The Making of Global Capitalism
The Political Economy of American Empire
by Leo Panitch and Sam Gindin
Verso, 2013, 456 pages, $29.95 hardback.
THE MAKING OF Global Capitalism presents a sweeping history of the century-long U.S. ascendancy to the “commanding heights” of the global economy. Leo Panitch and Sam Gindin recount how the United States came to rule and continues as the primary architect, coordinator and essential guarantor of the present empire of capital.
This is an immense work, complex in its numerous themes and detailed arguments regarding the centrality of the U.S. state as the main bulwark and backer of accumulation on a world scale.
Not solely a historical narrative, the book offers interventions on a number of central questions for the left. Among other concerns, Gindin and Panitch map out a position regarding the meaning of “empire.” They take up issues of stagnation, U.S. “decline,” and the question of challenges to U.S. hegemony, recent and present. They explain the post-1970s “neoliberal turn” not as a retreat from state intervention, but as a state-guided economic restructuring.
Much of their enquiry focuses on class forces, domestic and international, and the division of labor within and among the nation states that came to shape the U.S.-anchored global order. The book also provides a layered historical understanding of the contemporary global crisis.
Placing the U.S. state at the center of the story, the work stands as an important counter to those who posit the existence of some extra-territorial stateless “empire” or supra-national global state. Their analysis also critiques the view of those “horizontalists” or “quasi-anarchists” who imagine a better world is possible without wresting power from “the state.”
Revising and expanding upon the decades-old understanding of the United States as an “informal empire,” without the need for extra-territorial colonies and a cumbersome colonial administration, the book recounts the long quest for the free movement of capital through the creation of an “empire of a new kind.”
Gindin and Panitch note straightaway that theirs is a work on the political economy of a “quite distinctive imperial state,” in which “the Pentagon and CIA have been much less important to the process of capitalist globalization than the U.S. Treasury and Federal Reserve.” Leaving to others the oft-repeated focus on direct “hard power” interventionism, the “national security state” and the “Imperial Presidency,” the authors place U.S. finance and “financialization” of the economy, and state-guided development and control of key financial institutions, at the heart of their interpretation of the process known as “globalization.”
The book hones in on the role of the U.S. state not as something separate from “the market,” but as the overall “superintendent of global capital” — the agency concerned first and foremost with facilitating and safeguarding the flow of credit, investment and accumulation; the international “lender of last resort” in periods of crisis, and the ultimate “firefighter-in-chief” coordinating the flow of vast streams of liquidity from behind a “firewall of failure containment.”
The authors explore the ways in which the “informal empire” developed. They trace the origins, evolution and centrality of the Treasury and the Fed and related state agencies in response to successive capitalist crises at home and abroad, economic nationalism and protectionism, and the subsequent wars and revolutions that convulsed the first half of the 20th century.
The heart of the book is the triumph of U.S. capital in the post-World War II decades. To set the stage, the early chapters survey the course of unparalleled U.S. economic expansion up through World War I and the 1920s (a decade now imagined as an era of “isolationism”).
While noting that the United States emerged as the leading capitalist power by the end of the 19th century, and that World War I saw the country turn from being a debtor to a creditor nation, Gindin and Panitch highlight the U.S. structural and institutional incapacity to manage or rearrange the global economy in its own image during that earlier period.
Those initial incapacities, they tell us, were gradually overcome, first by the varied institutional New Deal responses to the Great Depression, the often experimental economic interventions of the liberal state (later to be “internationalized”), and then by the experiences in managing the economy during World War II.
With other capitalist centers in shambles, at war’#8221;s end the United States readily stepped up as the economic leader for those parts of the globe remaining within the capitalist sphere at the time.
As an example of how conscious the effort was, the authors point to “An American Proposal,” the product of a series of “Roundtable” discussions among prominent businessmen initiated in 1939. Widely circulated in the spring of 1942 by the editors of Fortune, Life and Time, the “Proposal” projected a global U.S. role to follow the war.
Already confident that “America will emerge as the strongest single power in the postwar world,” those corporate leaders set their sights on replacing an older “dead and dying imperialism,” with a system of “universal free trade” under the aegis of the United States.
The conscious design and construction of that postwar agenda came to be led not by Wall Street but by the state, centered not by the State Department but rather by the Treasury.
As the leading postwar power, one very much concerned with a return of the Depression as well as a postwar leftward turn in Western Europe (as opposed to a Soviet threat from the east), the United States mobilized its resources to restore Western European and Japanese capitalism.
