[OPE] Riccardo Bellofiore and Joseph Halevi, "Deconstructing Labor What Is 'New' in Contemporary Capitalism and Economic Policies: a Marxian-Kaleckian Perspective"

From: Gerald Levy <jerry_levy@verizon.net>
Date: Tue Apr 14 2009 - 08:29:30 EDT

Deconstructing Labor:
What Is "New" in Contemporary Capitalism and Economic Policies: a
Marxian-Kaleckian Perspective
by Riccardo Bellofiore and Joseph Halevi
Paper presented at the Congrès Marx International V, Paris-Sorbonne et
Nanterre, October 2007
1. Introduction
About a decade ago the radical left, both in Italy and elsewhere in Europe,
had been gripped by an understanding of contemporary capitalism as based on
a three-pronged tendency: 'globalization' as an already accomplished state,
the 'end of labor' due to mechanization, and the 'whittling away' of the
nation-state.1 Equally unreliable was the subsequent interpretation of the
'new economy' and of the world-economy by the authors stressing the
constitution of Empire. This last view originated in the post-workerist
literature ('operaismo'), and its apologetic tones were not very subtly
concealed.2 Both readings, entailing the spilling of rivers of ink, banked
on the stable nature of the new capitalism, more or less in the same vein as
envisioned by the global centre-left project of Clinton, Blair, and
Jospin -- in Italy echoed, each in its own way, by the Prodi, D'Alema, and
Amato governments.
We never believed in all this. In the second half of the '90s we
anticipated the crisis of the 'new economy', i.e. the collapse of the
dotcoms, the resurgence of war capitalism, the coming back of the State,
which followed in the subsequent years with an accommodating monetary policy
and, in the Anglo-Saxon countries, with a strong fiscal expansion through
the form of military spending.3 It does not follow, however, that we are in
agreement with a too-simple criticism of the hard-thesis about an
hyper-globalization or of the myth of the new economy, according to which no
major changes have occurred in present-day capitalism or in actual economic
2. How the New Capitalism Has, for the Time Being, Solved the Problem of
Monetary Realization of Profits. . .
The neo-liberal turn of the early 80s established a powerful stagnationist
tendency, but from the mid 1990s onwards, political countertendencies were
activated which solved, though temporarily, the problem of an insufficient
effective demand, at the same time weakening and fragmenting labor.4 These
political processes and mechanisms -- the epicenter of which is in the
United States -- gave way to a new kind of interventionist economic
policies. At any rate, the active intervention of the State has never
really disappeared, not even in the years of Mrs. Thatcher and President
Reagan. Whoever thinks that neo-liberalism is a return to laissez faire --
the actual historical existence of the latter being, as Keynes was well
aware, rather dubious -- is mistaking ideology for facts. All this
notwithstanding, we think there is something 'new' in contemporary
capitalism and in its economic policies which requires a new understanding.
The stagnationist tendency takes hold in the 1980s and in the early 1990s.
The deregulation of capital movements, the restrictive monetary policies,
the attack on welfare provisions, the aggressive competition of global
players in manufacturing and service sectors have all been at the root of
the low and unstable levels of investment and of the violent compression of
the share of wages, and often of real wages, hence of workers' consumption.
The novelty of the last decade manifests itself in two phases. The first
phase belongs to golden years of the new economy, especially after June 1995
when the long-term decline of the US dollar was halted and reversed by the
deliberate policy of the Federal Reserve -- sustained by the Bundesbank --
to stave off the collapse of Japan. The renewed strength of the US dollar
and the Fed's monetary policy favored the Wall Street boom in stock prices
which led to an expansion of consumption, and of investment, particularly in
the technology sectors tightly linked to financial services. The whole
process depended essentially upon the private sector going into deficit,
with expenditure higher than disposable income: thus, in the second part of
the Clinton presidency, when the State budget deficit was reversed into a
surplus, private debt replaced a shrinking public debt. Rising household
indebtedness was, in turn, guaranteed vis-à-vis financial institutions by
that very rapid expansion of financial wealth.
The collapse of the 'irrational exuberance' bubble did determine the end of
the most naive delusions about the new economy but it did not produce a
vertical fall of the US and -- by implication -- of the world economy. The
crisis in the US economy was short-circuited by a quick and massive
injection of liquidity and by lowering the interest rate to practically
zero, as well as in the resumption of a deficit-orientated fiscal policy
leading -- contrary to the Clinton years -- to a renewed rise in the public
debt. In short, the crisis was avoided by creating endogenous money and by
relying again on war Keynesianism.
Yet, we can't stop here and conclude that the latter is the sole form of
Keynesianism compatible with, and acceptable to, contemporary capitalism.
We cannot conclude that for two reasons. Firstly because --as we have
already hinted -- the new economy, no matter how paradoxically, relied on an
efficacious form of Keynesianism through the financial lever via the command
over money exercised by the Federal Reserve. Secondly, low interest rates
and military spending were not enough to kick-start the American economy,
and that of the world. We come now to the second phase of our narrative
about the novelty and changes of the last decade. Large injections of
liquidity and military spending guaranteed a floor to the fall of economic
activity. However the factors that have enabled the upswing in the cycle of
the world economy are related to two other circumstances which are far from
being purely contingent: the United States' relations with Asia, first and
foremost with China and India5; and then banks' willingness to finance
consumption entailing a rising households' debt -- a key element now being
the financing of the 'real estate' bubble now on the verge of a sharp
deflation. This is daily stuff by now and it heralds a message for Europe
as well.
Asia has been covering United States' twin deficits for years.
Schematically we may capture the essence of the contemporary situation as
follows. Net world demand is predominantly generated by Anglo-Saxon
capitalism and it is supplied through a productive cycle largely based on
delocalized production processes. The key variable in the positive dynamics
of demand is private indebtedness, which in the United States has grown
exponentially. On the whole, net savings of the private sector, even of
households, are now negative. Banks, busy as they are in sustaining
consumption, provide firms indirectly -- but not less efficiently -- both
with liquidity and market outlets for their production: so that finance to
households' consumption is in fact finance to firms' production and
guarantees an adequate effective demand. Asia is also the new world
manufacturing engine, and it exploits a huge 'industrial reserve army' of
labor, while deindustrialization and the new service economy at home -- i.e.
in the mature countries -- inescapably give rise to generalized
precariousness in job and working conditions.
