Socio-Economic Review (2011) 9, 59-81 Advance Access publication November 11, 2010

doi:10.1093/ser/mwq026

Are there laws of motion of capitalism?

Robert Boyer
* CEPREMAP, Paris; GREDEG, Sophia-Antipolis, France *Correspondence: robert.boyer@ens.fr

This article takes seriously the conflict of paradigms between a market economy approach and a capitalism approach. The first has recurrently shown its inability to explain the major stylized facts of the last two decades. The second now receives more attention as a possible alternative but the field has been so underexplored by so few people that the task is somehow promethean. Is it possible to explicitly state laws of motion of capitalism? Previous failed attempts justify some scepticism. A review of the multiplicity of meanings and conceptualizations of economic laws suggests first that the existence of general quantitative regularities, which economists are fond of, is quite unlikely. Second, it is possible to identify explicit partial and temporary regularities that are indexed upon a given institutional configuration of capitalism. Third, mobilizing the results of past historical analyses and building upon the contributions of some key economists and social scientistsMarx, Polanyi, Schumpeter, Kaldor, Wallerstein and Kindlebergerthe article proposes seven conjectures about possible laws of motion of capitalism. Keywords: capitalism, varieties of capitalism, markets, institutional political economy, regulation theory, financial crisis JEL classification: B51 current heterodox approaches: socialist, Marxian, Sraffian, B52 institutional, evolutionary, E02 institutions and the macroeconomy, O11 macroeconomic analysis of economic development, P16 political economy

1. Introduction The last decade has clearly shown the limits of mainstream economists approaches. The panorama of ideas and theories has been enlarged after the bursting out of the 2008 crisis and some key economists have been convinced to study capitalism as a system. Actually, the major stylized facts of the 2000s do not fit with the market economy doxa and seem to give a clear advantage to methodologies that recognize the relevance of the notion of capitalism. In order to enlighten this new intellectual environment, this article confronts four major approaches.

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Since the Second World War, economists have benchmarked their discipline against the natural sciences and mathematics. Implicitly, they were looking at the equivalent of the laws of physics. In retrospect, this grand project has been disappointing. This is an invitation to investigate the various meanings of laws in economics and by extension in social, political and historical disciplines (Section 2). The term capitalism seemed to belong to a remote past of uncertain foundations for the economic discipline and of hot ideological debates. Had not the Marxist project of discovering the laws of motion of capitalism failed? Therefore, the concept of market economy permeated the whole economic profession as a more decent and useful concept. Contemporary research does observe an opposite shift towards the relevance of capitalism, as a multidisciplinary social sciences concept. Does it help in diagnosing regularities and the equivalent of laws (Section 3)? One then encounters a striking paradox. Some heterodox economic approaches had pursued an investigation of capitalism as a dynamic and evolving socioeconomic system. One of their basic findings has been to point out the persistent variety/diversity of contemporary capitalisms but with few concerns about locating the features common to all of these varieties. Quite on the contrary, each configuration seemed to exhibit specific macroeconomic quantitative regularities. This is the joint conclusion of the so-called rgulation theory and the Varieties of Capitalism approach (Section 4). Is it nevertheless possible to pinpoint other types of regularities? It is probably the case if one adopts a more modest conception of regularities as qualitative dynamical patterns. In order to do so, it is crucial to revisit the main contributors to a political approach of capitalism and to test their conjectures against the stylized facts that emerge from the bulk of economic and financial history researches. Seven broad conjectures emerge out of this very preliminary survey (Section 5).

2. Does a scientific approach need explicit economic laws? A French economist who specializes in the history of economic thought has recently proposed a very illuminating survey of the concepts of law (Berthoud et al., 2008). It is possible to extract from his analysis at least seven proposals and conjectures and to extend them to the purpose of the present paper: can one identify economic laws? P1. First the duality of the concept of law in sciences is to be underlined: this term either indicates a constant relationship between variable terms or it states a causality which is exerted under well-defined conditions. One seems to perceive in the evolution of the doctrines and economic theories a shift from

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the first to the second definition. If the classical economists sought to determine the laws and principles that govern the creation of wealth, the majority of the contemporary economists seem to be satisfied if they can exhibit any causality between economic variables or between other variables and some economic variables. P2. It would seem that another dividing line is relevant to understanding the different concepts adopted, respectively, by the macroeconomists who refer to law as causes and the microeconomists who construct a law as a norm of rational behaviour. The first group seeks causal mechanisms (for example that happens if the Central bank raises its interest rate). The second one rather clarifies what should be the rational behaviour of an individual under the assumption that only resource allocation problems matter. P3. The standard theory which puts forward a positive approachimplicitly research into the laws governing the economyis in fact mainly a normative theory: how resources should be allocated in an economy that would function according to the principle of full rationality at the individual level and efficiency of markets. The permanent reference to the concept of optimality illustrates this typical primacy of the professional economist habitus. Some have even advanced that the standard economist was in fact a preacher of the market (Marglin, 2008). The misadventures of the Washington Consensus are there to show the pervasiveness of this conception of economics as a discipline. Today researchers in economic sociology and political economy are following a different and more promising strategy, basically a positive approach. P4. Economic history does not have to refer to the concept of law since it is essentially a matter of interpretation: it would be a form of hermeneutics. Similarly, conomie des conventions) brings the French economics of convention (le into play the plurality of justifications which the individuals may give of their actions according to the context and the place (une cite in French) and has coined the concept of test (preuves), whereby conflicting logics are struggling to impose an outcome that will depend upon the idiosyncrasies of place and time. Thus one is far from the mechanicist concept of a causal link restricted to the economic sphere. Since its inception, rgulation theory has pointed out how the historical time of structural change was orthogonal to the time of expectations that is implicit to neoclassical theory which assumes a stable institutional, technological and political environment. P5. Consequently, what is the status of the pure economy? It aims to sustain a rigorous analytical judgement. Thus the Walrasian model attempts to capture the essence of a market economy via a thought experiment. The idea of causality tends to dissolve into that of interdependence of individual behaviours coordinated by the price system. Whereas the Hayekian conception assumes that the economic system functions as much with ignorance as with

