The Rise and Fall of Neoliberal Capitalism

288 Pages·2015·1.67 MB·English

by  David M. Kotz

The Rise and Fall of Neoliberal Capitalism

The Rise and Fall of
Neoliberal Capitalism
David M. Kotz
Cambridge, Massachusetts & London, England
2015
Copyright © 2015 by the President and Fellows of Harvard College
All rights reserved
Printed in the United States of America
First printing
Library of Congress Cataloging-in-Publication Data
Kotz, David M. (David Michael), 1943–
The rise and fall of neoliberal capitalism / David M. Kotz.
pages cm
Includes bibliographical references and index.
ISBN 978-0-674-72565-2 (alk. paper)
1. Neoliberalism. 2. Capitalism. 3. United States—Economic
policy—1945– I. Title.
HB95.K67 2014
330.12'2—dc23 2014017153
Contents
List of Figures and Tables vii
Preface xi
Acknowledgments xv
1 Introduction 1
2 What Is Neoliberalism? 8
3 The Rise of Neoliberal Capitalism 45
4 How Has Neoliberal Capitalism Worked? 85
5 Crisis 127
6 Lessons of History 181
7 Possible Future Paths 197
Appendix: Data and Data Sources 221
Notes 223
References 253
Index 265

List of Figures and Tables
Figures
2.1. World exports as a percentage of world gross domestic product,
1950–2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
2.2. Merger transactions reported to the Federal Trade Commission,
1979–2011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.3. Monthly benefi t per recipient under aid to families with
dependent children or temporary assistance for needy
families in 2009 dollars, 1962–2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.4. Federal hourly minimum wage in 2011 dollars, 1960–2007. . . . . . . . . . .24
2.5. Top federal marginal tax rates, 1952–2007. . . . . . . . . . . . . . . . . . . . . . . 25
2.6. Union members as a percentage of all employees, 1973–2012. . . . . . . . 28
2.7. Gross value added of fi nancial corporations as a percentage of
gross value added of all corporations in the U.S., 1948–2012. . . . . . . . 34
2.8. Profi ts of fi nancial corporations as a percentage of the profi ts
of all corporations in the U.S., 1948–2012. . . . . . . . . . . . . . . . . . . . . . . 35
2.9. U.S. imports as a percentage of gross domestic product,
1948–2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.10. Government expenditure as percentage of gross domestic product,
1948–2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
2.11. Government infrastructure spending as a percentage of gross
domestic product, 1959–2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
3.1. Rate of profi t of the u.s. nonfi nancial corporate business sector,
1948–1982. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
3.2. Annual infl ation and unemployment rates, 1960–1985. . . . . . . . . . . . . 64
viii List of Figures and Tables
3.3. Multilateral trade-weighted value of the U.S. dollar, 1967–1979
(March 1973=100). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
3.4. Goods imports as a percentage of goods-only gross domestic
product, 1960–1979. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
4.1. Rate of profi t of the U.S. nonfi nancial corporate business sector,
1948–2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
4.2. Annual growth rate of U.S. gross domestic product in
chained 2005 dollars. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
4.3. Annual growth rate of world gross domestic product. . . . . . . . . . . . . . . .91
4.4. Annual growth rate of western european gross domestic
product. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .91
4.5. Average annual labor productivity growth rate in the U.S. . . . . . . . . . . 92
4.6. Investment performance in the U.S. in two periods. . . . . . . . . . . . . . . . 93
4.7. Personal saving as a percentage of disposable personal income,
1948–2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
4.8. Consumer spending as a percentage of gross domestic product,
1979–2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
4.9. Business fi xed investment as a percentage of gross domestic
product, 1979–2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
4.10. Share of aggregate income received by lowest 20% and top 5%
of families. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
4.11. Income shares of richest 1% and richest 0.1% as a percentage
of total income, 1920–2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
4.12. Annual growth rates of wages and salaries and corporate profi t. . . . . . . . 99
4.13. Average hourly earnings of nonsupervisory workers in 2011
dollars, 1948–2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
4.14. Percentage increase in the average real family income of
quintiles and the top 5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .101
4.15. Average annual unemployment rate. . . . . . . . . . . . . . . . . . . . . . . . . . . .102
4.16. Families below the poverty line, 1959–2007. . . . . . . . . . . . . . . . . . . . .102
4.17. U.S. trade balance as a percentage of gross domestic product,
1948–2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .103
4.18. The house price index relative to homeowner’s equivalent rent,
1982–2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .107
4.19. Consumer spending as a percentage of disposable personal
income, 1948–2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .110
List of Figures and Tables ix
4.20. Household debt as a percentage of disposable personal income,
1980–2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .111
5.1. Debt of sectors of the U.S. economy as a percentage of gross
domestic product, 1948–2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
5.2. Outstanding value of collateralized debt obligations in the
global economy, billions of U.S. dollars, 1995–2007.. . . . . . . . . . . . . . 134
5.3. Capacity utilization rate in manufacturing for business cycle
peak years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .142
5.4. Causes of the economic crisis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .143
5.5. Estimated average house price by calendar quarter,
2000–2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .145
5.6. Delinquency rate on single-family residential mortgages,
quarterly rates, 2006–2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
5.7. Gross domestic product, fi rst quarter of 2007 to third quarter
of 2009, billions of chained 2005 dollars. . . . . . . . . . . . . . . . . . . . . . . .148
5.8. Monthly excess reserves of depository institutions in billions
of dollars, 2007–2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .151
5.9. Monthly unemployment rate, 2007–2013. . . . . . . . . . . . . . . . . . . . . . . 156
5.10. Monthly job gain or loss, hundreds of thousands,
2008 and 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
5.11. Monthly underemployment rate, 2007–2013. . . . . . . . . . . . . . . . . . . . .163
5.12. Long-term unemployed as a percentage of all unemployed,
monthly, 2007–2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .163
5.13. Employment as a percentage of the working age population,
monthly, 2007–2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164
5.14. Median family income in 2012 dollars, 1990–2012. . . . . . . . . . . . . . . .165
5.15. U.S. federal debt held by the public as a percentage of gross
domestic product, 1940–1975. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .172
5.16. Rate of profi t of the nonfi nancial corporate business sector,
2000–2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .176
5.17. Annual rate of capital accumulation, 1948–2012. . . . . . . . . . . . . . . . . .179
Tables
2.1. The Ideas and Institutions of Neoliberal Capitalism . . . . . . . . . . . . . . . 42
3.1. The Ideas and Institutions of Regulated Capitalism . . . . . . . . . . . . . . . . 51