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date: 25 May 2020

Stages of Capitalism and Social Structures of Accumulation: A Long View

Abstract and Keywords

The Marxian theory of stages of capitalism emerged in two waves. The first wave, at the turn of the twentieth century, was rooted in the Marxist response to the recovery of capitalism from its late nineteenth-century crisis. Conversely, the second wave in the 1970s grew out of the faltering of the relatively unproblematic accumulation associated with the post–World War II capitalist order. One wave was concerned with the beginning of a period of long-run accumulation. The second wave was concerned with the advent of a downturn in capitalist accumulation and a period of crisis. These turning points marked the inauguration of a period of relatively unproblematic reproduction of capitalist social relations and, symmetrically, the beginning of a period of stagnation and crisis. This chapter examines the Marxist concept of a stage of capitalism and concludes with an application to the contemporary crisis at a global, regional and national level.

Keywords: stages, institutions, structures, accumulation, crisis

1. Finance Capital Joins Commercial and Industrial Capital

The concept of a stage of capitalism within Marxism begins in Marx’s distinction between commercial and industrial capitalism. This simple original distinction in the history of capitalism was complicated by Rudolf Hilferding when he identified finance capital as a third stage of capitalism in the early twentieth century. The theory of finance capital begins with a crisis precipitated by the recovery of the capitalist economy from the first Great Depression at the end of the nineteenth century. Seeing capitalism recover from what was thought to be its final crisis, Marxist activists searched for a way of explaining this recovery without abandoning the revolutionary implications of Marx’s analysis of the contradictory character of capitalist social relations. This explanation was to be found in the pioneering work of Rudolf Hilferding, as well as Nicolai Bukharin on the world economy, and V.I. Lenin on imperialism. All three argued that the capitalist economy had, with the advent of monopoly capitalism, entered a new and higher stage of capitalism. This new stage underlay the recovery, but it had not transcended the basic Marxian dynamics of capital accumulation.

Marxism first obtained prominence in the context of the Great Depression of the late nineteenth century. Dobb (1947:310) sums up the period as “essentially a depression of cut-throat competition and cut prices of the classic textbook type.” Geary (1987:2) relates the views of contemporary Marxist observers:

The extent to which there really was a 'great depression between 1873 and 1896 is of course a source of dispute amongst economic historians but there is no doubt that (p. 560) many contemporaries, amongst them August Bebel and Eduard Bernstein (initially), saw the recession as nothing less than the ‘final crisis of capitalism.’

However, after 1896, capitalism was showing definite signs of recovery. Geary (1987:36) sums up the developments in the German economy, while indicating their significance in the inauguration of theoretical debate:

Revisionism was not spawned ex nihilo but was the fruit of the economic recovery which took place after 1896 (not only in Germany) and of a change in the political situation of the Second Reich. From 1896 until the First World War the German economy enjoyed almost uninterrupted growth and low levels of unemployment.

The immediate evidence for a crisis within the Marxism of the Second International is to be found in a largely unconstructive debate over the significance of the recovery for the strategy of the socialist movement. Marxists had looked for a swift, worldwide proletarian revolution produced by the worsening of the capitalist crisis. When recovery instead of revolution materialized, a debate began concerning the role of economic crisis in revolutionary theory.1

This “breakdown controversy” was an argument between orthodox Marxists like Karl Kautsky, who claimed that capitalist crisis would continue to worsen, thereby producing a revolutionary conjuncture, and Edouard Bernstein’s followers, who rejected revolutionary tactics. The latter argued that revolution is only required if capitalism breaks down. For if the system will not fail of its own accord, then the class struggle can be ameliorated within the existing political framework, and men will be able to realize “the continuance of free development” (Bernstein 1961:82–87).

The constructive Marxist response to the capitalist recovery was to be found in the contributions of Rudolf Hilferding (1980), Nicolai Bukharin (1973), and Lenin (1968) (HBL). It is these three authors whose work, taken together, forms the structure of the early twentieth-century Marxist theory of both imperialism and stages of capitalism. Hilferding’s Finance Capital appeared in 1910 and was received in Marxist circles as virtually another volume of Capital (Hilferding 1980:1). Finance Capital would be the foundation for both Bukharin’s and Lenin’s later volumes.

1.1 Hilferding’s Contribution

Just as Marx had analyzed the emergence and dynamic growth of industrial capital in contrast to the previously dominant merchant capital in Das Kapital, Hilferding set out in Das Finanzkapital to analyze the emergence from industrial capital of the new form (p. 561) of finance capital. Such a study, Hilferding writes, is essential to achieving a “scientific understanding of the economic characteristics of the latest phase of capitalist development” (Hilferding 1980:21).

Hilferding begins with an analysis of money and the increasing importance of credit in the capitalist valorization process. Banks begin to concern themselves with the “long-range prospects of the enterprise and the future state of the market” (Hilferding 1980:95). With the advent of the joint-stock company, banks become involved in raising industrial capital through the promotion of stock issues. The organization of a stock exchange makes possible the pooling of capitals and opens the way for an enormous expansion of the scale of capitalist enterprise. Since considerably less than 100% of the stock is necessary to exercise control, the organizing reach of an individual capital is greatly extended. A common ownership interest is created among various companies, which is reinforced by interlocking boards of directors.