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informed action, standard theory sticks to the postulate that models are designed like experiments of thought, for lack of a possibility of experimentation at the required level, especially for macroeconomic issues. In a sense, one could oppose the project of mathematization and of axiomatization of the economy to that of the constitution of a social physics that would study how configurations are reproduced and change sequentially under the effect of a series of causalities. P6. From a strict epistemological point of view, it is extremely difficult to make compatible the laws conceived like causal mechanisms and the laws emanating from humanly constructed norms and regulations. Via specialization, the economist asserts a causal approach (what are the explanatory factors of inflation, of unemployment?) but the normative approach is never very faraway insofar as he is tempted to see in the social norms, legal or ethical, the sources of the prejudicial discrepancies from a model in which, for example, unemployment would not exist and where price flexibility would be guaranteed by principle. Other currents of research attempt to show that it is rational to satisfy certain ethical standards because they may improve economic efficiency. However, in any case, ethics and economics belong to quite distinct domains. This tension between economic efficiency and social values is very present in contemporary research and it brings many ambiguities, or worse, major misunderstandings. P7. Finally, Arnaud Berthoud advances the idea that economics should belong to the field of art or technique, because it should be located at an intermediate level between a pragmatic approach and pure science. This meso-level is familiar to rgulationist research which attempted to show that intermediate categories are necessary to diagnose the existence of regularities, even if they change through time and across space. Whereas the concept of law seems to postulate invariants which cross the diversity of economic systems, would not the task of the economist be rather to delimit with precision the conditions under which certain regularities are reproduced transitorily? This brief survey suggests a quite cautious approach in the search of regularities and causal relations in a social science such as economics. 3. Does the shift from a market economy to a capitalism approach help? Yesterday, economists were studying market economies, now all of them propose to analyse the merits and limits of capitalism. Nevertheless, this does not mean the emergence of an alternative and coherent paradigm. Even the definitions of capitalism are quite diverse, because capitalism is a complex entity. Thus, capitalism is still challenging social scientists. Implicitly, at least, economists,

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sociologists and historians do not treat market economy and capitalism as synonymous. What are the key features that distinguish these two visions of economies and societies? The adoption of the notion of a market economy implies that markets are the dominant, if not totally exclusive, mechanisms for coordinating economic activity. States, communities and civil society are a priori excluded and this might be perceived as evidence of the limited ambition of the economist. But as soon as actual observations contradict the hypothesis of selfequilibrating markets, the neoclassical economists are prone to attribute the related malfunction to an imperfection with respect to the ideal of a pure market. Are such imperfections so widely present, for example for labour and credit and why do they persist? Because these markets are embedded into social, political relations that distort the mere pursuit of self (economic)interest and the convergence towards an equilibrium. Hence general equilibrium theory is the implicitand frequently explicitbenchmark in many empirical analyses by conventional economists. Contrary to frequent statements, a market economy approach is not necessarily devoid of any value judgement, since it assumes that efficiency is the key performance criteria and that the markets are the less imperfect mechanisms of coordination between free and independent individuals pursuing their own interests. Indeed, for some fundamentalists, markets are the only perfect mechanism. The normative content of the notion of market economy should never be underestimated. Last but not least, since Smith (1776 [1976]), the market is perceived by economists as an abstraction for the price mechanism itself. The power of the metaphor called the market is quite strong since its use has been extended to some domains of sociology (the marriage market, the family, etc.) and subdisciplines of political sciences (the market for ideas, voting as a market, the median voter, etc.). The notion of capitalism unfortunately evokes an ideological construction that is supposed to be sustained by the doctrine of liberalism, to follow feudalism and to be opposed to socialism and communism. Actually, it can also be an analytical tool. A synthetic definition would state that capitalism is a legal regime, an economic system and a social formation that unfolds in history and that is built upon two basic social relations: market competition and the capital/labour nexus. The differences with respect to a market economy are not purely semantic (Table 1). First, the market is only one component of a capitalist economy that does not exclude other coordinating mechanisms and actors than markets and firms. Second, capitalism is not by nature only an economic system, since it requires legal rules and a precise type of political power that respects and defends

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Table 1 From market economy to capitalism: a major paradigm shift Market economy Concept of markets Pure economic abstraction of supply and demand adjustments Horizontal coordination among equals Capitalism A nexus of social relations

