an in+adin$ ar%ets hitherto doinated by
prod"!ers of the leader re$ions, espe!ially the 56 and also the 5># (13)
This irr"ption of lower=pri!ed $oods into the 56 and world ar%ets
"nderined the ability of 56 an"fa!t"rers to se!"re the established rate
of ret"rn on their pla!eents of !apital and labo"r, pro+o%in$, between
196B and 1973, a de!line in the rate of ret"rn on their !apital sto!% of o+er
@A per !ent# 56 an"fa!t"rers responded to this intensifi!ation of
!opetition at hoe and abroad in +ario"s ways# They pri!ed prod"!ts
below f"ll !ost8that is, they so"$ht the established rate of profit only on
their !ir!"latin$ !apitalG they repressed the $rowth of wa$e !ostsG and they
"pdated their plant and eC"ipent# 5ltiately, howe+er, the ost de!isi+e
56 weapon in the in!ipient !opetiti+e str"$$le was a drasti! de+al"ation
of the dollar relati+e to the Hapanese yen and Geran ar%# (1@)
/nd of the gold0dollar "tandard
To soe e,tent, the de+al"ation was itself the res"lt of the deterioration in
the 56 balan!e of trade that ens"ed fro the loss of !opetiti+eness of
.eri!an +is=I=+is Geran and Hapanese an"fa!t"rers# 9e+ertheless, the
effe!ts of this trade balan!e on the +al"es of the three !"rren!ies were
!onsiderably aplified by $o+ernent poli!ies that destabili0ed8and
e+ent"ally disr"pted8the international $olddollar standard re$ie,
established at the end of the 6e!ond Dorld Dar# Eor the Geran and
Hapanese $o+ernents responded to the inflationary press"res en$endered
in their doesti! e!onoies by the e,port=led prod"!tion boo with a
repression of doesti! deand, whi!h f"rther in!reased both their trade
s"rpl"ses and spe!"lati+e deand for their !"rren!ies# (1B) .t the end of
Hohnsons adinistration and at the be$innin$ of 9i,ons, the 56
$o+ernent did attept to t"rn the tide of $rowin$ international onetary
instability, thro"$h fis!al a"sterity and ti$ht onetary poli!ies# 6oon,
howe+er,
the politi!al !osts of s"stainin$ a serio"s anti=inflationary poli!y8not
to ention the alarin$ fall in the sto!% ar%et # # # pro+ed
"na!!eptable to the 9i,on .dinistration# Dell before the defeat of
the Fep"bli!ans in the !on$ressional ele!tions of 9o+eber 197A,
and as hi$h interest rates threatened to !ho%e off the re!o+ery, the
$o+ernent t"rned on!e a$ain to fis!al sti"l"s and the Eed
a!!oodated with a poli!y of easy !redit# .s 9i,on was to p"t it
se+eral onths later, De are all >eynesians now# (16)
The 56 t"rn to a!roe!onoi! e,pansionary poli!ies in id=197A so"nded
the death %nell for the $olddollar standard# .s interest rates fell in the
5nited 6tates, while reainin$ hi$h or in!reasin$ in ?"rope and Hapan,
short=ter spe!"lati+e oney fled the dollar, sendin$ the 56 balan!e=of=
payents defi!it 4short and lon$ ter7 thro"$h the roof# The half=hearted
attept of the 6ithsonian .$reeent of De!eber 1971 to preser+e fi,ed
e,!han$e rates thro"$h a 7#9 per !ent de+al"ation of the dollar a$ainst
$old, and a re+al"ation of the ar% by 13#B per !ent and of the yen by 16#9
per !ent a$ainst the dollar, failed to !ontain the renewed downward
press"re that the 9i,on adinistration p"t on the 56 !"rren!y thro"$h yet
another ro"nd of e!onoi! sti"l"s# *y 1973, the press"re be!ae
"nbearable, res"ltin$ in a f"rther a/or de+al"ation of the dollar and the
foral abandonent of the fi,ed=rate syste of e,!han$e in fa+o"r of the
float# (17)
The assi+e de+al"ation of the dollar a$ainst the ar% 4by a total of BA per
!ent, between 1969 and 19737 and the yen 4by a total 18#1 per !ent, fro
1971 to 197378*renner !lais8se!"red the %ind of t"rnaro"nd in relati+e
!osts that (the 56 an"fa!t"rin$ se!tor) had been "nable to a!hie+e by
way of prod"!ti+ity $rowth and wa$e restraint The t"rnaro"nd had a
$al+ani0in$ effe!t on the 56 e!onoy# 3rofitability, in+estent $rowth and
labo"r prod"!ti+ity in an"fa!t"rin$ sta$ed a !oeba!%, and the 56 trade
balan!e was restored to a s"rpl"s# The ipa!t on the Geran and Hapanese
e!onoies was /"st the opposite# The !opetiti+eness of their
an"fa!t"rers was sharply !"rtailed, a%in$ it their t"rn to fore$o their
hi$h rates of ret"rn if they wished to aintain their sales The world !risis
of profitability had not been o+er!oe# *"t its b"rden was now ore e+enly
shared aon$ the !hief !apitalist !o"ntries# (18)
2n s", "ne+en e!onoi! de+elopent8"nderstood as a pro!ess of
s"!!essf"l !at!hin$ "p of la$$ard with leadin$ e!onoi! powers8prod"!ed
both the lon$ postwar boo and the !risis of profitability of the late 196As
and early 197As# .s lon$ as the !at!hin$ "p was $oin$ on, it s"stained a
worldwide +irt"o"s !ir!le of hi$h profits, hi$h in+estents and in!reasin$
prod"!ti+ity# *"t on!e the la$$ards8or at least two of the ost si0eable
ones8had a!t"ally !a"$ht "p with the forer leader, the res"lt was a
worldwide $l"t of prod"!ti+e !apa!ity and a !onseC"ent downward press"re
on rates of profit# 6oon, howe+er, a assi+e, $o+ernent=s"pported
de+al"ation of the dollar a$ainst the ar% and the yen distrib"ted the fall in
profitability ore e+enly aon$ the three ain !apitalist powers#
+ 1ver-.apacit$ and 2er"i"tent )tagnation
5ne+en de+elopent $enerated the e,!ess !apa!ity that pro+o%ed the
$eneral fall in the rate of profit between 196B and 1973# *"t it was the
fail"re of !apitalist enterprises and $o+ernents to restore profitability to
its pre+io"s le+els thro"$h the eliination of e,!ess !apa!ity that was
priarily responsible for the persisten!e of !oparati+e sta$nation o+er the
two de!ades fro 1973 to 1993# 2n *renners !on!ept"ali0ation, there is
o+er=!apa!ity and o+er=prod"!tion 4two ters he always "ses to$ether7
when there is ins"ffi!ient deand to allow hi$her=!ost firs to aintain
their forer rates of profit# These firs are th"s obli$ed to !ease "sin$
soe of their eans of prod"!tion and !an a%e "se of the rest only by
lowerin$ their pri!es and th"s their profitability# There is o+er=!apa!ity and
o+er=prod"!tion, with respect to the hitherto-eistin! profit rate# (19)
?ither the o+er=s"pply of prod"!ti+e !apa!ity is eliinated, or the rate of
profit "st fall, with all the dire !onseC"en!es that s"!h a fall entails in a
!apitalist e!onoy, fro drops in the rates of in+estent and prod"!ti+ity
$rowth to the de!line of real wa$es and le+els of eployent# *renners
!ontention is that, at least "p to 1993, the o+er=s"pply of prod"!ti+e
!apa!ity that "nderlay the !risis of profitability of 196B73, far fro bein$
eliinated, if anythin$ in!reased f"rther, !ontin"ally depressin$ profitability#
The !ontention is based on two lines of ar$"ent, one !on!ernin$ !apitalist
enterprises and one !on!ernin$ $o+ernents# 2n *renners
!on!ept"ali0ation of world !apitalis, there is no spontaneo"s ar%et
e!hanis that will pre+ent o+er=!apa!ity fro de+elopin$ in a lar$e
n"ber of ind"stries, or fro be!oin$ a !hroni! feat"re of the world
e!onoy on!e it has de+eloped# Ji$her=!ost in!"bent firs ha+e both the
eans and the in!enti+e to resist e,it fro o+er!rowded ind"stries, while
o+er=!apa!ity and fallin$ profits do not ne!essarily dis!o"ra$e new entry#
Ji$her=!ost in!"bents resist e,it be!a"se any of their tan$ible and
intan$ible assets !an be reali0ed only in their established lines of
prod"!tion and wo"ld be lost were (the in!"bents) to swit!h lines#
<oreo+er, the slowed $rowth of deand whi!h is the "na+oidable
e,pression of the red"!ed $rowth of in+estent and wa$es that ine+itably
res"lts fro fallin$ profit rates, a%es it in!reasin$ly diffi!"lt to reallo!ate
to new lines# These firs, therefore, ha+e e+ery reason to defend their
ar%ets (by see%in$ the a+era$e rate of ret"rn on their !ir!"latin$ !osts
only) and to !o"nteratta!% by speedin$ "p the pro!ess of inno+ation,
thro"$h in+estent in additional fi,ed !apital The adoption of s"!h a
strate$y, in t"rn, will tend to pro+o%e the ori$inal !ost=red"!in$ inno+ators
to a!!elerate te!hni!al !han$e thesel+es, f"rther worsenin$ the already
e,istin$ o+er=!apa!ity and o+er=prod"!tion# (1A)
.t the sae tie, the a$$ra+ation of o+er=!apa!ity does not deter new
entry and a !onseC"ent f"rther downward press"re on the rate of profit#
:n the !ontrary# The initial fall in profitability # # # !an be e,pe!ted to
intensify the world=wide dri+e for e+en lower prod"!tion !osts, thro"$h the
!obination of e+en !heaper labo"r with e+en hi$her le+els of te!hniC"es in
still later=de+elopin$ re$ions# (11) The ost !onspi!"o"s instan!e of s"!h
new entry d"rin$ the lon$ downt"rn were prod"!ers based in so=!alled -ess
De+eloped Ko"ntries8espe!ially in ?ast .sia, b"t also <e,i!o and *ra0il8
who ana$ed to a%e si$nifi!ant inroads in world ar%ets for
an"fa!t"red $oods, f"rther intensifyin$ the downward press"re on pri!es
and profitability# There was, in short, not only too little e,it, b"t too "!h
entry# (11)
This first line of ar$"ent is, for the ost part, de+eloped ded"!ti+ely on
the basis of !ir!"stantial e+iden!e# There is +ery little b"siness history
proper in either Global T"rb"len!e or The Boom and the Bubble 2n both
te,ts, the b"l% of the epiri!al e+iden!e and histori!al narrati+e !on!erns
the se!ond line of ar$"ent, a!!ordin$ to whi!h the $o+ernents of the
ain !apitalist powers, espe!ially the 5nited 6tates, share responsibility for
a$$ra+atin$ rather than alle+iatin$ the ar%et tenden!y towards too little
e,it and too "!h entry# 2n this respe!t, *renners ain !ontrib"tion to o"r
"nderstandin$ of the lon$ downt"rn is to show that the $o+ernents in
C"estion a!ted not so "!h as re$"lators8tho"$h they did that too8b"t as
a!ti+e parti!ipants, e+en prota$onists, of the syste=wide !opetiti+e
str"$$le that has set !apitalists a$ainst one another sin!e the late 196As#
)tate intervention"
.s pre+io"sly noted, in his a!!o"nt of the 196As !risis of profitability
*renner already saw the 56 $o+ernents p"rs"it of a a/or de+al"ation of
the dollar a$ainst the ar% and yen as a%in$ a de!isi+e !ontrib"tion to
shiftin$ the b"rden of the !risis fro .eri!an to Geran and Hapanese
an"fa!t"rers# 6iilarly, in his a!!o"nt of the lon$ downt"rn, *renner
shows how the ebb and flow of !"rren!y de+al"ations and re+al"ations
ha+e been %ey instr"ents of $o+ernental a!tion in the inter=!apitalist
!opetiti+e str"$$le# These are ar%ed by three a/or politi!al=e!onoi!
t"rnin$ points; the Fea$anThat!her onetarist re+ol"tion of 19798A,
whi!h re+ersed the de+al"ation of the 56 dollar of the 197AsG the 3la0a
.!!ord of 198B, whi!h res"ed the dollar de+al"ationG and the so=!alled
re+erse 3la0a .!!ord of 199B, whi!h a$ain re+ersed the de+al"ation# -et
"s briefly e,aine *renners a!!o"nt of the relationship between these
t"rnin$ points and the persisten!e of o+er=prod"!tion and o+er=!apa!ity in
an"fa!t"rin$, whi!h "nderlies his lon$ downt"rn#
*y the late 197As, the 56 a!ro=poli!y of Eederal defi!its, e,tree
onetary ease and beni$n ne$le!t with respe!t to the dollars e,!han$e
rate rea!hed the liit of its ability to s"stain e!onoi! e,pansion and
restore .eri!an an"fa!t"rin$ !opetiti+eness and profitability# The
poli!y had enabled the ad+an!ed !apitalist e!onoies to trans!end the oil
!risis re!ession of 197@B and to !ontin"e to e,pand d"rin$ the reainder
of the de!ade# 9e+ertheless, in their effe!ts >eynesian sti"li pro+ed to be
profo"ndly abi+alent# Dhile s"stainin$ the $rowth of deand
doesti!ally and internationally, >eynesian reedies helped to perpet"ate
o+er=!apa!ity and o+er=prod"!tion, pre+entin$ the harsh edi!ine of
sha%eo"t, indeed depression, that histori!ally had !leared the way for new
"pt"rns (in profitability) Fed"!ed profitability, in t"rn, ade firs "nable
and "nwillin$ # # # to brin$ abo"t as $reat an in!rease in s"pply as in the
past when profit rates were hi$her # # with the res"lt that the e+er=
in!reasin$ p"bli! defi!its of the 197As bro"$ht abo"t not so "!h in!reases
in output as rises in prices The es!alation in inflationary press"res was
a!!opanied by re!ord=brea%in$ defi!its in the 56 balan!e of payents# *y
197778 these defi!its pre!ipitated a de+astatin$ r"n on the 56 !"rren!y
that threatened the dollars position as an international reser+e !"rren!y,
(!learin$ the path) for a a/or !han$e of perspe!ti+e# (13)
The !han$e !ae with the Fea$anThat!her onetarist re+ol"tion of 1979
8A# .!!ordin$ to *renner, its ain ob/e!ti+e was to re+i+e profitability, not
/"st or e+en priarily in an"fa!t"rin$, b"t in the low=prod"!ti+ity ser+i!e
se!tor and, espe!ially, in the doesti! and international finan!ial se!tors,
thro"$h red"!ed !orporate ta,ation, in!reased "neployent and the
eliination of !apital !ontrols# 5nli%e earlier, >eynesian sol"tions, howe+er,
onetarist reedies so"$ht to restore profitability by adinisterin$ the
harsh edi!ine of sha%eo"t# 5npre!edentedly ti$ht !redit pro+o%ed a p"r$e
of that $reat led$e of hi$h=!ost, low=profit an"fa!t"rin$ firs that had
been s"stained by the >eynesian e,pansion of !redit .ltho"$h inflationary
press"res were rapidly bro"$ht "nder !ontrol, re!ord=hi$h 56 real interest
rates and the risin$ dollar asso!iated with the threatened to pre!ipitate a
worldwide !rash, startin$ in the 56# (1@)
The !rash was a+oided by the fort"ito"s ret"rn of >eynesianis8with a
+en$ean!e# Fea$ans on"ental pro$rae of ilitary spendin$ and ta,
red"!tion for the ri!h # # # partly offset the ra+a$es of onetarist ti$ht !redit
and %ept the e!onoy ti!%in$ o+er# Fea$anite poli!ies did, of !o"rse, brin$
ba!% !"rrent=a!!o"nt defi!its, also with a +en$ean!e, espe!ially sin!e, fro
this point onward, ost of the rest of the world in!reasin$ly es!hewed
>eynesian p"bli! defi!its# .s in the 197As, "npre!edented defi!its pro+ided
the in/e!tions of deand that were needed # # # to p"ll the world e!onoy
o"t of the re!ession of 197981# 2n !ontrast to the 197As, howe+er, e+en
lar$er 56 defi!its did not now pro+o%e a r"n on the dollar# :n the !ontrary,
the p"ll of e,treely hi$h real interest rates and a p"sh fro the Hapanese
<inistry of Einan!e res"lted in a assi+e inflow of !apital into the 5nited
6tates fro all o+er the world, leadin$ not to a depre!iation b"t to a sharp
appre!iation of the 56 !"rren!y# (1B)
2la'a Accord
The syner$y of red"!ed inflationary press"res, hi$h real interest rates,
assi+e inflows of !apital and a risin$ dollar was in %eepin$ with the
Fea$an adinistrations ob/e!ti+e of stren$thenin$ 56 finan!e !apital# 2t
nonetheless pro+ed !atastrophi! for lar$e se!tions of 56 an"fa!t"rin$#
5nder stron$ press"re fro Kon$ress and any of the !o"ntrys leadin$
!orporate e,e!"ti+es, the Fea$an adinistration had little !hoi!e b"t to
"nderta%e an epo!h=a%in$ re+ersal of dire!tion# The !entrepie!e of this
re+ersal was the 3la0a .!!ord of 6epteber 11, 198B, whereby the G=B
powers, "nder 56 press"re, a$reed to ta%e /oint a!tion to help .eri!an
an"fa!t"rers by red"!in$ the e,!han$e rate of the dollar# The +ery ne,t
day, the .!!ord was !opleented by stepped="p 56 den"n!iations of the
"nfair tradin$ pra!ti!es of other !o"ntries# The den"n!iations soon
es!alated into threats, s"pported by new le$islation8ost notably, the
:nib"s Trade and Kopetition .!t of 1988 and the 6tr"!t"ral
2pedients .!t of 19898to !lose off the 56 ar%et to leadin$ 4ostly
?ast .sian7 forei$n !opetitors# This was a bl"d$eon both to liit their
iports8thro"$h +ol"ntary e,port restraints8and to for!e the openin$ of
their ar%ets to 56 e,ports and forei$n dire!t in+estent# (16)
2n see%in$ a radi!al de+al"ation of the dollar while si"ltaneo"sly steppin$
"p prote!tionist and ar%et=openin$ eas"res, the Fea$an adinistration
was followin$ in the footsteps of 9i,on, Eord and Karter# The o"t!oe of
these initiati+es in the 198As and early 199As was nonetheless C"ite
different to that of the 197As#
The 3la0a .!!ord, and its seC"els, pro+ed to be the t"rnin$ point in
the 56 an"fa!t"rin$ t"rnaro"nd, and a a/or watershed for the
world e!onoy as a whole# 2t set off ten years of ore or less
!ontin"o"s, and a/or, de+al"ation of the dollar with respe!t to the
yen and the ar%, whi!h was a!!opanied by a de!ade=lon$ free0e
on real wa$e $rowth# 2t thereby opened the way si"ltaneo"sly for
the re!o+ery of !opetiti+eness, alon$ with the speed="p of e,port
$rowth, of 56 an"fa!t"rin$G a se!"lar !risis of Geran and
Hapanese ind"stryG and an "npre!edented e,plosion of e,port=based
an"fa!t"rin$ e,pansion thro"$ho"t ?ast .sia, where e!onoies for
the ost part tied their !"rren!ies to the dollar and thereby se!"red
for their an"fa!t"rin$ e,porters a a/or !opetiti+e ad+anta$e +is=
I=+is their Hapanese ri+als when the dollar fell between 198B and
199B# (17)
*y 1993, the tenden!ies set off by the 3la0a .!!ord, alon$ with the prior
sha%eo"t of the 56 ind"strial str"!t"re pro+o%ed by the "npre!edentedly
ti$ht !redit of the early 198As, res"lted in a re+i+al of 56 profitability,
in+estent and prod"!tion# (18) To paraphrase Veblen, the reedies
!on!o!ted by the $o+ernent to !"re the alady of the affe!tions of 56
b"siness seeed, at lon$ last, to ha+e rea!hed the eotional seat of the
tro"ble and restored profits to a reasonable rate# The !"re, howe+er, had
soe serio"s side effe!ts#
2n *renners +iew, the ain proble was that the 56 re+i+al had o!!"rred
priarily at the e,pense of its Hapanese and Destern ?"ropean ri+als and
had done little to o+er!oe the "nderlyin$ o+er=!apa!ity and o+er=
prod"!tion in an"fa!t"rin$ whi!h ha"nted the $lobal e!onoy# This 0ero=
s" nat"re of the re+i+al was probleati! for the 5nited 6tates itself# Eor
one thin$, the e+er slower $rowth of world deand, and in parti!"lar the
related intensifi!ation of international !opetition in an"fa!t"rin$ liited
the re+i+al there, too# <ore !opellin$ly, the 5nited 6tates !o"ld hardly
afford a tr"ly serio"s !risis of its leadin$ partners and ri+als, espe!ially
Hapan# (19)
This !ontradi!tion s"rfa!ed star%ly in the wa%e of the <e,i!an peso !risis of
199@9B# The !risis, and Dashin$tons res!"e of the <e,i!an e!onoy, led
to a new r"n on the dollar, sharply a!!ent"atin$ its downward trend of the
pre!edin$ de!ade# Dith the yen rea!hin$ an all=tie hi$h of L79;M1 in .pril
199B, Hapanese prod"!ers !o"ld not e+en !o+er their +ariable !osts and # #
the Hapanese $rowth a!hine appeared to be $rindin$ to a halt 6till "nder
the sho!% of the <e,i!an !ollapse and its disastro"s ipa!t on international
finan!ial stability 4and with the "p!oin$ 1996 presidential ele!tion
looin$ in the ba!%$ro"nd7, the Klinton adinistration siply !o"ld not
ris% a Hapanese +ersion of the <e,i!an deba!le#
?+en if a Hapanese !risis !o"ld be !ontained, it wo"ld probably entail
the lar$e=s!ale liC"idation of Hapans enoro"s holdin$s of 56 assets,
espe!ially Treas"ry *onds# 6"!h a de+elopent wo"ld !hase "p
interest rates, fri$hten the oney ar%ets, and possibly (threaten) a
re!ession at the +ery oent that the 56 e!onoy appeared finally
ready to ri$ht itself# (3A)
-ed by Treas"ry 6e!retary Fobert F"bin, the 5nited 6tates entered into an
arran$eent with Gerany and Hapan to ta%e /oint a!tion aied at
re+ersin$ the "pward trend of the yen and the downward trend of the
dollar# This do"ble re+ersal was to be a!hie+ed by a f"rther lowerin$ of
interest rates in Hapan, relati+e to those of the 5nited 6tates, and by
s"bstantially enlar$in$ Hapanese p"r!hases of dollar=denoinated
instr"ents s"!h as Treas"ry bonds, as well as Geran and 56 p"r!hases
of dollars in !"rren!y ar%ets# -ater !alled the re+erse 3la0a .!!ord, the
a$reeent represented a st"nnin$8and entirely "ne,pe!ted8abo"t=fa!e
in the poli!y stan!e of both the 56 and its ain allies and ri+als, in "!h
the sae way as had the ori$inal 3la0a .!!ord of 198B# (31)
Thro"$h this +olte=fa!e, the $o+ernents of the worlds lar$est e!onoies
swit!hed roles in their in"et of "t"al help# H"st as Hapan and Gerany
had had to a!!ede to the 3la0a .!!ord # # # to res!"e 56 an"fa!t"rin$
fro its !risis of the first half of the 198As, at $reat !ost to thesel+es, so
the 56 (was now) obli$ed to a!!ept a C"ite siilar bailo"t of Hapans !risis=
bo"nd an"fa!t"rin$ se!tor8a$ain with epo!h=a%in$ res"lts# (31) Eor
the swit!h transfored the on$oin$ 56 e!onoi! re+i+al into the boo and
b"bble of the se!ond half of the 199As8the s"b/e!t atter of *renners
third ain !ontention, to whi!h we now t"rn#
.+ (n"#"tainable Revival
*renners ar$"ent on the pre!ario"sness of the e!onoi! re+i+al of the
199As is ore diffi!"lt to pin down than his !ontentions !on!ernin$ the
!risis of the late 196As and early 197As, and the persisten!e of relati+e
sta$nation fro 1973 to 1993# The diffi!"lty arises fro the presen!e of
two o+erlappin$ ar$"ents; one in+ol+in$ the nat"re of the re+i+al, before
the f"ll dilation of the new e!onoy b"bbleG and the other, the ipa!t of
the b"bble on the re+i+al# -et "s e,aine ea!h ar$"ent in t"rn#
2n his ?!onoi!s of Global T"rb"len!e, written before eC"ity pri!es went
thro"$h the roof at the end of the 199As, *renner e,pressed serio"s do"bts
abo"t whether the on$oin$ re+i+als of the 56 and world e!onoies
!onstit"ted a definiti+e trans!enden!e of the lon$ downt"rn# Je fo"nd little
e+iden!e of the %ind of syste=wide re!o+ery of profitability that wo"ld
ha+e si$nalled the o+er!oin$ of the se!"lar proble of an"fa!t"rin$
o+er=!apa!ity and o+er=prod"!tion# Je did a!%nowled$e that, in the wa%e
of the re+erse 3la0a .!!ord, the 5nited 6tates had e,perien!ed an e,port=
led boo whi!h !ontrib"ted s"bstantially to settin$ off ore rob"st e,port
$rowth in both ?"rope and Hapan# This tenden!y held o"t the possibility
that the ad+an!ed !apitalist e!onoies are finally ready to follow a
6ithian re!ipe of "t"ally self=reinfor!in$ $rowth thro"$h spe!iali0ation
and the $ains fro trade Je nonetheless went on to ar$"e that the
o"tbrea% of the ?ast .sian !risis of 199798 deonstrated the persisten!e,
or e+en a stren$thenin$, of the tenden!y towards o+er=prod"!tion and
o+er=!apa!ity# (33)
*renner also entioned the possible eer$en!e of another optiisti!