The new joint stock corporation had numerous competitive advantages over the individually owned enterprise. It had a much greater capacity for growth, drawing as it did upon the whole supply of free money capital. The ability to retain profits gave the corporation an advantage in price competition and in surviving business downturns. Increasing bank involvement with industrial production created a change in business principles:

The professional banking principle of maximum security makes the banks inherently averse to competition and predisposed in favour of the elimination of competition in industry through cartels, and its replacement by a ‘steady profit.’

(Hilferding 1980:179)

Bank capital, increasingly concentrated itself, began to promote combination rather than competition in industry. Integration raised the profit rate through decreasing competition, greater economies of scale and technical innovation, and greater stability over the business cycle. Concentration was achieved through the formation of cartels and trusts:

Industrial profit incorporates commercial profit, is itself capitalized as promoter's profit, and becomes the booty of the trinity which has attained the highest form of capital as finance capital. For industrial capital is God the Father, who sent forth commercial and bank capital as God the Son, and money capital is the Holy Ghost. They are three persons united in one, in finance capital.

(Hilferding 1980:220)

While the basic capitalist tendencies toward crises still exist, the concentration of industries tends to mitigate the negative effects for capital. Hilferding (1980:289) observes that the ability of an enterprise to survive increases with its size. The ability of cartels to maintain prices means that they can divert the main burden of a crisis to the noncartelized industries. The existence of capitalist crisis then accelerates the process of concentration.

(p. 562) Having undertaken the comprehensive description of transformations at the economic level of society, Hilferding makes the transition to political analysis in the following passage:

Finance capital signifies the unification of capital . . .The basis of this association is the elimination of free competition among individual capitalists by the large monopolistic combines. This naturally involves at the same time a change in the relation of the capitalist class to state power.

(Hilferding 1980:30)

It is with this transition that Hilferding lays the foundations for analyzing the close relationships among the economic, political, and cultural levels of society.

Hilferding develops this point about the changing relation of class and state power through a discussion of the tariff. The generalization of the protective tariff increases the importance of the size of the protected area and hence the size of the national territory and the control of colonial areas. To raise price, cartelized industries are forced to restrict production for the domestic market, necessitating export sales to raise capacity utilization. This overseas expansion of economic activity can only be accomplished through the threat or use of military force. As the world is increasingly divided up between the major economic powers, the political and military conflict between them becomes increasingly bitter. Owing to uneven development, newly industrializing powers may find themselves without a proportionate share of colonial possessions. The redistribution of territory can only be accomplished by force and war becomes likely.

Hilferding also seeks to understand the ideological changes that accompany the economic and political transformations associated with finance capital. The new ideology abandons liberalism, in favor of a politically powerful state that can protect its interests both at home and abroad. This new nationalism inevitably takes on racist overtones:

Since the subjection of foreign nations takes place by force—that is, in a perfectly natural way—it appears to the ruling nation that this domination is due to some special natural qualities, in short to its racial characteristics. Thus there emerges in racist ideology, cloaked in the garb of natural science, a justification for finance capital's lust for power.

(Hilferding 1980:335)

Hilferding also examines the changes in the relation of the various classes to one another in the era of finance capital. Support for the tariff, a strong state, and opposition to the working class increasingly unites capital and large landowners. Small business is increasingly subordinated to big capital and a1so shares its opposition to labor. A new middle strata arises, consisting of the salaried managerial and technical employees in commerce and industry.

In the field of labor relations, unions find themselves facing a capitalist class increasingly united in employers’ organizations, which can temporarily fill orders, compensate (p. 563) losses and prevent strikers from finding alternate employment. Monopoly corporations are also able to claw back wage rises through price increases.

Hilferding finds that finance capital is associated with changes in the class structure, the character of class alliances, and the balance of class forces. The changing interests of capital lead to changes at the political level. Capital becomes more closely associated with a strong state, which can protect its monopoly position at home while pursuing an aggressive policy of imperialism abroad. At the ideological level, these changes are justified by the abandonment of liberalism and the adoption of a reactionary nationalism and racism. This multilevel analysis of the role of political and social institutions laid the intellectual basis for later multifactoral analyses of capitalist stages.

1.2 Bukharin and Lenin

According to his biographer, Finance Capital was “the starting point and essential inspiration (Cohen 1980:25)” of Bukharin’s ([1915]1973) contribution, The World Economy and Imperialism. The major difference between Bukharin’s treatment and that of Hilferding was that Bukharin reversed the order of Hilferding’s presentation. Hilferding had argued from finance capital to concentration to the world economy and imperialism. Bukharin started with the world economy. He then set about drawing the connections between the world economy, state policy, class relations, concentration, and finance capital.

It is largely through the medium of Lenin’s ([1917]1968) Imperialism, the Highest Stage of Capitalism that Hilferding and Bukharin’s ideas have come down to us, especially in the English-speaking world. Bukharin’s work was for many decades crushed under the weight of Stalinist repression. Remarkably, an English-language translation of Finance Capital did not appear in print until 1980. Lenin’s work was not intended as a major independent theoretical treatise but was in Lenin’s own subtitle “a popular outline” drawing extensively on the previous two works. Nevertheless, from the point of view of advancing a Marxist theory of stages of capitalism, Imperialism makes two significant contributions. The first is to identify imperialism specifically as a “stage” of capitalism (see Albritton 1986:98). The second is to identify the imperialist stage with monopoly capitalism.