Links between various spheres Nature of evolution

Uniqueness/ diversity

Both horizontal (competition among firms) and vertical relations (capital/labour nexus) Ideally self-equilibrating Propagation of an unbalanced capital accumulation Ideal of a total disconnection of the The interdependence of economic sphere (pure economy) economy, society and polity is intrinsic to capitalism Implicit conception of a natural equilibrium Accumulation is the norm, and changing social and economic relations prevent any static equilibrium At best, kinematical time Sense of historical time Ideal of Pareto optimality . . . and . . . Succession of historical stages benchmarking and competition reduced and coexistence of various variety brands of capitalism

property. Empirical observations exhibit more diverse social, economic and political configurations than would a mere economic system. This explains why the literature on capitalism stresses so much the existence of stages of capitalism (commercial, industrial, financial, cognitive) as well as the variety of its brands in the contemporary world. Third, the interplay of market competition with the conflicting nature of the capital/labour nexus promotes the accumulation of capital as a systemic constraint. This is a process full of disequilibria, contradictions and crises, at odds with the smooth equilibrium typical of the static world captured by the notion of a market economy. Capitalist economies are dynamic systems, putting into motion structural change and innovation, i.e. history. The authors working along these linesMarx, Sombart, Veblen, Schumpeter, in a sense Keynes, Braudel and Galbraith among othersdo recognize the historical nature of capitalist configurations and the interdependence between the various spheres (economy, polity, society) that are kept disconnected by market economy approaches. Finally, these two different research programmes should be distinguished, even if the reference to capitalism is not, by far, a sufficient condition for capturing the essence of contemporary economies. It might explain why a significant fraction of former orthodox economists have adopted a dynamic approach to capitalism

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instead of refining models of pure and static economies. Can one find laws of motion of capitalism or are they the nave illusion of Marxism?

4. How to overcome the legacy of two decades of studies about the persistent diversity of capitalisms? This was precisely the aim of seminal research upon the long-run transformations of American capitalism (Aglietta, 1982). This was the starting point of rgulation theory and the related large research programme based on the multiplication of long-run historical analysis of various national economies. This was complemented by a series of contemporary international comparisons of institutional architectures (Jessop, 2001; Boyer and Saillard, 2002; Amable, 2003). Their results converge with those of similar institutional analyses (Aoki, 2002; Fligstein, 2001; Hall and Soskice, 2001; Yamamura and Streeck, 2003; Streeck, 2009a).

4.1

The search for time- and space-specific regularities: rgulation theory

Two assumptions were at the core of the seminal analyses about the emergence, maturation and crisis of Fordist growth that was the starting point of rgulation theory. On the one hand, it is necessary to specify the precise configuration of basic social relations prevailing in a capitalist economy in order to understand the nature of the growth process, its stability or fragility, the prevalence of inflation or deflation, under-employment or over-employment. The nature of the capital labour relations and the form of competition shape the accumulation regime that is propelling long-term growth. These two institutional forms along with the monetary regime also define various rgulation modes, which shape the dynamic pattern according to which actors adjust to their environment (Figure 1). On the other hand, capitalism features a relentless transformation of technologies, products, organizations and institutions. Therefore, the concept of equilibrium is devoid of meaning since the accumulation process generates endogenously recurring imbalances that can be either self-correctingperiodic recessions are the methods for re-equilibrating accumulationor the source of the break down of the past architecture of institutional forms: this then is a major or structural crisis. In such circumstances, the previous regularities vanish and the apparent economic determinism is replaced by an open process of social and political conflicts, trials and errors, in order to build new institutional forms and possibly restore the viability of an emerging accumulation regime.

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Figure 1 Starting from Marxian theory in order to understand the institutions of capitalism: regulation theory in a nutshell.

Thus, traditionally, rgulation theory explores an intermediate space between general laws that could be derived from the basic features of a capitalist mode of production and the simple observation of empirical regularities. Between grand theory and pure description, the formalization of models and the test of the related modes of accumulation and modes of rgulation seek to build this mesolevel analysis. Possible regularities are to be observed at this level. The development of this research programme has more and more downplayed the possibility of precise quantitative economic laws. Here are some examples. Contrary to the early works on the United States and France, the Fordist accumulation regime has appeared much less general than expected. This is the central result of systematic international comparisons concerning various European countries, Japan and Korea (Boyer and Saillard, 2002). The diversity is still more pronounced when the sample of countries is extended to Latin America (Quemia, 2001). The modes of rgulation themselves are far from having converged towards a canonical model even if national economies became increasingly interdependent. When they are facing identical shocks, they react differently because their institutional configurations are not interchangeable. When these economies finally enter into a structural crisis, the objectives of the economic policy and the recombining of the institutional forms continue to differ. Long-run historical analyses confirm that possible economic regularities are restricted to a period of a few decades. This is the case for productivity regimes or for wage formation because the potentialities of a rgulation mode

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tend to become exhausted because of its maturation and very success. Essentially, the crisis of a configuration is, in its initial stages, in the repetition of the business cycles which lead to a slow deterioration of the structural parameters of the accumulation regime out of its stability zone (Lordon, 1997).

4.2

The economist: a modern Sisyphus?