s!enario, whereby
the flood of low=pri!ed $oods !oin$ fro Hapan and the rest of .sia
wo"ld ainly ser+e # # # not so "!h to for!e down 56 prod"!ers
pri!es and profits as to red"!e their prod"!tion !osts, enhan!in$ their
!opetiti+eness, in!reasin$ their ar%"ps and sti"latin$ f"rther
!apital a!!""lation# They wo"ld, by the sae to%en, re+i+e the lo!al
e!onoies, a%in$ possible the $reater absorption of 56 iports#
Kopleentarity wo"ld, in other words, o+erride !opetition, settin$
off a +irt"o"s "pward spiral, with the 56 p"llin$ alon$ the world
e!onoy toward a new boo# (3@)
:n balan!e, howe+er, *renner was s!epti!al abo"t the li%elihood that this
alternati+e s!enario !o"ld a!t"ally ateriali0e# Father, he e,pe!ted world
e,ports to $row ore rapidly than world ar%ets, perpet"atin$ and
e,a!erbatin$ the lon$er=ter trend towards o+er=!apa!ity and o+er=
prod"!tion# 2n parti!"lar, he fo"nd it hard to belie+e that the radi!al
de+al"ation of .sian !"rren!ies8espe!ially that of the yen, by soe @A per
!ent sin!e 199B8wo"ld not e,er!ise an e,!r"!iatin$ downward press"re on
56 an"fa!t"rers pri!es and profits#
2n this ore probable s!enario, red"ndant prod"!tion wo"ld yet a$ain
"nderine the $ains fro trade and competition would end up
trumpin! complementarity# The a!!eleratin$ s"pply of world e,ports
in the fa!e of shrin%in$ ar%ets, far fro f"ellin$ 56 profits and
s"stainin$ the boo, wo"ld "nder!"t the and thereby the re!o+ery,
in this way !"ttin$ short a syste=wide se!"lar "pt"rn and ris%in$ a
serio"s new t"rn downward of the world e!onoy# (3B)
2n the two years followin$ the p"bli!ation of Global T"rb"len!e,
s%yro!%etin$ 56 eC"ity pri!es and a propt re!o+ery of the world e!onoy
fro the ?ast .sian !risis i$ht ha+e seeed to in+alidate this pessiisti!
!on!l"sion# .ltho"$h the new e!onoy b"bble had already b"rst and
"!h of the hype s"rro"ndin$ the sharp 56 e!onoi! "pt"rn of the 199As
had waned before The Boom and the Bubble was !opleted, two C"estions
reained open; first, how did the b"bble fit in the s!hee of thin$s laid o"t
in Global T"rb"len!eN .nd se!ond, how did its o!!"rren!e affe!t *renners
e,pe!tations for the f"t"re of the 56 and world e!onoiesN
2n answer to the first C"estion, *renner has no diffi!"lty in e,plainin$ the
b"bble in ters of the "nintended, b"t !ertainly not "nwel!oe, effe!ts of
the re+erse 3la0a .!!ord on the one side, and the Eederal Feser+es
p"rposef"l n"rt"rin$ of risin$ eC"ity pri!es on the other# ?+en before 199B,
the re!o+ery of profitability in 56 an"fa!t"rin$ had translated into an
in!rease in sto!% pri!es# The re+erse 3la0a .!!ord aplified this in!rease
for forei$n in+estors by p"shin$ "p the +al"e of the dollar# <ore iportant,
the .!!ord "nleashed a torrent of !ash fro Hapan, ?ast .sia and o+erseas
ore $enerally into 56 finan!ial ar%ets, whi!h sharply eased interest
rates and opened the way for a i$hty in!rease in !orporate borrowin$ to
finan!e the p"r!hase of shares on the sto!% ar%et Kr"!ial in this respe!t
were Hapanese poli!ies# 9ot only did the To%yo a"thorities dire!tly p"p
oney into 56 $o+ernent se!"rities and the dollar, and en!o"ra$e
Hapanese ins"ran!e !opanies to follow s"it by loosenin$ re$"lations on
o+erseas in+estent# 2n addition, by slashin$ the offi!ial dis!o"nt rate to
A#B per !ent, they enabled in+estors8in!l"din$, abo+e all, 56 in+estors8to
borrow yen in Hapan alost for free, !on+ert the into dollars and in+est
the elsewhere, espe!ially in the 56 sto!% ar%et# (36)
This flood of 56=bo"nd forei$n !apital and the asso!iated appre!iation of
the dollar were essential in$redients in the transforation of the pre=199B
boo in eC"ity pri!es into the s"bseC"ent b"bble# 2n *renners a!!o"nt,
howe+er, the transforation wo"ld probably not ha+e o!!"rred witho"t the
en!o"ra$eent of the Eed# Despite his fao"s De!eber 1996 warnin$
abo"t the sto!% ar%ets irrational e,"beran!e, Greenspan did nothin$ to
indi!ate by his a!tions any serio"s worry abo"t orbitin$ eC"ity pri!es :n
the !ontrary, while steadily e,pandin$ the doesti! oney s"pply, he did
not raise interest rates si$nifi!antly or ipose $reater reser+e reC"ireents
on ban%sG nor did he raise ar$in reC"ireents on eC"ity p"r!hases#
Dorse still, as the b"bble $ained oent", Greenspan went "!h
f"rther#
*y sprin$ 1998, he wo"ld be e,pli!itly rationali0in$ tearaway eC"ity
pri!es in ters of 9ew ?!onoy prod"!ti+ity $ains whi!h he saw as
at on!e %eepin$ down inflation and $i+in$ !reden!e to in+estors
e,pe!tations of the e,traordinary $rowth of profits into the distant
f"t"re# Je wo"ld also be e,pressin$ his war appre!iation of the
stepped="p !orporate in+estent and ho"sehold !ons"ption that
flowed fro the wealth effe!t of e,plodin$ asset +al"es, and whi!h
stren$thened the boo# # # # ?C"ity spe!"lators !o"ld hardly be
fa"lted if they drew the !on!l"sion that the Eed Khairan, despite his
professed !a"tion, fo"nd their e,"beran!e not /"st not irrational, b"t
also sensible and benefi!ial# (37)
The inr"sh of !apital "nleashed by the re+erse 3la0a .!!ord and the Eeds
easy !redit re$ie were ne!essary !onditions of the eC"ity=ar%et b"bble#
*"t the ain a!ti+e for!e in its dilation were 56 non=finan!ial !orporations,
whi!h e,ploited these !onditions to rat!het "p their borrowin$ for the
p"rpose of b"yin$ shares in !olossal C"antities8either to a!!oplish
er$ers and a!C"isitions or to siply re=p"r!hase 4retire7 their own
o"tstandin$ eC"ities ?nterin$ "pon the $reatest wa+e of a!!""lation of
debt in their history, 56 !orporations p"ped "p share +al"es at
"npre!edented rates# 6in!e risin$ eC"ity pri!es, by pro+idin$ $rowin$
paper assets and thereby in!reased !ollateral, fa!ilitated still f"rther
borrowin$, the b"bble was enabled to s"stain itself, as well as to f"el the
stron$ !y!li!al "pt"rn already in pro$ress# (38)
Impact of the b#bble
This brin$s "s to o"r se!ond C"estion# Jow did the b"bble affe!t the re+i+al
already in pro$ressN Did it !han$e the !onditions of the "pt"rn to render
ore probable the eer$en!e of one of the optiisti! s!enarios abo"t
whi!h *renner had been so s!epti!al in Global T"rb"len!eN *renners
answer is that, by f"rther in!reasin$ international o+er=!apa!ity and o+er=
prod"!tion, the b"bble ade any s"!h o"t!oe e+en less li%ely# The
inflation of the paper +al"e of their assets, and the b"bble=ind"!ed wealth
effe!t on !ons"er deand, led !orporations to in+est well abo+e what
was warranted by their a!t"ally reali0ed profits# .s a res"lt, as soon as the
wealth effe!t !eased to s"bsidi0e prod"!ti+ity $rowth, in+estent and
!ons"er deand, firs # # # were bo"nd to s"ffer tr"ly e,!r"!iatin$
downward press"re on their rates of ret"rn# 2ndeed, writin$ in id=1AA1,
*renner already obser+ed the initial ipa!t on the 56 and world e!onoies
of the b"rst b"bble and the h"$e $l"t of prod"!ti+e !apa!ity left in its
wa%e8ost notably, a disastro"s de!line in the non=finan!ial !orporate
profit rate, whi!h wiped o"t +irt"ally all of the $ains in profitability
a!hie+ed in the e,pansion of the 199AsG and a sharp !ontra!tion in !apital
a!!""lation# (39)
2n spe!"latin$ on how serio"s the ens"in$ downt"rn wo"ld be, *renner
rea!hes essentially the sae !on!l"sions he had !oe to fo"r years earlier
in Global T"rb"len!e# Je points o"t that the "nderlyin$ C"estion is still
whether the bi$ re!essions and !rises # # # that had p"n!t"ated the 199As,
as well as the rise of new ind"stries all a!ross the ad+an!ed !apitalist
world, had finally rid international an"fa!t"rin$ of its tenden!y to
red"ndant prod"!tion and ade for the # # # in!rease in !opleentarity
that was reC"ired to finally s"pport a dynai! international e,pansion :n
balan!e, he a$ain finds that no s"!h sha%eo"t had a!t"ally o!!"rred# :n
the !ontrary, in his /"d$eent the b"rstin$ of the b"bble left the 56
e!onoy wei$hed down by any of the sae sta$nationist for!es that
held ba!% the Hapanese e!onoy at the end of its b"bble8that is, both
the downward spiral set off by the b"bble=in=re+erse and an international
an"fa!t"rin$ se!tor still !onstrained by o+er=!apa!ity and o+er=
prod"!tion# .ltho"$h the 56 ay be in a position to a+oid the ban%in$
!risis that has !rippled Hapan, it nonetheless la!%s the enoro"s sa+in$s
and !"rrent=a!!o"nt s"rpl"ses that ha+e enabled Hapan8so far8to "ddle
thro"$h# 2t is therefore +"lnerable, not /"st to the destr"!ti+e red"!tions in
deand that wo"ld ens"e fro attepts to red"!e the h"$e indebtedness
of 56 !orporations and ho"seholds, b"t also to the possibility of
withdrawals of forei$n in+estent and !onseC"ent r"ns on the dollar# (@A)
5nder these !ir!"stan!es, the 5nited 6tates is ore li%ely to lead the
world e!onoy into a self=reinfor!in$ re!ession than a re!o+ery# 2n a sense,
s"!h a re!ession wo"ld !onstit"te a !ontin"ation of the international !risis
of 199798, whi!h was teporarily postponed by the last phase of the 56
sto!% ar%et r"n="p b"t ne+er f"lly resol+ed# .s in that earlier !risis, ?ast
.sia will on!e a$ain pro+e the worlds powder %e$, with assi+e o+er=
!apa!ity in Hapan and elsewhere in the re$ion e,er!isin$ a stron$ downward
press"re on profitability, lo!ally and $lobally# (@1) 3r"dently, *renner does
not !oit hiself to any parti!"lar s!enario# *"t the o+erwhelin$
ipression with whi!h we are left is that the lon$ downt"rn is far fro
o+erG indeed, that the worst is yet to !oe#
II. LONG DOWNTURN IN WORLD-HISTORICAL
PERSPECTIVE
De are all in debt to *renner for pro+idin$ a systeati! analysis of $lobal
t"rb"len!e whi!h !ontrasts sharply with the pre+ailin$ iedia!y and
s"perfi!iality of e,istin$ a!!o"nts of the relationship between the 5nited
6tates and the world e!onoy o+er the past half=!ent"ry# 2 !annot thin% of
a better startin$ point fro whi!h to "nra+el the !ople,ities of that
relationship# .t the sae tie, we sho"ld not be s"rprised if an analysis of
this s!ope raises ore C"estions than it !an resol+e# -et "s see what these
C"estions are and in whi!h dire!tions we sho"ld loo% in order to pro+ide
soe answers#
The !entral thesis "nderlyin$ all *renners !ontentions is that the
persisten!e of relati+e sta$nation in the world e!onoy at lar$e o+er the
last thirty years has been d"e to too little e,it and too "!h entry8too
little and too "!h, that is, relati+e to what wo"ld be reC"ired in order to
restore profitability in an"fa!t"rin$ to the le+el it had attained d"rin$ the
lon$ boo of the 19BAs and 196As# .s we ha+e seen, *renner tra!es this
tenden!y to the "t"ally reinfor!in$ a!tion of the beha+io"r of hi$her=!ost
in!"bent firs and the poli!ies of the $o+ernents of the worlds three
lar$est e!onoies# .s a res"lt of this !obination, ea!h of these three, and
the world e!onoy at lar$e, were pre+ented fro p"r$in$ s"perfl"o"s,
hi$h=!ost eans of prod"!tion by the standard capitalist methods of
ban%r"pt!y, downsi0in$, and layoffs#
Ji$her !ostOlower profit firs were th"s able to lon$ o!!"py e!onoi!
positions that !o"ld, in the abstra!t, e+ent"ally ha+e been ass"ed
by ore prod"!ti+e, hi$her profit, and ore dynai! enterprises# *"t
allowin$ the less prod"!ti+e, less profitable firs to $o o"t of
b"siness by lettin! the business cycle ta"e its natural course wo"ld
+ery li%ely ha+e t"rned the lon$ downt"rn, with its relati+ely serio"s
b"t nonetheless liited re!essions, into outri!ht depression 6iply
p"t, the pre!ondition for restorin$ the syste to health was a debt=
deflation, leadin$ to what <ar, !alled a sla"$hterin$ of !apital
+al"es *"t sin!e the only systeati! way to a!hie+e this was thro"$h
depression, the only real alternati+e was !ontin"in$ debt e,pansion,
whi!h !ontrib"ted both to sta$nation and finan!ial instability# (@1)
2n his a!!o"nt of the lon$ downt"rn, *renner entions two oents when
the standard !apitalist ethod of str"!t"ral sha%eo"t was briefly at wor%;
the early 198As, "nder Fea$an, and the id=199As, "nder Klinton# *"t as
soon as the sha%eo"t threatened to tri$$er a syste=wide depression, the
!on!erted a!tion of the ain !apitalist states !"t short the sla"$hter of
!apital +al"es thro"$h an e,pansion of p"bli! and pri+ate debt# *"t while
the $rowth of debt # # # was helpin$ to sta+e off depression, it was also
slowin$ down that re!o+ery of profitability whi!h was the f"ndaental
!ondition for e!onoi! re+itali0ation# (@3)
*renner ne+er tells "s what a depression8as opposed to the !oparati+e
sta$nation of the lon$ downt"rn8wo"ld loo% li%e# 2n the passa$es /"st
C"oted, the !onte,t s"$$ests that it wo"ld be a far ore destr"!ti+e
o!!"rren!e# *"t the differen!e is ne+er ade e,pli!it, lea+in$ "s wonderin$,
first, whether world !apitalis has e+er a!t"ally e,perien!ed this alle$edly
!lassi!al, nat"ral, standard sha%eo"t and o"tri$ht depressionG se!ond, if
it did, what alteration in histori!al !onditions has enabled !onteporary
!apitalis to a+oid the sae e,perien!eG and finally, what are the
ipli!ations of this !han$e for the f"t"re of world !apitalis and world
so!ietyN
3wo long downt#rn" compared
2n see%in$ answers to s"!h C"estions, it is helpf"l to !opare the s%et!h of
the $reat depression of 187396, set o"t at the be$innin$ of this arti!le,
with *renners a!!o"nt of the lon$ downt"rn or persistent sta$nation of
197393# 9otwithstandin$ the widespread desi$nation of the earlier period
as a depression, s"!h a !oparison iediately re+eals stri%in$
siilarities# (@@) *oth were len$thy periods of red"!ed profitabilityG both
were !hara!teri0ed by a syste=wide intensifi!ation of !opetiti+e
press"res on !apitalist enterpriseG and both were pre!eded by an
e,!eptionally s"stained and profitable e,pansion of world trade and
prod"!tion# <oreo+er, in both periods the !risis of profitability and the
intensifi!ation of !opetition spran$ fro the sae so"r!es as the
pre!edin$ e,pansion; the s"!!essf"l !at!hin$ "p by la$$ard !o"ntries with
de+elopental a!hie+eents pre+io"sly onopoli0ed by a leadin$ !o"ntry#
:n!e we s"bstit"te the 5nited >in$do for the 5nited 6tates as the leadin$
!o"ntry, and the 56 and Gerany for Gerany and Hapan as the la$$ards,
*renners interpretation of the late=twentieth=!ent"ry lon$ downt"rn !an
eC"ally well be applied to that of the late nineteenth !ent"ry#
Differen!es between the two lon$ downt"rns were, in %ey respe!ts, e+en
ore iportant than siilarities, as we shall see# Pet, fa!ed with a sit"ation
of intensifyin$ !opetition !oparable to that of the late twentieth !ent"ry,
world !apitalis in the late nineteenth !ent"ry e,perien!ed relati+e
sta$nation for ore than twenty years8with plenty of lo!al or short=li+ed
!rises and re!essions, b"t witho"t the %ind of syste=wide sha%eo"t whi!h,
a!!ordin$ to *renner, is the standard !apitalist ethod of restorin$
profitability# 2n an"fa!t"rin$, in parti!"lar, there !ontin"ed to be too
"!h entry and too little e,it, as well as a/or te!hnolo$i!al and
or$ani0ational inno+ations whi!h intensified rather than alle+iated
!opetiti+e press"res syste=wide# (@B) .nd yet, in spite of the absen!e of
a syste=wide sha%eo"t, in the !losin$ years of the !ent"ry profitability
was restored, $eneratin$ the "pt"rn of the ?dwardian belle poque#
.s ar$"ed in detail elsewhere, and f"rther spe!ified in a later se!tion of this
arti!le, this "pt"rn !an be tra!ed to a response to syste=wide
intensifi!ations of !opetition that has !hara!teri0ed world !apitalis fro
its earliest, pre=ind"strial be$innin$s ri$ht "p to the present# This response
!onsists of a syste=wide tenden!y, !entred on the leadin$ !apitalist
e!onoy of the epo!h, towards the finan!iali0ation of pro!esses of !apital
a!!""lation# 2nte$ral to the transforation of inter=!apitalist !opetition
fro a positi+e= into a ne$ati+e=s" $ae, this tenden!y has also a!ted as
a %ey e!hanis for restorin$ profitability, at least teporarily, in the
de!linin$ b"t still he$eoni! !entres of world !apitalis# Ero this
standpoint we !an dete!t reseblan!es, not /"st between the $reat
depression of 187396 and the lon$ downt"rn of 197393, b"t also
between the ?dwardian belle poque and the 56 e!onoi! re+i+al and
$reat e"phoria of the 199As# (@6)
Dhile a +erdi!t on the e+ent"al o"t!oe of the 199As re+i+al i$ht be
preat"re, we %now that the ?dwardian belle poque ended in the
!atastrophes of two world wars and the inter+enin$ $lobal e!onoi! !rash
of the 193As# This !ollapse is, in fa!t, the only o!!"rren!e of the last
!ent"ry and a half that !orresponds to *renners ia$e of a syste=wide
sha%eo"t or o"tri$ht depression# 2f this is indeed what is si$nified by
*renners ia$e, we "st !on!l"de that s"!h a sha%eo"t appears to ha+e
been an e,!eptional o!!"rren!e rather than the standard or nat"ral
!apitalist ethod of restorin$ profitability# Dhat has re!"rred th"s far is the
tenden!y for "ne+en de+elopent, in *renners sense, to $enerate a lon$
boo, followed by a lon$ period of intensifyin$ !opetition, red"!ed
profitability and !oparati+e sta$nationG itself followed by an "pt"rn of
profitability, based on a finan!ial e,pansion !entred on the epo!hs leadin$
e!onoy# The one and only systei! brea%down of the last 1BA years has
o!!"rred in the transition fro the first to the se!ond ro"nd of "ne+en
de+elopent#
.ontra"ted tra4ectorie"
The C"estion then arises of whether a !oparable brea%down is now in the
a%in$, and whether s"!h an o!!"rren!e is as f"ndaental a !ondition for
the re+itali0ation of the $lobal e!onoy as *renner sees to thin%# 2n order
to answer this C"estion, we "st hi$hli$ht not /"st the siilarities b"t also
the differen!es between the two lon$ downt"rns8whi!h are, indeed,
eC"ally stri%in$# .ltho"$h both downt"rns were !hara!teri0ed by an
es!alation of !opetiti+e str"$$les, these "nfolded alon$ radi!ally different
paths# .s pre+io"sly noted, in 187396 the ain for of inter=enterprise
!opetition was a pri!e war, res"ltin$ in the ost drasti! deflation in the
eory of an# Klosely related to this tenden!y, the $o+ernents of the
ain !apitalist !o"ntries s"b/e!ted their !"rren!ies to the self=re$"latin$
e!haniss of a etalli! standard, thereby s"rrenderin$ de+al"ation and
re+al"ation as a eans of !opetiti+e str"$$le#
2n!reasin$ly, howe+er, $o+ernents be!ae a!ti+e s"pporters of their
doesti! ind"stries thro"$h prote!tionist and er!antilist pra!ti!es,
in!l"din$ the !onstr"!tion of o+erseas !olonial epires8thereby
"nderinin$ the "nity of the world ar%et# .ltho"$h *ritain !ontin"ed to
pra!ti!e free trade "nilaterally, it also reained in the +an$"ard of
territorial e,pansion and epire b"ildin$ o+erseas# Ero the 188As, this
tra/e!tory of intensifyin$ interstate !opetition in o+erseas=epire b"ildin$
translated into the es!alation of the araents ra!e aon$ risin$ and
de!linin$ !apitalist powers, whi!h e+ent"ally !ae to a head in the Eirst
Dorld Dar# .ltho"$h *ritain was an a!ti+e parti!ipant in this s!rable, it
!ontin"ed to pro+ide the world e!onoy with !apital thro"$h two a/or
wa+es of o+erseas in+estent8in the 188As and in the 19AAs8whi!h
in!l"ded po"rin$ si$nifi!ant f"nds into the 5nited 6tates#
2n all these respe!ts, the !opetiti+e str"$$le d"rin$ the late twentieth
!ent"rys lon$ downt"rn "nfolded alon$ a radi!ally different path# D"rin$
the 197As, in parti!"lar, !oodity pri!es $enerally rose rather than fell, in
what was probably one of the $reatest syste=wide inflations in a tie of
pea!e# .ltho"$h inflationary press"res were !ontained in the 198As and
199As, pri!es !ontin"ed to rise thro"$ho"t the downt"rn# .t its o"tset, the
last ten"o"s lin% between onetary !ir!"lation and a etalli! standard8the
$olddollar e,!han$e rate established at *retton Doods8was se+ered and
ne+er a$ain restored# .s *renner "nders!ores, the $o+ernents of the
ain !apitalist !o"ntries were th"s in a position to "se the de+al"ation and
re+al"ation of !"rren!ies as a eans of !opetiti+e str"$$le# .nd while
they did so systeati!ally, they nonetheless !ontin"ed to proote the
inte$ration of the world ar%et thro"$h a series of ne$otiations whi!h
f"rther liberali0ed $lobal trade and in+estent, e+ent"ally res"ltin$ in the
foration of the Dorld Trade :r$ani0ation#
Ear fro bein$ "nderined, the "nity of the world ar%et was th"s f"rther
!onsolidated d"rin$ this period# 9or was there any si$n of an araent
