Very interesting perspective, slightly longish and academic though.
Central thesis is that Asset bubbles post the 70s aren't aberrations or side-effects but the main drivers of whatever growth we saw in the non-bubble periods. Revolutionary, and no wonder the author takes us on a trip starting Sri Karl Marx's understanding of the competing systems of socioeconomic organization.
Brenner is skeptical. What sets him apart from both conventional liberal and conservative analysis that seeks to explain the crisis in terms of financial shenanigans is his view of the “decreasing vitality of the advanced capitalist economies rooted in a major decline, and stubborn failure to revive, of the rate of profit, finding its fundamental... source in a persistent tendency towards over-capacity in the global manufacturing sector, which originated in the intensification of international competition between the mid-1960s and mid-1970s.” (emphasis added).
It is here that Brenner becomes so interesting to those of us who study East Asia. Because unlike any other Western economic historian of whom I am aware, Brenner fully grasps the significance to global capitalism of what has happened in East Asia since the appearance of the export-led, state-directed Japanese growth model in the 1960s and its spread throughout Asia since the 1970s.
“Manufacturing over-capacity emerged, was reproduced, and has been further deepened by way of an extended process of uneven development in which a succession of newly-emerging manufacturing powers has been able, thanks to systematic state intervention and highly organized forms of capitalism, to realize the potential advantages of coming late, especially by combining ever increasing technological sophistication with relatively cheap labor and orienting for the world market.”
Brenner contends that “the premature entry of high-competitive lower cost producers, especially in the newly developing regions of East Asia” would have led to serious crisis were it not for the ability of advanced capitalist governments to make available “titanic volumes of credit.” For a while, “traditional Keynesian measures” did the trick in compensating for the decline in manufacturing profitability in the Western capitalist countries, but like a diabetic facing insulin-resistance, governments found that these measures became less and less effective over time.
Instead, “artificially cheap domestic credit” opened the way for “domestic asset bubbles” made possible by the growing financialization of the economy and the migration of human and financial capital from industry to Wall Street and the City of London. Specifically, “the weakness of business investment made for a sharp reduction in the demand by business for credit.
East Asian governments' unending purchases of dollar-denominated assets with the goal of keeping the value of their currencies down, the competitiveness of their manufacturing up, and the borrowing and the purchasing power of US consumers increasing made for a rising supply of subsidized loans...One has therefore witnessed for the last dozen years or so the extraordinary spectacle of a world economy in which the continuation of capital accumulation has come literally to depend upon historic waves of speculation, carefully nurtured and publicly rationalized by state policy makers and regulators – first in equities between 1995 and 2000, then in housing and leveraged lending between 2000 and 2007. What is good for Goldman Sachs – no longer GM – is what is good for America.” (emphasis in the original).
Read it all. Recommended read only.If this is correct, there is no easy fix for our problems. The blowing of asset bubbles is not an unfortunate side effect of regulatory capture or Wall Street’s greed. It was the only way governments could keep economic growth from falling below politically dangerous levels once traditional Keynesian methods of fiscal stimulus through deficit spending were no longer adequate to compensate for the sclerosis at the heart of the advanced capitalist economies: “worsening difficulties with profitability and capital accumulation.” Brenner labels this bubble-blowing “stock market Keynesianism” referring to deliberate measures by governments to steer credit into equity markets.
to the rescue.