If one acknowledges these premises, a double-paradox threatens economic analysis. The first points out that economists end up understanding the features of a growth regime or the success of an economic policy at the time when they enter into crisis and erode the effectiveness of the public interventions that were so effective yesterday. The second paradox builds upon the opposition between the kinematic time of the dynamic models of the economist and the historical time of the transformation of the techniques, institutions, laws and political coalitions. By methodological convenience, the economist postulates the equivalent of a stationary state, for example a static macro-economic equilibrium or a steady growth path. In such a configuration, representations, expectations and behaviours coalesce into a smooth economic equilibrium that makes them mutually compatible. In such a case, the knowledge of the economist is not fundamental since the economic agents themselves seem to have discovered the economic characteristics of the prevailing model. It is the charm and evident limit of the rational expectations assumption. But then crises come as totally unexpected and wildly surprising events, in any case caused by exogenous factors. But it is precisely that a capitalist economy is never stuck in a stationary state since it is affected by the process of accumulation, the recurrence of social conflicts, major crises and the impact of radical innovations. In such a context, the economist cruelly lacks the tools needed in order to determine the consequences of a radical innovation: will it, or not, end up generating an unprecedented configuration? The errors of the profession in assessing the consequences of the Euro, the temporal horizon of the New Economy or the Great Transformation of the Soviettype societies, are there to show the difficulty of the task. When it is important to analyse an emergent potential regime, the economist is far from being adequately equipped. The profession does not have a list of the laws supposed to govern great economic transformations. At most, the neo-Schumpeterians imagine the recurrence of episodes in which a bunch of innovations, primarily technological, transforms the economic system and feeds a new process of accumulation. But they are not so relevant for analysing institutional, financial and political innovations without which technological innovations would not be viable.

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4.3 Contrasted national trajectories and diversity of contemporary capitalisms: where is the theory? At this stage of the presentation, the logical conclusion seems to be that the search for general laws for capitalisms is pointless. It is especially so for the rgulationist research agenda: Can one find laws of capitalism? It is probably an impossible mission! Nevertheless, it might be time to come back to the status of this theory and try to capitalize upon a cumulative research programme and, incidentally, to reply to frequent criticisms. If economic regularities are indexed upon accumulation regimes, then this is not at all a theory but a mere post hoc description. Actually until now, no quantitative regularity could be derived from the comparison of the five accumulation regimes that have been observed in US capitalism (Table 2). Similarly, if these accumulation regimes are self-defeating, the related regularities are time-dependent and it is another limitation of the theory. Can one clever observer diagnose, in real time, a given accumulation regimes entry into structural crisis? This would be necessary to cope with the determinist criteria typical of a large part of the natural sciences. Similarly, at a given historical period, various forms of capitalism may coexist. It was recurrently shown for OECD countries: their Social Systems of Innovation differ drastically (Amable et al., 1997), as do their wage labour nexus (Boyer and Saillard, 2002). When the sample of countries is extended, the number of key configurations of capitalism is enriched, for instance from four to five (Amable, 2003) and unprecedented configurations are pointed out in Latin America (Quemia, 2001) and Asia (Inoue and Yamada, 2002). It is important to stress that the brands of capitalism are far less numerous than the size of the sample of the countries. The related taxonomy is the starting point for building relatively simple models with a multiplicity of regimesthis is done according to key parameters directly related to the nature of the institutional architecture. This is a first necessary step in order to get away from the implicit conception of conventional neoclassical theory according to which only one canonical form of capitalism exists (one size for all) . . . with only marginal national variations. But unfortunately, the rgulationist analysis is more complex and no general policy recommendation can be derived from this body of research. Thus, the economic profession usually prefers a united and simple, but inherently false, theory to an eclectic and much more complete construction, one less prone to inaccuracies! It could then be interesting to try to explore the founding blocks of a general theory. Two strategies are available: the first reviews all the findings obtained within the rgulationist research agenda itself; the second makes advancements to the past literature on the theorizing of capitalism, as well as the contemporary research that treats the dynamics of capitalism as the central issue.

Table 2 The American capitalism: the succession of five different accumulation regimes over 150 years Regime Extensive with limited insertion of labour Large manufacture Intensive without mass consumption Taylorism, then Fordist assembly line Still competitive but growth of wage-earner Shift in favour of profits Increasing share of wage-earner consumption Inter-war period

Components Organization of production Wage -labour nexus population Income distribution Nature of demand

Intensive with mass consumption Large increasing returns to scale Institutionalization of productivity sharing and constitution of welfare systems Stabilization ex ante of the wage share Leading role of consumption of wage-earners

Extensive with widening inequalities Exhaustion of the productivity gains and shift towards services Decentralization, individualization and decline of collective agreements Decline of the wage share and then stabilization More and more differentiated according to level of income 1980 to mid-1990s

Finance-led Delocalization in search for shareholder value More flexibility in employment and remuneration, privatization and financialization of welfare systems Stabilization of a high rate of return on capital for shareholders Credit boom as a substitute for real income of wage-earners Mid-1990s to 2007

Fragmented and competitive

Strong reserve army impact

From farming community, middleclass, public civil servants Historical period Second half of the nineteenth century

After Second World War

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5. What could be the general and common features of capitalisms? Informed by the present survey, one should follow two principles. On the one side, it would be erroneous to look for static properties of capitalism, since it is by nature a constantly evolving regime. The possible laws of motion should be at most dynamic patterns. On the other side, the possible regularities are quite unlikely to imply quantitative variables because until now the search for them has been quite unsuccessful. Thus the properties of dynamic patterns should be essentially qualitative. This strategy delivers the following conjectures. Just to help the reader to capture the essence of each of them, they have been attributed to past economists or present social scientists . . . but of course, only the author is responsible for such a labelling. Fortunately, some conjectures are common with other recent contributions in the search for general features of capitalism (Streeck, 2009b, c). A distinctive feature of this article is to stress the dialectical nature of these conjectures: few permanent trends but on the contrary a succession of contrasted evolutions caused by the expression of the same contradiction.