If today there is some kind of Keynesianism, it is of this kind, and it is
quite consistent with a growing 'casualisation' of the labor force, so that
the consequent 'full employment' is intrinsically precarious and unstable.
It is a 'financial' form of Keynesianism -- initially centered mainly on the
stock exchange bubble, and today on credit to consumers thanks to the real
estate bubble -- which is temporarily allowing to 'close' the monetary
circuit from the effective demand side. It is neither a new stable regime
for the extraction of surplus value (as the hyper-globalisers or the
followers of Antonio Negri would want us to believe), nor is it a
stagnationist regime as old and new Keynesians are fond to claim.
Workers are sucked into the vortex of this infernal whirlpool activated by
financial Keynesianism not only as workers (squeezed by restructuring at
home and competitive pressure from outside) but also as savers and as
consumers. They are involved in the financial markets, to different degrees
depending upon the institutional set up of the countries concerned, as
investors of their own monetary savings (these are being now mobilized
without any impediment and national controls following the dismantling of
the national pension systems and the concomitant rise of institutional
investors), and as debtors towards the banking system (because of
consumption and mortgage loans to households). Such is the general economic
tendency everywhere, supported and driven by the active 'new' economic
policies. In a vicious circle of expanded reproduction: it produces an
accelerated 'deconstruction' of labor as well as a radical redesign of the
modalities regarding the extraction of value and of surplus value.
The axis of this new model -- which, it must be stressed, presupposes in the
United States the primacy of expansive monetary and fiscal policies, i.e.
exactly the opposite of the European Central Bank + Maastricht parameters +
Dublin's Stability Pact model -- can be then portrayed as follows: low
wages, precarious jobs, budget deficits, high indebtedness, plus absorption
of wage earners in the financial circuits qua investors6 and debtors. The
problem of effective demand, that is, the question of the monetary
realization of profits is, as a consequence, temporarily solved. It would
be difficult to predict how long can this sort of solution last since it
contains unstable and, in the long run, unsustainable elements and forces.
These are to be seen within the dominant economies, within geopolitical
factors, and, perhaps increasingly, within the global reserve army economies
of China and India.7
3. . . . Meanwhile in Europe the Stability Pact Is Not the Main Problem
Europe does not belong to a different narrative.8 The reasons, however, are
quite different from the vision of a homogenous world put forward by the
mythology of globalization or by Negri's equally mythological notion of
Empire. To begin with, the nature of the new American-Asian model is such
that Europe plays the role of a residual actor and appears as a loser. The
axis USA-Asia requires that the US dollar remain the pivot of the world
financial system, even under conditions of systemic but controlled
devaluation. This factor, together with the rise of the Asian manufacturing
sector, hurts the Old Continent, and within it the weakest areas such as
Italy, whose decline has become a free fall. Yet, were the new model --
which we described only in the most general terms -- to implode, it would
bring to a halt the only global economic locomotive still active
notwithstanding its limitations. Europe would simply not be in a position
to replace it even if it wanted to. The European impotence ensures that the
United States will always hold a significant blackmailing power.
Furthermore, Europe is increasingly taking the social and financial reality
of the United States as its model, albeit in contradictory and, sometimes,
reluctant terms. Lastly, Italy, and with a vengeance compared to other
European countries, precisely because of its relative backward conditions,
is implementing at reckless speed the reorganization of financial
institutions, of the labor market, of production processes, and of the
governance of firms along criteria imported from Anglo-Saxon capitalism.
Indeed, Italy is the last carriage but of the same train!
It is necessary to avoid a serious misunderstanding. We should not believe
that the Maastricht Treaty and the Stability and Growth Pact of Dublin and
Amsterdam were just mindless or a stupid thing, to quote the former head of
the European Commission and now Italy's Prime Minister, Signor Romano Prodi.
Instead, the Maastricht Treaty and the Stability Pact represent the alibi
behind which proceeded in Europe industrial restructuring, the creation of a
financial space, the formation of new regional articulations, and the
dismantling of the welfare state based on acquired rights. These processes,
however, stem from much more substantial factors which are bound to persist,
and they will, even in the case of the relaxation -- which has been already
happening in the last few years -- of the treaties' constraints on public
finances. These processes not only admit but require divergent dynamics for
the different areas of the European Union. The divergent dynamics are
rendered more dichotomous by the new entrants from Eastern Europe with their
disguised unemployment and low wages also for their skilled labor force.
Our scenario identifies 4 different and divergent areas with the European
Union and the countries gravitating towards it. A quality based
manufacturing pole centered on the traditional Franco-German heart of
Europe, which therefore includes Belgium but also Austria and, de facto, the
regions of heavy industry of Switzerland. This pole has, through Germany's
activity of restructuring, a small industrialized periphery in Eastern
Europe mostly in the Czech Republic and to some extent in Slovakia. The
Western European side of this pole still has a substantial system of welfare
provision which is being gradually thinned out. We then have a pole based
on niche productions of advanced technologies located in the Scandinavian
countries, including Finland, where the essential features of the social
democratic model seem to be still holding pretty well, but the
generalization of such a model to the rest of Europe is out of the question.
Then we have the United Kingdom, fundamentally a pole onto itself, but with
strong ties to the Netherlands and Luxembourg qua financial and service
centers, linked mostly to Anglo-Saxon capitalism. The last pole is centered
on Italy and is characterized by being an area of relocation of low level
industries, as evidenced by the outsourcing of the small Italian firms in
the traditional sectors to countries still outside the EU, like Romania and
Albania. The new economic geography of Europe both updates and confirms the
old one: some countries, like Italy, slide down the ladder abandoning their
previous positions and roles, while at the same time there are tendencies to
establish also an imperialist pole centered on Mitteleuropa.
Within this context one cannot bury his/her head in the sand and not see
that, in the first few years of the new millennium, redefining, not just on
paper but in practice, the Stability Pact has become the lever with which
power relations are exercised and altered. The ways in which countries
pretend to apply it or decide to bypass it highlight in full the
predominantly national dimension of European policy making. The European
nation states (countries) constitute the pivot of the political and
institutional dimensions of the Continent's and of the European Union's
class articulations.
