POSC138S Midterm WL 3; Keynesianism and the Golden Age of Capitalism

unions and employees cooperated to control inflation

• kept wages in line with productivity

• unions powerful because employments levels are high

re-embedding the economy in social life

• make economic relations subordinate to social relations

• “embedded liberalism” (Ruggie 1982)

all due to backlash against dis-embedded market

• polanyi: “laissez-faire was planned; planning was not” 

cold war context

• Golden Age not so golden for everyone

• anti-colonial movements, poverty, & repression in developing countries

• massive inequality & discrimination on the basis of race, gender, religion, sexuality, etc. in the rich countries

the golden age of capitalism;

entailed a quarter century of awesome economic growth, stability, & prosperity unlike anything ever seen before in the history of global capitalism.

breakdown (again!)

• OPEC oil shock: 1973

• cost of everything rose

• stagflation

• 2nd oil shock: 1979

• Keynesian policies not working!

• so now reduce inflation

• but suffer recession, high unemployment

other macroeconomic pressures:

• international capital mobility

• deindustrialization

• shift to service sector:

  • “trilemma of the service economy” (Iversen & Wren 1998)

  • balanced budget / income equality / full employment (pick 2)

• labor-displacing technologies

• demographic shift

breakdown (continued)

• but not just structural pressures

• also major ideological shift

• rise of neoliberalism

• = the Second Great Transformation?

• once more dis-embedding & re- commodifying

• Polanyi underestimated the resilience of economic liberalism!

neoliberalism

“a theory of political economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free markets, and free trade” (Harvey 2005: 2).

re-establish market freedoms via:

• deregulation

• privatization

minimal role for the state

• logic:

• states can’t correctly guess market signals (prices)

• states get captured by powerful interest groups

neoliberalism (continued)

• increase corporate freedom

• general principles:

  • privatize, deregulate, open borders to trade & open up financial markets (economic globalization), limit state power, increase corporate freedom

  • however, played out differently in different countries

  • US, UK, & other LMEs (liberal market economies) were the most market- oriented countries and embraced neoliberalism most fully

neoliberalism: US, UK

• 1980s: Pres. Reagan & PM Thatcher

• privatization

• deregulation

• tax cuts for corporations

• cut public spending

  • states have less revenue from corporate taxes, so have to make cuts

• make labor more “flexible”

neoliberalism: US, UK (cont.)

• make labor flexible

• 1. part-time jobs

• 2. less job security

• 3. more temporary, seasonal, limited term contracts

• 4. just-in-time scheduling

• 5. make hiring & firing easier

• 6. defined-contribution retirement

• 7. outsource janitors, payroll, legal service, food service, etc.

• 8. weaken unions

  • UK: 1978/79 “winter of discontent,” then Thatcher

  • US: rise of professional union avoidance industry