5.1 Marxs conjecture: capitalism implies a dynamic accumulation process and the succession of booms and crises Even if the term of capitalism was not invented by him, it is quite logical to start with the author of Das Capital. As soon as goods become commodities, i.e. produced for their exchange value and no longer for their specific use, the very process of economic activity is transformed. Each economic entity has to create more value than is consumed in the commercialization or productive process and the competition triggers a built-in constraint and incentive to generate more value in order to accumulate capital. Modern theorizing suggests that it is not necessary to adopt labour value theory to generate such a dynamic pattern. The institution of a monetary/credit regime generates the autonomy of economic entities and their search for exchange values, hence competition of all against all (Benetti and Cartelier, 1980; Aglietta and Orlean, 1998). On top of the polarization of the successful accumulation by some firms at the detriment of others incurring deficits and finally bankruptcy, the opposition between capital and labour sets into motion a permanent change. With the transformation of labour force into a commodity, the process of accumulation experiences a new dynamism, which is precisely described by Karl Marx in Das Capital. Capital accumulation becomes the engine of growth and the vector of society-wide transformation, since anything can then become a commodity. If one follows this argument, it is erroneous to try to build a static theory of capitalism because essentially this socioeconomic regime puts human history into

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motion, thus paraphrasing Marx. This might be the main weakness of JohnMaynard Keynes General Theory: in order to win the battle against Pigou, he restricted his analysis to the stability of a purely static equilibrium with involuntary employment. In contrast, Michal Kalecki was more in line with a realist theory of investment as a dynamical process. Imagining that capitalism would converge towards a steady state is a contradiction in terms. A second consequence of the domination of commoditization under pressure from the profit motive is to introduce a radical uncertainty about the reproduction of the economy. Says law is basically false since each commodity has to find its way to the market. Sectoral crises are thus inherent to capitalism. Furthermore, the iron law of accumulation implied by competition leads periodically to overproduction, which is a typical new feature of this mode of production in contrast to the previous ones (Braudel and Labrousse, 1976). Thus, macroeconomic crises are inherent to the process of capital accumulation within capitalism. Until now, any time when overconfident economists have reached conclusions about the end of the business cycle and the impossibility of a major structural crisis, this very belief has generated the seeds of a new crisis. Quite a surprise for them but not for any one acquainted with Marxist theory! 5.2 Schumpeters conjecture: capitalism means the permanent search for innovations that once again trigger accumulation and its crises The previous mechanisms are sufficient to explain the succession of boom and crises, more or less severe, according to the precise institutional setting of the related capitalism regimes. But Marx adds that capitalism brings about permanent innovation in terms of work organization, products, techniques, legal forms, contracts and social values. Actually, this method of creating new opportunities for accumulation simultaneously increases the degree of uncertainty that is typical of capitalism, since it is by definition impossible to forecast the success or failure of any radical innovation. Endogenous innovations thus reinforce the Marxist conjecture about the unbalanced nature of the process of accumulation. Observing a very specific phase of manufacturing capitalism, Marx thought to have proved that the tendency of the rate of profit to fall was a basic and permanent dynamic pattern of capitalism. Unfortunately, the demonstration of volume III of Das Capital (Marx, [1867] 2008) was not correct: contemporary economists have shown that innovations, instead of implying a deepening of the relation between constant capital and variable capital, actually tend to increase the average rate of profit as soon as capitalists only introduce profitable innovations (Okishio, 1961; Bowles, 1981). Therefore, the second stylized dynamic pattern has to be attributed to Joseph Schumpeter: by pointing out that accumulation needs to be restarted periodically by bunches of innovation, he identified a basic feature of capitalism.

