Robert Brenner’s book “The Economics of Global Turbulence” is built around the thesis that the developments in the global economy since 1945 have been driven by systemic overcapacity within manufacturing, driving down the rate of profit. The various responses from within the leading capitalist countries have failed to deliver the theoretically expected response – the shift of investment into alternative industries, allowing the economy to adjust to demand through the closure of firms – delivering production which is rebalanced into the equilibrium which orthodox economists believe markets tend towards.
Brenner’s analysis is therefore fundamentally Marxist in approach. He stresses the drivers creating an inherent tendency for the rate of profit to fall based on the response to competitive pressure, meaning that companies are unlikely to exit the field as predicted by orthodox theory but will persist with lower rates of profit for longer than expected periods of time. Government policies have failed to resolve this long term decline either by Keynesian demand management (which simply allows the less competitive companies to survive, continuing the overcapacity) or fiscal and monetary tightening (which creates an economic environment in which reinvesting in other production lines is unlikely). The inability of capitalism to coordinate activity across the economy has resulted in serious and persistent imbalance.
In other words, the global economy since 1945 has not shown a tendency towards equilibrium. Rather the mechanics of capitalism have produced a long slow decay – termed the “long downturn” by Brenner – with moments of crisis precipitated by changing policy responses and the changing global (im)balance between the major capitalist nations.
Since the neo-liberal revolution, these policies have been driven by the orthodox belief that declining profit rates have been caused by over-generous wages and welfare systems. The sustained assault pursued over more than 30 years on earnings and conditions of employment have has however failed to deliver sustained improvement in profit rates. But it has provided quite effective support for asset holders. As Brenner notes in one example:
“[E]ven contemporary economic orthodoxy has failed to establish that inflation rates of up to 8 percent have any negative impact on the economy’s vitality… [T]here is no evidence that reducing inflation below 8 percent yields any gains whatsoever in terms of growth or living standards. For this reason, there are strong grounds for believing that the grand crusade to control inflation, while very costly to most people, has had little positive effect, except, of course, for the owners and lenders of capital.”
“The Economics of Global Turbulence” p.253, Robert Brenner, Verso, London 2006.
Recent writing by Paul Mason and Wolfgang Streeck (among others) has talked of the gradual death of capitalism and the growing emergence of a ‘post capitalist’ world, driven at least partially on capitalism’s failure to deliver a sustained rate of growth, and the impact of the policies pursued across capitalist countries to address the manifest problems. Brenner provides a detailed review of analysis of statistics that could provide a concrete underpinning for this viewpoint.
Brenner takes issue however with one of the proposed causes underlying the slow decline of capitalism, namely the long development swings associated with technological development. This view emphasises that economic growth in the past has been delivered by spurts of innovation, from the original industrial revolution on, and that in the absence of another bout of new technology to spur the economy forward long term decline is inevitable. Brenner considers this view Malthusian, and outlines clearly that the statistics do not support it when the cycle of growth across different countries is considered. In fact it is the inability of a global capitalist economy to coordinate and plan activity which prevents it from being able to take advantage of technological change, and also constricts it’s ability to remain dynamic.
“Continuity of technical change, but a reduction in the ability to make use of it”
“The Economics of Global Turbulence” p.243, Robert Brenner, Verso, London 2006.
Updated for the Verso edition in 2006, Brenner extends his analysis to cover the period from the bursting of the dot-com bubble in 2000-1 to 2006. He identifies the continuation of the tendencies towards manufacturing overcapacity – driven now by the massive growth of China taking a growing share of the global market through low labour costs and an undervalued renminbi. Meanwhile, the US economy is sustained by facilitating a series of financial asset bubbles, most recently in domestic housing, and endemic trade deficits. Brenner highlights the instability this is likely to cause, and of course we all know how this story ended.