The concept of a stage of capitalism is used in Lenin’s subtitle and appears frequently throughout the work. This is not merely a matter of terminology. Lenin gives substance to his use of the new term by seeking to identify more sharply the boundary between the imperialist stage of capitalism and its predecessor. Throughout Imperialism, Lenin is concerned to identify the time of the transition between stages as closely as possible. For instance, he argues that:

For Europe, the time when the new capitalism definitely superseded the old can be established with fair precision; it was the beginning of the twentieth century.

(Lenin [1917]1968:180, emphasis in original)

(p. 564) Subsequent discussion centers the change specifically on the year 1900. This concern with the identification of the turning point that marks the transition from one stage of capitalism to another cannot be found in either Hilferding’s or Bukharin’s treatments. The location of the point of transition from the previous stage of capitalism to the new stage of imperialism emphasizes the qualitative nature of the transition. It is this difference that lends content to Lenin’s change in terminology in designating imperialism as a stage of capitalism rather than a phase or an epoch.

The other major difference in Lenin’s work is in the role given specifically to the development of monopoly market structures. We have already discussed how Hilferding began his analysis with finance capital while Bukharin analyzed virtually the same set of institutions using the world economy as his starting point. Lenin adopts still another starting point by emphasizing the role of monopoly capital in imperialism. Indeed, in one of the most-quoted passages from Imperialism Lenin equates the two:

If it were necessary to give the briefest possible definition of imperialism we should have to say that imperialism is the monopoly stage of capitalism.

(Lenin [1917]1968:23)

Lenin begins his discussion of the highest stage of capitalism with a discussion of “concentration of production and monopolies” (Lenin [1917]1968:176). This transposition of the order of the discussion would not have great significance except that Lenin also gives the emergence of monopoly a causative significance in the development of the rest of the basic features of imperialism. Finance capital, the export of capital, and the imperialist division of the world all stem from the emergence of the monopoly market structure.

This identification of monopoly capital as the key factor in determining the character of the new stage would have a profound influence on subsequent generations of Marxist stage theorists. HBL analysis would be carried into the post–World War II era through the work of Paul Sweezy (1968) and Ernest Mandel (1970). In their influential expositions of Marxian economics, the HBL analysis of monopoly capitalism was treated by each as essentially a fourth volume of Capital. Their descriptions of the transition to monopoly capital consolidated stage theory as an accepted component of Marxian theoretical practice. Both would be influential in forming the basis for the second wave of Marxian stage theory.

2. The Second Wave of Marxian Stage Theory

The second wave of Marxian stage theory emerged with the end of the post–World War II expansion. Ernest Mandel’s long wave theory (LWT), the Regulation Approach (RA), and the Social Structure of Accumulation Framework (SSAF) analyzed the stagflationary crises of the advanced capitalist countries as the end of a long wave of growth following (p. 565) the end of the war. This long wave of accumulation was underpinned by the emergence of a new stage of capitalism, which was analogous to the reorganization brought about by monopoly capital at the turn of the century. Since this new stage was the resolution of the crisis of the monopoly stage, these new schools were reluctant to predict the non-resolution of the then-current crisis, thus opening up the possibility of further stages of capitalism in the future. This identification of a new postwar stage following from HBL’s monopoly stage and the possibility of subsequent stages in the future elevated Lenin’s theory of the highest stage to a general theory of stages of capitalism.

The SSAF built on Sweezy’s contribution and that of the American Monopoly Capital School. Mandel’s LWT, not surprisingly, was founded on his earlier analysis of monopoly capital. The RA claimed no precursors apart from Louis Althusser, though Althusser’s admiration for Lenin and specifically his Imperialism is well known.

2.1 Ernest Mandel’s Long Wave Theory

Mandel’s (1970) early expositions of the twentieth century economy owe a great deal to the HBL analysis. Chapters 12, 13, and 14 of Marxist Economic Theory are entitled respectively “Monopoly Capitalism,” “Imperialism,” and “The Epoch of Capitalist Decline.” These chapters reproduce and update much of the HBL explanation of the era of finance capital. Mandel parallels Sweezy in substituting the term “monopoly capitalism” for Hilferding’s finance capital and Lenin’s imperialism. In his monumental Late Capitalism, Mandel develops a theory of long waves of capitalist development. These long waves form the basis for periodizing capitalism into stages:

The long waves . . . do not simply represent statistical averages for given time spans . . . They represent historical realities, segments of the overall history of the capitalist mode of production that have definitely distinguishable features. For that very same reason they are of irregular duration. The Marxist explanation of these long waves, with its peculiar interweaving of internal economic factors, exogenous “environmental” changes, and their mediation through sociopolitical developments (i.e., periodic changes in the overall balance of class forces and intercapitalist relationship of forces, the outcomes of momentous class struggles and of wars) gives this historical reality of the long wave an integrated “total” character.

(Mandel 1980: 97)

Mandel identifies three successive stages in capitalist history: competitive capitalism, classical imperialism, and late capitalism.

