Magazine article Canadian Dimension

The Multiple Crises of Global Capitalism

Magazine article Canadian Dimension

The Multiple Crises of Global Capitalism

Article excerpt

The drama of whether or not the United States will invade Iraq has temporarily drawn the attention of many from a deepening economic crisis that is shaping up to be the worst crisis of global capitalism since the Great Depression 70 years ago.

What makes the current conjuncture particularly volatile and unique is the way the chronic crisis at the heart of the system of production is unfolding alongside a massive crisis of the system of reproduction of global capitalism. That is, the crisis that analysts from Joseph Schumpeter to Joan Robinson to Robert Brenner have called capitalism's crisis of overproduction, or overcapacity, is intersecting with a crisis in the reproduction of the ideological and political processes that sustain the productive system.

The Crisis of Overproduction

Central to current conjuncture is a crisis of overproduction and overcapacity that could portend more than an ordinary recession. Tied to an increasingly integrated global production system and market, the manufacturing sector of the world's leading economy, the United States, saw its profits stop growing after 1997. By the end of the decade, practically all key industrial sectors were suffering tremendous overcapacity globally, with the worst situation existing in the telecommunications sector, where only 2.5 per cent of the infrastructure layed down was being utilized. By 2002, the gap between capacity and output globally was, according to The Economist, the largest since the Great Depression.

With manufacturing and the rest of the "real economy" ceasing to absorb investment profitably, capital migrated to the speculative sector, where a period of hyperactive growth in high-technology stocks was carefully nursed by the low-interest-rate policy and "New Economy" talk of U.S. Federal Reserve Chairman Alan Greenspan.

Grounded in the illusion of future profitability of high-tech firms, the phenomenon extended the upswing by about two years. But with the profitability of the financial sector dependent on the underlying, actual profitability of the manufacturing sector, this finance-driven growth ultimately had to run out of steam. The loss of $7 trillion in paper wealth in the stock-market collapse that began in March, 2000, represented the rude reassertion of the reality of a global economy crippled by overcapacity, overproduction and lack of profitability. With the mechanism of "stock-market Keynesianism" exhausted, the capacity of the U.S. economy to avoid a serious and prolonged downturn has been greatly eroded -- a condition increasingly recognized by mainstream economists who talk about a "double-dip recession" for the United States.

A Crisis of Legitimacy

Alongside and intersecting the crisis of overproduction is a massive crisis of reproduction. There are three processes that are severely complicating the ability of the system to reproduce itself stably: the crisis of ideological legitimacy, the crisis of liberal democracy and the crisis of overextension.

The crisis of ideological legitimacy refers to the increasing inability of the neoliberal ideology underpinning today's global capitalism to persuade people of its necessity and viability as a system of production, exchange and distribution. The disaster wrought by structural adjustment in Africa and Latin America; the chain reaction of financial crises in Mexico, southeast Asia, Brazil and Russia; the descent into chaos of free-market Argentina; and the combination of massive fraud and the spectacular wipe-out of $7 trillion of investors' wealth -- a sum that nearly equals the U.S.'s annual GDP -- have all eaten away at capitalism's credibility.

The transnational corporation is the engine of the system, yet even in the heartland of global capitalism, even before Enron and the unending stream of Wall Street scandals, over 70 per cent of Americans said that the corporation had too much power over their lives. …

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