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An innovator takes the risk of a new product, a new technique, a new market. If initially successful, heisimitatedby followerswho progressivelyerode hisinnovation rents. The economic system is progressively transformed until it reaches the full maturity of the innovation and sees the levelling off of the innovators extra profit (Schumpeter, 1911 [1983]). The sequence may start again with a new cluster of innovations. Consequently, Joseph Schumpeter argued that economic development cannot be disentangled from the sequence of long booms followed by more or less severe depressions. Paradoxically, his argument is also converging towards the same conclusion as Karl Marx concerning the long-run erosion of the virtues of capitalism as caused by its own success. When the heroic individual entrepreneur is replaced by a more collective process of innovation and with the rise of middle classes, the dynamism of economic development is bound to slowdown (Schumpeter, 1954). This long-term prognosis has been invalidated by the dynamism of innovation after the Second World War . . . this shows again how difficult it is to point out general trends that would transcend the succession of historical epochs, i.e. accumulation regimes in the rgulationist taxonomy. Nevertheless, the Schumpeterian conjecture about one of the mechanisms governing capitalist development is still relevant: the surge of information and communication technologies (ICT) has given a new example of such a sequence. After the subprime crisis, financial markets themselves are screening all emerging innovations in order to try to detect which could be the next engine of accumulation and growth. It is important to note that if the turning point from boom to depression is endogenous and largely determinist, this is not the case for the emergence of innovations powerful enough to restart accumulation. 5.3 Polanyis conjecture: capitalism displays a built-in tendency to extend market relations to the whole society . . . and to destroy its implicit permissive conditions Marx had already pointed out the pervasiveness of the process that can transform any good or service into a commodity even if it has no contribution to value creation and accumulation. In a sense, Karl Polanyi extended this feature from the economy to the whole society. In other words, any market economy tends to push towards a market society where any relation is finally monetized and then organized according to a market. This conjecture was derived from the observation of the long-run evolution of the English economy and it pointed out the shift from typical commodities to fictitious commodities and the related danger of a collapse of the entire society under the pressure of pure economic forces. Thus, when, for instance, labour is transformed into a typical commodity, capitalism runs into the danger of destroying one of the very conditions of its viability, i.e. the long-run reproduction of the workers who are the bearers of labour

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that is not a pure commodity. Similarly, when the monetary regime is no longer the foundation of market relations but is itself invaded by the profit motive and intense competition among banks, this second pillar of a capitalist economy might collapse. Finally, when nature is exploited and destroyed without any consideration for ecological reproduction, the dynamism of accumulation might be halted by the exhaustion of the natural resources that feed the production of commodities. The evolution of capitalism since the publication of The Great Transformation (Polanyi, 1946 [1983]) has provided another example of a new wave of the commoditization of labour relations, the privatization of the credit and the monetary regimes and the predatory and destructive impact of the diffusion of capitalism on global public goods such as financial stability and climate. These are evidence of a major crisis in the Polanyian sense, since the logic of the market destroys its implicit permissive conditions: decent work and wage for labour, monetary stability and long-term sustainability of the interactions between the economy and the ecological system. 5.4 Wallersteins conjecture: the capitalist accumulation process tends to spill over across political frontiers . . . and thus progressively builds a world economy Clearly, the viability of capitalism requires some basic conditions that it cannot produce within its own logic. A credible monetary and credit system, legal settlements concerning property rights, contracts and capital labour relations are usually set by political powers that, by definition, are local. But the inner logic of market relations and the incentive to permanently innovate challenge these domestic institutions. Historical evidence suggests that early commercial capitalism started by organizing long-distance trade, which in turn has required different legal rules and institutions. For instance, merchants created their own private money quite independently from the fiat money created by the prince or political local authorities. Thus, this very first form of capitalism structurally organized trade between different political spaces (Wallerstein, 1979, 1980, 1989). Capitalism is transnational by essence . . . and contemporary globalization is part of a long-term process. This trend towards the crossing of political boundaries by entrepreneurs, commodities and financial assets takes a new form with the rise of industrial capitalism, especially in England and continental Europe. The conventional contemporary vision imagines that development takes place first at the domestic level and then the economy is progressively opened up to world trade, productive capital and finance. At odds with this vision, the British trajectory shows that the first industrial revolution required a surge of exports for quite structural reasons: the internal imbalance in income distribution between wage and profit called for an extraversion of the process of

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accumulation (Sternberg, 1950 [1956]). Therefore, the dynamics of the traditional textile industry in India became dependent on the drastic competition exerted by the modern methods of production implemented in England. Similarly, the erosion of Fordism thatquite exceptionally basically relied upon the domesticmarketcomes fromthestrategyoffirms that struggle fornew markets abroad in order to adjust the dynamism of production capacities to a domestic market that progressively becomes too narrow or less profitable due to labour conflicts implying a profit squeeze. Contemporary financial deregulation was initiated back in the sixties when large American firms created xeno-dollar markets abroad and it culminated with the emergence of numerous fiscal paradises. Not to mentionthedelocalizationofmature unprofitable industries to attractive new industrializing countries (NICs). Finally, two decades later, these NICs are themselves closely dependent on world trade and flow of productive and financial capital. To sum up, the unbalanced nature of accumulation regimes triggers a recurring trend towards the disconnection between the domestic political arena and the process of accumulation that is operating more and more at the international level. But since the constitutive institutions equivalent to the one constructed at the national level are non-existing or weak, frictions and conflicts among firms and States, and between States, challenge the viability of the internationalization process. After 2008, the diffusion of the subprime crisis to the rest of the world and the subsequent difficulties in finding a global solution to the systemic and structural crisis are still further examples of the plausibility of Wallersteins conjecture.