The small countries support the Stability Pact precisely because they went
through heavy sacrifices to comply with it. For this purpose they had, as
in the Dutch case, to impose sacrifices which redefined the relations with
Trade Unions and social relations within the society. In Holland, for
instance, the path to compliance has entailed the mutation of around 40% of
the total employment into part-time jobs. Neither capitalists nor any
standard government would, in all good faith, call this outcome into
question and say, "Sorry, we were wrong, let us pay no attention to the
Stability Pact for which we put 40% of you into precarious occupations."
Thus to fence off the possible repercussions coming from the (large)
countries which are not abiding by the criteria is, for Holland, a manner to
defend the new class articulation achieved through the imposition of those
For France and Germany the situation appears to be altogether different.
Already with the launching of new single currency these two countries were,
without fudging the data, outside the parameters. The situation has
certainly not been corrected since. These two were also the countries that
most adamantly opposed, by throwing their weight around, the creation of a
truly European budget. They were exercising their pressures while they were
successfully demanding to be allowed not to respect the rules that they
imposed upon the smaller members of the EU as well as upon Italy. It is
equally significant that France and Germany are crucial contributors, at the
EU level, to the reformulation of the discretional rules in a way which
would favor a greater severity regarding the criteria of public debt. The
new discretional rules that France and Germany are supporting are
constructed on the basis of an ideal culprit, Italy, so that Paris and
Berlin can continue to ignore the Stability Pact, while Italy will have to
converge towards its parameters.
It follows therefore that it is impossible to see on what kind of common
interests a European form of Keynesianism can emerge, leading to a coherent
reform of the Pact. There is simply no scope for this kind of action.
Europe has been in effect a unified territory for quite along time, but not
because of the impact of the overarching process of globalization. Rather,
what unified the European territory was and is political intervention. It
is a unified space in terms of markets which are regularly the target of
neo-mercantilist forays by the very same national capitalisms forming that
space. It suffices to take a look at the German current account surplus 110
billion dollars by the time of writing (March 2006). If we now add the
Swedish, the Dutch, the Belgian, and the Swiss surpluses, we obtain a sum
equal to that of Germany. The bulk of these surpluses are realized, in a
pure Marxian-Keleckian sense, within Europe itself, that is through
intra-European transactions. This fact points to a problem that, for the
Continent, has by far deeper, more structural, and graver implications than
the supposed constraints of the Maastricht parameters. Indeed, in Europe
there is absolutely no mechanism to recycle in a Keynesian manner the
current account surpluses of the countries accumulating them. The recycling
used to occur quite swiftly before the creation of the European Community.
This was in the 1950s thanks to the European Payments Union set up to
receive the counterpart funds of the American Marshall Plan. While the
balance of payments issue is unavoidable, the Maastricht parameters can be
ignored, as France and Germany (and Britain) are doing right now.
We can rest assured that also in the case of the external surplus Germany
will never accept the formation of a European-wide clearing union in the way
suggested by Keynes during the negotiations at Bretton Woods. This reason
is rather elementary. For Germany the surpluses are profits obtained on the
external transactions by German companies or by the German affiliates of
foreign multinationals. And profits must remain profits: it is not
acceptable to 'socialize' them. If one follows our non 'idealistic' reading
of Keynes' analytical apparatus and, in this context, sees the
anti-Keynesian implications of the surpluses in the current account, it is
easy to grasp the present-day impossibility of a European-wide Keynesianism.
Hence our reasoning uncovers the flimsy nature of those analyses which end
up advocating greater margins for budget deficits and for the public debt in
matters of economic policies and stronger wage demands in matters of social
policies and actions.
Our analysis leads us to reject the Stability Pact and the present
mechanisms of income distribution without any delusion concerning the
possibility of opening up today new spaces for Keynesian policies. We deem
that both the Pact and the distributive mechanism at work nowadays are
structurally tied to the capital-labor relation that has been established in
the European neo-mercantilist context. Instead our analysis suggests that
it is urgent to tackle politically from the left the neglected issue of the
structural determination of the productive system -- 'what' and 'how' to
produce. This alternative discourse and policy project -- at the European
level -- cannot but be grounded on the explicit integration into the
conceptual and policy frameworks of class analysis: also because the current
configuration of the capitalist system and of actual economic policies is
framed in a way coherent to the re-making of the immediate valorization
process, something which is deepened by what may be labeled as the real
'subsumption' of labor to finance. This reality cannot be opposed and
reshaped without understanding the changes in the capitalist labor process.
Unfortunately most of progressive economists in Europe make only a
liturgical reference to class and then proceed to suggest reforms to the
existing arrangements as if all that was needed is a team of non-orthodox
economic advisors, be they Sraffo-Keynesian or Post-Keynesian.9
4. The New Modalities of the Old System of Exploitation
We have already pointed out that, at least as far as the pressure on the
labor force is concerned, the so-called European model increasingly appears
to be a local adaptation of the Anglo-Saxon model. The long-run growth rate
is low and unstable, the composition of demand depends in a growing measure
on rising inequalities in the distribution of income, and finance has
acquired commanding role with direct repercussions on firms' corporate
governance. What is crucial to understand in the present capitalist
dynamics is that these factors allow for a 'systematic' control over labor
whatever the skill levels.
On one hand, the new forms of command over 'flexible' and precarious labor
force appear as imposed upon firms by markets' profound unpredictability and
fickleness, though, as we have shown, they are also the product of political
decisions regarding global macroeconomic management. The disgraceful
monetary and fiscal policies pursued in the Eurozone of the European Union
are certainly playing a role in creating such a situation. Yet beneath
those policies lie the harsh substance of the social relations of
production. No progressive economic policies can be conceived without first
addressing the nature of the social relations of production prevailing
today -- something that the anti-Maastricht Keynesians never ever mention,
even the most Sraffa-addicted Italian left-wingers among them.
On the other hand, the 'fragmentation' of labor and its 'destructuring' are
generated from within the firms on the basis of the new microeconomic
criteria of corporate governance. All this is deeply affecting the dynamics
of valorization directly in the production process. Work is no longer
performed according to productivity criteria defined a priori in a stable
productive and technological context (production as a plan to be
sequentially and rigidly implemented). Instead it is being organized around
objectives and targets which will be evaluated ex-post. Production becomes
a task to perform with flexibility. The market itself 'enters' into the
process of production since each unit, in the by now restructured
organization, is judged on whether or not it is a profit center also in the
internal, virtual, make or buy transactions with the other units. The
penetration of the market into the mechanism of production has been going on
since the 1980s and it is being accelerated with the transition from
traditional outsourcing to in-house outsourcing. It entails the formation
of 'clients' viewed as external normal clients even when the production
cycle remains exactly the same, and the workers keep functioning side by
side as before. Under the new regime of profit versus cost centers, workers
of the same production line end up belonging to different contractual
frameworks and are unionized differently and separately. The new regime is
conducive to the extension of precarious occupations, and living labor
itself is treated as if it would be a 'commodity' just like any other, to be
performed and paid 'just in time.' In this respect Italy, precisely because
it is a periphery in Europe and relatively weak, has been and is an
experimental laboratory of anti-labor policies, starting with the "pacchetto
Treu" of the first Prodi government in the 1996-98 period and then with the
so-called "Legge Biagi" of the last Berlusconi government.
