Capitalism and Its Economics by Dowd Douglas;

Author:Dowd, Douglas;
Language: eng
Format: epub
Publisher: Pluto Press

Toward the new world order

There was another major development, very different in kind, working to the advantage of the biggest companies and the financial sector, and to the detriment of most wage-earners. As corporate profits and real investment began a long decrease in national economies, businesses (led by U.S. banks) increased their efforts in the international arena. As the 1970s ended and the 1980s began, a new global economy was being shaped, one that would be dominated by the transition from MNCs to TNCs, and by the growing dominance of finance over production, within and between economies.

Facilitating that major set of changes – given the always improving technologies of communications and transportation – was one consequence of the stagnation that had become evident in the late 1960s: falling profits and excess productive capacities within national economies meant that the financial community found itself with excess capital on hand.

This prompted a concerted movement to press governments that were providing subsidized loans with low interest rates or free grants-in-aid to the “developing countries” to cease doing so. This opened the doors for bankers – literally flying all over the world with deals in hand – to “extend” private loans (frequently with the assistance of corrupt governments and Cold War links). The private loans were not subsidized, let alone free; indeed, what came to be universal already by the early 1970s were substantial loans with “variable” interest rates, mostly payable in dollars – variable upward, as inflation took hold. In that almost all the poorer economies involved were also importers of petroleum (the prices of which escalated in that decade); this assured that from then on the indebted countries would move into and remain in deepening and spreading economic and associated political crises. As we will see in the next chapter, the stagflation crisis of the 1970s was surmounted but, as in the past, by changes whose evolution would produce its own “defects and virtues” – among them the greatest ever “triumph of the market.” The “market” that triumphed was not that which was esteemed by Adam Smith, but one dominated by a giant corporations and speculators. Rather than the “euthanasia of the rentier class,” the end of the twentieth century saw them become top dogs. In the same process, the vocabulary of economic life came to be filled with the ugly terms and realities of “downsizing, outsourcing, and derivatives.” In the next chapter it will be seen that mainstream economists, confronted with these developments, bowed even lower than before – except that there were also importantly positive contributions from economists who had seen themselves as part of the economics “establishment,” and, as well as from “radicals.” We look first at those useful developments.

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