ra!e aon$ risin$ and de!linin$ !apitalist powers# :n the !ontrary, after
the final es!alation of the Kold Dar ars b"ild="p in the 198As, $lobal
ilitary !apabilities be!ae e+en ore !entrali0ed in the hands of the
5nited 6tates than they had been pre+io"sly# .t the sae tie, instead of
pro+idin$ !apital to the rest of the world e!onoy, as *ritain had
thro"$ho"t the nineteenth=!ent"ry downt"rn and finan!ial e,pansion, sin!e
the 198As the 5nited 6tates has been absorbin$ !apital at histori!ally
"npre!edented rates, as *renner hiself notes#
2n all these respe!ts, the tra/e!tory of the !opetiti+e str"$$le in the latest
lon$ downt"rn differs radi!ally fro the pre+io"s one# Jow !an we a!!o"nt
for this !obination of siilarities and differen!es between the two, and
what new li$ht does this %ind of !oparison throw on *renners analysis of
$lobal t"rb"len!e o+er the last thirty yearsN 2n dealin$ with these iss"es, 2
will fo!"s on the three ain short!oin$s of *renners ar$"ent# The first
!on!erns labo"r!apital relationsG the se!ond, so=!alled 9orth6o"th
relationsG and the third, inter=!apitalist !opetition itself# -et e deal with
ea!h in t"rn#
A+ 1#tflanking Labo#r Re"i"tance
2n Global T"rb"len!e and, to a lesser e,tent, The Boom and the Bubble,
*renner presents his a!!o"nt of the lon$ downt"rn as a !ritiC"e of what he
!alls s"pply=side theories of !apitalist !rises# .d+an!ed in +ario"s fors by
-eft and Fi$ht ali%e, these !ontend that, by the 196As, labo"r had a!C"ired
a le+era$e in the wealthier !apitalist !o"ntries s"ffi!ient to sC"ee0e profits
and thereby "nderine the e!haniss of !apitalist a!!""lation# Dhile
a!%nowled$in$ that labo"r ay indeed be in s"!h a position lo!ally and
teporarily, *renner finds it in!on!ei+able that it !an wield the power
ne!essary to pro+o%e a lon$=ter, syste=wide downt"rn#
-abo"r !annot, as a r"le, brin$ abo"t a teporally e,tended,
systei! downt"rn be!a"se, as a r"le, what i$ht be !alled the
potential sphere of in+estent for !apital in any line of prod"!tion
$enerally e,tends beyond the labo"r ar%et that is affe!ted by
"nions andOor politi!al parties or is re$"lated by nors, +al"es, and
instit"tions s"pported by the state# 6o firs !an $enerally !ir!"+ent
and thereby "nderine the instit"tionali0ed stren$th of wor%ers at
any $i+en point by in+estin$ where wor%ers la!% the !apa!ity to
resist# 2ndeed, they "st do so, or they will find thesel+es
o"tflan%ed and !opetiti+ely defeated by other !apitalists who will#
(@7)
2t follows that, as *renner p"ts it, +erti!al press"re on !apital, fro below
8that is, fro labo"r8!o"ld not and did not brin$ abo"t the spatially
$enerali0ed and teporally e,tended sC"ee0e on profits that "nderlies the
lon$ downt"rn# :nly hori0ontal press"re fro inter=!apitalist !opetition
!o"ld do so# (@8)
This hypothesis is based on the ass"ption that there is in fa!t !heaper
labo"r that !an be !obined with eans of prod"!tion ebodyin$
soethin$ li%e the !"rrent le+el of te!hnolo$y witho"t loss of effi!ien!y
4that is, at lower "nit !ost7 .!!ordin$ to *renner, this ass"ption is
/"stified for two reasons# Eirst, labo"r for!es in re$ions with lon$ histories
of e!onoi! de+elopent tend to re!ei+e wa$es that are s"bstantially
hi$her than !an be e,plained siply by referen!e to their relati+e le+el of
prod"!ti+enessG and se!ond, o+er siilarly e,tended tie periods,
te!hni!al !han$e tends to red"!e the s%ill reC"ired to prod"!e any $i+en
array of prod"!ts, with the res"lt that the labo"r for!e that !an a%e those
prod"!ts witho"t loss of effi!ien!y is !ontin"ally enlar$ed, and the wa$e
reC"ired to pay it !orrespondin$ly red"!ed# (@9)
2n short, for histori!al reasons whi!h *renner does not e,plore, labo"r
for!es in ad+an!ed !apitalist !o"ntries ha+e se!"red rewards for effort far
hi$her than warranted by their prod"!ti+ity# This in itself a%es the
+"lnerable to the !opetition of labo"r for!es that8for eC"ally "ne,plored
histori!al reasons8wor% for wa$es lower than their a!t"al or potential
prod"!ti+ity i$ht warrant# .t the sae tie, te!hni!al !han$e !ontin"ally
enlar$es this $lobal pool of "nderpaid wor%ers, or wo"ld=be wor%ers, who
!an be obili0ed to o"tflan% the press"re on profitability !oin$ fro
o+erpaid labo"r# The only press"re on profitability that !apitalists !annot
o"tflan% is that whi!h !oes fro the !opetition of other !apitalists#
There are two ain probles with this ar$"ent# Eirstly, it wo"ld appear to
be lo$i!ally in!onsistent sin!e it !lais that, in the past, wor%ers in the
ad+an!ed !apitalist !o"ntries had been able to $ain $reater rewards than
warranted by their prod"!ti+ity, in !ontradi!tion to the theoreti!al !lai that
any attept to do so wo"ld pri!e the o"t of the world ar%et# 2n
addition, the ar$"ent o+erestiates the ease with whi!h, in the present
no less than in the past, !heaper labo"r s"pplies !an be obili0ed to
o"tflan% ore e,pensi+e ones# -et "s !larify these probles by loo%in$
on!e a$ain at the histori!al re!ord#
5ori'ontal v" vertical6
.n analysis of the lon$ downt"rn of 187396 pro+ides stron$ e+iden!e both
for and a$ainst *renners thesis on the predoinan!e of hori0ontal 4inter=
!apitalist7 o+er +erti!al 4labo"r=!apital7 relations, in brin$in$ abo"t a lon$=
ter and $enerali0ed sC"ee0e on profits# 2n s"pport of *renners ar$"ent,
it !o"ld be pointed o"t that intense labo"r!apital !onfli!ts8either in the
for of s"stained stri%e a!ti+ity, as in *ritain and the 5nited 6tates, or in
the for of wor%in$=!lass party foration, as in Gerany and elsewhere8
followed rather than pre!eded the onset of the lon$ downt"rn in
profitability# There !an be little do"bt that intense inter=!apitalist
!opetition, in the for of a relentless pri!e war, was the ain, and prior,
dri+in$ for!e for the s"bstantial in!rease in real wa$es that o!!"rred d"rin$
the lon$ downt"rn, espe!ially in *ritain# 2t is also pla"sible to ass"e that
risin$ real wa$es at hoe were at least in part responsible for the e,plosi+e
$rowth of *ritish o+erseas in+estent in the 188As# *renners ar$"ent for
the late twentieth !ent"ry th"s fits %ey feat"res of the late=nineteenth=
!ent"ry e,perien!e# The fit, howe+er, is far fro perfe!t#
.ltho"$h inter=!apitalist !opetition was "ndo"btedly the priary for!e
sC"ee0in$ profitability and p"shin$ "p real wa$es thro"$h drasti! pri!e
deflation, did not wor%ers resistan!e in the for of in!reasin$ stri%e
a!ti+ity and !lass=based or$ani0ation !ontrib"te in a a/or way to that
o"t!oe, by pre+entin$ noinal wa$es fro de!reasin$ as rapidly as
pri!esN .nd did not this resistan!e itself affe!t the tra/e!tory of inter=
!apitalist !opetition by stren$thenin$ the tenden!y, not /"st towards the
e,port of !apital fro *ritain and the iport of labo"r to the 5nited 6tates,
b"t also towards the politi!i0ation of that !opetition, thro"$h a re+i+al of
neo=er!antilist pra!ti!es and o+erseas epire=b"ildin$ on an
"npre!edented s!aleN Dhate+er the e,a!t answer to these C"estions,
*renners hard and fast distin!tion between hori0ontal and +erti!al !onfli!ts,
and his a priori e,!l"sion of the latter as a possible !ontrib"tin$ fa!tor to
$eneral and persistent downt"rns in profitability, are ill=s"ited to "nra+el
the !ople, histori!al intera!tion between the two %inds of !onfli!ts# (BA)
6iilarly, *renners !ontention !on!ernin$ the ine+itable o"tflan%in$ of
wor%ers le+era$e in !ore !apitalist !o"ntries thro"$h international fa!tor
obility i$nores %ey aspe!ts of how that obility a!t"ally f"n!tioned d"rin$
the earlier lon$ downt"rn# <ost of the !apital e,ported fro *ritain and
lesser !ore !o"ntries in this period did not in+ol+e a relo!ation of ind"strial
prod"!tion b"t the b"ildin$ of infrastr"!t"res in o+erseas territories,
e,pandin$ deand for the o"tp"t of *ritish and other etropolitan
ind"stries while in!reasin$ the s"pply of !heap raw aterials and wa$e
$oods# Ear fro "nderinin$ the le+era$e of labo"r in the ain !apitalist
!entres, this pattern of o+erseas in+estent !onsolidated it# .t the sae
tie, while !onstant ii$ration ay ha+e helped !ontain the $rowin$
le+era$e of 56 labo"r, assi+e ei$ration8espe!ially fro *ritain8s"rely
helped the epowerent of ?"ropean labo"r# (B1) .ll thin$s !onsidered,
the persisten!e and $enerality of the late=nineteenth=!ent"ry profit sC"ee0e
appear to ha+e been d"e, not /"st to the intensifi!ation of inter=!apitalist
!opetition, b"t also to the effe!ti+e resistan!e of wor%ers a$ainst
attepts to a%e the bear the !osts of that !opetitionG and to the
diffi!"lties whi!h !apitalists en!o"ntered in o"tflan%in$ that resistan!e#
2n the half=!ent"ry followin$ the end of the lon$ downt"rn of 187396,
inter=!apitalist !opetition be!ae in!reasin$ly politi!i0ed; literal wars
aon$ risin$ and de!linin$ !apitalist powers, rather than pri!e wars aon$
!apitalist enterprises, !ae to doinate the dynai!s of hori0ontal and
+erti!al !onfli!ts ali%e# Ero the late 189As "ntil the Eirst Dorld Dar, this
transforation was instr"ental in re+i+in$ profitability# ?+ent"ally,
howe+er, it res"lted in the brea%down of the 5>=!entred world ar%et and
a new and ore +i!io"s ro"nd of inter=iperialist !onfli!ts# Eor all pra!ti!al
p"rposes, in the 193As and 19@As there was no world ar%et to spea% of#
2n ?ri! Jobsbaws words, world !apitalis had retreated into the i$loos of
its nation=state e!onoies and their asso!iated epires# (B1)
-abo"r!apital !onfli!ts in the first half of the twentieth !ent"ry de+eloped
alon$ two distin!t and in!reasin$ly di+er$ent paths# :ne was the
predoinantly so!ial path of o+eents nestin$ at the point of
prod"!tion, whose ain weapon of str"$$le was the disr"pti+e power that
ass prod"!tion p"ts in the hands of strate$i!ally pla!ed wor%ers# This
ori$inated in late=nineteenth=!ent"ry *ritain b"t ass"ed alost ideal=
typi!al for in the 5nited 6tates# The other was the predoinantly
politi!al path of those nestin$ in the b"rea"!rati! str"!t"res of politi!al
parties, whose ain weapon was the sei0"re of state power and the rapid
ind"striali0ation and oderni0ation of the states that fell "nder their
!ontrol# This ori$inated in Kontinental ?"rope, ost notably in Gerany,
b"t ass"ed its ideal=typi!al for in the 566F# (B3)
The !o"rse of str"$$le alon$ both paths was f"ndaentally shaped by the
two world wars# ?a!h of these was !hara!teri0ed by a siilar pattern; o+ert
labo"r ilitan!y rose on the e+e of both wars, de!lined teporarily d"rin$
the !onfli!ts thesel+es, and then e,ploded in their afterath# The F"ssian
Fe+ol"tion too% pla!e d"rin$ the Eirst Dorld Dars wa+e of labo"r ilitan!y,
while that of the 6e!ond Dorld Dar saw the spread of Ko"nist re$ies
to ?astern ?"rope, Khina, 9orth >orea and Vietna# 2t was in this !onte,t
of es!alatin$ labo"r ilitan!y in the !ore, and ad+an!in$ re+ol"tion in
peripheral and sei=peripheral re$ions, that the so!ial paraeters of the
56 post=war world order were established# (B@) Th"s the for and intensity
of inter=!apitalist !opetition8that is, inter=iperialist ri+alries and world
wars8shaped the for and intensity of wor%ers str"$$les d"rin$ this
period# 9e+ertheless, the feedba!% of these str"$$les on the tra/e!tory of
inter=!apitalist !onfli!ts was e+en ore powerf"l in the first half of the
twentieth !ent"ry than it had been d"rin$ the lon$ downt"rn of 187396#
2ndeed, witho"t s"!h intera!tion, the establishent at the end of the
6e!ond Dorld Dar of what .ristide Qolber$ has !alled a labo"r friendly
international re$ie wo"ld be hard to e,plain# (BB)
.lon$ with the 56=sponsored re!onstit"tion of the world ar%et on new and
ore solid fo"ndations, this re$ie !reated the instit"tional !onditions for
the syste=wide re+i+al of profitability that "nderlay the lon$ boo of the
19BAs and 196As# 2 ha+e no parti!"lar disa$reeent with *renners
!ontention that "ne+en de+elopent, in his sense of the ter, was a %ey
deterinant of the boo and of the lon$ downt"rn that followed# *"t his
insisten!e that labo"r!apital !onfli!ts played no si$nifi!ant role in the
e,tent, len$th and shape of this downt"rn sees e+en less warranted than
for earlier !oparable periods#
.la"" conflict"
-et "s be$in by notin$ that, in the late twentieth !ent"ry, wor%ers
str"$$les played a far ore pro=a!ti+e role +is=I=+is inter=!apitalist
!opetition than they did in the late nineteenth !ent"ry# Dhereas in the
earlier period the intensifi!ation of labo"r!apital !onfli!ts, and the ost
si$nifi!ant in!reases in real wa$es, followed the onset of the downt"rn, in
the se!ond half of the twentieth !ent"ry they preceded it# 2n ar$"in$ his
!ase a$ainst the role of wor%ers le+era$e in brin$in$ abo"t a syste=wide
and persistent sC"ee0e on profits, *renner fo!"ses alost e,!l"si+ely on
the !ontainent of wor%ers power in the 5nited 6tates in the late 19BAs
and early 196As; sin!e this o!!"rred before the !risis of profitability, he
ar$"es, the !risis !o"ld not be d"e to wor%ers press"res# (B6)
5nfort"nately, this narrow fo!"s on the sin$le tree of a short=ter and
lo!al episode of !lass !onfli!t pre+ents *renner fro seein$ the forest of
the multinational risin$ tide of !onfli!ts o+er wa$es and wor%in$ !onditions
whi!h, between 1968 and 1973, !"linated in what ?# J# 3helps *rown
aptly !alled the pay e,plosion# (B7) Koin$ in the wa%e of twenty years of
risin$ real wa$es in the !ore re$ions of the world e!onoy, and at a tie of
intensifyin$ inter=!apitalist !opetition worldwide, this pay e,plosion did
not erely e,er!ise a syste=wide downward press"re on profitability, as
any ha+e ephasi0ed# (B8) <ore iportant, it had a a/or and lastin$
ipa!t on the s"bseC"ent tra/e!tory of inter=!apitalist !opetition#
This brin$s "s to a se!ond obser+ation !on!ernin$ differen!es between the
two end=of=!ent"ry lon$ downt"rns# .ltho"$h he o!!asionally entions
pri!e inflation, *renner is $enerally obli+io"s to the pe!"liarly inflationary
!hara!ter of the downt"rn he des!ribes8all the ore rear%able when
!ontrasted with the stron$ deflation of the late nineteenth !ent"ry# *renner
ne+er C"estions this pe!"liarityG nor does he raise the !losely related iss"e
of why the 196B73 !risis of profitability witnessed the se+eran!e of the
last ten"o"s lin% between onetary !ir!"lation and a etalli! standard, in
sharp !ontrast with the tenden!y of the 187As and 188As towards the
diff"sion of the $old and other etalli!=based re$ies#
To be s"re, *renner does ipli!itly a!%nowled$e that Dashin$tons final
abandonent, in 197A, of half=hearted attepts to ste the tide of
spe!"lation a$ainst the $olddollar syste was not /"st a ploy to shift the
downward press"re on profits fro .eri!an to Hapanese and Geran
an"fa!t"rers thro"$h a radi!al reali$nent of e,!han$e rates# .s he
entions in passin$, the politi!al !osts of s"stainin$ a serio"s anti=
inflationary poli!y # # C"i!%ly pro+ed "na!!eptable to the 9i,on
adinistration# (B9) Dhat these politi!al !osts were, and whether they
had anythin$ to do with labo"r!apital relations, we are not told# .s we
shall see in the ne,t se!tion, in the !ase of the 5nited 6tates s"!h !osts
were world=systei! as well as doesti!# 9e+ertheless, e+en in the 568
torn as it was by intense so!ial !onfli!ts o+er war in Vietna and !i+il ri$hts
at hoe8the politi!al pri!e of s"b/e!tin$ onetary !ir!"lation to the
dis!ipline of a etalli! standard !learly had a so!ial !oponent, in!l"din$
the ris% of alienatin$ labo"r fro the ideolo$ies and pra!ti!es of the
doinant blo!# (6A)
2n fa!t, the ost !opellin$ e+iden!e for the role played by labo"r le+era$e
in the final deise of the $old standard !oes, not fro the 5nited 6tates,
b"t fro the !o"ntry that had been the sta"n!hest ad+o!ate of a ret"rn to
a p"re $old=based re$ie in the 196As; De Ga"lles Eran!e# Eren!h
ad+o!a!y of the $old standard ended abr"ptly, ne+er to be re+i+ed a$ain, in
<ay 1968, when De Ga"lle had to $rant a h"$e wa$e=hi%e to pre+ent
labo"r fro sidin$ with the rebellio"s st"dents# Jad onetary !ir!"lation
been s"b/e!t to the a"toati! e!hanis of a etalli! standard, s"!h a
wa$e=hi%e wo"ld ha+e been ipossible# *ein$ perfe!tly aware of this, De
Ga"lle did what was ne!essary to restore so!ial pea!e and stopped
daydreain$ abo"t a ret"rn to $old# (61)
.s the 56 and Eren!h e,perien!es s"$$est, the le+era$e of labo"r d"rin$
the transition fro boo to relati+e sta$nation in the late 196As and early
197As was not siply a refle!tion of inter=!apitalist !opetition, as it
lar$ely had been at the onset of the late=nineteenth=!ent"ry downt"rn#
(61) :n the !ontrary, it was si$nifi!ant eno"$h to a%e its own
independent !ontrib"tion, not /"st to the sC"ee0e of profitability that
"nderlay the transition, b"t also towards la"n!hin$ the downt"rn alon$ an
inflationary rather than deflationary path# This does not ean that inter=
!apitalist !opetition was not also at wor% in sC"ee0in$ profits, nor that
wor%ers and their so!ial power benefited fro the inflationary nat"re of the
downt"rn8they !learly did not# .ll it eans is that *renners odel8near=
absol"te predoinan!e of inter=!apitalist !opetition o+er labo"r!apital
!onfli!ts8fits the latest lon$ downt"rn e+en less than it did the pre+io"s
one#
Limit" to capital migration
. !loser e,aination of the effe!ts of !apital obility on labo"r le+era$e
pro+ides f"rther e+iden!e for s"!h an assessent# 2n the 197As, in
parti!"lar, there was indeed a stron$ tenden!y for !apital, in!l"din$
ind"strial !apital, to i$rate to lower=in!oe, lower=wa$e !o"ntries#
9e+ertheless, as *e+erly 6il+er has do!"ented in $reat detail, the
relo!ation of ind"strial a!ti+ities fro ri!her to poorer !o"ntries has ore
often than not led to the eer$en!e of stron$, new labo"r o+eents in
the lower=wa$e sites of in+estent, rather than an "nabi$"o"s ra!e to
the botto .ltho"$h !orporations were initially attra!ted to Third Dorld
sites8*ra0il, 6o"th .fri!a, 6o"th >orea8be!a"se they appeared to offer a
!heap and do!ile labo"r for!e, the s"bseC"ent e,pansion of !apital
intensi+e, ass=prod"!tion ind"stries !reated new and ilitant wor%in$
!lasses with si$nifi!ant disr"pti+e power# This tenden!y was already in
e+iden!e in the late nineteenth and early twentieth !ent"ries in te,tiles, the
!hief ind"stry of *ritish !apitalis# *"t it has been far stron$er in the
leadin$ ind"stries of 56 !apitalis, s"!h as a"toobiles# (63)
Th"s, !apitalist attepts to o"tflan% labo"r press"res on profitability
thro"$h ind"strial relo!ation tended to depri+e !apital of the !onsiderable
benefits asso!iated with prod"!in$ !lose to the wealthier ar%ets and in
safer politi!al en+ironents, witho"t a!t"ally pro+idin$ any of the
e,pe!ted benefits of ab"ndant low=wa$ed and easy=to=dis!ipline labo"r
s"pplies# .!tin$ in !on/"n!tion with other fa!tors that will be dis!"ssed in
the ne,t two se!tions, this tenden!y ade its own !ontrib"tion to the
assi+e redire!tion of transnational !apital flows in the 198As, fro low=
and iddle=in!oe destinations to the 5nited 6tates# .$ain, 2 a not
denyin$ that ind"strial relo!ation helped to "nderine wor%ers le+era$e in
the !o"ntries that e,perien!ed the $reatest net o"tflow of !apital# 2 a
siply sayin$ that, $enerally spea%in$, it tended to ba!%fire on profitabilityG
and, in so far as the 5nited 6tates was !on!erned, the net o"tflow soon
t"rned into a h"$e net inflow# 2f labo"rs le+era$e de!lined in the !o"rse of
the lon$ downt"rn, as it !ertainly did, !apital obility is not a +ery
!on+in!in$ e,planation#
-abo"r i$ration does not pro+ide a +ery pla"sible e,planation either# 2t is
tr"e that labo"r i$ration o+er the last thirty years has !oe
predoinantly fro poor !o"ntries, to a far $reater e,tent than in the late
nineteenth !ent"ry8thereby !onstit"tin$ a $reater !opetiti+e threat for
wor%ers in the wealthier ind"strial !entres# 9e+ertheless, in the late
twentieth !ent"ry the !apa!ity of wor%ers in the ri!her !o"ntries to forestall
!opetition fro ii$rant labo"r for!es 4often thro"$h adheren!e to
ra!ist ideolo$ies and pra!ti!es7 has been far $reater# (6@)
2n s", *renners ar$"ent for the absol"te predoinan!e of inter=
!apitalist !opetition o+er labo"r!apital str"$$les in deterinin$ syste=