It is at this point that the class adversary orchestrates the ideological
exploitation of the new and much worsened reality of concrete exploitation.
Wage labor is effectively subsumed into finance and debt thanks to changes
in the pension system, the ensuing redirection of workers' savings towards
the financial markets, and the reform of the banking system on the
Anglo-Saxon model.10 The wage squeeze and job uncertainties should --
according to the ideologues -- be counterbalanced by higher returns
obtained by investing workers' savings in the stock exchanges. We therefore
have a two-pronged tendency: a sequence goes from the predominance of
finance to the control over labor via the volatility of markets; the other
sequence goes from the predominance of finance to the control over labor via
the internal decentralization of firms. The current worldwide expansion of
wage labor -- which in itself shows the futility of the arguments which just
a few years ago were advanced in favor of the 'end of work' or of the
'crisis of the wage-work relation' -- translates itself in a fragmentation
of the working class. The latter does not disappear but is being emptied of
its social consciousness and strength.
In this context we feel compelled to criticize those ideologies portraying
contemporary capitalism, and within it the Italian economy as well, as
increasingly based on non-material, knowledge-intensive, activities. It
must be stressed that in Marx the term 'working class' is not a
sociological-descriptive concept covering only industrial labor. More than
that: the relevance of the working class does not lie in its numerical
expansion as a growingly homogenous subject. Its importance as a class
resides in the fact that the income produced is nothing but the monetary
expression of the living labor spent by the working class. This is true
even today, when the increasing centralization of the commanding heights of
capital (both in finance and production) is going on hand-in-hand with a
decrease of the size of the immediate productive units: in Marxian terms,
and opposite to what was true since a few decades ago, a 'centralization
without concentration.' This means that capital's drive to divide and
fragment the working class is much more powerful than ever in the past.
The unity of the working class is not however the outcome of some
spontaneous process: it is rather always the product of a conscious
political and social action against the 'deconstruction' furthered by
capital. After some decades when it decreased as a share in total
employment (the 'fordist' era), nowadays wage labor, the labor dependent
upon capital, is significantly expanding again, not only in absolute terms
but also as a proportion of total employment: in the world arena as in the
'mature' capitalist countries.
Lastly, the manufacturing sector has an important role in the occupational
structure. Although the data may tell a different story, in reality many
occupations appear as belonging to the service sectors simply because they
have been outsourced by the industrial firms, whereas previously they were
integrated into the data on industrial employment proper. 'Manufacturing
matters' also in the pure technical productive sense. Without a strong
advanced industry nothing can be produced, not even services, since they
require significant industrial inputs such as computers. If a country, like
Italy nowadays, loses its industrial base, demand polices in the Keynesian
sense cannot bring it back. In 2005, Galapagos, the pen name of the
economic editor of the Italian left-wing paperIl Manifesto, raised precisely
the question of the irrelevance of Keynesian policies in a structurally
disintegrating economy. His article gave rise to an unnecessary polemic by
the typically Italian left-wing Sraffo-Keynesians. Yet, despite perhaps
some ambiguities, he was fundamentally correct. The case of the United
States proves his point. 'American' capitalism does have its industrial
sector, only that it is increasingly located outside the national territory
and outside the direct realm of the US dollar. Thus unless one wishes to
maintain that the US balance of payments deficit does not matter, the US
case confirms, by default, the national importance of having and nurturing a
strong manufacturing sector.
Although 'turbo-capitalism' can coexist both with military Keynesianism and
industrial hollowing out, its impact is severe for the population of the
country originating it, as argued by the inventor of the term, the former
Reagan advisor Edward Luttwak. Similar processes are bound to occur, and
indeed are occurring, in Europe as well. Hence the organization of the
oppositional struggle must have as the first item of the agenda the social
reunification of labor, 'from below.' An exclusive focus on economic
policies 'from above,' as the left-of-center Post-Keynesians in Europe
insistently do when they propose alternative blueprints (even if 'augmented'
with some stress on distributional conflict, as the left-wing
Sraffo-Keynesians in Italy propose), is only a necessary but far from
sufficient condition to advance the unification of labor. The crucial issue
is the centrality of class relations and of the mode of production both
within the inquiry of contemporary capitalism and the configuration of
alternative economic policies. These twin elements must become the defining
elements of any political and economic strategy of the left.
>From the point of view of labor the essence of contemporary capitalism as we
depicted it can be summarized as follows. The unstable equilibrium of
today's capitalistic growth rests on scared workers (because of the
transformations in the labor process and in the so-called labor market),
terrorized savers (because of the modifications in retirement systems and
the uncertainties related to financial investments), and indebted consumers
(because of the increased dependency of consumption expenditure on banks'
credit). This is nothing but the dialectical aspect -- from the angle of
wage labor -- of the process centered on the formation and expansion of an
industrial reserve army on the world scale, on global migration flows, and
on the planetary delocalization of manufacturing industries. In each
economic area this harsh global class reality is politically managed
according to a different specific macroeconomic dynamics.
Let us add that if in the 1930s State intervention was the condition for
restarting the process of expanded reproduction, under contemporary
capitalism the management and the very reproduction of 'instability' and
even 'crisis' becomes the political and economic condition for the
governance of the phases of accumulation. It is therefore futile to
separate 'growth' from instability and crisis in assessing the dynamics of
the system. The Achilles heel of both the Post-Keynesian and
Sraffo-Keynesian approaches lies precisely in the unwarranted separation
between, on one side, the dynamics of accumulation and, on the other side,
the reproduction of instability and crisis, the latter being a condition of
the former in these decades.
5. The Italian Case
We can only briefly treat the Italian case explicitly. We will do so with
the aim of putting to rest a number of misguided conventional views, in
order to bring back a class-based understanding of economic processes.