Mandel (1980:20) emphasizes the “key roles” of extra economic factors. The increase in the profit rate that inaugurates a long wave upturn (and hence a new period in the history of capitalism) can be understood:

only if all the concrete forms of capitalist development in a given environment . . . are brought into play . . . These radical changes in the overall social and geographic (p. 566) environment in which the capitalist mode of production operates in turn detonate, so to speak, radical upheavals in the basic variables of capitalist growth

(Mandel 1980:21–22)

In connection with the era of classical imperialism, Mandel discusses the concentration and centralization of capital, the export of capital, colonialism, militarism, imperialist competition and unequal exchange, the growing importance of the state, the introduction of welfare measures and changing technology. This multifactoral discussion is also applied to the analysis of late capitalism in the post–World War II period. In this connection, Mandel discusses changes in technology, the weakening of labor organization, long-term collective bargaining, shopfloor control of the labor process, multinational corporations, the new international division of labor, the international monetary system, the Marshall Plan, the state guarantee of profits through military contracts and other means, deficit finance and inflation, the growth of marketing and customer manipulation, the extension of consumer credit, mass communications and technocratic ideology.

2.2 The Regulation Approach

Though the term regulation had earlier been borrowed from systems theory by French Marxist scholars, the Regulation Approach effectively begins with Michel Aglietta’s A Theory of Capitalist Regulation: The U.S. Experience published in 1976. In this work Aglietta put forward an analysis of the institutional framework of accumulation cast in Althusserian structuralist terms. Aglietta begins the book with an extended critique of neoclassical general equilibrium theory. While rejecting the notion of equilibrium, Aglietta recognizes the necessity of analyzing the preconditions of the reproduction of the wage relation over time. Hence, he argues that the study of economics must replace the theory of general equilibrium with a theory of capitalist regulation. In his introduction, Aglietta (1979:29) defines part of his project as seeking to show “that the institutionalization of social relations under the effect of class struggles is the central process of their reproduction.” He applies this understanding to capitalist regulation and crises in the following way:

This theoretical position will enable us to conceive crises as ruptures in the continuous reproduction of social relations, to see why periods of crisis are periods of intense social creation, and to understand why the resolution of a crisis always involves an irreversible transformation of the mode of production.

(Aglietta 1979:19)

Aglietta’s book stimulated subsequent work in France applying the framework to historical movements in the French economy. During this period, Robert Boyer emerged as the leading figure of what was referred to as the Parisian school of regulation theory. In 1986, Boyer set out to sum up this work in a concise introduction.

(p. 567) After discussing the mode of production, Boyer then introduces a number of “intermediate” concepts. The first is the regime of accumulation. This set of economic elements includes first, the organization of production, then the distribution of the value produced and a related composition of social demand, which is consistent with production potentialities. These regimes of accumulation vary over time and space within the overall framework of the capitalist mode of production.

The regime of accumulation is conditioned and reproduced by further intermediate institutional forms. These institutional forms are collected under five headings: forms of monetary constraint, configurations of the wage relation, forms of competition, position within the international regime, and forms of the state. These institutional forms together constitute the mode of regulation. The combination of the regime of accumulation and a type of regulation is the mode of development. The objective of the regulation school is “to explain the rise and subsequent crises of modes of development” (Boyer 1990:48).

2.3 The Social Structure of Accumulation Framework

At the end of the 1970s, David Gordon (1978:1980) published two articles linking long cycle theory with the concept of stages of capitalism. In this context, the advent of monopoly capital at the turn of the century coincides with the completion of the long wave trough at the end of the nineteenth century and the inauguration of the long wave expansion that ended with the Great Depression of the 1930s. The new question that the adoption of a long wave perspective posed to the monopoly stage of capitalism tradition was whether the postwar expansion was associated with a similar set of multidimensional institutional changes. Gordon (1978) answers this question by proposing a set of postwar institutions whose establishment accounted for the long period of postwar prosperity. These institutions included among others multinational corporate structures, dual labor markets associated with a bread-and-butter industrial unionism, American international economic and military hegemony, easy credit, conservative Keynesian state policy, and bureaucratic control of workers.

In this way, Gordon established the possibility of articulating a postwar set of institutions that conditioned the subsequent expansion of the economy in a way similar to the set of institutions analyzed by HBL, which accounted for the turn-of-the-century expansion. Thus, the multi-institutional analysis of monopoly capital is implicitly used by Gordon as a model for explaining the postwar expansion.

The repetitive use of this kind of explanation raised the question of whether the assembling of such sets of institutions could be generalized as the basis of a comprehensive theory of stages of capitalism. Gordon (1978 and 1980) answers this question by proposing that both the institutions comprising monopoly capital and those making up the postwar social order constituted examples of SSAs. The construction of a new SSA provided the basis for a new stage of capitalism. The disintegration of this set of institutions marks the end of each stage.

(p. 568) The SSA approach achieved its definitive form shortly thereafter with the publication of Gordon, Edwards, and Reich’s Segmented Work, Divided Workers (1982).2 This volume used Gordon’s SSA approach to capitalist stages to reformulate these authors’ earlier analysis of the history of capital-labor relations in the United States (Reich et al. 1973). The authors’ exposition of the SSA, which dominated the capitalist world at the beginning of the twentieth century, clearly owes a great deal to HBL’s original description of the era of imperialism.