It did so with loans and aid, most notably via the Economic Recovery Program (the Marshall Plan), accompanied always by sets of preconditions, expertise, policies and institutional mechanisms fashioned at the 1944 Bretton Woods conference and beyond — a system of global investment and “free trade,” the unrestricted movement of capital, and the primacy of the dollar described as the “American way of doing capitalism.”
Gindin and Panitch importantly describe the increased presence of U.S. capital and accompanying practices in postwar Western Europe and elsewhere as a kind of “imperialism by invitation,” never simply imposed but actively welcomed by those national bourgeoisies seeking to rebuild as they fended off their respective challenges from the Left.
Understanding that the resuscitation of the major capitalist economies and the revival of competition was essential for the system as a whole, U.S. economic planners and state policy makers readily took on that “burden” of imperial leadership.
Recounting the construction of this “empire of a new kind,” our authors interweave an “inside” and “outside” story — as domestic class concerns affected global economic initiatives, and vice versa.
Certainly the specter and reality of labor militancy at home shaped the thinking, resultant policies and institutional/structural innovations of those gazing abroad throughout the postwar decades. Both the fear and the reality of labor and working class militancy, while seemingly subdued on occasion, would repeatedly come to the fore to play a role in shaping capitalist class strategies at home and abroad.
A good portion of the book centers on how U.S.-led capital reshaped the global economy in response to working class demands from the late 1960s on. In contrast to those who would argue that the U.S. economy has been in a state of “stagnation” and decline ever since the early 1970s, it paints a different portrait.
The authors bracket several distinct periods: the postwar “golden age” running from 1950 to 1967 whose contradictions gave rise to the extended crisis of 1968 to 1982 — an era characterized by a “profit squeeze” inflation largely brought on, they argue, by near full-employment labor militancy and popular demands placed on the Keynesian social state. That era was then followed by one of stepped-up profitability, productivity, investment and overall economic growth between 1983 and 1999, a period that entailed an “astonishing” restructuring propelled by state fiscal and monetary policy and the “neoliberal turn” from the social state — a conscious class offensive that, among other things, left real private-sector wages lower in the latter year than in 1968.
The authors describe what they dub a “second golden age” for capital, between 1983 and 2007, during which “the material base of the American empire was reconstituted.” They chronicle a set of major transformations of the U.S. economy and social relations that were “crucial for the way global capitalism was ‘made’#8221; in the final decades of the twentieth century.”
While others have pointed to the “hollowing out” of the U.S. “real economy” to “deindustrialization,” to “outsourcing” and the loss of well paying jobs to “overseas competition” as indicators of U.S. decline, Gindin and Panitch call attention to capital’#8221;s success, the international leadership and profitability of its multi-national corporations as world leaders in new growth sectors — in information technologies, pharmaceuticals, and aerospace.
A key transformation had to do with the restructuring of manufacturing, most notably in the “core industries” — steel, auto, and machinery — buffeted by imports and job losses through the 1980s and beyond. By the end of the century, a combination of geographic shifts in production, especially in auto, to the (non-union) South, direct foreign investment (Japanese and other) and plant reorganizations typified by “lean production,” outsourcing, and the adoption of high-tech, computerized equipment altered the industrial terrain.
Importantly, the last two decades also witnessed the growth of a diverse range of highly profitable “professional and business services,” and exported American “best practices” in everything from consulting, law, accounting, market research, engineering, computer software and systems analysis.”
All of the above was facilitated, assisted or subsidized by the corporate state, and ultimately by the continuing U.S. position as key creditor and international negotiator and “consumer of last resort.”
They highlight a “new age of finance” that witnessed a broadening and deepening of U.S. financial markets and the “financialization” of non-financial corporations that enabled the massive reallocation of capital involved in the restructuring of the economy during the period.
Refuting suggestions of an overall decline at the base, Gindin and Panitch point to the massive increase in productivity, shored up by those high-tech driven sectors. They point out that by the end of the century, of the top dozen global firms by sector, the United States accounted for 77 per cent of the world’#8221;s aerospace sales, 75 percent of all sales of computers and office equipment, and 91 percent of software sales and 62 percent of pharmaceuticals.
That exceptional productivity and expansion, they note, came about despite (or because of) the periodic downturns and recessions marking the period. All along, the entire restructuring was spearheaded by the dramatic “downsizing” of labor in manufacturing, a shrinkage in the size and strength of organized labor, a decline in wages and benefits, a corresponding increase in the number of hours worked, a mounting dependence of low -paying and precarious jobs in the service sector.