A regular obsession expressed by right-wing forces and also by the moderates
on the left is the state of public debt, the cost of labor, the alleged
inflexibility of the labor market. We cannot accept the first response from
the left that imputes the level of the public debt exclusively to the
spending policies of the 1980s by the Christian Democrats and the Socialist
Party. The responsibilities of the Bank of Italy, from the time of Governor
Ciampi onward, cannot be omitted from the picture. During the 1980s the
Bank of Italy kept interest rates higher than what would have been warranted
by the international situation and by the borrowing needs the public
administration. The Bank of Italy's policy of dear money imposed upon firms
an adaptive strategy of industrial restructuring, which tamed labor
conflicts in the workplace. As a result, unions entered a phase of systemic
long-run weakness clearing the ground for mutual agreements, instead of
compromises arrived at by means of struggles, in matters of labor relations
and industrial policies in general.
We also reject another regular refrain of the official Italian left, namely
that the country's predicament is due to the absence of a real
entrepreneurial class; hence the decay of the large industrial companies and
the ensuing exceptionally small size of the average Italian company which
precludes substantial R&D activities. We submit that in this case we have
to look for something else, for a different interpretation. The Italian
'industrial decline' has its origin almost 40 years ago, when Italian
capitalism responded in a regressive way to the conflict in the valorization
process revealing the inner limits of the 'dualistic' unbalanced 'economic
miracle.' No serious attempt at some kind of planning helping to upgrade
the position of Italy in the international arena was promoted. The
strategic choices made -- or rather, missed -- by the Italian capitalists in
the 1960s led over the decades, but indeed pretty soon in the 1970s, to the
disappearance of entire sectors such as nuclear engineering, electronics,
pharmaceutical, chemical, civilian aeronautical, automotive, steel, and
telephony. There has been no industrial or banking policy imposing a
positive change in the international specialization of the Italian economy,
or favoring the emergence of new sectors and the formation of a new set of
large firms. Nothing at all: just a 'passive' adaptation to foreign
It should not come as a surprise that in this relatively backward context
the policy pursued to join the EMS, and later the single currency, could
find its 'room to move' only in the downward compression of the exchange
value of labor (the wage) and in raising its use value (mainly through the
higher intensity of the work performed). The entrance into the EMS
(1979-1992) and into the Eurozone (1998) deprived the economy from the
safety valve represented by competitive devaluations. The adoption of the
Euro has led to the abandonment of any independent monetary and fiscal
policy. The crisis of the old industrial sectors and the absence of new
ones left the country bereft of a solid structural basis. No surprise that
labor has therefore become the only adjustment variable. Indeed, the attack
on labor has been the hallmark of all the governments of the past
legislatures, by those of the "Left" as by those of the "Right," and by the
entire entrepreneurial class regardless of its internal divisions. This
strategy means that Italy's development, when it exists at all, is towed by
outside forces. This is not to deny the existence of small high-quality
niche sectors or firms, which however, because of their limited range, do
not generate any self-propelling impulse for the country as a whole.
The phenomenology of Italy's most recent crisis is easy to depict. Its most
visible moments occurred in the last years marked by the Fiat crisis,12 and
by the financial failures of the food conglomerates Cirio and Parmalat,
along with the troubles besieging the small firms and the associated eclipse
of the industrial districts. The decline of Italy is of course parallel
with the European stagnation of the first years of the new century, but with
worsened features. Indeed, the growing US-Asia axis marginalizes Europe
but, within it, Italy is particularly affected because this country does not
posses a world financial system like the UK, or world industrial sectors
like Germany. It is clear that Italy's decline did not begin with
Berlusconi, nor was it the consequence of the pricking of the Wall Street
speculative bubble (though it is true that its end has impacted negatively
on fashionable Italian exports). As it is clear that the difficulties
linked to the strong revaluation of the Euro highlight the nature of the
decline rather than accounting for it.
The sound finance policies enforced by the center-left governments in the
1990s have a much greater responsibility in furthering the decline.
Especially since they were in line with the strategy of disengagement from
the leading industrial sectors followed -- as a matter of choice -- by
Italian capitalism. The massive privatizations implemented by the
center-left meant the abandonment of public strongholds in industry and in
the banking system which would have been of crucial importance in any truly
alternative economic policy. Privatizations have instead launched and
sustained a rentier capitalism: something which is made evident by the fact
that the only large private firms with a positive balance sheet are nothing
but the former state monopolies.
6. Neo-liberals and Social-liberals
One of the limits of the movement for a 'different globalization' consists
in that the present capitalist configuration is interpreted as a neo-liberal
one, without further specification. Accordingly, the positions of the
center-left forces or of the moderate left are portrayed as a soft variant
of 'neo-liberalism.' When and if these positions are related to some
economic theory, the reference is to neo-classicals. We think this outlook
is definitely wrong, both as an understanding of what is going on and of
what is the nature of the political-economic cycle.
Within the theoretical debate in economics an important component of the
mainstream is that of the 'imperfectionists.' For these authors the theory
of perfect market equilibrium is still the basic starting point, as a
rigorous exercise in economic logic, even though its practical relevance for
the analysis of actual market economies is immediately negated. Only by
considering the 'imperfections' and the 'asymmetries' of markets will it be
possible to take into account of the role of money, uncertainty, time,
institutions, dynamics, and so on. Some even argue for micro-behavioral
foundations of class conflict. The majority of these economists would not
think of themselves as neo-classical and it would be wrong to equate them to
the old orthodoxy. In Italy, to take just an example we know all too well,
the position of the imperfectionists is found in the Di Vittorio Foundation
close to the Italian General Confederation of Labor (CGIL), in the recent
past dominated by the Communist Party.