The relationship between the RA and the SSAF was recognized early. Bob Jessop lists the SSAF as one of his seven schools of the RA (Jessop 1990). The SSA is analogous to a combination of the regulation theory concepts “regime of accumulation” and “mode of regulation.” Subsequent developments within the Parisian School of Regulation have led, however, to a steady drift away from Marxism. This is most pronounced in the founding Parisian school. In their edited Regulation Theory: The State of the Art, Boyer and Saillard (2002:46) discuss the wage-labor nexus:

Its initial basis was none other than the Marxist theory of exploitation which in the 1990s is no longer a major reference point. Today the theory centres on relations between power, wage compromise and the institutional determinants of the wage-profit division.

Several other chapters discuss the RA as a variety of institutionalism.

The RA has moved away from its original concern with the succession of a Fordism in crisis with Post-Fordism. The argument was originally that capitalism survives through its variation across time. The crisis of Fordism could be overcome through the transition to Post-Fordism. As it became clear that this Post-Fordism was being organized around an aggressive neoliberal project, carried out in the context of increasing globalization, the concern with capitalism’s survival became more specific. The guiding question became, not whether capitalism could survive, but whether an alternative to neoliberalism could survive in a globalized world. Globalization set different national economies in direct competition with one another in world markets. Analysts began to wonder whether this global competition would force a convergence to a neoliberal model of capitalism on a worldwide basis. In Europe the question became would the European social model survive the transition to Post-Fordism.

This reposing of the question of capitalism’s survival shifted the emphasis from capitalism’s ability to vary across periods of time to whether capitalism could vary across space, or more particularly across national boundaries. The RA became more concerned with identifying the coherence of different varieties of capitalist institutional arrangements. This has inevitably led to a greater emphasis on the stability of alternative institutional arrangements:

(p. 569)

An institutional logic in each society leads institutions to coalesce into a complex social configuration. This occurs because the institutions are embedded in a culture in which their logics are symbolically grounded, organizationally structured, technically and materially constrained and politically defended. The institutional configuration usually exhibits some degree of adaptability to new challenges, but continues to evolve with an existing style.

(Boyer and Hollingsworth 1997:2)

The SSAF has generally moved in the opposite direction from the RA by reemphasizing its roots in the Marxian tradition. In his 1997 retrospective and prospective on the SSAF, Michael Reich (1997:4) identifies the early theoretical perspective as rooted in “Marxian insights concerning class conflict over production and distribution at the workplace and in the political arena, and by Marxian and Keynesian macroeconomic analyses.” Most subsequent SSA studies proceed on this basis.

In addition to its emphasis on the problems of the reproduction of capitalism as such, the SSAF continues to emphasize capitalist variation across time. While it by no means denies the possibility of capitalist variation across countries or regions, the SSAF locates these differences in national responses to capitalist crises that demand for their resolution the reorganization of the institutional conditions of the capitalist accumulation process. In this way, the emphasis is on the dynamics of capitalism over time, the reproduction of these dynamics over time, and the recovery of capitalist social formations from periodic major crises of capitalist reproduction.

Analyzed in the Marxian tradition, capitalism contains multiple conflicts, instabilities, and crisis tendencies that need to be moderated and channeled through institutional means. The SSAF is sometimes seen as an alternative to traditional Marxist crisis theory. This is the case only in that SSA theory insists on deploying the full range of Marxist crisis theories over time and space, rather than favoring one tendency across capitalist history. Class conflict and capitalist competition play prominent roles. Capital accumulation is seen to erode its own institutional preconditions. This creates a historical dynamic of both the success and failure of capital accumulation, alternating periods of growth and crisis. While SSAs are stable for an extended period of time, capitalist contradictions eventually come to the fore, eroding the institutional conditions of capitalist accumulation and precipitating crisis. The failure of institutional resources as well as conflict in the context of the developing crisis further erodes the institutions. The stagnation will only be overcome eventually through the construction of a new SSA. Contrary to any stability thesis, the new SSA differs fundamentally from the previous SSA.

Wolfson and Kotz (2010:81–89) elaborate a conception of Liberal SSAs and Regulated SSAs. Liberal SSAs tend to enter into crisis because capital’s ability to dominate labor leads to stagnant wages, inadequate demand, and overcapacity. Unregulated economies are often prey to financial crises. These Liberal crises are most easily resolved through an increase in the strength of labor, a limited redistribution of income, and the regulation of demand and finance—that is, the establishment (p. 570) of a Regulated SSA. Regulated SSAs by contrast are prone to “profit-squeeze” crises, due to rising wages and popular demands for intervention by government in the markets. These crises are most often resolved through the reassertion of capital’s dominance over labor and the promotion of deregulation through the creation of a Liberal SSA.

Thus, types of capitalism are not internally reproduced over the medium term. Rather they enter into crisis and succeed one another, sometimes in a repeated leapfrog fashion. This analysis serves to emphasize the variability of SSAs over time. In fact, Kotz and Wolfson’s suggestion of two types runs against the tendency of the rest of the literature. The emphasis there is on the concrete historical origin of SSAs in the context of the crisis that precedes them. A wide variety of institutional regimes are capable of characterization as SSAs.

