[R-G] Walden Bello on Robert Brenner

[Yoshie Furuhashi]

REVIEW ARTICLE
The crisis of capitalism
WALDEN BELLO

The Boom and the Bubble: the US in the World Economy by Robert Brenner;
Verso, London and New York, 2002; pages 303, $23.

THE recent work of Professor Robert Brenner of the University of 
California, Los Angeles (UCLA) is a solidly argued and empirically 
impeccable restatement of the centrality of overproduction in 
capitalism - a problem that has preoccupied thinkers as diverse as 
Marx, Joseph Schumpeter, Joan Robinson, Ernest Mandel, Paul Baran, 
and Paul Sweezy. Brenner's distinctive contribution is to draw out 
the specific dynamics and consequences of overproduction or 
underconsumption in the era of integrated, globalised production and 
markets. The picture he draws is not one of corporations 
denationalised by economic integration and states whose powers have 
been eroded, as in much current writing on globalisation. In 
Brenner's global economy, state elites battle to gain a competitive 
edge for their corporate elites. But if national competition is 
central, so is the common interest among the competing elites of the 
central economies to expand the global
economy. The trajectory of the United States economy is determined 
largely by this volatile relationship of competition with and 
dependence on the other global capitalist centres of Europe, Japan, 
and - though to a much lesser degree - East Asia.

In Brenner's view, the post-Second World War era is divided into a 
period of dynamic global economic expansion from the late 1940s to 
the early 1970s and one marked by persistent crises and uneven growth 
since then - a relatively dismal period broken only by the seven-year 
U.S. boom in the 1990s. Whereas in the first phase, the U.S., Europe, 
and Japan derived mutual benefit from global expansion, from the 
early 1970s on, economic growth became largely a zero-sum game, where 
one centre economy's advance was purchased with stagnation or 
recession in its neighbours.

Since the 1970s, the key problem for the centre economies has been a 
chronic tendency towards overcapacity and thus a steady decline in 
profitability. Disposing of old capital stock, increasing 
productivity, and regaining profitability has been an urgent need of 
each centre economy, but achieving it has run into opposition from 
established monopolies, organised labour, and powerful rival centre 
economies.

By delinking the dollar from the gold standard and effectively 
devaluing it, the Nixon administration hoped to steal a march over 
its rivals. It was, however, left to the Reagan administration to 
restore decisively the American economy's edge, and this it did 
through three mechanisms: breaking organised labour to hold down 
wages, maintaining high interest rates to attract capital to the 
U.S., and engineering the infamous "Plaza Accord" in 1985, which 
pushed up the value of the yen and set the stage for the "relentless 
rise" of the mark to make the Japanese and German manufacturing 
sectors bear the lion's share of adjustment. In a global economy 
marked by overcapacity, the result was eventually to push both Japan 
and Germany to recession and lay the ground for greater U.S. 
competitiveness and profitability in the late 1980s and early 1990s.

The effect was, however, two-edged, for even as U.S. manufacturing 
regained profitability, it was also threatened by the prolonged 
recession that settled over Japan and Germany, which degraded the 
capacity of these economies to absorb U.S. exports, which had served 
as a key engine of the U.S. manufacturing recovery. In an 
increasingly integrated global economy, Brenner points out, "the fact 
remains that while the U.S. economic revival took place largely at 
the expense of its leading rivals, that it had to do so was 
ultimately at the cost of the U..S economy itself". Consequently, 
Washington under the Clinton administration engineered the "reverse 
Plaza Accord" in the mid-1990s, when the value of the dollar was 
allowed to rise relative to the yen in an effort to help spark an 
export-led recovery in Japan. Just as the Plaza Accord had 
essentially been a rescue operation of U.S. industry by Japan and 
Germany, so was the Clinton-Rubin reversal of the rising dollar a 
U.S.-engineered "bailout of Japan's crisis-bound manufacturing 
sector".

This move, however, failed to spark sustained economic revival in 
Japan. And a great part of the reason was that the global 
overcapacity problem had become even more acute owing to the Japanese 
conglomerates moving a great many of their labour-intensive 
manufacturing operations to China and East Asia, precisely to escape 
being rendered non-competitive by the rising yen. But even as it 
failed to reactivate the Japanese economy, the reverse Plaza Accord 
played a key role in undermining the competitiveness of the northeast 
Asian and southeast Asian economies whose currencies were tied to the 
rising dollar. When these economies, with their sizable markets, 
collapsed during the Asian financial crisis in 1997-98, the global 
crisis of overproduction intensified.

Tied to an increasingly integrated but keenly competitive global 
production system and market, the U.S. manufacturing sector saw its 
profits stop growing after 1997. By the end of the decade, 
practically all key industrial sectors were suffering tremendous 
overcapacity, with the worst situation existing in the 
telecommunications sector, where only 2.5 per cent of the 
infrastructure laid down was being utilised. By 2002, the gap between 
capacity and output 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 nursed carefully by the low-interest-rate policy and "New 
Economy" talk of Federal Reserve chairman Alan Greenspan. Grounded in 
the illusion of future profitability of high-tech firms, the dot.com 
phenomenon extended by about two years. "Never before in U.S. 
history," Brenner contends, "had the stock market played such a 
direct, and decisive, role in financing non-financial corporations, 
and thereby powering the growth of capital expenditures and in this 
way the real economy. Never before had a U.S. economic expansion 
become so dependent upon the stock market's ascent."

But with the profitability of the financial sector being dependent on 
the underlying, actual profitability of the manufacturing sector, the 
finance-driven growth ultimately had to run out of steam. The 
dizzying rise in market capitalisation of non-financial corporations 
from $4.8 billion in 1994 to $15.6 trillion in the first quarter of 
2000 represented what Brenner characterises as an "absurd 
disconnection between the rise of paper wealth and the growth of 
actual output, and particularly of profits, in the underlying 
economy." 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" having been exhausted, the capacity of 
the U.S. economy to avoid a serious and prolonged downturn has been 
greatly eroded, though Brenner is cautious about writing it off....

Walden Bello is executive director of Focus on the Global South and 
Professor of Sociology and Public Administration at the University of 
the Philippines. His latest book is Deglobalization (Zed Press, 
London, 2002).

<http://www.flonnet.com/fl1922/stories/20021108001507400.htm>
-- 
Yoshie

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