They describe a dramatically altered, disciplined and integrated working class, “more individualized and fragmented, [with] its collective capacity for resistance severely atrophied” (192) that increasingly turned to individuated survival strategies, most notably a dependence on “easy” consumer credit, made more accessible by government policy and low interest rates. The burden of household debt, most notably in the form of home mortgages bundled, “securitized” and speculated upon internationally, of course, became clear when the highly financialized housing bubble collapsed in 2007-2008.
Gindin and Panitch point out that the making of global capitalism has entailed the making of a global proletariat as the production of such commodities as textiles and garments, electronic components, etc., moved to low-wage export-oriented countries. While the ongoing global crisis was rooted in the volatility of finance and not in a crisis of production, a significant factor in generating the conditions that led to it was what happened to the world’#8221;s working classes since the crisis of the 1970s.
The growth of the global proletariat, essential to capitalist globalization, has produced what they describe as tendencies toward narrowing the differences in wages and conditions between developed and developing countries which, in part, explains the “continuing travail” of trade unionism in the developed capitalist countries.
“The very financialization through which global capitalism was realized,” they tell us, “was also the means through which workers were disciplined; and the political and organizational defeats they had suffered since the 1980s were closely linked to the recovery of corporate profitability — albeit a recovery characterized by new vulnerabilities...”
The authors take issue with much of the contemporary literature on U.S. decline and loss of hegemony in regard to an ascendant China. While noting China’#8221;s rapid rise to become the world’#8221;s second largest economy, especially after its entry into the World Trade Organization in 2001, they show how it remains an export-oriented society dependent upon the United States as the “consumer of last resort.”
A fully integrated part of the global system, China’#8221;s political economy is increasingly penetrated by “Western” capital, fraught with its own growing class contradictions and tensions, incapable of taking on the role of capitalism’#8221;s global guarantor.
Rather than inter-imperialist rivalries, Gindin and Panitch portray a global system based on the cooperation of the dominant capitalist powers joined together in such bodies as the G7 and the G20, still under the practical leadership of the United States.
In this “empire of a new kind,” the authors see inter-imperialist rivalry as eliminated or at least contained. The system’#8221;s inherent contradictions, rather than playing out between various capitalist nation-states, are increasingly coming to the fore within them. The new fault lines of antagonism, made worse by the exactions of austerity demanded by overlords of capital, continue to surface from Cairo and Wisconsin to Athens, from Istanbul to Rio.
The book, it could be argued, is somewhat “Eurocentric” in that its primary focus is on the economically intertwined capitalist centers of the “Atlantic community.”
There is some discussion of the defeat of earlier Third World import-substitution strategies, the 1980s “debt crisis,” the 1997-1998 “Asian crisis” and the rise of a new international division of labor, but little if any concerning the diverse roles played by an unevenly developed Global South in Gindin and Panitch’#8221;s capitalist order.
Africa and Latin America barely appear. Nor do those oil producers of the Middle East and Central Asia rich in energy and petrodollars vital to the economies of “the West” and the viability of the global system.
The volume tells us how the contemporary global system, guided primarily by U.S. state institutions, came about and how it functions. It would have been helpful if the authors had explored how those institutions at the “commanding heights” get reproduced. After all, they are filled with human actors connected through their social relations, class ties and shared values who came from somewhere.
While smartly focusing on the central role of the state, they give little if any sense of the constantly “revolving doors” between the corridors of power at the Treasury and Fed, say, and the boardrooms of the “private sector” corporate giants on Wall Street and elsewhere.
The book also gives too short shrift to state spending on “defense” and “national security” at all levels. The national security state’#8221;s economic role as sponsor of research and development generating numerous spinoffs (the internet, for example), as provider of innumerable procurement contracts and as a significant employer (civilian and military, alike) cannot be ignored. Neither can the weapons sales to junior partner ruling regimes worldwide.
All that and much more continues to have all sorts of positive and negative “multiplier effects,” at home and abroad. It seems that if U.S. state-run financial institutions underpin the global economy and provide cover for the major loan sharks and bail bondsmen of the world, then some accounting of the globalized “protection and security” racket providing “defense” against the increasing number of global indignados must be included.
Gindin and Panitch’#8221;s complex but rewarding history will nonetheless take its place as a serious and sobering contribution to the lengthy literature on the workings of the U.S. empire, the realities of “globalization,” and the severity of the most recent capitalist crisis. If our goal is not only to understand the world, but ultimately to change it, then a close read of their account should be of inestimable help. That certainly is the authors’#8221; expressed concluding hope.
November/December 2013, ATC 167