The Restructuring of Capitalism in Our Time

The Restructuring of Capitalism in Our Time

William K. Tabb
Copyright Date: 2012
Pages: 352
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  • Book Info
    The Restructuring of Capitalism in Our Time
    Book Description:

    Actions taken by the United States and other countries during the Great Recession focused on restoring the viability of major financial institutions while guaranteeing debt and stimulating growth. Once the markets stabilized, the United States enacted regulatory reforms that ultimately left basic economic structures unchanged. At the same time, the political class pursued austerity measures to curb the growing national debt. Drawing on the economic theories of Keynes and Minsky and applying them to the modern evolution of American banking and finance, William K. Tabb offers a chilling prediction about future crises and the structural factors inhibiting true reform.

    Tabb follows the rise of banking practices and financial motives in America over the past thirty years and the simultaneous growth of a shadow industry of hedge funds, private equity firms, and financial innovations such as derivatives. He marks the shift from an American economy based primarily on the production of goods and nonfinancial services to one characterized by financialization, then shows how these developments, perspectives, and approaches not only contributed to the recent financial crisis but also prevented the enactment of effective regulatory reform. He incisively analyzes the damage that increasing unsustainable debt and excessive risk-taking has done to our financial system and expands his critique to a discussion of world systems and globalization. Revealing the willful blind spots of mainstream finance theory, Tabb moves beyond an economic model reliant on debt expansion and dangerous levels of leverage, proposing instead a social structure of accumulation that places economic justice over profit and, more practically, institutes an inclusive, sustainable model for growth.

    eISBN: 978-0-231-52803-0
    Subjects: Political Science, Business

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
    (pp. vii-x)
  4. 1 The Centrality of Finance
    (pp. 1-24)

    Not long ago the near collapse of the financial system discredited the excessive financialization central to contemporary American capitalism. History suggests a prolonged transformative crisis, one made worse by macroeconomic policy errors, including in the handling of the debt ceiling, and by overoptimism regarding the self-healing powers of the market. As banks and the stock market recovered, the conversation moved to worrying about public debt. Financial reform was presumed to have been achieved; the financial crisis safely consigned to history. This book is a protest against this premature dismissal and suggests we need to understand the damaging role finance has...

  5. 2 Financialization and Social Structures of Accumulation
    (pp. 25-59)

    The social structure of accumulation (SSA) framework suggests that periods of growth require a coherent set of mutually reinforcing institutions favorable to capital accumulation. These involve the creation of relatively lasting accommodations between contesting social forces, including stable understandings between capital and labor, the United States and the rest of the world, capital and the state, capitalists and other capitalists, and citizens and their government. Institutional stability provides conditions under which the behavior of others, the meaning of events, and the likely outcome of actions can be predicted over the relevant planning horizon with enough confidence to provide consistent expectations,...

  6. 3 Realism in Financial Markets
    (pp. 60-92)

    The first financial crisis in the Western world is said to have been in 1622 when the Holy Roman Empire debased its coins, bringing on a modern-style banking crisis. This could be understood perhaps as the result of poor monetary policy or simply the greed of an elite that did not distinguish between the state and the self. Since the triumph of the market system, economists with faith in the rational expectations of investors and financial markets to produce efficient outcomes understand crises as caused by shocks to the system coming from the outside. The most frequently mentioned of these...

  7. 4 The Shadow of the Financial System
    (pp. 93-131)

    Traditionally, banking was understood as consisting of banks that took deposits and made loans that were held to maturity, when the debt was repaid, with interest payments made along the way. Depositors’ savings anchored lending. This system eroded over the decades of the global neoliberal SSA as shadow banking activities became an outlet for capital seeking higher returns, given the lack of investment opportunities with comparable returns in the nonfinancial economy. With profits down in many areas of the real economy in the mature markets of the core, investment banks seeking higher returns put greater amounts of capital at speculative...

  8. 5 The Coming Apart
    (pp. 132-175)

    The global financial crisis, or the Great Recession, had its trigger in the collapse of the housing market and the impact of unpaid subprime mortgages on securitized debt in the United States. It was the third business cycle in a row rooted in an asset bubble and was far worse than one might have thought from the dollar amount of underlying mortgages involved. In the era of national Keynesianism, home owners unable to meet their mortgage obligations would not have produced anywhere near the same damage; it was the extent of financialization and the interconnectedness of segments of finance in...

  9. 6 Rescue and the Limits of Regulation
    (pp. 176-210)

    It is unlikely that anything government can do in a capitalist economy can prevent economic crises. Nonetheless, rapid growth of credit should be a signal for regulatory measures. Policies are available to lean against the wind and take the punch bowl away to keep the party from getting out of hand. This will not prevent cycles but can moderate both damage from overexpansion and then the extent of the collapse—if there is effective government intervention. For this, however, the government must be free of the control of those they presumably regulate and be able and willing to take steps...

  10. 7 Nations, Globalization, and Financialization
    (pp. 211-245)

    America’s problems at first produced widespread schadenfreude from those who had long been lectured by Washington. In his opening remarks to the UN General Assembly in September 2008, Secretary General Ban Ki-Moon spoke for many when he declared there was a need for “less uncritical faith in the ‘magic’ of markets,” an obvious riposte to Ronald Reagan’s announcement three decades earlier at the dawn of the neoliberal ascendancy. President Reagan told the General Assembly that the United States would not make redistributive concessions to poor countries. Instead of looking for paternalistic handouts, they should put their faith in “the magic...

  11. 8 The Present in History
    (pp. 246-276)

    By early 2011 the stock market had recovered most of its losses, and Wall Street executives were enjoying record bonuses. The new financial sector regulations were unlikely to do much to prevent the next crisis, even as the increased moral hazard—based on the extensive subsidies that governments responding to the global financial crisis had provided—raise expectations of similar bailouts for irresponsible risk taking gone wrong in the future. Simon Johnson (2011) warned that “the big banks have won completely this round of boom-bust-bailout. The risk inherent to our financial system is now higher than it was in the...

    (pp. 277-314)
  13. INDEX
    (pp. 315-342)