In the United States and in the rest of the Anglo-Saxon world dominates an
ad hoc vision slightly different from that in vogue in Italy. The mostly US
literature has gone beyond the issue of imperfections, although it starts
from there, and goes into the formulation of the appropriate 'institutional
design' to implement policies which are thought as market-friendly but not
in a blind manner. The work of Alberto Alesina at Harvard is a good example
of what we are talking about. This orientation has its noble origins in the
philosophical ideas of Hume and its practitioners. They argue, for example,
that for the economic system to function properly property rights must be
defined unambiguously. The related academic exercises entail results based
on purely 'contingent' equilibria defining a particular institutional
set-up, often arrived at by means of game theoretic constructions. Monetary
policy becomes, in effect, the only policy instrument. Its objective should
not stem from a theoretical vision based on some kind of new neo-classical
synthesis nor must it follow the old or the new monetarism. As Greenspan
has argued and shown in practice, monetary policy is decided case by case,
without an equilibrium model behind it. This is in fact the 'new consensus'
in the debate on monetary policies. Underneath the veneer of sophistication
combined with apparent commonsense, the real policy issue is how to convince
or compel the world to transfer its own savings to the USA in order in to
refinance US deficits -- something that only China would have the power to
stop doing.
The imperfectionists' positions -- based on the acceptance of the
fundamental basis of General Equilibrium Theory of multimarkets equilibrium,
only to argue that in practice there are imperfections to be corrected and
which justify interventions to make competition work -- are theoretically
unfounded. We owe to the major contemporary theoreticians of General
Equilibrium Theory the proof that the theory is not reliable not because the
world is imperfect, but because the theory' results are extremely special
and ad hoc highlighting the existence of multiple equilibria and the
instability of equilibrium, even in the remote case of the latter being
actually found.13 But there is an even greater impediment to the acceptance
of the imperfectionists' approach. Their theoretical scheme, at the first
level of abstraction, is constructed on the absence of money and on the
absence of the macrosocial relations among classes. Such an invalid
starting point renders ipso-facto irrelevant the new individualistic
approach in relation to contemporary monetary capitalist economies.
 Indeed -- as Schumpeter, but also Marx (before him) and Keynes (after him),
taught us -- economic analysis, if it aims to be a theory of a truly
capitalist monetary economy, must introduce money and classes at the very
foundations of the theoretical edifice.14
The brief reference to the state of the economic debate allows us to gauge
the policy discussions of the last few years and to understand why things
are more complicated than the too easy dichotomy between 'liberalizers' and
'State interventionists.' At one extreme we have the 'neo-liberal'
position, which in economics may have some relation with the authors
belonging to New Classical Macroeconomics, though a more appropriate
reference would be to the exaltation of the 'free market' by the 'Austrian
School' of Hayek or even Mises. On this view, the United States represents
the only winning model. Neoliberals declare vehemently their love for the
free market, but they do not oppose monopolistic positions, as shown in
practice by both Bush and Berlusconi in person. Of course, their objective
is dismantling by means of microeconomic reforms the residual rigidities
still operating everywhere, and this is also true for the European
Neoliberals. Labor must become more competitive, its cost must be reduced,
its services have to be supplied in the most flexible way. The welfare
state must be pulled apart too, since it keeps people from participating in
the market process and in capitalist production. It is clear that those
who espouse these ideas have no qualms against using the old Keynesians
tools of budget deficits and of accumulating an ever growing public debt, if
they need to sustain activity and money profits.
At the other extreme we have something which escapes the attention of most
of the theorists of the 'movement of the movements': the 'social-liberals.'
They are not just soft neo-liberals, and their theoretical references are
markedly different from the latter. In Italy and France, for example, they
are informed by the 'imperfectionists': more specifically by the New
Keynesian Macroeconomics, and also by a bastardized version of the French
Regulation School which has moved significantly away from its original
Marxist roots.
Social-liberals are worried not only by State failures but also by market
failures, and they proclaim to be in favor both of more State together with
more free market. Unlike the neo-liberals they sincerely strive for more
competition in markets for goods and services; in this way they are more for
'free competition' than the neo-liberals are. They also advocate a greater
regulatory role for the State ("liberalize in order to re-regulate" is their
manifesto). They want a redistributive State in relation to the labor
market and to welfare. For the former they do advocate labor flexibility,
yet cushioned by a social protective network and by guarantees enforced
through State regulations. They push for a form of universal welfare
including guaranteed minimum incomes labeled with new terms such as
citizenship's income, basic unconditional income, etc. Social-liberals know
that an indiscriminate attack on the Welfare State or on labor would impact
negatively on the productivity of the latter. More than that: no
social-liberal would deny the supporting role of State intervention as an
essential provider of demand, nor would they reject the role of the Central
Bank as a lender of last resort in a crisis. They would even worry and
propose something against financial instability. In short, they are a bit
Keynesian, according to circumstances. They claim to be in favor of strong
industrial and credit policies with structural objectives, while being at
the same time strongly against any direct State intervention by means of
even indicative plans, lest they stand accused of étatism. Both in France
and in Italy social-liberals favor the formation of pension funds to channel
workers' savings toward the stock exchange, thereby helping create a bourse
worthy of that name. The list can go on.
This is the theoretical and policy configuration of the moderate left
economists operating with trade unions and centre-left political forces. To
identify them with the neo-liberals is not only implausible: it is actually
damaging. By the way, many of the positions voiced by the antagonistic
left, in Italy and elsewhere, associated with Toni Negri -- like the basic
unconditional income for all referred above, but something similar may be
said of the reduction of working hours -- are nothing but the radical
variant of the same social-liberal reasoning. It finally becomes clear
that, at the policy level, the clash between the 'progressives' and the
'moderates' -- such as was the case in Italy between Rifondazione Comunista
and the DS (Democrats of the Left) -- can be overcome without much
difficulty, provided that the new trends of today's capitalism are neglected
while deluding oneself into believing that the system is essentially stable
for the years to come. The progressives take on board the progressive side
of the moderates -- social guarantees aimed at cushioning the effects of
labor market flexibility, universal welfare, minimum income -- while
delegating to some future social conflict -- exogenous to the political
framework within which the progressives operate -- any further shift to the
If however contemporary capitalism corresponds to what we have been
describing, the social-liberal position does not face up to it at all and
can even strengthen it by helping the new form of capitalism which is
emerging to get over its labor pains.
7. The New Economic and Political Cycle
The new center-left Prodi government in Italy, as its predecessors in France
(Jospin) and in Germany (Schroeder), if analyzed from the dichotomy
neo-liberals/social-liberals can be viewed as a perfect example of the new
political-economic cycle.
The social-liberal culture advocates more competition and less monopoly,
thus it is the culture of the antitrust as a central regulatory institution.