2.4 The Crisis of Global Neoliberalism

Because of the movement of the RA away from Marxism and the paucity of subsequent work building on Mandel’s LWT, subsequent discussion will concentrate on the SSAF. Within the SSA framework, recent events can be analyzed as the crisis of global neoliberalism, an additional SSA that succeeded the 1970s crisis. While each SSA is different from those that preceded it, global neoliberalism constituted a particular break with previous SSAs in that these SSAs were primarily national in scope, whereas global neoliberalism developed at an international level. The relation between the global and national aspects is therefore different in the contemporary stage of accumulation compared to previous eras.

The post–World War II stage of accumulation can be thought of as a series of national state-regulated structures that were linked, internationally, by a set of transnational institutions, such as the Bretton Woods system. By contrast, the global neoliberal stage exists in its most pure form at the international level, where neoliberal principles became dominant as expressed in institutions such as the World Trade Organization (WTO), International Monetary Fund (IMF), and the World Bank. Global neoliberalism is a transnational structure with local social structures nested within it. There is variation in the extent to which local arrangements reflect the broader global neoliberal model of capital accumulation.

3. Nested Crises

The remainder of this article will examine this issue in the context of the current economic crisis in Ireland, in the EU, and at the global level to illustrate the way in which national and regional economic dynamics are nested within the larger global neoliberal SSA. The Irish crisis is simultaneously the result of its own neoliberal institutional (p. 571) structures and also an expression of the global neoliberal crisis. The Irish case is further complicated in that Ireland is a part of the European Union and more particularly the Eurozone currency area. Like Ireland, the crisis in the Eurozone is simultaneously a local manifestation of the global crisis and a crisis of the specifically European version of global neoliberalism. The following section will first draw out the origins of the global crisis and then look at the European crisis. Finally, the outline of the Irish crisis will be traced in the context of the other two.

3.1 The Global Crisis

A brief outline of the global crisis begins with a simplified framework presented in Figure 29.1. The analytical challenge is to proceed from the basic structure of global neoliberalism, on the left in Figure 29.1, to the current crisis on the right. For convenience, the SSA will be outlined in relation to four general constituent elements: globalization, neoliberalism, weakened labor, and financialization. These factors all initially led to restored profitability and will be discussed in turn.

Stages of Capitalism and Social Structures of AccumulationA Long View

Figure 29.1: The global crisis of neoliberalism

Globalization is located in several developments. One is a significant increase in the international movement of capital, goods and money consequent on the wide-spread reduction in both physical and political barriers to markets. A second development is a geographical extension of capitalist relations of production to Eastern Europe and China. These transitions have opened up vast supplies of raw materials, extensive investment opportunities, massive pools of cheap labor, and large new markets for global capitalism. The result of this new mobility is the fragmentation of production across borders and its reintegration via trade and the global supply chains of transnational corporations (Gereffi and Korzeniewicz 1994; Kaplinsky and Morris 2001). In this context, the (p. 572) emergence of transnational class relations has become increasingly important, and arguably key from a specifically Marxist perspective (van der Pijl 1998; Overbeek 2001; Robinson 2004).

Neoliberalism is a multifaceted entity that includes political-economic institutions, policies, theories, and ideology. Key institutions include those charged with promoting the economic liberalization of world markets, such as the WTO and IMF. The smaller domestic state must be included as well as numerous private think tanks and organizations. At the policy level, neoliberalism advocates privatization, deregulation, and price stabilization. The dominant theory is an ultra-free-market version of neoclassical economics, predicated on the glorification of individual choice in unregulated markets.

The third element of the SSA is the weakened role of labor, which was pursued though the shift or threatened shift of production location. This is a new labor control strategy through “spatialization” (Wallace and Brady 2010). Trade unions have experienced declining density, influence, and power. This has been accompanied by the emergence of new production regimes that further diminish the organizational capacity of labor, such as models of lean manufacturing and flexible specialization (Parker and Slaughter 1994).

Finally, financialization “refers to the increasing importance of financial markets, financial motives, financial institutions, and financial elites in the operation of the economy and its governing institutions, both at the national and international level” (Epstein 2005: 1).

Short-term performance and quarterly returns have become the measure of success (Tabb 2010). Regulations restricting the unfettered movement of finance have been systematically eliminated. Financial innovation has proliferated. Finance has created a tendency to divert investment from the productive sector of the economy.

In the manner of Hilferding’s and Bukharin’s earlier work, SSA theorists generally agree on this description of the institutions of the latest SSA but disagree on where to locate priority. Wallace and Brady (2010) emphasize the weakening of labor in identifying “spatialization” as central to the SSA. Kotz (2015) prioritizes neoliberalism. Tabb (2012) lays prime importance on financialization. Robinson (2004) chooses globalization. This chapter refers to the global neoliberal SSA.