5.5 Kaldors first conjecture: the long-run dynamics of the world economy are derived from the interactions between the industrial and the primary commodities sectors Can the analysis make one step further and characterize how such an interdependent international economy evolves in the long run? Maybe, if one takes into account the fact that typical capitalist economies interact with rentier States that deliver the raw materials necessary to the manufacturing industries. The dynamic of the world economy may result from the interaction of two contrasted but interdependent logics (Kaldor, 1963, 1967). On one side, the evolution of manufacturing production is the outcome of the mobilization of significant dynamically increasing returns to scale. Thus, only two factors limit such a growth engine: an insufficient demand, or the scarcity of labour and natural resources. The first factor is crucial in the reversal from boom to recession, thus sustaining the viability of the accumulation regime via an adequate regulation mode. Concerning the second one, given the large pool of labour at the global level, the main hindrance to an unlimited growth of

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manufactured goods production is the limitation of natural resources that have no capacity to grow at the same pace. On the other side, at a given period of time, declining marginal productivity is typical of the production of natural resources. The time lag between any surge of demand and the ability to satisfy it is usually much larger in natural resources production than for manufacturing. Therefore, an industrial boom encounters the limit of rapidly rising prices of natural resources that hurts profitability, hence the investment and productive capacities. The industrial slow-down that follows induces a reduction of the demand addressed to rentier sectors and/or countries, and therefore the relative price of manufactured goods and raw materials stops deteriorating . . . and a new cycle may take place. In a sense, this is the reinterpretation of the old prognosis of classical economists, such as Ricardo. He was anticipating the long-run convergence of economies towards a steady state, where the rentiers would finally appropriate the totality of the surplus to the detriment of the rate of profit of manufacturers. Kaldor provides a dynamic model that takes into account the structural differences between the two sectors in terms of productive techniques and time lags. However abstract and simplified this model might seem, it provides some intelligibility to the recurrence of this very specific dynamic pattern of the world economy. Therefore the successive oil shocks that are supposed to be exogenous by conventional national macroeconomic approaches are largely endogenous. Similarly, it explains why it is not realistic to extrapolate a cumulative and permanent rise of oil and other natural resources, since this would induce a drastic recession in the short term, and renewed efforts in order to find new locations of natural resources. Two recent macroeconomic episodes seem to confirm Kaldors model. At the end of the speculative Internet boom, one of the limits encountered by the Silicon Valley start-ups was the spectacular rise of house and land prices. What was one of the early warnings about the tensions created by the subprime bubble and the spectacular Chinese accumulation regime? The acceleration of prices of oil and of most natural resources required by manufacturing was the primary factor that caused the American down-turn in 2007. But this does not capture the totality of the mechanisms that shape contemporary international relations. Actually, the wide diffusion of finance all over the world introduces another set of interdependencies: the rentier economies come to play a major role in financial intermediation. 5.6 Kindlebergers conjecture: major economic crises derive from a weak and lagging collective control over powerful private financial innovations In the capitalist mode of production, finance tends to evolve faster than the economy and periodically it tends to become autonomous with respect to the

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slow process that governs the formation of the rate of profit. The related speculation ineluctably runs against the macroeconomic constraints of the real economy and this generates a financial crisis. It is more or less severe according to the nature of the accumulation regime and its degree of dependence on financialization. There is a long-lasting tradition in standard economic theory to attribute these recurring crises to the irrationality of individuals, the greed and corruption of some financiers or even the adverse impact of public regulations. It can be argued, quite on the contrary, that the occurrence of crisis is a permanent and structural feature of financial markets facing radical uncertainty (Orlean, 1990). A review of all the major financial crises since the seventeenth century confirms the generality of the mechanisms that are mixing the Schumpeterian general hypothesis with the specificities of financial innovations intensively studied by Kindleberger (1978). The sequences from the innovator to economic crisis can be easily summarized. The next step aims at understanding why economic actors and especially public authorities cannot learn from this impressive succession of financial crises. One apparent reason relates to the fact that each precise financial innovation is by definition without precedent and its proponents can argue that it is so new that previous regularities are no longer valid. Remember the belief in the financial community about ICT and the related end of the business cycles or the self-confidence of Wall Street about the absolute security provided by securitization. De facto, beneath the absolute novelty, Kindlebergers dynamic pattern still applies. Either the innovation miserably fails and is forgottenthe Laws systemor public authorities design regulations and new rules of the game in order to make the benefits of the innovation compatible with financial stabilitythe modern commercial banks (Boyer et al., 2004). The history of bank runs shows that they disappeared after a trial and error process of financial regulations (Figure 2). The contemporary crisis is a new example of the relevance of Kindlebergers conjecture: the financial laisser-faire strategy adopted by the American public authorities has definitely contributed to the severity of the ongoing crisis. 5.7 Kaldors second conjecture: structural crises exhibit a generational shift in the conceptions about the relations between State and the economy, from laisser-faire to interventionism and vice versa This last dynamic pattern builds on the conjunction of Polanyis and Kindlebergers conjectures. The dynamism of innovation may trigger a rapid and finally unstable accumulation that unfolds into a structural crisis. Then, the restoration of the viability of the credit system calls for public intervention. When the deployment of the strategy of individual capitalists leads to the collapse of the pillars of

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Figure 2 Financial crises: the outcome of private innovations dynamism versus lagging collective control.