This culture is based on the view that more competition and more
liberalization, including some privatizations, are useful to control and
regulate big business. The social-liberals are more for (standard-textbook)
competition than the neo-liberals are (at least in practice). At the same
time, they want flexibility, not the casualization of work. For that reason
they are willing to maintain some guarantees in the labor market for
workers, and they are willing too to put in place a social safety net
revising the old welfare system. This network of social protection performs
exactly the role of preventing the destructive effects of labor market
The unfolding of the new political-economic cycle in Europe can be
understood by juxtaposing the position of the center-left with that of the
right, whose program is to curtail as much as possible the welfare system
and to render employment as precarious as possible. The project of the
right is not succeeding 100% even when they are in government (compare
Villepin in France in the last few months, or Berlusconi in Italy). The
right partly fails because it immediately encounters an opposition which
unites the moderate with the radical left. At the same time the right
expands the budget deficit and the public debt without creating any true
Keynesian economic expansion, but cushioning the fall in activity levels.
At some stage the point is reached where the right gets thrown out of office
and the center-left takes its place. The new government tries to follow its
social-liberal principles, not only by liberalizing but also by
re-regulating the economy. It insists on implementing labor market
flexibility but also by redistributing something. The redistributive
measures however cannot but be bland and limited because, the new government
claims, available resources are scarce due to the profligacy of the right
when in government. It is precisely when the center-left tries to implement
the social side of its program that it demands, in exchange, that the Trade
Unions accept to play a subordinate role in the reform of labor relations in
the workplace. These are the very 'structural reforms' that, according to
the center-left, ought to ensure renewed economic growth.
Forms of income subsidies, or the reduction in working hours as in France,
are the levers through which the power of labor to influence its material
condition in the workplace is being reduced, because in exchange capital
asks and obtains more flexibility to be introduced in the capitalist labor
process. This cannot but create splits within the trade unions and in the
left. By sowing disenchantment at the social level, the center-left
government may well emerge as being more destructive than the right. A
radical social conflict may spring up again but, this time, led from the
'social right'. The center-left government then loses the elections, and
the cycle is restarted all over again, in a spiral going downward, and in
each of its stages labor's bargaining power is reduced.
8. What Kind of Alternative Economic Policies?
Any left-oriented fiscal policy claiming the necessity to expand the share
of public expenditure over national income must deal with a radical
redefinition of the content and composition of State spending. If our
observations are correct, namely that capitalism today is, in its particular
way, capable of attaining a form of precarious and part-time-based 'full
employment' on the basis of a flimsy growth process led by military
spending, the core of an alternative policy must be that of a different
planning of employment, work organization, and of the economy. The need to
open up new planning horizons stems also from the fact that decades of
restrictive policies have led to bottlenecks on the supply side, especially
in relation to new sectors and new types of equipment.
The skeleton of this strategy is known: public intervention to determine the
long-run directions of investment, an active industrial policy together with
a selective credit policy, a welfare system providing goods and services in
kind on an expanded basis. It is in relation to these objectives that
industrial restructuring and conversion ought to be planned. The question
of the environment can become the pivot in the formulation of the strategy
since addressing the matter seriously raises a number of challenges. Far
from being a hands-off affair the environmental question can be tackled --
within the limits of entropy -- by means of advanced investment and
cutting-edge biotechnologies, and also by restricting the private use of the
public space, air, soil, and water, by the major corporations. This
strategy is completely at variance with the institutional privatization of
the environment pursued by the European Union with its marketable pollution
permits. The environmental issue, if addressed seriously, opens up the way
to the planning of the modalities of transportation, to a redefinition of
the size and role of the usage of private transport, and to the planned
reform of urban settings.
In the above context we are convinced of the limited effectiveness of
traditional monetary policies based on the unreliable presumption that
private investment immediately responds to a reduction in interest rates.
And at any rate, the issue is not that of an unqualified aggregate expansion
of investment but rather that of its qualitative dimensions. Of course,
deficit spending contributes to profits in a pure Kaleckian fashion. But we
do not believe that a positive effect on employment will automatically
follow. Instead, we submit, that the impact of deficit spending upon
employment will not follow a mechanical pattern. It will rather depend on
the independent decisions of industrial and financial capital. By the same
token we do not believe that policies raising money incomes (through higher
wages, transfers, basic income, and the like) imply by themselves direct and
positive repercussions on the distribution of income in real terms. Firms'
real decisions are independent from the money choices of wage earners or
households, and this asymmetry is not beaten with more nominal
To actively modify income distribution in real terms and to determine not
just the total level of employment but also its sectoral allocation, thereby
producing a qualitative change in the composition of output, it would be
necessary to tie an active demand policy with the structural composition of
investment. It must be borne in mind however that no economic policy of
this kind, including universal welfare based on expanding services in kind,
will be possible without introducing, within Europe itself, a segmentation
of capital markets, including controls on the nature and on the amounts of
capital flows.
One of the features of the social-liberal orientation is the idea that a
full employment policy requires the 'employability' of labor. People must
be taught 'how to work.' The mere process of training the labor force is
supposed to increase employment and real incomes. The schooling and the
university system should, then, be reformed away from education towards
vocational training in ways most functional to the (short-terms) exigencies
of the economy and of the territories. Again, unemployment is no longer
seen as a problem originating from the angle of demand: namely that, given
the institutional set up, the level of demand is not sufficient to ensure
full employment. Social-liberals look at unemployment as essentially a
supply bottleneck due to mismatching and lack of the required specifications
within segments of the labor force. In short, the unemployed have only
themselves to blame for their condition.
Our position is that the struggle over the distribution of income goes
through the creation of jobs for the people as they are. The aim should be
to generate more vacancies than available workers. For this purpose a kind
of 'labor plan' is needed, managed and planned by the State. In this
context the best form of 'training' is that of a universally accessible
education emphasizing general knowledge and critical faculties, since it is
from these two factors that the subaltern classes can become protagonists
and grasp the changes occurring in the world we live. But all this is quite
incompatible with the present trends in capitalism so that the alternative
strategy must openly confront how to politically deal with the clash between
the needs of the subalterns and the exigencies of capital.