wide and persistent !ontra!tions in profitability isses the !ople,
histori!al intera!tion between hori0ontal and +erti!al !onfli!ts# .ltho"$h,
world histori!ally, inter=!apitalist !opetition has indeed been the
predoinant infl"en!e8pro+ided that we in!l"de inter=!apitalist wars
aon$ the ost iportant fors of that !opetition8labo"r!apital
!onfli!ts were ne+er erely a dependent +ariable, abo+e all on the e+e and
in the early sta$es of the latest lon$ downt"rn# (6B) 9ot only did !onfli!ts
o+er wa$es and wor%in$ !onditions in !ore re$ions !ontrib"te to the initial
sC"ee0e on profitability in the !r"!ial 196873 periodG ore iportantly,
they for!ed the r"lin$ $ro"ps of !ore !apitalist !o"ntries to !hoose an
inflationary rather than a deflationary strate$y of !risis ana$eent#
To p"t it bl"ntly; by the end of the lon$ post=war boo, the le+era$e of
labo"r in !ore re$ions was s"ffi!ient to a%e any attept to roll it ba!%
thro"$h a serio"s deflation far too ris%y, in so!ial and politi!al ters# .n
inflationary strate$y, in !ontrast, proised to o"tflan% wor%ers power far
ore effe!ti+ely than international fa!tor obility !o"ld# 2t was, indeed, the
$reat sta$nation=!"=inflation of the 197As8sta$flation as it was !alled at
the tie8and its effe!ts on inter=!apitalist !opetition and labo"r!apital
relations, that effe!ti+ely wore down wor%ers power in the !ore, openin$
the way for its !ollapse "nder the ipa!t of the Fea$anThat!her
!o"nterre+ol"tion# 2n order to !apt"re the f"ll si$nifi!an!e of this
de+elopent and its ipa!t on the s"bseC"ent tra/e!tory of the lon$
downt"rn, howe+er, it is not eno"$h to fo!"s on labo"r!apital relations#
?+en ore iportant were 9orth6o"th relations, to whi!h we now t"rn#
+ )o#thern /7po"#re
2n his !ritiC"e of s"pply=side theorists, *renner !ontrasts their disposition
to +iew the world e!onoy as the ere s" of its national !oponents
with his own attept to see systei! pro!esses as ha+in$ a lo$i! of their
own#
(T)he ephasis of the s"pply=side theorists on instit"tions, poli!y and
power has led the to frae their analyses too hea+ily on a !o"ntry=
by=!o"ntry basis, in ters of national states and national e!onoies
8to +iew the international e!onoy as a sort of spill=o+er of national
ones and to see systei! e!onoi! probles as stein$ fro an
a$$loeration of lo!al ones# 2n !ontrast, 2 shall ta%e the international
e!onoy8 the capital accumulation and profitability of the system as
a whole8as a theoreti!al +anta$e point fro whi!h to analyse its
!rises and those of its national !oponents# (66)
-a"dable as this intent is, *renners analysis falls short of its proise# 2n
The Boom and the Bubble, as in Global T"rb"len!e, he fo!"ses alost
e,!l"si+ely on three national statesOe!onoies 4the 5nited 6tates, Hapan
and Gerany7 and their "t"al relations, with o!!asional referen!es to
other Destern ?"ropean !o"ntries and the ira!le e!onoies of ?ast .sia#
Khina appears only fleetin$ly towards the end of Global T"rb"len!e and in
little ore detail in the !losin$ pa$es of The Boom and the Bubble# The +ast
a/ority of the worlds states and the b"l% of its pop"lation ha+e,
apparently, no bearin$ on the f"n!tionin$ of *renners world e!onoy#
*renner adits that !on!entratin$ on three !o"ntries does introd"!e
distortions *"t witho"t spe!ifyin$ what these distortions are, he $oes on to
/"stify his narrow fo!"s on three $ro"nds# Eirst, in 19BA, the 56, Geran
and Hapanese e!onoies ta%en to$ether a!!o"nted for 6A per !ent of the
o"tp"t 4in ters of p"r!hasin$ power parities7 of the se+enteen leadin$
!apitalist e!onoies and by 199@ that fi$"re had risen to 66 per !ent#
6e!ond, ea!h of the three e!onoies stood # # # at the h"b of $reat
re$ional blo!s, whi!h they effe!ti+ely dynai0ed and doinated# .nd
finally, the intera!tion aon$ these three e!onoies was # # # one of the
%eys to the e+ol"tion of the ad+an!ed !apitalist world thro"$ho"t the
postwar period# (67)
These preises are C"estionable on two $ro"nds# The !obined wei$ht of
the three e!onoies in C"estion is indeed !onsiderable, tho"$h soewhat
less than *renners so"r!es s"$$est# (68) 9e+ertheless, their !obined
share of +al"e added in an"fa!t"rin$8the bran!h of a!ti+ities on whi!h
*renner !on!entrates8has de!lined si$nifi!antly in the !o"rse of the lon$
downt"rn# The fall has been lar$ely d"e to the rapid ind"striali0ation of
any !o"ntries of the worlds 6o"th8what .li!e .sden has !alled The
Fise of the &Fest'# (69) <oreo+er, as .sden shows, the 6o"ths share of
world an"fa!t"red e,ports has been $rowin$ e+en faster than its share of
+al"e added in an"fa!t"rin$, risin$ fro 7#B per !ent in 197B to 13#3 per
!ent in 1998, in sharp !ontrast with the Hapanese, Destern ?"ropean and
9orth .eri!an shares, whi!h were either sta$nant or de!linin$# (7A) *y
dealin$ with the worlds 6o"th in s"!h a !"rsory way, *renner tends to iss
one of the ost dynai! eleents of the intensifi!ation of !opetition to
whi!h he attrib"tes so "!h iportan!e#
8orld-political conte7t
The se!ond proble with *renners fo!"s on three !o"ntries is ore
serio"s; the +irt"al e+i!tion of world politi!s fro the analysis of !apitalist
dynai!s# There is no C"estion that the intera!tion of the 5nited 6tates,
Hapan and Gerany has been one of the %eys to the e+ol"tion of world
!apitalis sin!e the 6e!ond Dorld DarG b"t it has !ertainly not been the
only one, or e+en the ost iportant# .s *renner ipli!itly re!o$ni0es in
the passa$e C"oted on pa$e nine abo+e, thro"$ho"t the lon$ boo 56
intera!tion with Gerany and Hapan was thoro"$hly ebedded in, and
doinated by, the Kold Dar relations between the 5nited 6tates, the 566F
and Khina# The !risis of profitability that ar%ed the transition fro the
lon$ boo to the lon$ downt"rn, as well as the $reat sta$flation of the
197As, were thesel+es deeply affe!ted by the parallel !risis of .eri!an
he$eony whi!h ens"ed fro the es!alation of the Vietna war and the
e+ent"al 56 defeat# .s for the Fea$anThat!her neoliberal
!o"nterre+ol"tion, it was not /"st, or e+en priarily, a response to the
"nsol+ed !risis of profitability, b"t also8and espe!ially8a response to the
deepenin$ !risis of he$eony# .ll alon$, the tra/e!tories of inter=!apitalist
!opetition and the intera!tion aon$ the worlds three lar$est e!onoies
were shaped by the broader politi!al !onte,t# The alost !oplete absen!e
of world politi!s fro *renners story prod"!es not only distortions b"t
indeterinateness as well#
Konsider the !onne,ion between the !risis of profitability of the late 196As
and early 197As and the !onteporaneo"s brea%down of the $olddollar
e,!han$e standard# .s we ha+e seen, *renner ipli!itly a!%nowled$es that
politi!al !osts played a role in the abandonent of $old, b"t nonetheless
"pholds the thesis that its priary deterinant was the !opetiti+e
str"$$le between .eri!an an"fa!t"rers and their Geran and Hapanese
ri+als# De ha+e already !riti!i0ed this ar$"ent for i$norin$ the relati+ely
a"tonoo"s role that wor%ers le+era$e played in the !risis# 9e+ertheless,
the ost iportant deterinant was neither inter=!apitalist !opetition nor
labo"r!apital relations b"t the dire!t and, espe!ially, the indire!t effe!ts of
the es!alation of the Vietna Dar on the 56 balan!e of payents#
.ltho"$h Vietna is !onspi!"o"s for its absen!e in *renners story, these
effe!ts do !reep in on a few o!!asions# Th"s, stepped="p Vietna Dar
spendin$ is said to be the reason for the s"dden a!!eleration of pri!e
inflation in the 5nited 6tates whi!h, between 196B and 1973, slowed down
b"t did not stop the $rowth of real wa$es# This a!!eleration of inflation, in
t"rn, is held responsible for the wea%enin$ of the !opetiti+e position of
.eri!an an"fa!t"rers, both at hoe and abroad, +is=I=+is their Geran
and Hapanese ri+als in the sae period# (71)
These !as"al obser+ations show that e+en *renner is for!ed to
a!%nowled$e that, behind the intensifi!ation of !opetition between 56 and
forei$n an"fa!t"rers, and the +a$aries of labo"r!apital !onfli!ts in the
5nited 6tates and elsewhere, there l"r%s an einently systei! b"t politi!al
+ariable, whi!h his resear!h desi$n has r"led o"t of !onsideration# This
l"r%in$ +ariable is the power str"$$le in whi!h the 56 $o+ernent so"$ht
to !ontain, thro"$h the "se of for!e, the /oint !hallen$e of nationalis and
!o"nis in the Third Dorld# .s the es!alation of the war in Vietna
failed to brea% the ba!% of Vietnaese resistan!e, and pro+o%ed instead
widespread opposition to the war in the 5nited 6tates itself, this str"$$le
rea!hed its !lia, in the sae years as the !risis of profitability# .s 2 ha+e
ar$"ed elsewhere, the !osts of the war8in!l"din$ those pro$raes aied
at stein$ the tide of doesti! opposition8not only !ontrib"ted to the
profit sC"ee0e, b"t were the ost f"ndaental !a"se of the !ollapse of the
*retton Doods re$ie of fi,ed e,!han$e rates and the assi+e de+al"ation
of the 56 dollar that ens"ed# (71)
Nadir of () hegemon$
.s *renner aintains, the dollar de+al"ation of 196973 did help the
5nited 6tates to foist the b"rden of the profitability !risis onto Gerany
and Hapan and !he!% the press"re of risin$ oney wa$es on profits at
hoe# *"t 2 wo"ld ar$"e that this redistrib"tion of the b"rden was lar$ely a
by=prod"!t of poli!ies aied priarily at freein$ the 56 $o+ernents
str"$$le for doinan!e in the Third Dorld fro onetary !onstraints# .t
least initially, the liC"idation of the $olddollar e,!han$e standard did see
to endow the 56 $o+ernent with an "npre!edented freedo of a!tion in
tappin$ the reso"r!es of the rest of the world siply by iss"in$ its own
!"rren!y# (73) Jowe+er, this free hand !o"ld not pre+ent the defeat of the
5nited 6tates in Vietna nor stop the pre!ipito"s de!line of .eri!an
presti$e in its wa%e# 2ndeed, if anythin$, it worsened that de!line by
pro+o%in$ a worldwide inflationary spiral whi!h threatened to destroy the
entire 56 !redit str"!t"re and the worldwide networ%s of !apital
a!!""lation on whi!h .eri!an wealth and power had be!oe ore
dependent than e+er before# (7@)
The de!line of 56 power and presti$e rea!hed its nadir in the late 197As
with the 2ranian Fe+ol"tion, a new hi%e in oil pri!es, the 6o+iet in+asion of
.f$hanistan and another serio"s !risis of !onfiden!e in the 56 dollar#
*renner hardly entions this deepenin$ !risis of 56 he$eony as the
!onte,t in whi!h, between 1979 and 1981, the onetary poli!ies of the 56
$o+ernent !han$ed fro "ltra la,ity to e,tree ti$htness# Je does tra!e
the swit!h to a de+astatin$ r"n on the 56 !"rren!y that threatened the
dollars position as an international reser+e !"rren!y# *"t he has no
satisfa!tory e,planation for the fli$ht and pays no attention to the .rab
fears o+er .f$hanistan and 2ran whi!h, a!!ordin$ to Business Wee"# were
behind the s"r$e in the pri!e of $old to an all=tie hi$h of M87B in Han"ary
198A# (7B) .s in the !ase of the liC"idation of the $olddollar e,!han$e
standard ten years earlier, war and re+ol"tion in the 6o"th, rather than
inter=!apitalist !opetition aon$ the worlds three lar$est e!onoies,
were the priary dri+in$ for!e of the onetarist re+ol"tion of 197981#
E"ndaental !han$e in the onetary sphere on!e a$ain had a/or
ipli!ations both for inter=!apitalist and !lass str"$$les in !ore re$ions# *"t
the stron$est sti"l"s for the !han$e !ae fro the "nsol+ed !risis of 56
he$eony in the Third Dorld rather than the !risis of profitability as s"!h#
Jere too, the pe!"liarities of the late=twentieth=!ent"ry lon$ downt"rn ay
be "sef"lly hi$hli$hted thro"$h a !oparison with that of 187396# Tho"$h
seldo rear%ed "pon, differen!es in 9orth6o"th relations between the
two lon$ downt"rns are e+en ore si$nifi!ant than those of labo"r and
!apital# <ost iportantly, the earlier downt"rn o!!"rred in the idst of the
last and lar$est wa+e of 9orthern territorial !onC"est and !oloni0ation of
the 6o"th, whereas that of the twentieth !ent"ry too% pla!e at the tail=end
of the $reatest wa+e of de!oloni0ation in world history# (76) 2n between
there stood the $reat re+olt a$ainst the west of the first half of the
twentieth !ent"ry whi!h, in Geoffrey *arra!lo"$hs +iew, ar%ed the
be$innin$ of an entirely new era;
9e+er before in the whole of h"an history had so re+ol"tionary a
re+ersal o!!"rred with s"!h rapidity# The !han$e in the position of the
peoples of .sia and .fri!a and in their relations with ?"rope was the
s"rest si$n of the ad+ent of a new era, and when the history of the
first half of the twentieth !ent"ry8whi!h, for ost historians, is still
doinated by ?"ropean wars and ?"ropean probles # # # !oes to
be written in a lon$er perspe!ti+e, there is little do"bt that no sin$le
thee will pro+e to be of $reater iportan!e than the re+olt a$ainst
the west# (77)
The oent for the lon$er perspe!ti+e ad+o!ated by *arra!lo"$h has
ob+io"sly not yet !oe# De li+e instead in a tie when the tri"ph, the
seein$ly "nliited power of the Dest, a%es the earlier 6o"thern re+olt
loo% insi$nifi!ant, if not f"tile# Pet the f"ndaental differen!e between
9orth6o"th relations d"rin$ the two lon$ downt"rns reains, and neither
the ori$ins, nor the tra/e!tory, nor the !onseC"en!es of the latest !an be
a!!"rately de!iphered e,!ept in its li$ht# To ill"strate the point 2 shall fo!"s
on!e a$ain on the onetary aspe!ts of the two lon$ downt"rns#
India!" contrib#tion
2n the pre!edin$ se!tion we tra!ed the inflationary !hara!ter of the latest
lon$ downt"rn to the so!ial and politi!al ipossibility of s"b/e!tin$ labo"r
!apital relations in !ore re$ions to the dis!ipline of a etalli! standard, as
they had been d"rin$ the late nineteenth !ent"ry# The nat"re and stren$th
of this so!ial !onstraint within !ore re$ions, howe+er, thesel+es depend
!riti!ally on the parti!"lar politi!al arran$eents that lin% the !ore to the
peripheries# 9othin$ ill"strates this better than the !lose !onne,ion
between *ritains adheren!e to the $old standard and its e,tra!tion of
trib"te fro the 6"b!ontinent# *ritains 2ndian epire was !r"!ial in two
ain respe!ts# Eirst, ilitarily; in -ord 6alisb"rys words, 2ndia was an
?n$lish barra!% in the :riental 6eas fro whi!h we ay draw any n"ber
of troops witho"t payin$ for the# (78) E"nded entirely by the 2ndian
ta,payer, these for!es were or$ani0ed in a ?"ropean=style !olonial ary
and "sed re$"larly in the endless series of wars thro"$h whi!h *ritain
opened "p .sia and .fri!a to Destern trade, in+estent and infl"en!e# (79)
They were the iron fist in the +el+et $lo+e of Vi!torian e,pansionis # # #
the a/or !oer!i+e for!e behind the internationali0ation of ind"strial
!apitalis# (8A)
6e!ond, and eC"ally iportant, the infao"s Joe Khar$es and the *an%
of ?n$lands !ontrol o+er 2ndias forei$n=e,!han$e reser+es /ointly t"rned
2ndia into the pi+ot of *ritains $lobal finan!ial and !oer!ial s"prea!y#
2ndias balan!e=of=payents defi!it with *ritain, and s"rpl"s with all other
!o"ntries, enabled *ritain to settle its defi!it on !"rrent a!!o"nt with the
rest of the world# Ditho"t 2ndias for!ible !ontrib"tion to the balan!e of
payents of iperial *ritain, it wo"ld ha+e been ipossible for the latter
to "se the in!oe fro her o+erseas in+estent for f"rther in+estent
abroad, and to $i+e ba!% to the international onetary syste the liC"idity
she absorbed as in+estent in!oe# <oreo+er, 2ndian onetary reser+es
pro+ided a lar$e masse de manoeuvre whi!h *ritish onetary a"thorities
!o"ld "se to s"ppleent their own reser+es and to %eep -ondon the !entre
of the international onetary syste# (81)
2n enfor!in$ onetary dis!ipline at hoe on wor%ers and !apitalists ali%e,
*ritains r"lin$ elite th"s fa!ed an alto$ether different sit"ation to that of
56 leaders a !ent"ry later# Eor one thin$, the e,er!ise of world=he$eoni!
f"n!tions8in!l"din$ the endless series of wars fo"$ht in the worlds 6o"th
8did not in+ol+e the %ind of inflationary press"res that the Vietna Dar
en$endered in the 5nited 6tates# 9ot only were the wars finan!ed by 2ndian
oney b"t, fo"$ht by 2ndian and other !olonial troops, they did not reC"ire
the %ind of so!ial e,pendit"re the 56 $o+ernent had to in!"r in order to
!ontain doesti! opposition to es!alatin$ !as"alties#
Kosts of war aside, "nli%e the 5nited 6tates in the late twentieth !ent"ry,
*ritain !o"ld internali0e the benefits 4for its etropolitan s"b/e!ts7 and
e,ternali0e the !osts 4on its !olonial s"b/e!ts7 of the !easeless str"!t"ral
ad/"stents in+ol+ed in the s"b/e!tion of its !"rren!y to a etalli!
standard# Koer!i+e !ontrol o+er the s"rpl"s of 2ndias balan!e of payents
enabled *ritain to shift the b"rdens of its own persistent trade defi!its onto
2ndian ta,payers, wor%ers and !apitalists# (81) 2n a post=!olonial world, in
!ontrast, no s"!h blatant !oer!ion was a+ailable# The 5nited 6tates fa!ed
the star% !hoi!e of either balan!in$ its trade and !"rrent=a!!o"nts defi!it
thro"$h a drasti! downsi0in$ of its national e!onoy and e,pendit"res
abroad, or alienatin$ a $rowin$ share of its f"t"re in!oe to forei$n
lenders# The !hoi!e of an inflationary strate$y of !risis ana$eent was
not di!tated solely by the so!ial and politi!al ipossibility of s"b/e!tin$ the
.eri!an national e!onoy to a drasti! downsi0in$, or by the relief fro
forei$n !opetiti+e press"res that the strate$y !o"ld brin$ to 56
an"fa!t"rers# 2t was also a ore or less !ons!io"s attept not to !hoose
between the two eC"ally "npalatable alternati+es# The deepenin$ !risis of
56 he$eony of the late 197As and the de+astatin$ r"n on the dollar it
pro+o%ed were a sho!%in$ reinder that the !hoi!e !o"ld no lon$er be
postponed#
The onetary !o"nterre+ol"tion initiated in the !losin$ year of the Karter
adinistration and p"rs"ed with $reater for!e "nder Fea$an was a
pra$ati! response to this sit"ation# .s *renner notes, the t"rnaro"nd
deepened rather than alle+iated the !risis of profitability# *"t as he does not
note, it did re+erse8beyond the rosiest e,pe!tations of its perpetrators8
the pre!ipito"s de!line in 56 world power of the pre!edin$ fifteen years#
(83) 2n order to "nderstand this "ne,pe!ted re+ersal, we "st on!e a$ain
shift fo!"s to ree,aine the pro!esses of inter=!apitalist !opetition that
are at the !entre of *renners analysis#
.+ 9inancial (nderpinning" of the () Revival
*renner, as we ha+e seen, attrib"tes the persisten!e of o+erprod"!tion and
o+er!apa!ity after 1973 partly to the beha+io"r of hi$her=!ost in!"bent
firs8whi!h had e+ery reason to defend their ar%ets and !o"nteratta!%
by speedin$ "p the pro!ess of inno+ation and in+estent in additional fi,ed
!apital8and partly to the a!tions of the 56, Hapanese and Geran
$o+ernents, whi!h a$$ra+ated rather than alle+iated the "nderlyin$
tenden!y towards too little e,it and too "!h entry# De also noted that,
while $o+ernental a!tion o!!"pies !entre=sta$e in *renners histori!al
narrati+e, the theoreti!ally ore !r"!ial ar$"ent abo"t firs is for the
ost part de+eloped ded"!ti+ely, on the basis of !ir!"stantial e+iden!e#
. first proble with this !entral thesis is that it is alost e,!l"si+ely
fo!"sed on an"fa!t"rin$# *renner does not $i+e an e,pli!it /"stifi!ation for
this, as he does for his fo!"s on the .eri!an, Hapanese and Geran
e!onoies# The theoreti!al and histori!al identifi!ation of !apitalis with
industrial !apitalis appears to be for hi8as for ost so!ial s!ientists,
<ar,ist and non=<ar,ist ali%e8an arti!le of faith whi!h reC"ires no
/"stifi!ation# Pet the share of +al"e added $enerated in an"fa!t"rin$
worldwide has been !oparati+ely sall, shrin%in$ steadily fro 18 per
!ent in 196A, to 1@#B per !ent in 198A, to 1A#B per !ent in 1998# <oreo+er,
the !ontra!tion has been $reater than a+era$e in *renners ad+an!ed
!apitalist !o"ntries, the share for 9orth .eri!a, Destern ?"rope,
."stralasia and Hapan !obined ha+in$ de!lined fro 18#9 per !ent in
196A, to 1@#B per !ent in 198A, to 19#7 per !ent in 1998# (8@)
*renner does see to be aware of this proble b"t he sees it as a
sypto of e!onoi! !risis rather than a reason for C"estionin$ the
rele+an!e and +alidity of his fo!"s on an"fa!t"rin$# Th"s, in !oentin$
on the h"$e e,pansion e,perien!ed by the .eri!an non=an"fa!t"rin$
se!tor in the 198As, he interprets it as a sypto of the broad e!onoi!