Global neoliberalism initially led to restored profitability. The impact of weakened labor, the globalization of capital, the inauguration of neoliberal policies, and financialization all initially contributed to restored profitability. Restored profitability led to a period of stability and growth though at a lower level than in the post–World War II era. At the same time, global neoliberalism began storing up problems that would eventually lead to the current crisis. Weakened labor led to relatively stagnant wage levels across the Western World. At the same time, globalization was leading to a renewed era of competition, this time between giant transnational corporations. This contributed inevitably to the emergence of excess capacity, as firms geared up for a global market while wages stagnated.

The combination of excess capacity and stagnant consumer income in turn led to sluggish investment in real productive capacity. The paucity of attractive investment opportunities coupled with the restoration of profitability created a pool of liquid capital (p. 573) seeking an outlet. This pool of funds was sucked into the growing financial sector and fed into a series of asset bubbles of increasing size including the dot-com bubble and various property bubbles. These asset bubbles underpinned an expansion of consumer debt that propped up the demand side of the economy.

Eventually the bursting of the last of these bubbles would inaugurate the current global financial crisis. The credit crisis quickly fed into a collapse of demand from households, businesses, and ultimately governments. Thus, the credit-based collapse brought to the fore the deeper underlying problems generated by stagnant wages and sluggish investment. At the time of writing we are still living with these consequences. Global neoliberalism first restored the capitalist economy but also laid the foundations for the current collapse.

3.2 The Crisis of the Eurozone

The advent of the common currency and its associated institutions mark the neoliberalization of the European social structure. Indeed, the Eurozone SSA can be regarded as hyper-neoliberal when compared institution by institution to its American counterpart. Figure 29.2 identifies the Euro system as an expression of the four general global neoliberal institutions.

The Eurozone arises in the context of the progressive creation of the European single market. The removal of trade barriers within Europe has been a stepping stone to full integration into the global trading order. This is made especially clear by Europe’s active participation in the current Transatlantic Trade and Investment Partnership negotiations and a recent free-trade agreement with Canada.

Stages of Capitalism and Social Structures of AccumulationA Long View

Figure 29.2. The European crisis

(p. 574) Both globalization and financialization are implicated in the creation of the single currency. The Euro was intended to facilitate trade within the European area and to smooth interstate financial transactions. It was also hoped that it would become a global currency to rival the dollar, creating seigniorage benefits for European governments. While it has to a certain extent accomplished these things, its insulation of monetary policy from democratic control within the European states has been its most important consequence. The European Central Bank (ECB) has been mandated to pursue the neoliberal priority of price stabilization, while, in contrast to the Fed in the United States, the bank has no mandate to balance this with a concern for growth and employment creation.

The European Union has lacked both the capacity and the will to conduct a policy of substantial fiscal transfers from successful to less successful regions. EU budget expenditure has not substantially exceeded 1% of EU gross national income. This is well short of the 15% it would take to be able to make a serious impact.

Together these institutions constitute a fundamentally neoliberal framework. Trade is radically open both within Europe and with the rest of the globe. The capacity for fiscal policy within the Eurozone is severely truncated. States cannot use monetary creation to reflate in downturns, employ unused resources, or control the interest rates at which they borrow. Exchange rate policy is impossible within the common currency. In any case, decision making within the European Union is insulated from popular influence. This overall framework encourages states to compete for inward investment.

The combination of free trade and fixed exchange rates under the common currency led inevitably to the emergence of trade surpluses and trade deficits, which were to a certain extent mutually complementary. More particularly, Germany has been in substantial surplus while the southern periphery has been seriously in deficit. To some extent, Germany’s surpluses were recirculated through the financial system, contributing to property bubbles, especially in Ireland and Spain.

The outbreak of the international financial crisis was immediately translated into a sovereign debt crisis through this institutional framework. Weak states suffering from trade deficits were forced to rescue their banking systems and address the consequences of the downturn, taking large deficits and blowing them up further. Lack of control over monetary policy prevented the monetization of deficits and countercyclical monetary policy. States were essentially operating with a foreign currency and were forced to borrow on foreign exchange markets, driving up interest rates. The combination of large deficits and high interest rates made government debt unsustainable. States were “bailed out” by a “troika” consisting of the IMF, the European Commission, and the European Central Bank. The bailouts were accompanied by what was essentially an IMF-style structural adjustment program. The required expenditure cuts and tax increases deepened the recession into a depression in the European periphery.

3.3 The Irish Crisis

National differences are bound to alter the expression of crisis dynamics rather than simply mirroring them. In this context, the Irish crisis is simultaneously both a (p. 575) manifestation of the global crisis and an expression of how its own national institutional dynamics played out. The same four categories utilized in the description of global neoliberalism and the Eurozone, Figures 29.1 and 29.2 above, are replicated in the Irish context in Figure 29.3.

Stages of Capitalism and Social Structures of AccumulationA Long View

Figure 29.3. The crisis of global neo-liberalism: Irish style

Irish trade policy has been outwardly oriented since the late 1950s when a nationalistic import substitution policy was abandoned and foreign direct investment actively pursued. In 1981, a corporate tax rate of 10% was introduced on all manufacturing profits to promote exports. Subsequently, a uniform corporate tax rate of 12.5% was introduced. An active intervention by state agencies was oriented to connecting the Irish economy to the global. Net foreign direct investment rose by over 700% in 1989 over the previous year. It doubled in 1990 and again by 1996 to €2.62 billion, with a peak of nearly €30 billion in 2002 (World Bank Development Indicators). Irish exports took off after 1990 and rose from 56.7% of GDP and peaked at 100% of GDP in 2001 (World Bank Development Indicators).