capitalism, it is up to collective actors such as States to introduce countervailing forces in order to curb their opportunism. Rhetorically, political discourse then legitimizes State interventions by the fact that financial stability and social peace are public goods (Rajan and Zingales, 2003). This is the beginning of a search process aimed at realizing a redesign of the institutional configuration, acceptable politically and viable economically in terms of the resilience of the accumulation regime. Generally, the previous sources of financial and economic instability are thus removed, but the maturing of this new regime ineluctably triggers new opportunist strategies that finally destroy the coherence of the new accumulation regime and the mode of rgulation. The legacy of the previous structural crisis is only embedded into the institutions and the legal system but no more in the memory of economic actors. It is then tempting to attribute the blocking of accumulation to the excessive constraints imposed by regulations and public controls: deregulation becomes quite a tempting strategy since it fulfils the objectives of the most powerful actors. The previous regulations are interpreted as arbitrary devices that were only generated via ideological and political struggles: economic actors as well as politicians forget that they emerged out of the collapse of a laisser-faire approach to capitalism. Actually, one observes the succession of laisser-faire periods, followed by a structural crisis; new regulations are then enforced and they generate a relatively stable accumulation pattern until it itself enters into a genuine form of crisis. The frequency of crisis follows the same pattern (Bordo et al., 2001; Boucher, 2003). Thislooks like a Kondratieffwave but the mechanisms are quitedifferent fromthe ones contemplated by the Russian economist. According to Nicholas Kaldor, one of the rare convincing explanations of these long cycles is to be found in the succession of intellectual conceptions about the functioning of a capitalist economy.

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One generation experiences the large social, political and economic costs of a major crisis, a consequence of liberalization. Remember the trauma associated with the American Great Depression that legitimized new political compromises and a totally different vision of the relations between State and market, the polity and the economy. Extensive regulations had, in the end, been quite favourable to the stability and dynamism of the Golden Age. When the dynamism of this configuration eroded, the inefficiency of the Keynesian policy mix called for searching for alternative forms of organization, and the relations between the State and the economy were reassessed. The generation exerting the power in the political and economic spheres had no direct experience of the interwar crisis: they implicitly assumed that if John-Maynard Keynes is wrong then Milton Friedman is necessarily right! Deregulation became quite attractive, at least, within all societies that cannot manufacture new social pacts. For instance, the Glass Steagal Act that organized the separation of commercial and investment banks was abandoned in 1999. Most people had forgotten that this Act was passed after the 1929 - 1932 collapse for quite serious reasons: preventing catastrophic financial collapses due to speculation. Quite soon, the fragilities of this form of accumulation manifested themselves in various initially limited crises (October 1987 stock market crash, LTCM collapse, ENRON bankruptcy, etc.) but all the disequilibria kept piling up until the collapse of Lehman Brothers. The melting down of the American financial system is the direct consequence of this obliviousness towards history. Can it happen again? was what Hyman Minsky (1982) was asking about the Great Depression. The response is yes! in conformity with Nicholas Kaldors second conjecture (Kaldor, 1987). 6. Conclusions This article proposed to take a serious look at the comeback of the concept of capitalism but also to reassess the notion of laws in the social sciences. It delivers the following provisional conclusions. C1. Two decades ago, the term capitalism was perceived as quite ideological indeed. Nowadays, a wider fraction of the economic profession refers again to this notion/concept. Is the change real or cosmetic and simply transitory? In any case, it seems to mean that the concerns of economists have shifted. First from static to dynamic analyses, second from more and more micro-studies to tentative analyses of the interdependences typical of an entire economic system. Clearly, technological, organizational and institutional innovations are more and more recognized as key factors in the long-run dynamism of capitalism. C2. Nevertheless, the failure of orthodox Marxism in identifying general laws of motion of capitalism should be acknowledged. Rgulation theory has emerged

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as a critical appraisal of this Marxist legacy. It has proposed to define precise configurations for the five basic institutional forms that make accumulation possible according to different regulation modes. It has shown that quantitative economic regularities themselves are transformed via a complex process of structural crises and collective reconfigurations of these institutional forms. For instance, productivity regimes are specific to a given productive paradigm, wage formation reflects the nature of social compromises and the interest rate is closely related to the nature of the monetary and credit regimes, and so on. C3. This central finding of rgulation theory meets the conclusions of recent advances in economic methodology and the history of economic theories. Economic laws have many different meanings in the social and natural sciences. For the former, they are basically the unintended outcome of human and collective actions in the design and redesign of economic institutions. Any regularity has to be related to a broad type of accumulation regime. These regimes vary in time and space and do not have any long-term stability since they trigger adverse trends that unfold into a series of cyclical and structural crises. C4. Thus, it seems far too ambitious to look for generic quantitative laws governing all types of capitalism. But it might be interesting to check whether capitalisms may share some common qualitative dynamic patterns that would not be invalidated by the stylized facts gathered by economic historians and contemporary comparative analyses about the diversity/variety of capitalisms. C5. This article proposes such possible qualitative dynamic patterns inspired by some key contributors to the understanding of the logic and dynamic of the capitalist mode of production. These are, respectively, the conjectures made by (or attributed to) Marx, Polanyi, Schumpeter, Kaldor, Wallerstein and Kindleberger. C6. These conjectures are calling for a renewed interest in the social sciences for capitalisms as complex and dynamic social systems. Not only an updating of concepts, methods and hopefully results is required from the economic profession, but this should also be a typical interdisciplinary project that could mobilize the expertise of economic history, political economy, economic sociology . . . and many other disciplines.

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