de!line that a!!opanied the !risis of an"fa!t"rin$ in the 56 e!onoy,
whi!h !an "sef"lly be !alled &de=ind"striali0ation', with all its ne$ati+e
!onnotations# (8B) .t one point, howe+er, he does feel it ne!essary to
pro+ide soe /"stifi!ation for his narrow fo!"s on an"fa!t"rin$#
2t has be!oe standard to downplay the iportan!e of the
an"fa!t"rin$ se!tor, by pointin$ to its shrin%in$ share of total
eployent and GD3# *"t, d"rin$ the 199As, the 56 !orporate
an"fa!t"rin$ se!tor still a!!o"nted for @68 per !ent of total profits
a!!r"in$ to the non=finan!ial !orporate se!tor 4the !orporate
e!onoy in"s the !orporate finan!ial se!tor7, and in 1999 it too%
@6#1 per !ent of that total# The !lib of pre=ta, an"fa!t"rin$
profitability was in fa!t the so"r!e of the parallel re!o+ery of pre=ta,
profitability in the pri+ate e!onoy as a whole# (86)
-ea+in$ aside the fa!t that it is not !lear why profits in the !orporate
finan!ial se!tor are not in!l"ded in the !oparison, this /"stifi!ation does
not stand "p to a !lose epiri!al s!r"tiny# .s Greta >rippner has shown, on
the basis of a thoro"$h analysis of the a+ailable e+iden!e, not only had the
share of total 56 !orporate profits a!!o"nted for by finan!e, ins"ran!e and
real estate 4E2F?7 in the 198As nearly !a"$ht "p with and, in the 199As,
s"rpassed the share a!!o"nted for by an"fa!t"rin$G ore iportant, in
the 197As and 198As non-financial firms themselves sharply in!reased their
in+estent in finan!ial assets relati+e to that in plant and eC"ipent, and
be!ae in!reasin$ly dependent on finan!ial so"r!es of re+en"e and profit
relati+e to that earned fro prod"!ti+e a!ti+ities# 3arti!"larly si$nifi!ant is
>rippners findin$ that an"fa!t"rin$ not only doinates b"t leads this
trend towards the finan!iali0ation of the non=finan!ial e!onoy# (87)
*renner does not pro+ide any indi!ator for his o+er=!apa!ity and o+er=
prod"!tion odel !oparable to >rippners "ltiple indi!ators for the
finan!iali0ation of the non=finan!ial e!onoy# 9e+ertheless, .nwar 6hai%h
does pro+ide two indi!ators for !apa!ity "tili0ation in 56 an"fa!t"rin$8
one based on his own eas"re, and one on that of the Eederal Feser+e
*oard8whi!h we ay ta%e as iperfe!t inverse indi!ators of o+er=!apa!ity#
(88) .!ross the entire period 19@79B, both indi!ators show a $reat deal of
fl"!t"ation in !apa!ity "tili0ation b"t no !lear lon$=ter trend# <ore
spe!ifi!ally, in line with *renners ar$"ent, both indi!ators8espe!ially
6hai%hs8s"$$est that o+er=!apa!ity in 56 an"fa!t"rin$ de!reased
sharply d"rin$ the !losin$ years of the lon$ boo and in!reased e+en ore
sharply d"rin$ the !risis of profitability that ar%ed the transition fro the
boo to the lon$ downt"rn# .fter 1973, in !ontrast, both indi!ators
!ontin"e to show !onsiderable fl"!t"ations b"t pro+ide no e+iden!e to
s"pport *renners !ontention that the lon$ downt"rn was !hara!teri0ed by
abo+e=noral o+er=!apa!ity# The Eederal Feser+e *oards fi$"res show
!apa!ity "tili0ation settlin$ ba!% to where it was in the 19BAs with no trend
either way, while 6hai%hs show !apa!ity "tili0ation in the 197As at hi$her
le+els than in the 19BAs and risin$ f"rther in the 198As and 199As8
s"$$estin$ a !oparati+ely low, and de!linin$, le+el of o+er=!apa!ity#
6"ppleented with what !an be $a"$ed fro these iperfe!t indi!ators,
>rippners "nabi$"o"s findin$s throw serio"s do"bts on *renners a priori
ass"ptions !on!ernin$ the beha+io"r of in!"bent, hi$her=!ost
an"fa!t"rers# The predoinant response of these firs to the irr"ption in
their ar%ets of lower=!ost !opetitors does not appear to ha+e been a
stren"o"s defen!e of their s"n% !apital, and a !o"nteratta!% thro"$h
additional in+estent in fi,ed !apital that f"rther in!reased o+er=!apa!ity#
.ltho"$h this %ind of response was !ertainly present, the predoinant
response was, in !apitalist ters, far ore rational# Konfronted with
hei$htened international !opetition 4espe!ially in trade=intensi+e se!tors
li%e an"fa!t"rin$7, hi$her=!ost in!"bent firs responded to fallin$
ret"rns by di+ertin$ a $rowin$ proportion of their in!oin$ !ash flows fro
in+estent in fi,ed !apital and !oodities to liC"idity and a!!""lation
thro"$h finan!ial !hannels#
This is what >rippner obser+es epiri!ally# *"t this is also what we sho"ld
e,pe!t theoreti!ally, whene+er ret"rns to !apital in+ested in trade and
prod"!tion fall below a !ertain threshold and inter=!apitalist !opetition
be!oes a 0ero= or ne$ati+e=s" $ae# 5nder these !onditions8pre!isely
those whi!h, a!!ordin$ to *renner, ha+e !hara!teri0ed the lon$ downt"rn8
the ris%s and "n!ertainties in+ol+ed in rein+estin$ in!oin$ !ash flows into
trade and prod"!tion are hi$h, and it a%es $ood b"siness sense to "se
the to in!rease the liC"idity of assets as a defensi+e or offensi+e weapon
in the es!alatin$ !opetiti+e str"$$le, both within the parti!"lar ind"stry or
sphere of e!onoi! a!ti+ity in whi!h the fir had pre+io"sly spe!iali0ed and
o"tside it# Eor liC"idity enables enterprises not /"st to es!ape the
sla"$hterin$ of !apital +al"es whi!h, sooner or later, ens"es fro the o+er=
a!!""lation of !apital and the intensifi!ation of !opetition in old and new
lines of b"siness, b"t also to ta%e o+er at bar$ain pri!es the assets,
!"stoers and s"ppliers of the less pr"dent and irrationally e,"berant
enterprises that !ontin"ed to sin% their in!oin$ !ash flows into fi,ed
!apital and !oodities# (89)
9inance- the la"t ref#ge
2n a sense, this !opetiti+e strate$y is nothin$ b"t the !ontin"ation by
other eans of the lo$i! of the prod"!t !y!le that *renner hiself in+o%es
in another !onte,t# Eor the leadin$ !apitalist or$ani0ations of a $i+en epo!h,
this lo$i! in+ol+es shiftin$ reso"r!es !easelessly, thro"$h one %ind of
inno+ation or another, fro ar%et ni!hes that ha+e be!oe o+er!rowded
4and therefore less profitable7 to those that are less !rowded 4and therefore
ore profitable7# Dhen es!alatin$ !opetition red"!es the a+ailability of
relati+ely epty, profitable ni!hes in the !oodity ar%ets, the leadin$
!apitalist or$ani0ations ha+e one last ref"$e, to whi!h they !an retreat and
shift !opetiti+e press"res onto others# This final ref"$e is the oney
ar%et8in 6!h"peters words, always, as it were, the headC"arters of
the !apitalist syste, fro whi!h orders $o o"t to its indi+id"al di+isions#
(9A)
2n this respe!t, as pre+io"sly noted, 56 !apital in the late twentieth !ent"ry
was followin$ a tra/e!tory analo$o"s to that of *ritish !apital a !ent"ry
before, whi!h had also responded to the intensifi!ation of !opetition in
an"fa!t"rin$ thro"$h finan!iali0ation# .s Jalford <a!%inder pointed o"t in
a spee!h deli+ered to -ondon ban%ers at the t"rn of the !ent"ry, when the
finan!iali0ation of *ritish !apital was already at an ad+an!ed sta$e; the
ind"striali0ation of other !o"ntries enhan!ed the iportan!e of a sin$le
!learin$ ho"se, whi!h will always be where there is the $reatest ownership
of !apital # # # (D)e are essentially the people who ha+e !apital, and those
who ha+e !apital always share in the a!ti+ity of brains and "s!les of other
!o"ntries# (91) This was !ertainly the !ase d"rin$ the belle poque, when
nearly one half of *ritains assets were o+erseas and abo"t 1A per !ent of
its national in!oe !onsisted of interest on forei$n in+estent# (91)
2n spite of the far $reater e!onoi!, ilitary and politi!al power of the
5nited 6tates in !oparison to the *ritish epire, sharin$ in the a!ti+ity of
brains and "s!les in other !o"ntries thro"$h finan!iali0ation has been
ore ard"o"s for 56 !apital# To be s"re, .eri!an pria!y in the foration
of +erti!ally inte$rated, "ltinational !orporations has been a hi$hly
effe!ti+e eans of p"ttin$ s"!h sharin$ into operation thro"$ho"t the
twentieth !ent"ryG and ii$ration, of !o"rse, has drained brains and
"s!les fro all o+er the world, thro"$ho"t 56 history# (93) 5nli%e *ritain
in the nineteenth !ent"ry, howe+er, the 5nited 6tates was not str"!t"rally
oriented to playin$ the role of $lobal !learin$ ho"seG its relationship to the
world e!onoy was rather that of a self=!entred and lar$ely self=s"ffi!ient
!ontinental e!onoy# (9@)
5nder the !onditions of the in!reasin$ fra$entation and e+ent"al
brea%down of the world ar%et that !hara!teri0ed inter=!apitalist str"$$les
in the first half of the twentieth !ent"ry, the s!ale, self=!entredness and
relati+e self=s"ffi!ien!y of the 56 e!onoy pro+ided .eri!an !apital with
de!isi+e !opetiti+e ad+anta$es# 56 pria!y in the foration of +erti!ally
inte$rated, "ltinational !orporations enabled it to o"tflan%, thro"$h dire!t
in+estent, the rapant prote!tionis of the period# 9e+ertheless, the
+ery s"!!ess of the 5nited 6tates in prootin$ the re"nifi!ation and
e,pansion of the $lobal ar%et after the end of the 6e!ond Dorld Dar
diinished those ad+anta$esG and the intensifi!ation of international
!opetition that ens"ed t"rned the, in soe respe!ts, into handi!aps# .n
e,panded and "nified world ar%et enabled enterprises based in saller,
less self=!entred and self=s"ffi!ient !o"ntries to en/oy e!onoies of s!ale
and s!ope !oparable to those of 56 firs# The la!% of or$ani! inte$ration
of the 5nited 6tates in the $lobal e!onoy, eanwhile, pre+ented .eri!an
!apital fro ta%in$ f"ll ad+anta$e of the tenden!y towards finan!iali0ation
whi!h was $ainin$ oent", at hoe and abroad, "nder the ipa!t of
intensifyin$ !opetition and the asso!iated !risis of profitability#
Jere lies yet another !ontradi!tion of the inflationary !risis=ana$eent
strate$y that the 5nited 6tates adopted "nder 9i,on# .s ar$"ed in the
pre!edin$ se!tions, this had been di!tated by a !obination of e!onoi!,
so!ial and politi!al !onsiderations whi!h, despite their di+ersity, had one
"nderlyin$ $oal in !oon; the attept to preser+e the relati+e self=
!entredness, self=s"ffi!ien!y and si0e of the .eri!an e!onoy# Dhate+er
its s"!!ess in redistrib"tin$ the b"rden of the profitability !risis fro 56
!apital to 56 labo"r and forei$n !opetitors, the strate$y ended "p by
deepenin$ the !risis of .eri!an he$eony and by pro+o%in$ a de+astatin$
r"n on the dollar whi!h threatened to destroy 56 finan!ial power in the
world at lar$e# The ar$"ent de+eloped in this se!tion pro+ides "s with
new insi$hts into the reasons for this deepenin$ !risis and for the s"!!ess
of the onetarist !o"nterre+ol"tion in re+ersin$ the pre!ipito"s de!line of
56 world power#
5egemon$ and financiali'ation
2n a n"tshell, the ain reason why the inflationary strate$y ba!%fired is
that, instead of attra!tin$, it repelled the $rowin$ ass of liC"idity, released
by the finan!iali0ation of pro!esses of !apital a!!""lation on a world
s!ale, fro the 56 e!onoy and its !"rren!y# .nd !on+ersely, the ain
reason why the onetarist !o"nterre+ol"tion was so st"nnin$ly s"!!essf"l
in re+ersin$ the de!line in 56 power is that it bro"$ht abo"t a assi+e
rero"tin$ of $lobal !apital flows towards the 5nited 6tates and the dollar# To
be s"re, this rero"tin$ transfored the 5nited 6tates fro bein$ the ain
so"r!e of world liC"idity and forei$n dire!t in+estent, as it had been in the
19BAs and 196As, into the worlds ain debtor nation and absorber of
liC"idity, fro the 198As "p to the present# (9B) .s we shall see, *renner is
probably ri$ht in do"btin$ that le+els of indebtedness of this order are
s"stainable in the lon$ r"n# 9e+ertheless, for twenty years now an
es!alatin$ forei$n debt has enabled the 5nited 6tates to t"rn the
deterioratin$ !risis of the 197As into a belle poque wholly !oparable to,
and in soe respe!ts far ore spe!ta!"lar, than *ritains ?dwardian era#
2t has, first of all, allowed the 5nited 6tates to a!hie+e thro"$h finan!ial
eans what it !o"ld not a!hie+e by for!e of ars8to defeat the 566F in
the Kold Dar and tae the rebellio"s 6o"th# <assi+e borrowin$ fro
abroad, ostly Hapan, was essential to Fea$ans es!alation of the
araent ra!e8priarily, tho"$h not e,!l"si+ely, thro"$h the 6trate$i!
Defen!e 2nitiati+e8well beyond what the 566F !o"ld afford# Kobined with
$enero"s s"pport to .f$han resistan!e a$ainst 6o+iet o!!"pation, the
es!alation for!ed the 6o+iet 5nion into a do"ble !onfrontation neither side
of whi!h it !o"ld win; in .f$hanistan, its hi$h=te!h ilitary apparat"s fo"nd
itself in the sae diffi!"lties that had led to the 56 defeat in VietnaG while
in the ars ra!e, the 5nited 6tates !o"ld obili0e finan!ial reso"r!es
wholly beyond the 6o+iet rea!h# (96)
.t the sae tie, the assi+e redire!tion of !apital flows to the 5nited
6tates t"rned the flood of !apital that 6o"thern !o"ntries had e,perien!ed
in the 197As into the s"dden dro"$ht of the 198As# Eirst si$nalled by the
<e,i!an defa"lt of 1981, this dro"$ht was probably the sin$le ost
iportant fa!tor in shiftin$ !opetiti+e press"res fro 9orth to 6o"th and
in pro+o%in$ a a/or bif"r!ation in the fort"nes of 6o"thern re$ions in the
198As and 199As# :n the one hand, there were re$ions8ost notably ?ast
.sia8that, for histori!al reasons, had a stron$ ad+anta$e in !opetin$ for
a share of the e,pandin$ 56 deand for !heap ind"strial prod"!ts# These
areas tended to benefit fro the redire!tion of !apital flows, be!a"se the
ipro+eent in their balan!e of payents lessened their need to !opete
with the 5nited 6tates in world finan!ial ar%ets, and indeed t"rned soe
of the into a/or lenders to the 56# :ther re$ions8ost notably, 6"b=
6aharan .fri!a and -atin .eri!a8were, for histori!al reasons, parti!"larly
disad+anta$ed in !opetin$ for a share of the 9orth .eri!an deand#
These tended to r"n into balan!e=of=payents diffi!"lties that p"t the
into the hopeless position of ha+in$ to !opete dire!tly with the 5nited
6tates in world finan!ial ar%ets# (97) ?ither way, the 5nited 6tates
benefited both e!onoi!ally and politi!ally as .eri!an b"siness and
$o+ernental a$en!ies were best positioned to obili0e in the $lobal
!opetiti+e and power str"$$les for the !heap !oodities and !redit
whi!h 6o"thern winners ea$erly s"pplied, as well as for the assets that
6o"thern losers had to alienate willy=nilly at bar$ain pri!es#
Einally, assi+e inflows of forei$n !apital were essential to the
>eynesianis with a +en$ean!e that res!"ed the 56 and world e!onoies
fro the deep re!ession pro+o%ed by the swit!h fro e,treely la, to +ery
ti$ht onetary poli!ies# This re!ession, and the ideolo$i!al and pra!ti!al
liC"idation of the welfare state that a!!opanied it, was the tr"e t"rnin$
point in the !ollapse of wor%ers le+era$e in the 56 and other !ore re$ions#
To be s"re, the sta$flation of the 197As had already worn down wor%ers
resistan!e a$ainst attepts to shift the b"rden of intensifyin$ !opetition
onto their sho"lders# *"t it was only in the 198As that, in !ore !o"ntries in
$eneral and the 5nited 6tates in parti!"lar, press"re fro below on oney
wa$es s"bsided, and wor%ers !ae to rely on $o+ernental !ontrol of pri!e
inflation as their best !han!e of prote!tin$ their standards of li+in$#
.s *renner aintains, the wea%enin$ of labo"rs le+era$e was $reater in
the 5nited 6tates than in other !ore re$ions and thereby !ontrib"ted to the
re+i+al of 56 profitability in the 199As# Pet altho"$h this was "ndo"btedly a
fa!tor in the re+i+al, *renners narrow fo!"s on inter=!apitalist !opetition
in an"fa!t"rin$ is a$ain isleadin$# Eor the t"rnaro"nd was priarily
d"e, not to the !oparati+ely slower $rowth of 56 real wa$es, b"t to the
o+erall re=orientation of the .eri!an e!onoy to ta%e f"ll ad+anta$e of
finan!iali0ation, both at hoe and in the world at lar$e# Ero this point of
+iew, the de=ind"striali0ation of the 5nited 6tates and other !ore re$ions
!ertainly had ne$ati+e !onnotations for the wor%ers ost dire!tly affe!ted
by itG b"t it had no s"!h dire eanin$ for the 56 e!onoy as a whole, and
espe!ially its wealthier strata# Father, it was a ne!essary !ondition of the
$reat re+i+al of 56 wealth, power and presti$e of the 199As, when8to
paraphrase -andess !hara!teri0ation of the ?dwardian era8in spite of
rattlin$s of ars in the 6o"th and forer ?ast or onitory referen!es to a
!oin$ !lash of !i+ili0ations, e+erythin$ seeed ri$ht a$ain#
III. A SOCIAL AND POLITICAL PERSPECTIVE
Fadi!al as the fore$oin$ !riti!iss ay appear and, in soe respe!ts,
a!t"ally are, they do not in+ol+e a ref"tation so "!h as a re!astin$ of
*renners ar$"ent within a broader so!ial and politi!al perspe!ti+e# 2n the
!on!l"din$ part of this arti!le, 2 shall a%e s"!h re!astin$ e,pli!it by
drawin$ fro and addin$ to *renners a!!o"nt of the lon$ downt"rn and y
own !ritiC"e of it# .s in the first se!tion, 2 shall deal s"!!essi+ely with the
ori$ins, dynai!s and prospe!ti+e o"t!oes of the lon$ downt"rn#
2n "nders!orin$ the diffi!"lties in+ol+ed in attrib"tin$ !a"sal priority to any
of the intera!tin$ eleents that ha+e propelled the e!onoi! e,pansion of
?ast .sia in the 197As and 198As, Fobert Dade has in+ited "s to thin%
ore in ters of openin$ a !obination lo!% than a padlo!%# (98) Dhat is
tr"e of ?ast .sia is a fortiori tr"e of the world=e!onoi! e,pansion of the
19BAs and 196As and of the lon$ downt"rn that followed# *renners "ne+en
de+elopent is "ndo"btedly an eleent of the !obinationG b"t it is by no
eans the %ey that "nlo!%s the e!haniss of !apital a!!""lation on a
world s!ale, fro boo thro"$h !risis to relati+e sta$nation#
A+ 1rigin" of the ,ownt#rn
The parti!"lar for that "ne+en de+elopent ass"ed after the 6e!ond
Dorld Dar8as opposed to the fors that it too%, let "s say, in the
nineteenth !ent"ry, or in the first half of the twentieth8was thoro"$hly
ebedded in, and shaped by, the foration and e+ol"tion of 56 world
he$eony in the Kold Dar era# 56 he$eony, in t"rn, had a pe!"liar so!ial
!hara!ter, refle!ted in syste=wide instit"tional arran$eents C"ite
different fro those that "nderlay the nineteenth=!ent"ry 5>=!entred world
e!onoy# 2t follows that the operation of "ne+en de+elopent in $eneratin$
both the postwar boo and the s"bseC"ent lon$ downt"rn !an only be
"nderstood in !on/"n!tion with the foration and e+ol"tion of the parti!"lar
instit"tional arran$eents of 56 he$eony#
These arran$eents were einently politi!al in ori$in and so!ial in
orientation# They were based on the widespread belief aon$ 56
$o+ernent offi!ials that a new world order was the only $"arantee
a$ainst !haos followed by re+ol"tion and that se!"rity for the world had to
be based on .eri!an power e,er!ised thro"$h international systes# (99)
?C"ally widespread was the belief that the lessons of the 9ew Deal were
rele+ant to the international sphere#
H"st as the 9ew Deal $o+ernent in!reasin$ly too% a!ti+e
responsibility for the welfare of the nation, 56 forei$n poli!y planners
too% in!reasin$ responsibility for the welfare of the world # # # 2t !o"ld
not ins"late itself fro the worlds probles# .s at hoe, oreo+er,
it !o"ld not neatly pi!% and !hoose aon$ those probles,
distin$"ishin$ politi!s fro e!onoi!s, se!"rity fro prosperity,
defen!e fro welfare# 2n the le,i!on of the 9ew Deal, ta%in$
responsibility eant $o+ernent inter+ention on a $rand s!ale# (1AA)
2n Eran%lin Foose+elts ori$inal +ision, the 9ew Deal wo"ld be $lobali0ed
thro"$h the 5nited 9ations, and the 566F wo"ld be in!l"ded aon$ the
poor nations of the world to be in!orporated into the e+ol+in$ 3a,
.eri!ana, for the benefit and se!"rity of all# 2n the shoddier b"t ore
realisti! politi!al pro/e!t that ateriali0ed "nder Tr"an, in !ontrast, the
!ontainent of 6o+iet power be!ae the ain or$ani0in$ prin!iple of 56
he$eony, and .eri!an !ontrol o+er world oney and ilitary power
be!ae the priary eans of that !ontainent# (1A1) This ore realisti!
