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Research Foundation of SUNY

Neoliberalism: The Crime and the Beneficiary
Author(s): Gérard Duménil and Dominique Lévy
Source: Review (Fernand Braudel Center), Vol. 25, No. 4 (2002), pp. 393-400
Published by: Research Foundation of SUNY for and on behalf of the Fernand Braudel Center
Stable URL: http://www.jstor.org/stable/40241744 .
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suchas the transition fromKeynesianism to neoliberalism. corporate explicit governance. and theirhistorical Ifwefurther evolution.393-400 This content downloaded from 194. 17 Dec 2014 18:13:00 PM All use subject to JSTOR Terms and Conditions 393 .2002. cepremap. are governedby criseswhichshakeup previous alliancesandpower majorstructural of relationships amongclasses. we are drivenintoa discussionofclassesand relations ofproduction.wearebacktoa veryoldframework that elaborated Marx in the middle of the nineteenth analysis: by thatthesestructural crisesare century.See [http://www.Despitethecomplexity ofevents.xxv. review.29.ens. forthepoor.214.fr/levy]. broadenthescopeoftheanalysis toincorporatetheviewthatlargetransformations of capitalism. by asserting linkedto thehistorical trendsoftheprofit rate. should we balk at the why second?Pointing to thepoweroffinance.29 on Wed.theviewthatcontemporary neoterminology liberalpoliciesaretheexpression Whatever ofthepowerof"finance" is nowwidelyacceptedon theleft. Butonce thisfirststephas been accomplished. sometraitsmaybe clearly theriseofinterest identified: rates.1 contempt Ourinterpretation ofthesephenomena isnotoriginal. placedwithin The structural crisisof thelatenineteenth century provokeda mutation of the between profound capitalism: separation ownership and management. Technically.the the of and fiposition monetary fightagainstinflation. prominent nancialmarkets.4. profitability targets. combinedwiththe diminished autonomyof 1The analysisin thisarticleis partof a broader researchproject.Neolïberalism The Crimeand theBeneficiary GérardDuménïl& DominiqueLevy FINANCEIN POWER:A HISTORICALPERSPECTIVE is used.we are definitively thisframework.

and the new (Tayloristor Fordist)organization relevantto our analysisis thefactthatlargemodern Particularly orientedto privateenterpriseoperations financialstructures structures as opposedto thetraditional from this crisis.and this thefailureof financeto cope withthecrisis.29.notwithout ofcapitaloftheprofit maximization rate. chargeof thecentralized first the of theSecondWorldWar. on finance wereputinplace. in its wasestablished to extraordinary levels.394 GérardDuménil& DominiqueLévy are used in the Two expressions workerswithinthe workshop. 17 Dec 2014 18:13:00 PM All use subject to JSTOR Terms and Conditions .butingeneralthiscomprolimitations withregardto institutions theroleoffinancial misedid notaffect orchestrate the enterprises. International was nowin The state.thenewframework byfinance. a new framework. "managerial relationship and clerical personnel) (managerial expansionofthebusinessstaff of production. of the linkedto growth financing primarily the followed ofcapitalism institutions andfinancial rapidly monetary first detwo the and of During separation ownership management.thefundamental principle ism. modernsetting. emerged ofthe Dramatic states.214. they mergers. After exerciseofcontroland regulation.whichunsettled the The era. a newgroupof government officials.i.despitetheextreme experiences but wasdeemedtolerable NewDeal. prices. The "corporate UnitedStatesto designatethesetransformations. thegenerallevel todetermine and theability ofthesystem stability ofcapitalwerealsoregulated. thestocksofcreditandmoneygrew cadesofthetwentieth century.itis theGreatDepressionofthe1930's.. movements ofactivity.29 on Wed. thestruggle ofcreditand thecontrol Inparticular. oftheownership shareholders) to the refers revolution" The to finance. As is wellknown. in generalremainedtheunchallenged financial mechanisms privlargebanksactingin theUnitedStatesas genuine ilegeoffinance. personnel managerial shareholdof the that was and (managers engineers) pittedagainst How wouldthe someemotionamongcapitalists. theoverall of lost control allot credits. and the revolution" refersto thelegalframework (thecorporation andits ofthemeansofproduction. ers.concerned and of system.e.and thestockmarket of class the the From outset.be maintained? personneland Despitetheriseofmanagerial thesefirstdecadesweremarkedby the of workers. This content downloaded from 194. They continuedto issue securities. dominant positionoffinance. ofthefinancial withthestability privatecentralbanks. and However. comproexpression Keynesian opening Some miseis oftenused to referto thisnewsocialconfiguration.