The best evidence for the dominance of neoliberalism in Ireland in this period is Ireland’s enthusiastic integration into international markets and openness to foreign direct investment. Further, the Irish government’s approach to regulation has been characterized as “light-touch” or “minimalist.” Another area in which the neoliberal policy agenda has been actively pursued is through privatization. Ireland had inherited a legacy of publicly owned corporations from an early history of public developmental projects. Wholesale privatizations began in 1991 and the largest was of the public telecommunications company in 1999. Tax reform was central to the neoliberal project. As a percentage of GDP, Irish taxation remains at a similar level to some of the poorer Eastern European states. It is considerably lower than Ireland’s neighboring competitors: the UK, France, Germany or Spain.

(p. 576) The first of a series of extensive tripartite capital-labor-government partnership agreements was negotiated in 1987. These agreements dovetailed wage restraint, negotiated welfare levels and lowered taxation. This “partnership” model has been held in contrast with the anti-union postures of paradigmatic neoliberal governments in the United States and United Kingdom. Indeed, the enthusiasm displayed by the union leadership for social partnership stemmed partly from a desire to avoid the kind of brutal confrontation which occurred under Thatcherism in the United Kingdom.

Despite this institutional arrangement, organized labor was weakened during the Celtic Tiger period. Income inequality rose (McDonough and Loughrey 2009). “Light-touch” employment regulation has favored capital at the expense of employee rights. Irish trade union membership declined from its peak in 1980 of 62%, to 31% by 2007 (CSO 2008). Non-unionism is particularly evident among the growing multinational sector, with the Industrial Development Authority (IDA) Ireland endorsing a choice of non-recognition for inward investing firms (Gunnigle et al. 2005 and 2009; Collings et al. 2008).

Ireland has been an enthusiastic participant in financialization. In 1987, tax relief was given to occupants of the Irish Financial Services Centre (IFSC), a government-initiated facility built on eleven acres of derelict ground in the Dublin Docklands. This quickly became an important center for a wide variety of transnational financial activity. Light touch financial regulation was essential to attracting this kind of inward investment. Domestic financial institutions moved to take advantage of this new ethos.

While the IFSC was doing its part to facilitate international financialization, a particularly Irish local counterpart was built up around the coalescing interests of Irish property developers, Irish banks, and a cadre of politicians. This led to tapping international capital flows to finance both the development of Irish property and the private purchase of this property once completed, inflating a massive property bubble. Growth increasingly depended on construction, and private spending increases depended on borrowing and inflated home equity. This was the Irish counterpart to the American sub-prime bubble.

House prices peaked in 2007, and anxiety generated by the global financial crisis accelerated the slide. Because of lower taxes on personal income, agreed through successive social partnership negotiations in exchange for wage restraint, taxes had become excessively dependent on income from the construction sector. The collapse of the housing bubble cut off these funds. At the same time, rising unemployment increased social welfare payments. This created a fiscal crisis. The downturn then set off a classic Keynesian downward spiral of rising unemployment and falling demand.

Ireland’s social structure and economic crisis was a variation within the larger global structure. One notable departure from the institutions of global neoliberalism was the social partnership model that took responsibility for negotiated wage restraint, welfare provision, and taxation. While Irish social partnership contributed to the Celtic Tiger success, it was itself heavily dependent for its longevity on the resources generated by the rapid expansion of the Celtic Tiger period (Rittau and Dundon 2010). Ultimately, it lacked many of the institutional underpinnings of regulated arrangements in other European/Nordic countries (Donaghey and Teague 2005). Wage restraint and lowered (p. 577) taxation featured prominently in the agreements. In these areas, it did not depart so radically from global neoliberal patterns. In the face of economic crisis, social partnership, successful in part in distributing the spoils of growth, proved unable to negotiate retrenchment and was abandoned.

4. The Marxian Theory of Capitalist Stages

Marxist stages of capitalism consist in complexes of institutions that support periods of capital accumulation. These stages are separated from one another by capitalist crises. This chapter has surveyed the Marxist concept of stages of capitalism using both an historical and contemporary frame. It has argued that the concept entered debates within the workers’ movement and Marxian theory at the turn of the twentieth century. The concept was then taken up again in the context of explaining the rise and demise of the post–World War II order. Finally, the concept, as developed in this second wave of theorizing, retains its usefulness in describing the current economic crisis in a global capitalist context. The workers and other progressive movements will find their opportunities and challenges in the context of the working out of this long-run crisis. The crisis may be followed by a new, institutionally novel stage of capitalism. Alternatively, we could see increasing popular struggle in the context of continuing social crisis—a struggle that could lead to transcending capitalism itself. Such a transcendence is all the more urgent in the face of multiplying ecological crises.

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Notes:

(1) A summary of the revisionist or breakdown controversy can be found in Sweezy (1968 [1942]:190–213).

(2) For collections of articles explaining, reviewing and applying the SSA approach see Kotz et al. (1994), and McDonough et al. (2010, 2014).