odel was not so "!h a ne$ation of the ori$inal notion of !reatin$ a
$lobal welfare state, as its transforation into a pro/e!t of a warfare=
welfare state on a world s!ale, in !opetition and opposition to the 6o+iet
syste of !o"nist states# (1A1)
The speed and e,tent of the pro!ess of "ne+en de+elopent, to whi!h
*renner tra!es both the postwar boo and the s"bseC"ent downt"rn, !an
only be "nderstood with referen!e to the s"!!esses and fail"res of this
pro/e!t# The odel was, indeed, hi$hly s"!!essf"l in la"n!hin$ one of the
$reatest syste=wide e,pansions in !apitalist history# 2n its absen!e, world
!apitalis i$ht well ha+e $one thro"$h a lon$ period of sta$nation, if not
o"tri$ht depression, !oparable to that whi!h e,tended fro the initial
establishent of *ritish he$eony at the end of the 9apoleoni! Dars to the
ta%e=off of the id=nineteenth=!ent"ry lon$ boo at the end of the 18@As#
5nder 56 he$eony, in !ontrast, s"!h a !ontra!tion was a+oided alto$ether
thro"$h the /oint operation of both ilitary and so!ial >eynesianis on a
world s!ale# <ilitary >eynesianis8that is, assi+e e,pendit"res on the
rearaent of the 5nited 6tates and its allies and the deployent of a far=
fl"n$ networ% of C"asi=peranent ilitary bases8was "ndo"btedly the
ost dynai! and !onspi!"o"s eleent of the !obination# *"t the 56=
sponsored spread of so!ial >eynesianis8that is, the $o+ernental p"rs"it
of f"ll eployent and hi$h ass !ons"ption in the Dest or 9orth, and of
de+elopent in the 6o"th8was also an essential fa!tor# (1A3)
The re!onstr"!tion and "p$radin$ of the Geran and Hapanese ind"strial
apparat"ses8the !entrepie!e of *renners "ne+en de+elopent8were
inte$ral aspe!ts of the internationali0ation of the 56 warfare=welfare state#
.s *r"!e K"in$s notes, !oentin$ spe!ifi!ally on the .eri!an
approa!h to Hapanese reind"striali0ation, Geor$e >ennans poli!y of
!ontainent was always liited and parsionio"s, based on the idea that
fo"r or fi+e ind"strial str"!t"res e,isted in the world; the 6o+iets had one
and the 5nited 6tates had fo"r, and thin$s sho"ld be %ept this way#
>ennans idea was translated into 56 $o+ernent sponsorship of Hapans
reind"striali0ation# The >orean Dar be!ae &Hapans <arshall 3lan' # # #
Dar pro!"reent propelled Hapan alon$ its war=beatin$ ind"strial path#
(1A@)
Ear fro bein$ a spontaneo"s pro!ess ori$inatin$ fro the a!tions of
!apitalist a!!""lators fro below8as it had been in the nineteenth
!ent"ry "nder *ritish he$eony8"ne+en de+elopent "nder .eri!an
he$eony was a pro!ess !ons!io"sly and a!ti+ely en!o"ra$ed fro abo+e
by a $lobali0in$ 56 warfare=welfare state# This differen!e a!!o"nts not /"st
for the speed and e,tent of the lon$ postwar boo b"t also for the
parti!"lar !obination of liits and !ontradi!tions that transfored it into
the relati+e sta$nation of the 197As and 198As# *renners a!!o"nt of the
onset of the lon$ downt"rn points to one s"!h liit and !ontradi!tion;
s"!!essf"l !at!hin$ "p !reates new !opetitors, and intensifyin$
!opetition e,er!ises a downward press"re on the profits of in!"bent
firs# To the e,tent that this was an "nanti!ipated o"t!oe of the Kold Dar
pro/e!t, it was not /"st a liitation b"t also a !ontradi!tion of .eri!an
poli!ies# 2t is nonetheless ore pla"sible to s"ppose that the o"t!oe was
an anti!ipated b"t "na+oidable e!onoi! !ost of poli!ies whose priary
ob/e!ti+es were not e!onoi! b"t so!ial8the !ontainent of !o"nis
and the tain$ of nationalis8and politi!al; the !onsolidation of 56
he$eony#
,rawback" of the .old 8ar pro4ect
The ost serio"s !ontradi!tion of 56 poli!ies lay elsewhere; that is,
pre!isely in the diffi!"lties in+ol+ed in attainin$ these so!ial and politi!al
ob/e!ti+es# To be s"re, in the in!"bent and risin$ !entres of !apital
a!!""lation, rapid e!onoi! $rowth, low le+els of "neployent and the
a!t"al spread of hi$h ass !ons"ption !onsolidated the he$eony of one
+ariant or another of liberal !apitalis# .s pre+io"sly noted, howe+er, e+en
in these !entres the politi!al tri"ph of !apitalis did not lessen and, on
the whole, a!t"ally stren$thened the disposition of wor%ers to see% a
$reater share of the so!ial prod"!t thro"$h dire!t str"$$le or ele!toral
obili0ation# Dashin$tons Kold Dar poli!ies th"s p"t a do"ble sC"ee0e on
profits8a first sC"ee0e fro the intensifi!ation of inter=!apitalist
!opetition, whi!h they prooted by !reatin$ !onditions fa+o"rable to the
"p$radin$ and e,pansion of the Hapanese and Destern ?"ropean prod"!ti+e
apparat"sesG and a se!ond sC"ee0e deri+in$ fro the so!ial epowerent
of labo"r, whi!h they prooted thro"$h the p"rs"it of near f"ll eployent
and hi$h ass !ons"ption thro"$ho"t the Destern world#
This do"ble sC"ee0e was bo"nd to prod"!e a syste=wide !risis of
profitability b"t there is no reason why, in itself, it sho"ld ha+e prod"!ed
the !risis of 56 he$eony whi!h be!ae the doinant e+ent of the 197As#
2f the probles of profitability !ae to be s"bs"ed within and doinated
by this broader he$eoni! !risis, the reason is that in the worlds 6o"th the
56 warfare=welfare state attained neither its so!ial nor its politi!al
ob/e!ti+es# 6o!ially, the Eair Deal that Tr"an proised to the poor
!o"ntries of the world in his 19@9 ina"$"ral address ne+er ateriali0ed in
any a!t"al narrowin$ of the in!oe $ap that separated 9orth and 6o"th# .s
Third Dorld !o"ntries stepped "p their ind"striali0ation efforts8the
$enerally pres!ribed eans to de+elopent8there was indeed ind"strial
!on+er$en!e between 9orth and 6o"thG b"t, as pre+io"sly noted, there was
no in!oe !on+er$en!e at all# Third Dorld !o"ntries were th"s bearin$ the
!osts witho"t reapin$ the e,pe!ted benefits of ind"striali0ation# Dorse still,
in 197A Fobert <!9aara, then president of the Dorld *an%, a!%nowled$ed
that e+en hi$h rates of G93 $rowth did not res"lt in the e,pe!ted
ipro+eents in the welfare of Third Dorld nations# (1AB)
3artly related to this so!ial fail"re, the politi!al fail"re of the 56 warfare=
welfare state was far ore !onspi!"o"s# The epi!entre of this was of !o"rse
the war in Vietna, where the 5nited 6tates !onfronted the pra!ti!al
ipossibility of +i!tory, despite es!alatin$ 56 !as"alties and the
deployent of ilitary firepower witho"t histori!al pre!edent for a !onfli!t
of this %ind# The "pshot was that the 5nited 6tates lost "!h of its politi!al
!redibility as $lobal poli!ean, thereby eboldenin$ thro"$ho"t the Third
Dorld the nationalist and so!ial re+ol"tionary for!es that Kold Dar poli!ies
were eant to !ontain# .lon$ with "!h of the politi!al !redibility of its
ilitary apparat"s, the 5nited 6tates also lost !ontrol of the world
onetary syste# .s !ontended earlier in this arti!le, the es!alation of
p"bli! e,pendit"res to s"stain the ilitary effort in Vietna and to
o+er!oe opposition to the war at hoe8thro"$h the Great 6o!iety
pro$rae8stren$thened inflationary press"re in the 5nited 6tates and
the world e!onoy at lar$e, deepened the fis!al !risis of the 56 state and
e+ent"ally led to the !ollapse of the 56=!entred syste of fi,ed e,!han$e
rates#
2t is, of !o"rse, ipossible to %now whether the *retton Doods re$ie
wo"ld ha+e s"r+i+ed witho"t these effe!ts of the Vietna Dar# 9or is it
possible to predi!t what wo"ld ha+e happened to world !apitalis had
"ne+en de+elopent been dri+en fro below, as in the nineteenth
!ent"ry, rather than fro abo+e as "nder the 56 Kold Dar re$ie# .ll 2
a sayin$ in !ontrast to *renners a!!o"nt is that, histori!ally, "ne+en
de+elopent after the 6e!ond Dorld Dar was ebedded fro be$innin$ to
end in Kold Dar ri+alries, and was therefore thoro"$hly shaped by the
s"!!esses and fail"res of the strate$ies and str"!t"res deployed by the
he$eoni! 56 warfare=welfare state# The intensifi!ation of inter=!apitalist
!opetition and the asso!iated !risis of profitability were iportant as a
si$nal that the lon$ postwar boo had rea!hed its liits# *"t they were
only an eleent of the broader !risis of he$eony that !onteporaneo"sly
si$nalled the liits and !ontradi!tions of 56 Kold Dar poli!ies#
+ 9inanciali'ation and the Monetari"t
.o#nterrevol#tion
To t"rn now to the dynai! of the lon$ downt"rn; y !riti!al assessent of
*renners a!!o"nt ipli!itly s"$$ested that the onetarist
!o"nterre+ol"tion of 197981 was a far ore de!isi+e t"rnin$ point in the
e+ol"tion of 56 and world !apitalis than either the 3la0a .!!ord of 198B
or the re+erse 3la0a .!!ord of 199B, to whi!h *renner sees to attrib"te
eC"al or e+en $reater iportan!e# 2n y +iew the a!!ords of 198B and
199B were oents of ad/"stent within a pro!ess of re+i+al of 56
he$eony that had be$"n with the swit!h fro "ltra la, to e,treely ti$ht
onetary poli!ies# *efore the swit!h, the 56 inflationary ana$eent of
the !rises of profitability and he$eony tended to repel rather than attra!t
the $rowin$ ass of !apital that so"$ht a!!""lation thro"$h finan!ial
!hannels# Dorse still, in spite of the positi+e effe!ts of the !opetiti+eness
of 56 an"fa!t"rers that *renner ephasi0es, they !reated !onditions of
a!!""lation on a world s!ale that benefited neither the 56 state nor
.eri!an !apital
Kr"!ial in this respe!t was the e,plosi+e $rowth of the ?"rodollar and other
e,traterritorial finan!ial ar%ets# K"rio"sly, *renner hardly entions this
de+elopent, e+en tho"$h it ori$inated in the sae years as his transition
fro boo to downt"rn and left an indelible ar% on the 197As#
?stablished in the 19BAs to hold dollar balan!es of !o"nist !o"ntries
"nwillin$ to ris% depositin$ the in the 5nited 6tates, the ?"rodollar or
e"ro!"rren!y ar%et $rew priarily thro"$h the deposits of 56
"ltinationals and the offshore a!ti+ities of 9ew Por% ban%s# Ja+in$
e,panded steadily thro"$h the 19BAs and early 196As, it started $rowin$
e,ponentially in the id= and late=196As8e"ro!"rren!y assets ore than
C"adr"plin$ between 1967 and 197A# (1A6)
Jard as it is to %now e,a!tly what lay behind this e,plosion, it is pla"sible
to s"ppose that it was tri$$ered by the /oint !risis of profitability and
.eri!an he$eony of those years# .ltho"$h *renner fo!"ses on 56
an"fa!t"rers prod"!in$ at hoe, we %now that 56 !orporations operatin$
abroad had also be$"n to fa!e to"$her !opetition fro their ?"ropean
ri+als# (1A7) <oreo+er, ?"rope was the epi!entre of the pay e,plosion of
196873# Jori0ontal press"re fro intensifyin$ !opetition and +erti!al
press"re fro labo"rs le+era$e "st ha+e $i+en a a/or boost to the
liC"idity preferen!e of 56 "ltinational !orporations operatin$ abroad#
6in!e !onditions for the profitable rein+estent of !ash flows in prod"!tion
were e+en less fa+o"rable in the 5nited 6tates than in ?"rope, as the
$rowin$ fis!al !risis of the 56 warfare=welfare state in!reased the ris%s of
new ta,es and restri!tions on !apital obility, it ade $ood b"siness sense
for .eri!an "ltinationals to par% their $rowin$ liC"id assets in
e"ro!"rren!y and other offshore oney ar%ets rather than repatriate
the#
*e that as it ay, the e,plosi+e $rowth of e"ro!"rren!y ar%ets pro+ided
!"rren!y spe!"lators8in!l"din$ 56 ban%s and !orporations8with a h"$e
masse de manoeuvre with whi!h to bet a$ainst, and thereby "nderine,
the stability of the 56=!ontrolled syste of fi,ed e,!han$e rates# .nd on!e
that syste a!t"ally !ollapsed, the $ates were open for an e+er=$rowin$
ass of pri+ately !ontrolled liC"idity to !opete with the 56 and other
state a!tors in the prod"!tion of world oney and !redit# Three "t"ally
reinfor!in$ tenden!ies were at wor% in this parti!"lar !opetiti+e str"$$le#
Eirst, the brea%down of the re$ie of fi,ed e,!han$e rates added a new
oent" to the finan!iali0ation of !apital, by in!reasin$ the ris%s and
"n!ertainties of !oer!ial=ind"strial a!ti+ities# El"!t"ations in e,!han$e
rates be!ae a a/or deterinant of +ariations in !orporate !ash=flow
positions, sales, profits and assets in different !o"ntries and !"rren!ies# 2n
hed$in$ a$ainst these +ariations, or in tryin$ to profit fro the,
"ltinationals tended to in!rease the ass of liC"idity deployed in finan!ial
spe!"lation in e,traterritorial oney ar%ets where freedo of a!tion was
$reatest and spe!iali0ed ser+i!es ost readily a+ailable# (1A8)
6e!ond, !obined with the loss of !redibility of the 5nited 6tates as $lobal
poli!ean, the assi+e de+al"ation of the 56 !"rren!y in the early 197As
propted Third Dorld $o+ernents to adopt a ore a$$ressi+e stan!e in
ne$otiatin$ the pri!es of their e,ports of ind"strial raw aterials8oil in
parti!"lar# 2ntensifyin$ inter=!apitalist !opetition and the steppin$ "p of
low= and iddle=in!oe !o"ntries ind"striali0ation efforts had already led
to si$nifi!ant in!reases in these pri!es before 1973# 2n 1973, howe+er, the
+irt"al a!%nowled$ent of defeat by the 56 in Vietna, followed
iediately by the shatterin$ of the yth of 2sraeli in+in!ibility d"rin$ the
Po >ipp"r Dar, ener$i0ed :3?K into prote!tin$ its ebers ore
effe!ti+ely fro the depre!iation of the dollar thro"$h a fo"r=fold in!rease
in the pri!e of !r"de oil in /"st a few onths# Koin$ as it did at the tail
end of the pay e,plosion, this so=!alled first oil sho!% deepened the !risis
of profitability and stren$thened inflationary tenden!ies in !ore !apitalist
!o"ntries# <ore iportant, it $enerated an M8A billion s"rpl"s of
petrodollars, a $ood part of whi!h was par%ed or in+ested in the
e"ro!"rren!y and other offshore oney ar%ets# The ass of pri+ately
!ontrolled liC"idity that !o"ld be obili0ed for finan!ial spe!"lation and new
!redit !reation o"tside p"bli!ly !ontrolled !hannels thereby re!ei+ed an
additional powerf"l sti"l"s# (1A9)
Einally, the treendo"s e,pansion in the s"pply of world oney and !redit,
d"e to the !obination of e,treely la, 56 onetary poli!ies and the
e,plosi+e $rowth of pri+ately !ontrolled liC"idity in offshore oney ar%ets,
was not at!hed by deand !onditions !apable of ens"rin$ the
preser+ation, let alone the self=e,pansion, of oney !apital# To be s"re,
there was plenty of deand for liC"idity, not only on the part of
"ltinational !orporations8to hed$e a$ainst or spe!"late on e,!han$e=rate
fl"!t"ations8b"t also on the part of low= and iddle=in!oe !o"ntries, to
s"stain their de+elopental efforts in an in!reasin$ly !opetiti+e and
+olatile en+ironent# Eor the ost part, howe+er, this deand added ore
to inflationary press"res than it did to the e,pansion of sol+ent
indebtedness#
Eorerly, !o"ntries other than the 5nited 6tates had to %eep their
balan!e of payents in soe sort of eC"ilibri"# They had to earn
the oney they wished to spend abroad# 9ow they !o"ld borrow it#
Dith liC"idity apparently !apable of infinite e,pansion, !o"ntries
deeed !redit=worthy no lon$er had any e,ternal !he!% on forei$n
spendin$ # # # 5nder s"!h !ir!"stan!es, a balan!e=of=payents
defi!it no lon$er pro+ided, in itself, an a"toati! !he!% to doesti!
inflation# Ko"ntries in defi!it !o"ld borrow indefinitely fro the a$i!
liC"idity a!hine # # # 9ot s"rprisin$ly, world inflation !ontin"ed
a!!eleratin$ thro"$ho"t the de!ade, and fears of !ollapse in the
pri+ate ban%in$ syste $rew in!reasin$ly +i+id# <ore and ore debts
were res!hed"led, and a n"ber of poor !o"ntries $rew fla$rantly
insol+ent# (11A)
2n short, the intera!tion between the !risis of profitability and the !risis of
he$eony, in !obination with the 56 inflationary strate$y of !risis
ana$eent, res"lted in a ten=year lon$ in!rease in world onetary
disorder, es!alatin$ inflation and a steady deterioration in the !apa!ity of
the 56 dollar to f"n!tion as the worlds eans of payent, reser+e
!"rren!y, and "nit of a!!o"nt# *renners narrow fo!"s on profitability in
an"fa!t"rin$ isses this broader !onte,t of the !ollapsin$ onetary
fo"ndations of the world !apitalist order# Dhat was the point of ta%in$ soe
of the press"re off profits in 56 an"fa!t"rin$ thro"$h la, onetary
poli!ies if, in the pro!ess, oney !apital8the be$innin$ and end of
!apitalist a!!""lation8was ade so ab"ndant as to be a free $oodN Das
not the ab"se of 56 sei$niora$e pri+ile$es in fa!t !hasin$ !apital into
alternati+e onetary eans, thereby depri+in$ the 56 state of one of its
ain le+ers of world powerN
.ri"i" of e7pan"ion
The root of the proble of 56 and world !apitalis in the 197As was not
low rates of profit as s"!h# .fter all, the dri+in$ down of profit rates in the
p"rs"it of a lar$er mass of profits has been a lon$ established tradition of
histori!al !apitalis# (111) The real proble thro"$ho"t the 197As was that
56 onetary poli!ies were tryin$ to enti!e !apital to %eep world trade and
prod"!tion e,pandin$, e+en tho"$h s"!h an e,pansion had be!oe the
priary !a"se of risin$ !osts and "n!ertainty for !orporate !apital in
$eneral, and .eri!an !orporate !apital in parti!"lar# 9ot s"rprisin$ly, only
a fra!tion of the liC"idity !reated by the 56 onetary a"thorities fo"nd its
way into new trade and prod"!tion fa!ilities# <ost of it t"rned into an
e,traterritorial oney s"pply, whi!h reprod"!ed itself any ties o+er
thro"$h the e!haniss of pri+ate inter=ban% oney !reation, and
proptly re=eer$ed in world ar%ets to !opete with the dollars iss"ed
by the Eederal Feser+e#
2n the last resort, this $rowin$ !opetition between pri+ate and p"bli!
oney did not benefit the 56 $o+ernent, be!a"se the e,pansion of the
pri+ate s"pply of dollars set an in!reasin$ly lar$e $ro"p of !o"ntries free
fro balan!e of payents !onstraints, and thereby "nderined the
sei$niora$e pri+ile$es of Dashin$ton# 9or did it benefit 56 !apital, sin!e the
e,pansion of the p"bli! s"pply of dollars fed offshore oney ar%ets with
ore liC"idity than !o"ld possibly be re!y!led safely and profitably# 2t
therefore for!ed the 56 ban%s and other finan!ial interediaries that
!ontrolled these ar%ets to !opete fier!ely with one another in p"shin$
oney on !o"ntries deeed !redit=worthy, and indeed in lowerin$ the
standards by whi!h this !redit=worthiness was assessed#
5nfoldin$ as it did in the !onte,t of a deepenin$ !risis of 56 he$eony, this
"t"ally destr"!ti+e !opetition !"linated in the de+astatin$ r"n on the
dollar of 19798A# Dhate+er the a!t"al oti+ations and ostensible rationale
of the s"dden re+ersal in 56 onetary poli!ies that followed the r"n, its
tr"e lon$=ter si$nifi!an!e8and the ain reason why it e+ent"ally re+i+ed
56 fort"nes beyond anyones e,pe!tation8is that it bro"$ht this "t"ally
destr"!ti+e !opetition to an abr"pt end# 9ot only did the 56 $o+ernent
stop feedin$ the syste with liC"idityG ore iportantly, it started to
!opete a$$ressi+ely for !apital worldwide8thro"$h re!ord hi$h interest
rates, ta, brea%s, in!reasin$ freedo of a!tion for !apitalist prod"!ers and
spe!"lators and, as the benefits of the new poli!ies ateriali0ed, an
appre!iatin$ dollar8pro+o%in$ the assi+e rero"tin$ of !apital flows
towards the 5nited 6tates dis!"ssed earlier on# To p"t it !r"dely, the
essen!e of the onetarist !o"nter=re+ol"tion was a shift of 56 state a!tion
fro the s"pply side to the deand side of the on$oin$ finan!ial e,pansion#
Thro"$h this shift, the 56 $o+ernent stopped !opetin$ with the $rowin$
pri+ate s"pply of liC"idity to !reate instead bris% deand !onditions for the
latters a!!""lation thro"$h finan!ial !hannels#
The onetarist !o"nterre+ol"tion was not an isolated e+ent b"t an on$oin$
pro!ess whi!h had to be ana$ed# *renners a!!o"nt of inter=state
!ooperation and !opetition aon$ the leadin$ !apitalist !o"ntries in the
198As and 199As is parti!"larly "sef"l in hi$hli$htin$ the swin$s that ha+e
!hara!teri0ed this ana$eent# Dhene+er the pro!ess threatened to $et
o"t of hand and pro+o%e a systei! brea%down, the leadin$ !apitalist
states !ooperated to a+ert the dan$er by brin$in$ relief fro !opetiti+e
press"res to the prod"!ers ost iediately threatened with !ollapse856
an"fa!t"rers on the e+e of the 3la0a .!!ord of 198BG Hapanese and, to a
lesser e,tent, Destern ?"ropean an"fa!t"rers on the e+e of the re+erse
3la0a .!!ord of 199B# *"t on!e the dan$er was a+erted, inter=state
!opetition res"ed "ntil the threat of a new brea%down looed on the
hori0on# 2ll"inatin$ as it is, this a!!o"nt does not tell "s whether this
pro!ess has any liits8and if it does, what these i$ht be# This brin$s "s
to *renners !ontention !on!ernin$ the pre!ario"sness of the 56 e!onoi!