1 The reference is to the book published in Italy in 1995 by Pietro Ingrao
and Rossana Rossanda, Appuntamenti di fine secolo, which included chapters
by Marco Revelli, Isidoro Mortellaro, and K.S. Karol. The book has been
translated in German as Pietro Ingrao/Rossana Rossanda, Verabredungen zum
Jahrhundertende. Eine Debatte über die Entwicklung des Kapitalismus und die
Aufgaben der Linken. Mit Beiträgen von Elmar Altvater, Joachim Bischoff,
Frank Deppe, Klaus Dörre, Hartwig Heine, Hasko Hüning, Martin Kronauer,
Oskar Negt, Hildegard Maria Nickel, Karl Heinz Roth, Wolfang Sachs, VSA,
Hamburg, 1996). Our criticism applies especially to the chapter signed by
Marco Revelli, "Economia e modello sociale nel passaggio tra fordismo e
toyotismo," which is present in the Italian edition but not in the German
translation. For a criticism of this line of thought see: Riccardo
Bellofiore: "Lavori in corso per Appuntamenti di fine secolo," in Politica
ed economia, n. 6, 1995 (there exists a translation in English in Common
sense, nr. 22, 1997, available on-line:
libcom.org/library/lavori-in-corso-common-sense); but also "After Fordism,
What? Capitalism at the End of the Century," in Global Money, Capital
Restructuring and the Changing Patterns of Labour, Edward Elgar, Cheltenham
2 Here the key proponent of this interpretation is Antonio Negri with
Michael Hardt: see their Empire, Harvard University Press, Cambridge, Mass.
3 Those who read Italian can see, for the last years, what we have written
in la rivista del manifesto. The whole collection (1999-2004) is available
on-line: www.larivistadelmanifesto.it.
4 For a more detailed analysis, cf. the last sections of the chapter by
Riccardo Bellofiore and Giovanna Vertova, "Lost in Space? The Geographical
and Political Dimension of Uneven Capitalist Development," included in
Changing EconomicGeography of Globalization, edited by Giovanna Vertova,
Routledge, London 2006.
5On East Asia, Japan, and China see, Joseph Halevi, "The Accumulation
Process in East Asia as Compared to the Role of Germany in European Post-war
Growth," in Global Money, Capital Restructuring and the Changing Patterns of
Labour, edited by Riccardo Bellofiore, Edward Elgar, Cheltenham (UK) 1999;
(with Bìll Lucarelli) "Japan's Stagnationist Crisis," in Monthly Review,
February 2002; (with Peter Kriesler), "The Changing Patterns of Accumulation
and Realization in East Asia since the 1990s," CAER working paper 2006/9,
University of New South Wales, Sydney. Available at
http://www.caer.unsw.edu.au/DP/CAER0609.pdf. Forthcoming in Marxist
Perspectives on South Korea in the Global Economy, to be published by
6 With the privatization of pension schemes and with the continuation of
compulsory contributions, but now to private or corporatized funds, wage
earners become captive investors although the decisions about actual
financial placements are made by the exceptionally high paid managers of the
now private pensions funds. This is not a minor point. No government
favoring the privatization of pension schemes has ever suggested to make
contributions optional. Hence all the rules and laws regarding compulsory
contributions are in place while the flow of funds is redirected towards the
privatized institutional investors.
7 A recent study by the Asian Development Bank has highlighted that the
persistence of low wages and an expanding, job-wise unstable informal sector
may actually bring down the growth rates of both China and India to the
relatively low level of 3% per annum, which in per capita term would be
less than 2%. (Labor Markets in Asia: Issues and Perspectives, London:
Palgrave Macmillan, 2006)
8 On all this, cf. Joseph Halevi and Peter Kriesler, "Stagnation and
Economic Conflict in Europe"; Riccardo Bellofiore, "Contemporary Capitalism,
European Policies, and Working-Class Conditions," both contributions to the
special issue The European Economic and Monetary Union in the Global
Economy: Is There a Deflationary Bias? of the International Journal of
Political Economy, Summer 2004.
9 Further considerations, in a much longer-run historical perspective, on
Europe may be found by the reader in our "Is European Union Keynesian-able?
A Skeptical View," included inMacroeconomics and Macroeconomic Policies:
Alternative Approaches to European Policies, edited by E. Hein, A. Heise and
A. Truger, Metropolis, Marburg 2006.
10 On a criticism of the so-called pension-fund capitalism, cf. in
Italian,"Il capitalismo dei fondi pensione," in la rivista del manifesto, n.
10, ottobre 2000, which is available online
11 The best analysis is by Luciano Gallino, the doyen of industrial
sociology in Italy, in his book on the waning of industrial Italy La
scomparsa dell'Italia industriale, Torino: Einaudi, 2003. Earlier, similar
points were made by an internationally known and respected monetary
economist, who is also a regular contributor to the daily la Repubblica,
Marcello De Cecco, L'economia di Lucignolo: opportunità e vincoli dello
sviluppo italiano, Roma: Donzelli, 2000. But all this is to no avail. They
can write in large circulation dailies, but no political notice is taken of
them by the political forces of the center-left.
12 On the Fiat crisis as exemplary of the difficulties of Italian
capitalism to locate itself in the new phase of capitalism cf., by Riccardo
Bellofiore, in Italian, "Il caso Fiat: una sfida anche per la sinistra," in
la rivista del manifesto, nr. 34, dicembre 2002.
13 All this is quite apart from the problem of capital in neoclassical
theory raised again, after Wicksell, by the well known Italian economists
Pierangelo Garegnani and Luigi Pasinetti in the wake of Piero Sraffa's work,
but oddly known as the 'Cambridge Controversy.'
14 Most monetary theories do not have money in them. The most striking
case is that of the famous Tobin model on money and growth where money is
nowhere to be found. But also the Sraffo-Keynesians do not have money and
their system is based exclusively on real exchange ratios: cf. the same book
of Sraffa, Production of Commodities by Means of Commodities, where money
appears only in § 44, as the (exogenous) rate of interest controlled by the
Central Bank.

Riccardo Bellofiore is Professor, Department of Economics 'Hyman P. Minsky',
Faculty of Economics, University of Bergamo, Italy and Research Associate,
History and Methodology of Economics Group, Faculty of Economics and
Econometrics, University of Amsterdam, Netherlands. Joseph Halevi teaches
political economy at the University of Sydney. He is a member of the
international editorial board of Economie Appliquée (Paris) and of the
editorial board of Cahiers d'Economie Politique (Paris). He is also
associated with France’s National Research Council's Institut de Recherches
Economiques sur la Production et le Développement at the University of
Grenoble. Since 1990 he has been a regular contributor to Il Manifesto.
This paper is available online at the Web site of Actuel Marx. It is
reproduced here for educational purposes.

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