rules and norms.thestategaineddirect in varioussettings. in particular theseparation of ownership of production. monetary policyin 1979.whichtargeted Thisevolution wasconsiderofitscostinunemployment.The debtofThirdWorldcounofthis a majorexampleoftheappalling triesprovides consequences newpolicyoutsidetheUnitedStates. rights.in corporate and management. differences and oftheeconomy. S.Its wasmadepossiblebythelargeinflation financewasthegreatchangein realand symbolic. controloflargesegments including planning or otherformsofprivileged subsidies. climax.214.andtrade-union welfare benefits. financing." financial Thisnew the institutions. relations It is powerwhichis at issuehere. In Europe. as a majorsource didnotuseborrowing traditionally trywherefirms offinancing. economy follows is.however.social Theway therighttowork. Whatdidfinanceachieve?Muchharmtoothersandadvantage as maybe expectedfroma rulingclassnotdedicatedtoalforitself. ofthesetransformaofthestagesandforms Thedetailedanalysis thanthediscussion of to our presentanalysis tionsis lessrelevant of therulingclasses. whichwasnevertruly acceptedby between theruling waslinkedtoa compromise powerconfiguration classesand salariedworkersin general:risingreal wages.however.29. and nature. This content downloaded from 194. imposing thatfinancedid notreversetheevolutionof the clear. 17 Dec 2014 18:13:00 PM All use subject to JSTOR Terms and Conditions . particular ofthe1970's.One fraction theirsignificance hasrestored ofcapitalist thedirectincarnation finance. ownership. We Thisiswhatweshalldemonstrate truism.29 on Wed. as wellas theseconquestswererealizedhas oftenbeendescribed.simultaneously policyto pricestability. comThe crisiswhichbeganin the1970'sundidtheKeynesian whichhadbeen ofthepoweroffinancepromise. macroeconomy (policies concerning pricestability). in a counoftheriseofinterest even umenttheconsequences rates.The restoration in the field of international in for prepared decades.neoliberalism: crimeand beneficiary 395 "financial itwascalleditrepresented a realsetbackrepression.A specificpurposeof what todoctouse theexampleoftheU. regardless of internationalization the reinforced production by continuing ably multinational within corporations. Itmustbe its itscontroloverthesystem. focuson theconsequencesof thechangein monetary policyinitiatedin theUnitedStatesin 1979. byusinga fewfigures. and thereturnforthe to achieveprofitability (activity governance the in the control of well as as shareholder).

396 GérardDuménil& DominiqueLévy THE VIOLENCEOF FIGURES The riseof interest rateswhichfollowedfromthechangein whosemajorsympmonetary policyin 1979didnotcausethecrisis.A partialrecovery at a levelstillinferior however ratefluctuating occurs. tomswerealreadyevidentin the1970's.in(netinterest. risenabovethelevelof1980.witha profit a measureof tothatoftheearly1970's.Con1 showstwomeasuresof thisprofit siderfirst themeasurebeforeinterest i. theriseofinterest ratesprolonged theeffects thebestaccountoftheevThesynthetic variable whichprovides whosedecline olutionistheprofit rateofnonfinancial corporations.Asmight be expected.29. are taken into terestpaid minusinterest received) then declineis clearin the1970's.itis impossible to speakofa recovery.up to 1982. payments The account. crisisofthe1970's.e. financing Figure1 Profit Rate.The crisisis a structural In fact.) and Payment after( ): U.214. Nonfinancial Corporations This content downloaded from 194.Thesecondseriesdescribes The gap betweenthetwo theprofitafterthepayment ofinterest. ofcapitalism..Figure hadbeenthemainfactor ofthestructural ratefrom1970to 2000.BeforeInterest (. thepatternof their as soon as theywereable to do so. 17 Dec 2014 18:13:00 PM All use subject to JSTOR Terms and Conditions .S. altering anddiminishing theirinvestment.to The recentflucthisdegree.29 on Wed. is dramatic seriesduringthetwodecadesofneoliberalism and. linkedto theinnertendencies phenomenon ofthecrisis. tuations oftheprofit ratehavescarcely and theprofit ratein 2000remainsnearlytwiceas smallas thatof netindebtedness their firms diminished 1970.

would remained balanced publicexpenses generally in mostofthemajorcapitalist countries! ratessharply affected ThirdWorldcountries Thisriseininterest a largeexternal debt.becamerapidly unbearable. This content downloaded from 194. 17 Dec 2014 18:13:00 PM All use subject to JSTOR Terms and Conditions . carrying ofthephenomenon. accelerating on publicexpenses(whiletheflowsofrevenueslowed thepressure downas a resultofdiminished rates).214. butitis important to measuretheamplitude forall developing The apparentrealrateofinterest2 countries.29 on Wed.butmostofitcan.3 in in which caused When measured dolpolicy change monetary ofpricesin theUnitedStates). revealing it.the forthevariation lars(corrected countries of the GNP of appearsdramatic.Notallofthiscanbe 1996.29.Thisfacthasoftenbeendenounced. 3 The data are fromthe World Bank.ithadhardly blamedon thecostofthedebt.Ifnotfortheburden growth have ofinterest.soaredfromthenegativerates thedefinition (whichhad madepossibletheriseof thedebt)to largely positive in theGNP ratesin the1980's.NEOLIBERALISM: CRIME AND BENEFICIARY 397 Itiswellknownthatthenegative ofthesetransfers consequences ofincometolenderswerenotlimited toenterprises.Figure2 showstheshareofinterest theirsuddenrise.correctedforthe rate of variation of pricesin the United States. Figure2 The ShareofInterest on theDebtin theGNP: Countries Developing 2 The ratioof interest paid to the stockof debt. by of theWorldBank. Allborrowers wereaffected. Thecostofthepublicdebt.whosefinancing hadtobe renewedat thenewrates.simultaneous to the ofthesecountries. The seriesis not availableafter1996. By collapse developing recovered thelevelof1979.