re+i+al of the 199As, to whi!h we now t"rn#
.+ 2o""ible 1#tcome"
2n $eneral ters, 2 !on!"r with *renners assessent that the 56 e!onoi!
re+i+al of the se!ond half of the 199As did not !onstit"te a definiti+e
trans!enden!e of the lon$ downt"rnG and that, indeed, the worst ay be
yet to !oe# Dritin$ in the early 199As8before the start of the re+i+al
analysed by *renner, b"t after the onetarist !o"nter=re+ol"tion had
already s"!!eeded in transforin$ the !risis of the 197As into a new belle
poque of 56 and world !apitalis82 !ontended that the ost stri%in$
siilarity (between this new belle poque and the ?dwardian one) has been
the alost !oplete la!% of reali0ation on the part of their benefi!iaries
that the s"dden and "npre!edented prosperity that they had !oe to en/oy
did not rest on a resol"tion of the !risis of a!!""lation that had pre!eded
the bea"tif"l ties# Father, the newly fo"nd prosperity rested on a shift of
the !risis fro one set of relations to another set of relations# 2t was only a
C"estion of tie before the !risis wo"ld re=eer$e in ore tro"blesoe
fors# (111)
There are nonetheless two ain differen!es between *renners dia$nosis of
the !risis of profitability "nderlyin$ the $lobal t"rb"len!e of the last thirty
years, and y own :ne is that 2 interpret the !risis of profitability as an
aspe!t of a broader !risis of he$eony# .nd the other is that 2 see the
finan!iali0ation of !apital, rather than persistent o+er=!apa!ity and o+er=
prod"!tion in an"fa!t"rin$, as the predoinant !apitalist response to the
/oint !risis of profitability and he$eony#
:ne of the ad+anta$es of this interpretation is that it enables "s to
establish !oparisons with earlier periods also !hara!teri0ed by a !risis of
he$eonyOprofitability and the finan!iali0ation of !apital, in an attept to
identify possible prospe!ti+e o"t!oes of the present !risis in the li$ht of
histori!al e,perien!e# This brin$s "s ba!% to the iss"e raised earlier of
whether the present belle poque !an be e,pe!ted to end as
!atastrophi!ally as the pre!edin$ one# 2n brin$in$ this arti!le to a !lose let
e briefly point to reasons why it ay and why it ay not#
The ain reason for anti!ipatin$ a new deba!le is that finan!ial e,pansions
ha+e a f"ndaentally !ontradi!tory ipa!t on systei! stability# 2n the
short r"n8with the "nderstandin$ that, in this !onte,t, a short r"n
en!opasses de!ades rather than years8finan!ial e,pansions tend to
stabili0e the e,istin$ order, by enablin$ in!"bent he$eoni! $ro"ps to
shift onto s"bordinate $ro"ps, nationally and internationally, the b"rdens of
the intensifyin$ !opetition that !hallen$es their he$eony# 2n the
pre!edin$ se!tion 2 ha+e s%et!hed the pro!ess thro"$h whi!h the 56
$o+ernent s"!!eeded in t"rnin$ the finan!iali0ation of !apital fro a
fa!tor of !risis for 56 he$eony8as it was thro"$h the 197As8into a fa!tor
of reflation for 56 wealth and power# Thro"$h different e!haniss,
analo$o"s8if less spe!ta!"lar8re+ersals !an be dete!ted not /"st in the
!o"rse of the 5>=!entred finan!ial e,pansion of the late nineteenth and
early twentieth !ent"ries, b"t e+en in the !o"rse of the D"t!h=!entred
finan!ial e,pansion of the id=ei$hteenth !ent"ry# (113)
:+er tie, howe+er, finan!ial e,pansions ha+e tended to destabili0e the
e,istin$ order thro"$h pro!esses that are as "!h so!ial and politi!al as
they are e!onoi!# ?!onoi!ally, s"!h e,pansions systeati!ally di+ert
p"r!hasin$ power fro deand=!reatin$ in+estent in !oodities
4in!l"din$ labo"r power7 to hoardin$ and spe!"lation, thereby e,a!erbatin$
reali0ation probles# 3oliti!ally, they tend to be asso!iated with the
eer$en!e of new !onfi$"rations of power, whi!h "nderine the !apa!ity of
the in!"bent he$eoni! state to t"rn to its ad+anta$e the syste=wide
intensifi!ation of !opetition# .nd so!ially, the assi+e redistrib"tion of
rewards and the so!ial dislo!ations entailed by finan!ial e,pansions tend to
pro+o%e o+eents of resistan!e and rebellion aon$ s"bordinate $ro"ps
and strata, whose established ways of life are !oin$ "nder atta!%#
The for that these tenden!ies ta%e, and the way in whi!h they relate to
one another in spa!e and tie, ha+e +aried fro finan!ial e,pansion to
finan!ial e,pansion# *"t soe !obination of the three tenden!ies !an be
dete!ted in ea!h of the two so=far !opleted he$eoni! transitions of
histori!al !apitalis8fro D"t!h to *ritish and fro *ritish to 56
he$eony# 2n the past transitions 4altho"$h not yet in the !"rrent one7,
they e+ent"ally res"lted in a !oplete and seein$ly irreediable
brea%down in the systes or$ani0ation, whi!h was not o+er!oe "ntil the
syste was re!onstit"ted "nder a new he$eony# (11@)
A new "$"temic breakdown6
The Krash and Great Depression of the 193As8the only o!!"rren!e in the
last 1BA years that !orresponds to *renners ia$e of a syste=wide
sha%eo"t or o"tri$ht depression8was an inte$ral eleent of the latest
brea%down# The s"!!ess of the onetarist !o"nterre+ol"tion, in
transforin$ the finan!ial e,pansion of the 197As into the dri+in$ for!e of
the reflation of 56 wealth and power of the 198As and 199As, is not in itself
a $"arantee that an analo$o"s systei! brea%down is not a$ain in the
a%in$# :n the !ontrary, the +ery s!ale and s!ope of the transforation
are probably e,a!erbatin$ reali0ation probles worldwide to s"!h an e,tent
as to a%e an o"tri$ht depression ore rather than less li%ely# (11B) This
is an iportant iss"e, and one to whi!h 2 wo"ld li%e to ret"rn on soe
other o!!asion# Eor the tie bein$, howe+er, let e siply note that, on!e
a$ain, the e!onoi!s of the sit"ation e+ol+es not in isolation fro b"t in
!obination with the politi!al and so!ial diensions of the on$oin$
transition to a yet "n%nown destination# .nd while the e!onoi!s of the
present transition is in %ey respe!ts siilar to that of past transitions8as
witnessed by the intensifi!ation of inter=!apitalist !opetition and
asso!iated finan!iali0ation of !apital8its politi!s and so!iolo$y are C"ite
different#
.s pre+io"sly noted, in the !o"rse of the latest lon$ downt"rn and belle
poque there has been no tenden!y8as there was in the !o"rse of the lon$
downt"rn and belle poque of the late nineteenth and early twentieth
!ent"ries8towards the transforation of inter=enterprise !opetition into a
world=s!ale inter=state str"$$le o+er territory, with its asso!iated es!alation
of the araents ra!e aon$ risin$ and de!linin$ !apitalist powers# :n the
!ontrary, $lobal ilitary !apabilities ha+e be!oe e+en ore !entrali0ed in
the hands of the 5nited 6tates than they already were, while risin$ and
de!linin$ !apitalist powers ha+e !ontin"ed to wor% towards the
!onsolidation of the "nity of the world ar%et# 2t is of !o"rse ipossible to
tell how this i$ht !han$e, were the in!reasin$ reali0ation probles to
pre!ipitate a a/or syste=wide depression# Eor the tie bein$, howe+er,
the $rowin$ se$entation of the world ar%et that !ontrib"ted de!isi+ely
to the e!onoi! brea%down of the 193As does not appear to be a fa!tor in
the present transition#
Klosely related to the abo+e, the so!ial for!es that ha+e shaped and
!onstrained inter=!apitalist !opetition in the late twentieth !ent"ry are
si$nifi!antly different fro those at wor% in the pre+io"s transition#
.ltho"$h the onetarist !o"nterre+ol"tion has been C"ite s"!!essf"l in
"nderinin$ the !apa!ity of labo"r in !ore re$ions, and of 6o"thern nations
in the world at lar$e, to obtain a lar$er share of the pie, this s"!!ess has its
own liits and !ontradi!tions# Khief aon$ these, as *renner hiself
ephasi0es, is the fa!t that the 56 e!onoi! re+i+al of the 199As, and the
!ontin"in$ dependen!e of the world e!onoy for its own e,pansion on a
$rowin$ 56 e!onoy, ha+e been based on an in!rease in 56 forei$n
indebtedness that has no pre!edent in world history# 2t is hard to see how
this sit"ation !an be reprod"!ed for any len$th of tie witho"t
transforin$ into an o"tri$ht trib"te, or prote!tion payent, the M1 billion
4and !o"ntin$7 that the 5nited 6tates needs daily to balan!e its !"rrent
a!!o"nts with the rest of the world# *"t it is e+en harder to en+ision the
%ind of syste=wide so!ial and politi!al !on+"lsions that are ne!essary to
a%e the e,tra!tion of s"!h a trib"te the fo"ndation of a new, and for the
first tie in history, tr"ly "ni+ersal world epire#
Towards the end of the belle poque of D"t!h !apitalis in 1778, the
periodi!al $e Bor!er wrote; ?a!h one says &it will last y tie and after
e, the del"$eR' as o"r (Eren!h) nei$hbo"rs pro+erb has it, whi!h we ha+e
ta%en o+er in deeds if not in words# (116) This pretty "!h s"s "p the
philosophy that "nderlies all finan!ial e,pansions and belle poques of
histori!al !apitalis, in!l"din$ o"r own# The ain differen!e between then
and now is the in!oparably $reater power wielded by the de!linin$
he$eoni! state#
.s Da+id Kalleo has ar$"ed, international systes brea% down not only
be!a"se "nbalan!ed and a$$ressi+e new powers see% to doinate their
nei$hbo"rs b"t also be!a"se de!linin$ powers, rather than ad/"stin$ and
a!!oodatin$, try to !eent their slippin$ pre=einen!e into an
e,ploitati+e he$eony# (117) .t the tie of the belle poque of D"t!h
!apitalis, D"t!h world power was already so diinished that the !o"ntrys
resistan!e to ad/"stent and a!!oodation played +irt"ally no role in the
s"bseC"ent systei! brea%down, in !oparison to the a$$ressi+e role
played by the eer$in$ epire=b"ildin$ national=states, first and foreost
*ritain and Eran!e# Today, in !ontrast, we ha+e rea!hed the other end of
the spe!tr"# There are no !redible a$$ressi+e new powers that !an
pro+o%e the brea%down of the 56=!entred world syste, b"t the 5nited
6tates has e+en $reater !apabilities than *ritain did a !ent"ry a$o to
!on+ert its de!linin$ he$eony into an e,ploitati+e doination# 2f the
syste e+ent"ally brea%s down, it will be priarily be!a"se of 56
resistan!e to ad/"stent and a!!oodation#
(1) Thorstein Veblen, The Theory of Business Enterprise, 9ew
*r"nswi!%, 9H 1978, p# 1@1# 2 wo"ld li%e to than% 3erry .nderson
and *e+erly 6il+er for their !oents#
(1) Da+id -andes, The Unbound %rometheus: Technolo!ical &han!e
and 'ndustrial $evelopment in Western Europe from ()*+ to the
%resent, Kabrid$e 1969, p# 131#
(3) 6# *# 6a"l, The ,yth of the -reat $epression# (.)/012, -ondon
1969#
(@) -andes, Unbound %rometheus, p# 1@A#
(B) -andes, Unbound %rometheus, p# 131#
(6) ?ri! Jobsbaw, 'ndustry and Empire: 3n Economic 4istory of
Britain since ()*+, -ondon 1968, p# 11B#
(7) 6a"l, ,yth, pp# 183@G <i!hael *arratt *rown, The Economics of
'mperialism, Jarondsworth 197@, table 1@#
(8) Verso; -ondon and 9ew Por% 1AA1G hereafter **# This arti!le will
also deal with thees that are de+eloped in ore detail in *renners
earlier te,t, The ?!onoi!s of Global T"rb"len!e; . 6pe!ial Feport on
the Dorld ?!onoy, 19BA98, 9-F 2O119, <ayH"ne 1998G hereafter
GT#
(9) GT, pp# 39137, and **, pp# 91@# *renners "se of the
e,pression "ne+en de+elopent e!hoes Trots%ys and -enins b"t
differs radi!ally fro the ore !oon !onteporary deployent
desi$natin$ the tenden!y of !apitalist de+elopent to polari0e and
di+ersify $eo$raphi!al spa!e# 6ee espe!ially 6air .in, Unequal
$evelopment, 9ew Por% 1976G and 9eil 6ith, Uneven $evelopment:
5ature# &apital and the %roduction of Space, :,ford 198@#
Thro"$ho"t this arti!le 2 will "se the e,pression in the sae sense as
*renner#
(1A) GT, pp# 911#
(11) **, pp# 1@1B#
(11) **, p# 1B#
(13) GT, p# @1, 1AB#
(1@) GT, pp# 939@G **, pp# 1718#
(1B) GT, pp# 9@, 116, 119, 1163A#
(16) GT, pp# 11A11#
(17) GT, pp# 11A13#
(18) GT, pp# 1131@, 137#
(19) GT, pp# 1B6G ephasis in ori$inal# .s noted, *renner in+ariably
"ses the ters o+er=!apa!ity and o+er=prod"!tion to$ether,
o!!asionally repla!in$ the with the ter o+er=a!!""lation 4e#$#
**, pp# 31, 1B97# 2n y +iew, what he is des!ribin$ is a !risis of o+er=
a!!""lation, of whi!h o+er=!apa!ity and o+er=prod"!tion are distin!t
anifestations# .s we shall see in the se!ond part of this paper, the
fa!t that *renner ne+er !larifies !on!ept"ally the differen!e between
o+er=!apa!ity and o+erprod"!tion !reates !onsiderable diffi!"lties in
epiri!ally assessin$ their a!t"al iportan!e, both in absol"te ters
and relati+e to other anifestations of the "nderlyin$ !risis of o+er=
a!!""lation#
(1A) GT, pp# 3133#
(11) GT, p# 3@#
(11) **, pp# 16, 31, 37#
(13) **, pp# 333@G ephasis in ori$inal# *renners a!!o"nt of the
seC"en!e of e+ents that led to the onetarist re+ol"tion 4or
!o"nterre+ol"tion, as 2 prefer to !hara!teri0e it7 is the wea%est lin% in
his story of the lon$ downt"rn# Eor one thin$, he lea+es "s wonderin$
why, "nder !onditions of o+er=!apa!ity and o+er=prod"!tion,
>eynesian sti"li bro"$ht abo"t in!reases in pri!es rather than
o"tp"tG and, on!e this had o!!"rred, why pri!e in!reases did not
res"lt in hi$her rates of profit# <ore iportant, in The Boom and the
Bubble, he does not tell "s how and why poli!ies desi$ned to restore
56 an"fa!t"rin$ !opetiti+eness res"lted instead in re!ord=
brea%in$ trade defi!its, despite a si"ltaneo"s es!alation in
prote!tionist eas"res 4the <"lti=Eiber .rran$eent of 1973, the
Trade .!t of 197@ a$ainst "nfair trade, and the ti$htenin$ of so=
!alled +ol"ntary e,port restraints iposed on ?ast .sian !o"ntries7#
2n his earlier te,t, he s"$$ests three reasons for this per+erse
o"t!oe; a 56 a!roe!onoi! poli!y ore sti"lati+e than that of
its !hief ri+alsG a slower $rowth of 56 labo"r prod"!ti+ityG and an
apparently $reater toleran!e of ri+al !apitalists abroad for red"!ed
profitability 4GT, pp# 1798A7# 9e+ertheless, these are ad hoc
e,planations whi!h do not !learly fit his too=little=e,it, too="!h=
entry thesis and, as we shall see in the se!ond and third parts of this
arti!le, iss the ost f"ndaental !a"ses of the de+astatin$ r"n on
the dollar of 19798A#
(1@) **, pp# 3B36#
(1B) **, pp# 36, B@BB#
(16) **, pp# B@, B96A#
(17) **, pp# 6A61#
(18) **, p# 8993#
(19) **, p# 117#
(3A) **, p# 13A31#
(31) **, p# 131#
(31) **, p# 117#
(33) GT, pp# 1B1, 1BB, 1B761#
(3@) GT, p# 161#
(3B) GT, p# 161G ephasis in ori$inal#
(36) **, pp# 139@1#
(37) **, pp# 1@36#
(38) **, pp# 1@67, 1B11#
(39) **, pp# 1A917, 1@8B3, 1616@#
(@A) **, pp# 169, 176, 17778G ephasis in ori$inal#
(@1) **, pp# 17881#
(@1) **, p# 113G GT, p# 1B1G ephases added#
(@3) GT, pp# 1B11#
(@@) .s noted earlier, the $reat depression of 187396 has been
!alled a yth pre!isely be!a"se it was !hara!teri0ed by a slowdown
in the rate of $rowth rather than a !ollapse of prod"!tion, trade and
in+estent, as in the tr"ly $reat depression of the 193As# *"t in the
187As and 188As profitability did !ollapse and reained depressed
thro"$h the early 189As# *renner does not deal with the seanti!
