A re-inflated bubble that's about to burst? Pitchforks and a French Revolution style conflict? A slow bleed into gated communities if not cities for the producers? Status quo? A new awakening where the working class is finally lifted up by the rising tide of the elite? Most of you know way more about economics than I do, so critique the piece and share your thoughts...
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Capitalism’s Deeper Problem
July 15, 2014
by Richard D. Wolff
Then in the 1970s, these circumstances profoundly changed. The rapid spread of jet air travel and global telecommunications enabled old-center capitalists to consider relocating their production facilities to lower wage areas (since monitoring and control could be accomplished at a distance). At the same time, mounting economic problems, crises and implosions of many state capitalist and poor nations undercut their efforts at independent paths of economic development. Their leaders were looking for a changed strategy of development.
Old-center capitalists seeking to relocate to the former colonial territories encountered there local partners eager to make and profit from deals with them. Hundreds of millions of new, much cheaper workers thereby became available to old-center capitalist employers. Globalization meant above all a sudden increase in the global supply of labor power, yielding an historically unprecedented buyers’ market for labor.
Globalization meant above all a sudden increase in the global supply of labor power, yielding an historically unprecedented buyers’ market for labor. By relocating production facilities out of their old centers, capitalists drastically cut labor costs.
By relocating production facilities out of their old centers, capitalists drastically cut labor costs. They could escape the higher real wages and welfare state services won by generations of old-center workers. The profit possibilities were stupendous. Competition from those who first successfully relocated then forced even reluctant old-center capitalists to follow.
Many of the firms formed in, nurtured (and variously subsidized) by the old capitalist centers abandoned them. Detroit, Cleveland and so many other capitalist centers – in the US but also in Europe and Japan – have thus been declining, often for decades, with tragic human as well as economic costs. Loss of jobs, incomes, benefits and public services shaped ever more individuals’ lives. Capitalism’s globalization produced more enemies as the gaps between its beneficiaries and victims widened. Growing skepticism and then rejection confronted the euphemisms used to obscure globalization’s goals and effects (“deindustrialization,” “post-industrialism,” “outsourcing,” “world-class competition,” “free-trade associations,” “declining middle class,” and “austerity,” among others).
Wealth and income distributions consequently polarized in the old capitalist centers. Capitalists’ profits grew sharply as they relocated production to lower waged workers in what became the new centers of capitalist growth (especially China, India, Brazil and so on). At the same time, such shifting of production provoked unemployment in the old centers, loss of higher-paying jobs that moved abroad and increasingly, the descent of workers into lower-paid, largely service-sector jobs. Old-center economies thus exhibited stagnant or falling real wages alongside soaring profits. The gap between rich and poor – between those whose incomes depend chiefly on profits and those who depend chiefly on wage work – starkly widened.
At the same time, wealth rose rapidly for the new-center partners of the old-center capitalists. Those partners who enabled old-center capital to flow into their societies and those who most successfully sold the resulting outputs back into old-center markets became wildly wealthy. Yet the mass of their fellow citizens remained mired in the poverty of their long-term economic underdevelopment. While new-center wages sometimes rose, their absolute levels remained low.
Sharply rising income and wealth inequalities thus characterized the new centers of capitalism as well as the old. Globalization distributed capitalism’s deepening inequality throughout the world. It likewise spread the usual effects of such inequality: speculation, real-estate bubbles, gross conspicuous consumption by the rich, political corruption and so on.