and thatnobodyreallybenefits showsthatprecisely fromunfavorable circumstances. loans. This content downloaded from 194.As expected.including lenders.usingtheemergency allyputin forcethroughout tionscreatedbythedebtcrisisoroffinancial crisesingeneral. situatheworld. The graduprograms. longingthecrisis.Duringthe1970's. sectors(excluding ativesizeofthefinancial funds)in theeconomy.a shareoftheburdenofthe crisishadbeenplacedon lenders. to conofshareholders The ability inparticular welfare trolmanagement wasrestored. shares. securities.butthenewcourseofmonetary In theearlierdecto theiradvantage.Atthebeginning for isobserved 5 or6% duringthe1990's. sector.29 on Wed.214. attracted the 4.investors sector.thisratereached18% in the 1990's.A similar picture reaching and thefraction ofhouseholds i. Publicexpenses. 17 Dec 2014 18:13:00 PM All use subject to JSTOR Terms and Conditions . Following nonfinancial and rate of financial corporations profit corporations wasinverted.29.inAs alreadyarguedbyboththeclassicaleconomists differentials rate vestments are influenced amonginby profit rushedintothefinancial dustries. the theratiobetween the1979changeinmonetary policy..4Beforethelate1980's.thispercentage GNP. rules were new neoliberal were constrained. interest and dividends thattheyreceivedamountedto 12%ofthe totalincomeof households.398 GérardDuménil& DominiqueLévy Theseexamplesofthemajorshockscausedbythepolicyofhigh of interest inthecontext ratesandlowinflation mustbe understood a moregeneraltransformation. In abouttenyearsthisratiogrewfrom in termsofcapitalinvested. thesituation policyreversed sectorrethatthefinancial interest ades. Whatfollows theoppositeis true. ofthe1980's.thenetflowofmonetary about3 or 4% of ceived(itsmainsourceof profits) represented rosegradually. holding In the1970's. fitratesachievedin thenonfinancial andMarx.the to that inferior ofthefinancial sectorwassignificantly profitability the above well it rose ofthenonfinancial when sector. perpetuated thepressure placedon laborcosts.Proinparticular finance allofitseffects. ofagentssuffered One possibleobjectionis thatall categories fromthecrisis. figure by largeprofit net the to corporations playstheratioofthenetworthoffinancial a measureoftherelThisratioprovides worthofall corporations. prosuddenly. Thisis shownin figure3.e.theflowsof thewealthiest fraction ofthepopulation. 4 The figuresforthe financialsectorexclude funds. diswhich in This is shown rate.

17 Dec 2014 18:13:00 PM All use subject to JSTOR Terms and Conditions .29.S.Nonfmcial Profit ( . Figure3 Rate(%): U.29 on Wed.NEOLIBERALISM: CRIME AND BENEFICIARY 399 As iswellknown.) and FinancialCorporations ( ) Figure4 RatiooftheNetWorthofFinancialCorporations to thatofNonfinancial (%): U." ofmutualandpensionfundshasbeendramatic..a true"explosion. thegrowth about13%to23%.214. Corporations This content downloaded from 194.S.

and Russiaare a majorcomponent secfinancial the of In addition. of theworld stockmarket. periodofemerging in common are verystrong. of thecostsof LatinAmerica. instability.214. pose a seriousthreaton thestability Great here the One should not Depressionofthe economy.29. financial recent the of financial Indeed. theprevious 1930's. periodshave This content downloaded from 194.whichfollowed hegemony The pointsthetwo newtrendsoftechnology. thedramatic neoliberalism. variable Andtheunderlying No doubtnuancesshould levelsofdevelopment amongcountries. forget alsoin a offinance. in theforFinanceis involved be addedto thisgeneralassessment. 17 Dec 2014 18:13:00 PM All use subject to JSTOR Terms and Conditions .29 on Wed. are which oftechnical a rolein thenewfeatures presently change (theriseoftheoutput/ capitalratio).400 GérardDuménil& DominiqueLévy IS AN OVERALLASSESSMENTSTILL PREMATURE? is ofneoliberalism Thisrapidbalanceofthecostsand benefits and benefits ofthepopulation costsforone fraction unequivocalis thatofsocialclassesand foranother. growth of the fall rise and with the in tordescribed infigure combination 4. emerging is thatitignorestheissue The maindeficiency ofthisevaluation crisesin Asia. sectoroftheeconoftheproduction mationofthenewstructures Thesestructures play probably omywhichare presently emerging.