abi$"ity of depression b"t it is !learly an iss"e that "st be
!onfronted to a%e sense of his freC"ent "se of the ter#
(@B) The lon$ downt"rn of the late 19th !ent"ry witnessed not /"st
the be$innin$ of the 6e!ond 2nd"strial Fe+ol"tion b"t also the
eer$en!e in the 56 of the odern "lti="nit, +erti!ally inte$rated
enterprise, whi!h be!ae the doinant odel o+er the ne,t !ent"ry#
.lost none,istent at the end of the 187As, these inte$rated
enterprises !ae to doinate any of the (56s) ost +ital
ind"stries within less than three de!ades; .lfred Khandler, The
6isible 4and: The ,ana!erial 7evolution in 3merican Business#
Kabrid$e, <. 1977, p# 18B# 2t is interestin$ to noti!e that the
notion of e,!essi+e !opetition, whi!h s"rfa!ed in Hapan d"rin$ the
!risis of profitability of the late 196As and early 197As, and whi!h
*renner o!!asionally "ses to !hara!teri0e the "nderlyin$ !ondition of
the lon$ downt"rn of 197393, first $ained !"rren!y in b"siness
!ir!les in the late 19th !ent"ry downt"rn, espe!ially in the 56# 6ee
Ter"too :0awa, ,ultinationalism# 8apanese Style: The %olitical
Economy of 9utward $ependency, 3rin!eton 1979, pp# 667G Veblen,
Theory of Business Enterprise, p# 116G and <artin 6%lar, The
&orporate 7econstruction of 3merican &apitalism# (.1+0(1(2: The
,ar"et# the :aw and %olitics, Kabrid$e 1988, pp# B3B6#
(@6) 6ee y The :on! Twentieth &entury, -ondon 199@G .rri$hi and
*e+erly 6il+er, &haos and -overnance in the ,odern World System,
<inneapolis 1999G and .rri$hi and *e+erly 6il+er, Kapitalis and
Dorld 4Dis7:rder, 7eview of 'nternational Studies, 17 41AA17#
(@7) GT, p# 1A# ?lsewhere *renner entions ii$ration8"nless # # #
restrained by politi!al eans8as another e!hanis thro"$h whi!h
wor%ers power !an be "nderined 4GT, p# 187# Jis o+erwhelin$
ephasis, howe+er, is on the obility of !apital#
(@8) GT, p# 13#
(@9) GT, p# 18#
(BA) 6ee *e+erly 6il+er, ;orces of :abour: Wor"ers< ,ovements and
-lobali=ation Since (.)+, Kabrid$e 1AA3, pp# 13138, for one set
of answers to these C"estions#
(B1) .s GSran Therborn notes, in the 19th !ent"ry ?"rope in $eneral,
and *ritain in parti!"lar, en/oyed pra!ti!ally "nliited i$ration
o"tlets for its labo"r# ?+en the ?n$lish !entre of $lobal ind"stry was
an o"t=i$ration area # # # . !onser+ati+e estiate is that abo"t BA
illion ?"ropeans ei$rated o"t of the !ontinent in the period 18BA
193A, whi!h !orresponds to abo"t 11 per !ent of the !ontinents
pop"lation in 19AA; European ,odernity and Beyond: The Tra>ectory
of European Societies# (1?*0@+++, -ondon 199B, p# @A#
(B1) Jobsbaw, 5ations and 5ationalism since ().+: %ro!ramme#
,yth# 7eality, Kabrid$e 1991, p# 131#
(B3) .rri$hi and *e+erly 6il+er, -abo"r <o+eents and Kapital
<i$ration; the 56 and Destern ?"rope in Dorld=Jistori!al
3erspe!ti+e, in Kharles *er$C"ist, ed#, :abour in the &apitalist World-
Economy, *e+erly Jills 198@, pp# 183116#
(B@) 6il+er, ;orces of :abour, pp# 11B31, 13861#
(BB) .ristide Qolber$, Fesponse; Dor%in$=Klass Dissol"tion,
'nternational :abour and Wor"in!-&lass 4istory, @7 4199B7, pp# 18
38# To be s"re, the labo"r friendly refors instit"ted with the
establishent of 56 he$eony8e#$#, a!roe!onoi! poli!ies
fa+o"rin$ f"ll eployent8went hand=in=hand with fier!e repression
of any se!tors of the labo"r o+eent that so"$ht a deeper so!ial
transforation than the post=war so!ial !ontra!t offered#
9e+ertheless, the refors instit"ted "nder the press"re of es!alatin$
labo"r "nrest and ad+an!in$ !o"nist re+ol"tion ar%ed a
si$nifi!ant transforation in !oparison with the laisse=-faire re$ie
!hara!teristi! of the period of *ritish world he$eony 4.rri$hi and
6il+er, &haos and -overnance, pp# 1A17G 6il+er, ;orces of :abour,
pp# 1B787#
(B6) GT, pp# B1B@, B863#
(B7) ?# J# 3helps *rown, . 9on=<onetarist View of the 3ay
?,plosion, Three Ban"s 7eview, no# 1AB 4197B7, pp# 31@#
(B8) 6ee, aon$ others, <a%oto 2toh, The World Economic &risis and
8apanese &apitalism, 9ew Por% 199A, pp# BAB3G 3hilip .rstron$,
.ndrew Glyn and Hohn Jarrison, &apitalism since World War '': The
,a"in! and Brea"up of the -reat Boom, -ondon 198@, pp# 16976G
and 3hilip .rstron$ and .ndrew Glyn, 3ccumulation# %rofits# State
Spendin!: $ata for 3dvanced &apitalist &ountries (1*@0./, :,ford
1986#
(B9) GT, pp# 11A11#
(6A) 6il+er, ;orces of :abour, pp# 16163#
(61) Kopletely for$otten today, the !onne,ion between the <ay
e+ents and the abr"pt end of Eren!h ad+o!a!y of the $old standard
was also little noti!ed at the tie# 2 nonetheless reeber C"ite
+i+idly fro newspaper a!!o"nts how <ay 1968 bro"$ht abo"t a
s"dden re+ersal of Eren!h s"pport for the $old standard as a eans
of !hallen$in$ 56 dollar s"prea!y#
(61) .s pre+io"sly noted, real wa$es rose thro"$ho"t the $reat
depression of 187396# .ltho"$h by the 188As and 189As the
in!rease !o"ld be attrib"ted to wor%ers resistan!e a$ainst !"ts in
noinal wa$es, initially it was entirely d"e to inter=!apitalist
!opetition dri+in$ pri!es down ore C"i!%ly than wa$es#
(63) 6il+er, ;orces of :abour, espe!ially !hapters 1 and 3# *renner
and 6il+er both a%e "se of Fayond Vernons prod"!t=!y!le odel;
2nternational 2n+estent and 2nternational Trade in the 3rod"!t
Ky!le, Auarterly 8ournal of Economics, +ol# 8A, no# 1 419667, pp#
19A1A7# *renner 4GT, p# 187 "ses it to b"ttress on a priori $ro"nds
the ass"ptions of his own odel, whereas 6il+er 4 ;orces of :abour,
pp# 77977 "ses it to show epiri!ally the liits of ind"strial
relo!ation in o"tflan%in$ labo"r resistan!e#
(6@) This $reater !apa!ity is refle!ted in the fa!t that, proportionately
spea%in$, i$ratory flows in the late 19th !ent"ry were lar$er than
todays, despite the te!hnolo$i!al ad+an!es in transportation sin!e
then# 6ee Da+id Jeld, .nthony <!Grew, Da+id Goldblatt and
Honathan 3erraton, -lobal Transformations, 6tanford, K. 1999,
!hapter 6# <oreo+er, ii$rant wor%ers were the prota$onists in
soe of the ost ilitant and s"!!essf"l labo"r str"$$les in the 56
in the 199As, for e,aple, the H"sti!e for Hanitors !apai$nsG see
Fo$er Daldin$er, Khris ?ri!%son et al#, Jelots 9o <ore; . Kase 6t"dy
of the H"sti!e for Hanitors Kapai$n in -os .n$eles, in >ate
*ronfenbrenner et al#, eds, 9r!ani=in! to Win, 2tha!a 1998, pp# 1A1
19#
(6B) 6ee y :on! Twentieth &entury, and .rri$hi and 6il+er, &haos
and -overnance#
(66) GT, p# 13G ephasis in ori$inal#
(67) GT, p# 9#
(68) 5sin$ the ore in!l"si+e data sets of the Dorld *an%, their
!obined share of world G93 appears to ha+e reained +irt"ally
!onstant, risin$ insi$nifi!antly fro B3#1 per !ent in 196A to B3#6 per
!ent in 1999 4!al!"lated fro World Tables, +ols 1 and 1,
Dashin$ton, DK 198@ and World $evelopment 'ndicators, KD F:<,
Dashin$ton, DK 1AA17# Dorld G93 e,!l"des the forer !o"nist
!o"ntries of the 566F and ?astern ?"rope and other !o"ntries for
whi!h there are no !oparable data for both 196A and 1999#
Jowe+er, all the a+ailable e+iden!e s"$$ests that the e,!l"sion has
the effe!t of raisin$ the abo+e fi$"res by one or two per!enta$e
points at ost#
(69) .li!e .sden, The 7ise of BThe 7est<, 9ew Por% 1AA1# 2n a ore
re!ent arti!le, .sden pro+ides data showin$ that the share of
an"fa!t"rin$ +al"e added prod"!ed in de+elopin$ !o"ntries 4o"r
6o"th7 ecludin! &hina rose fro 1A#7 per !ent in 197B to 17#A per
!ent in 1998; .sden, Good=bye Dependen!y Theory, Jello
Dependen!y Theory, Studies in &omparative 'nternational
$evelopment, +ol# 38, no# 1, 6prin$ 1AA3, Table 1# *y re!al!"latin$
her per!enta$es to in!l"de Khina, 2 obtain an in!rease in the
6o"thern share fro 11#9 per !ent in 197B to 11#8 per !ent in 1998#
.s shown elsewhere, this in!rease in the 6o"thern share of
an"fa!t"rin$ +al"e added refle!ts a stron$ 9orth6o"th
!on+er$en!e in de$ree of ind"striali0ation8a!!opanied, howe+er, by
a !oplete lac" of in!oe !on+er$en!e# 6ee .rri$hi, *e+erly 6il+er
and *en/ain *rewer, 2nd"strial Kon+er$en!e and the 3ersisten!e of
the 9orth6o"th Di+ide, Studies in &omparative 'nternational
$evelopment, +ol# 38, no# 1, 6prin$ 1AA3G and .rri$hi, 6il+er and
*rewer, . Feply to .li!e .sden, Studies in &omparative
'nternational $evelopment, +ol# 38, no# 1, 6prin$ 1AA3#
(7A) .sden, Good=bye Dependen!y Theory, Table 1#
(71) GT, p# 97G **, pp# 1A1, 119#
(71) :on! Twentieth &entury, pp# 3AA8, 31A11#
(73) Fi!!ardo 3arboni, The $ollar and its 7ivals, -ondon 1981, pp#
@7, 899A#
(7@) :on! Twentieth &entury, pp# 31A1@, 3171A# .s we shall see,
the so=!alled first oil sho!% of 19737@ was a !r"!ial inter+enin$
+ariable in the worldwide inflationary spiral that !onne!ts the !risis of
56 he$eony of the late 196As and early 197As to the de+astatin$
r"n on the 56 dollar of the late 197As#
(7B) Kited in <i!hael <offitt, The World<s ,oney: 'nternational
Ban"in! from Bretton Woods to the Brin" of 'nsolvency, 9ew Por%
1983, p# 178#
(76) :n wa+es of !oloni0ation and de!oloni0ation, see .lbert
*er$esen and Fonald 6!hoenber$, -on$ Da+es of Kolonial ?,pansion
and Kontra!tion, 1@1B1969, in *er$esen, ed#, Studies of the
,odern World-System, 9ew Por% 198A#
(77) Geoffrey *arra!lo"$h, 3n 'ntroduction to &ontemporary 4istory,
Jarondsworth 1967, pp# 1B3B@#
(78) *# F# Tolinson, 2ndia and the *ritish ?pire, 188A193B, The
'ndian Economic and Social 4istory 7eview, +ol# 11, no# @ 4197B7, p#
3@1#
(79) 2f we ta%e .sia and .fri!a to$ether, there were as any as 71
separate *ritish ilitary !apai$ns between 1837 and 19AA; *rian
*ond, ed#, 6ictorian ,ilitary &ampai!ns, -ondon 1967, pp# 3A911#
*y a different !o"nt, between 18A3 and 19A1 *ritain fo"$ht BA a/or
!olonial wars; .nthony Giddens, The 5ation-State and 6iolence,
*er%eley 1987, p# 113#
(8A) Da+id Dashbroo%, 6o"th .sia, the Dorld 6yste, and Dorld
Kapitalis, 8ournal of 3sian Studies, +ol# @9, no# 3 4199A7, p# @81#
(81) <ar!ello de Ke!!o, The 'nternational -old Standard: ,oney and
Empire, 1nd ed# 9ew Por% 198@, pp# 613#
(81) :n *ritains persistent trade defi!its see, aon$ others, .ndre
G"nder Eran%, <"ltilateral <er!handise Trade 2balan!es and
5ne+en ?!onoi! De+elopent, 8ournal of European Economic
4istory, +ol# B, no# 1 419787, pp# @A738G and de Ke!!o,
'nternational -old Standard#
(83) .rri$hi, :on! Twentieth &entury, pp# 313@#
(8@) The per!enta$es ha+e been !al!"lated fro Dorld *an%, World
Tables 4198@7, and World $evelopment 'ndicators 41AA17# The
fi$"res for the world in!l"de all the !o"ntries for whi!h data are
a+ailable for 196A, 198A and 1998# Val"e added is GD3#
(8B) **, p# 79#
(86) **, pp# 687AG ephasis in ori$inal#
(87) Greta >rippner, Dhat is Einan!iali0ationN 3aper presented at the
.eri!an 6o!iolo$i!al .sso!iation <eetin$, Khi!a$o, 1619 ."$"st
1AA1# >rippners analysis is based on data pro+ided by the Eederal
Feser+e Elow of E"nds .!!o"ntsG the *"rea" of ?!onoi! .nalysis
9ational 2n!oe and 3rod"!t .!!o"ntsG the 2F6 Korporation 2n!oe
Ta, Fet"rnsG *alan!e of 3ayents dataG and the 2F6 Korporate
Eorei$n Ta, Kredit data#
(88) .nwar 6hai%h, ?,plainin$ the Global ?!onoi! Krisis, 4istorical
,aterialism, no# B, Dinter 1999, pp# 1@A@1# . a/or proble in
"sin$ these two indi!ators, or indeed any other indi!ator, to $a"$e
*renners o+er=!apa!ity is that, as pre+io"sly noted, he always "ses
this ter to$ether with the ter o+er=prod"!tion, and ne+er tells "s
how to disentan$le the two !on!epts# This !onflation a%es it
ipossible to %now what wo"ld be a +alid indi!ator for either o+er=
!apa!ity or o+er=prod"!tion# *"t "nless the "se of the ter
o+er!apa!ity is !opletely red"ndant and has no eanin$ of its own,
it is reasonable to s"ppose that increases in *renners o+er=!apa!ity
are refle!ted in decreases in !apa!ity "tili0ation and +i!e +ersa#
(89) This aspe!t of inter=!apitalist !opetition has been the !learest
si$n of !ontin"ity aon$ the +ario"s or$ani0ational fors that
histori!al !apitalis has ass"ed before and after the ind"strial
re+ol"tion# 6ee y :on! Twentieth &entury, pp# 11A38#
(9A) Hoseph 6!h"peter, The Theory of Economic $evelopment, 9ew
Por% 1961, p# 116#
(91) T"oted in 3eter J"$ill, World Trade since (?/(: -eo!raphy#
Technolo!y and &apitalism, *altiore 1993, p# 3AB#
(91) .le! Kairn!ross, 4ome and ;orei!n 'nvestment# (.)+0(1(/,
Kabrid$e 19B3, pp# 3, 13# .s 3eter <athias noted, *ritish forei$n
in+estent was not /"st &blind !apital' b"t the &blind !apital' of
rentiers or$ani0ed by finan!iers and b"sinessen +ery "!h with a
+iew to the trade that wo"ld be flowin$ when the enterprise was
"nder way# *ritish railway b"ildin$ in the 56, and a fortiori in
!o"ntries li%e ."stralia, Kanada, 6o"th .fri!a and .r$entina was
instr"ental in openin$ "p these +ast land asses and de+elopin$
e,port se!tors in priary prod"!e # # # for *ritain# <athias, The ;irst
'ndustrial 5ation: 3n Economic 4istory of Britain ()++-(1(?, -ondon
1969, p# 319G see also 6tanley Khapan, ,erchant Enterprise in
Britain: ;rom the 'ndustrial 7evolution to World War ', 9ew Por%
1991, pp# 133ff# The ab"ndant liC"idity that a!!""lated in, or
passed thro"$h, *ritish hands was a powerf"l instr"ent in the
!opetiti+e str"$$le, not /"st in !oodity ar%ets b"t in the
araent ra!e as well# Ero the id=18@As "ntil the 186As ost
te!hnolo$i!al brea%thro"$hs in the desi$n of warships were pioneered
by Eran!e# .nd yet, ea!h Eren!h brea%thro"$h !alled forth na+al
appropriations in *ritain that Eran!e !o"ld not at!h, so that it was
relati+ely easy for the Foyal 9a+y to !at!h "p te!hni!ally and s"rpass
n"eri!ally ea!h tie the Eren!h !han$ed the basis of the
!opetition; Dillia <!9eill, The %ursuit of %ower: Technolo!y#
3rmed ;orce# and Society since 3$ (+++, Khi!a$o 1981, pp# 11718#
There is a little=noti!ed reseblan!e between this pattern of the 19th
!ent"ry araent ra!e and that between the 56 and 566F d"rin$
the Kold Dar# The %ey te!hnolo$i!al brea%thro"$h was the 6o+iet
Sputni" in :!tober 19B7# *"t on!e the 56 la"n!hed their own spa!e
pro$rae in 1961, it o+ertoo% 6o+iet a!hie+eents within a few
years#
(93) 56 !orporations be!ae "ltinational alost as soon as they
had !opleted their !ontinental inte$ration; 6tephen Jyer, The
<"ltinational Korporation and the -aw of 5ne+en De+elopent, in
Ha$dish *ha$wati, ed#, Economics and World 9rder, 9ew Por% 1971,
p# 111# *y 19A1 ?"ropeans were already spea%in$ of an .eri!an
in+asion, and by 191@ 56 dire!t in+estent abroad ao"nted to 7
per !ent of 56 G938the sae per!enta$e as in 1966, when
?"ropeans on!e a$ain felt threatened by an .eri!an !hallen$eG see
<ira Dil%ins, The Emer!ence of ,ultinational Enterprise, Kabrid$e
197A, pp# 71, 1A1#
(9@) This differen!e was "nders!ored by a 6t"dy Gro"p established in
the early 19BAs "nder the sponsorship of the Doodrow Dilson
Eo"ndation and the 9ational 3lannin$ .sso!iation# 2n !hallen$in$ the
ass"ption that a s"ffi!iently inte$rated world e!onoi! syste
!o"ld be a$ain a!hie+ed by eans essentially siilar to those
eployed in the 19th !ent"ry, it pointed o"t that the 568altho"$h a
at"re !reditor li%e 19th=!ent"ry *ritain8had an alto$ether
different relationship to the world# The latter was f"lly inte$rated into
the world e!onoi! syste and in lar$e eas"re a%in$ possible its
s"!!essf"l f"n!tionin$ owin$ to (its) dependen!e on forei$n trade, the
per+asi+e infl"en!e of its !oer!ial and finan!ial instit"tions, and
the basi! !onsisten!y between its national e!onoi! poli!ies and
those reC"ired for world e!onoi! inte$ration The 56, in !ontrast, is
only partially inte$rated into the world e!onoi! syste, with whi!h
it is also partly !opetiti+e, and whose a!!"stoed ode and pa!e
of f"n!tionin$ it tends periodi!ally to dist"rb# 9o networ% of .eri!an
!oer!ial and finan!ial instit"tions e,ists to bind to$ether and to
ana$e the day=to=day operations of the world tradin$ syste;
Dillia ?lliott, ed#, The %olitical Economy of 3merican ;orei!n %olicy:
'ts &oncepts# Strate!y# and :imits, 9ew Por% 19BB, p# @3# .s ar$"ed
elsewhere, this differen!e is iportant in e,plainin$ why, e+en at the
hei$ht of its liberal !r"sade of the 198As and 199As, the 56 did not
adhere "nilaterally to the pre!epts of the liberal !reed, as *ritain did
in the late 19th and early 1Ath !ent"ries# 6ee *e+erly 6il+er and
.rri$hi, 3olanyis &Do"ble <o+eent'; The Belle Cpoques of *ritish
and 56 Je$eony Kopared, %olitics and Society, +ol# 31, no# 1,
H"ne 1AA3#
(9B) The e,tent of this rero"tin$ !an be $a"$ed fro the !han$e in
the !"rrent a!!o"nt of the 56 balan!e of payents# 2n the fi+e=year
period 196B69 the a!!o"nt still had a s"rpl"s of M11 billion, whi!h
!onstit"ted alost half 4@6U7 of the total s"rpl"s of G7 !o"ntries# 2n
197A7@, the s"rpl"s !ontra!ted to M@#1 billion and to 11U of the
total s"rpl"s of G7 !o"ntries# 2n 197B79, the s"rpl"s t"rned into a
defi!it of M7#@ billion# .fter that the defi!it es!alated to pre+io"sly
"nia$inable le+els; M1@6#B billion in 198A8@G M66A#6 billion in
198B89G fallin$ ba!% to M31@#@ billion in 199A9@ before swellin$ to
M911#@ billion in 199B99 4!al!"lated fro 2nternational <onetary
E"nd, 'nternational ;inancial Statistics Dearboo", Dashin$ton, DK,
+ario"s years7#
(96) 6ee footnote 91 for a parallel with the role that s"perior finan!ial
reso"r!es played in deterinin$ the o"t!oe of the id=19th !ent"ry
ars ra!e between Eran!e and *ritain#
(97) Eor a preliinary analysis of the !oparati+e ad+anta$es of ?ast
.sia and disad+anta$es of 6"b=6aharan .fri!a in the new $lobal
en+ironent of the 198As and 199As, see y The .fri!an Krisis;
Dorld 6ystei! and Fe$ional .spe!ts, 9-F 1B, <ayH"ne 1AA1#
(98) Fobert Dade, ?ast .sian ?!onoi! 6"!!ess; Konfli!tin$
3erspe!ti+es, 3artial 2nsi$hts, 6ha%y ?+iden!e, World %olitics, @@
419917, p# 311#
(99) Eran0 6!h"rann, The :o!ic of World %ower: 3n 'nquiry into the
9ri!ins# &urrents and &ontradictions of World %olitics, 9ew Por%
197@, pp# @@, 68#
(1AA) .nn=<arie *"rley, Fe$"latin$ the Dorld; <"ltilateralis,
2nternational -aw, and the 3ro/e!tion of the 9ew Deal Fe$"latory
6tate, in Hohn F"$$ie, ed#, ,ultilateralism ,atters: The Theory and
%rais of an 'nstitutional ;orm# 9ew Por% 1993, pp# 11B6, 11931#
(1A1) 6!h"rann, :o!ic of World %ower, pp# B, 67, 77#
(1A1) To borrow Haes :Konnors e,pressionG see :Konnor, The
;iscal &risis of the State, 9ew Por% 1973#
(1A3) :n the !riti!al role of ilitary >eynesianis in la"n!hin$ the
e,pansion see, aon$ others, Ered *lo!%, The 9ri!ins of
'nternational Economic $isorder: 3 Study of the United States
'nternational ,onetary %olicy from World War '' to the %resent,
*er%eley 1977, pp# 1A3@G Thoas <!Kori!%, 3merica<s 4alf-
&entury: United States ;orei!n %olicy in the &old War, *altiore
1989, pp# 778G .rri$hi, :on! Twentieth &entury, pp# 19B98# :n the
9orthern and 6o"thern +ariants of so!ial >eynesianis, see .rri$hi
and 6il+er, &haos and -overnance# pp# 1A111G and 6il+er, ;orces of
:abour, pp# 1@961#
(1A@) *r"!e K"in$s, The :ri$ins and De+elopent of the 9ortheast
.sian 3oliti!al ?!onoy; 2nd"strial 6e!tors, 3rod"!t Ky!les, and
3oliti!al KonseC"en!es, in Erederi! Deyo, ed#, The %olitical Economy
of the 5ew 3sian 'ndustrialism, 2tha!a 1987, p# 6A# .nd K"in$s,
The 3oliti!al ?!onoy of the 3a!ifi! Fi, in Fa+i 3alat, ed#, %acific-
3sia and the ;uture of the World-System, Destport, KT 1993, p# 31#
6ee also Heroe Kohen, 8apan<s %ostwar Economy, *looin$ton, 29
19B8, pp# 8B91G Ta%af"sa 9a%a"ra, The %ostwar 8apanese
Economy, To%yo 1981, p# @1G and 2toh, World Economic &risis, p#
1@1# 56 prootion of the re!onstr"!tion and "p$radin$ of the
Geran ind"strial apparat"s o!!"rred thro"$h different b"t eC"ally
effe!ti+e !hannels# Gerany was of !o"rse aon$ the ain
benefi!iaries of the <arshall 3lan and 56 ilitary e,pendit"re abroad#
9e+ertheless, the ost iportant !ontrib"tion was 56 sponsorship of
Destern ?"ropean e!onoi! "nion# .s Hohn Eoster D"lles de!lared in
19@8, a healthy ?"rope !o"ld not be di+ided into sall
!opartents# 2t had to be or$ani0ed into a ar%et bi$ eno"$h to
/"stify odern ethods of !heap prod"!tion for ass !ons"ption .
reind"striali0ed Gerany was an essential !oponent of this new
?"rope 4C"oted in <!Kori!%, 3merica<s 4alf-&entury, pp# 798A7#
(1AB) Fobert <!9aara, The Tr"e Diension of the Tas%,
'nternational $evelopment 7eview, +ol# 1 4197A7, pp# B6#
(1A6) ?"$Vne Versl"ysen, The %olitical Economy of 'nternational
;inance, 9ew Por% 1981, pp# 1611G <ar!ello de Ke!!o, 2nflation and
6tr"!t"ral Khan$e in the ?"ro=dollar <ar%et, European University
'nstitute Wor"in! %apers, 13 419817, p# 11G .ndrew Dalter, World
%ower and World ,oney, 9ew Por% 1991, p# 181#
(1A7) .lfred Khandler, Scale and Scope: The $ynamics of 'ndustrial
&apitalism, Kabrid$e, <. 199A, pp# 61B16#
(1A8) 6ee, aon$ others, 6"san 6tran$e, &asino &apitalism, :,ford
1986, pp# 1113#
(1A9) 2toh, World Economic &risis, pp# B3B@, 6A68, 116G de Ke!!o,
2nflation and 6tr"!t"ral Khan$e, p# 11G 6tran$e, &asino &apitalism,
p# 18#
(11A) Da+id Kalleo, The 'mperious Economy, Kabrid$e, <. 1981,
pp# 13738#
(111) 6ee, aon$ others, >arl <ar,, &apital, +ol# 222, <os!ow 1961,
pp# 1@B6#
(111) :on! Twentieth &entury, p# 31@#
(113) .rri$hi and 6il+er, &haos and -overnance, !hapter 1 and
Kon!l"sion#
(11@) .rri$hi and 6il+er, &haos and -overnance, !hapters 1, 3 and
Kon!l"sion#
(11B) 2n response to a !ritiC"e by Haes Krotty, *renner
a!%nowled$es that ti$ht onetary poli!ies e,a!erbated reali0ation
probles in 19697AG see Krotty, Fe+iew of Turbulence in the World
Economy by Fobert *renner, &hallen!e, +ol# @1, no# 3, <ayH"ne
1999, pp# 1A818, and *renners reply, pp# 11913A# K"rio"sly,
howe+er, *renner hardly entions the "!h ore serio"s reali0ation
probles that ha+e been !reated by the far ore persistent,
widespread and ti$ht onetary poli!ies of the 198As and 199As#
(116) T"oted in Kharles *o,er, The $utch Seaborne Empire (2++0
(.++, 9ew Por% 196B, p# 191#
(117) Da+id Kalleo, Beyond 3merican 4e!emony: The ;uture of the
Western 3lliance, 9ew Por% 1987, p# 1@1#