[OPE-L] Andrew Glyn

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Mon Jul 17 2006 - 05:27:51 EDT


Andrew Glyn: 'Will we face a dystopia in which 
very large numbers of less qualified and poorly 
paid people exist to service the consumption 
needs of the rich?'
Interview by Rob Hoveman, July 2006
Andrew Glyn has been a prominent left wing 
economist for more than 35 years. He talks to Rob 
Hoveman about his latest book Capitalism 
Unleashed.
Andrew Glyn's previous books sought to analyse 
the factors which moved the world economy from 
its "golden age" of strong growth before 1973 
into the subsequent period of mass unemployment, 
lower growth and greater instability.

When we met at Corpus Christi College, Oxford, 
where he has taught since 1969, he said of his 
new book, "I wanted to trace how the world 
economy has changed over the last 30 years and 
try to make some sense of it. From the 1960s to 
the 1980s the primary problem for the capitalist 
class was the strength of labour. That threat has 
receded. I wanted to work through why this was 
and where the main problems for the world economy 
are now located."

Capitalism Unleashed covers the growth of 
privatisation and deregulation, the explosion of 
the financial sector, globalisation and the rise 
of China. It also looks at the assault on pay and 
conditions and the decline of union strength, the 
contradictions of growth over the last three 
decades and much more.

"In earlier books, such as British Capitalism, 
Workers and the Profits Squeeze (1972), I and my 
co-authors placed strong emphasis on the 
relations between capital and labour. It is still 
my view that labour's position became stronger in 
the long boom, trade unions negotiated higher 
wages and greater welfare spending. Even where 
trade unions were not strong, the sheer intensity 
of the boom pushed up wages significantly. 
Growing international competition also made it 
more difficult for firms to raise their prices in 
response to higher costs. The strength of labour 
forced an increase in real wages at the expense 
of profits. For me that was the most important 
cause of the transition from the golden age to an 
era of instability.

"The need for the capitalist class to weaken 
labour to restore their profits explains the 
policies they pursued. When Thatcher was elected, 
many on the left argued that monetarism was 
completely irrational. I disagreed. The rationale 
of monetarism, as a broad economic philosophy 
replacing Keynesianism, was to re-establish that 
the market rather than union militancy should 
determine wages, and that mass unemployment was a 
price that would have to be paid to restore 
profitability and ensure a healthier capitalism.

"Indeed countries with relatively high levels of 
industrial militancy in the 1960s later suffered 
much higher levels of unemployment. So the more 
the industrial unrest in the 1960s the more that 
unemployment had to be pushed up to try and force 
wages down and productivity up. Of course there 
was much wringing of hands about the rising 
unemployment but its effect in putting labour on 
to the defensive was welcomed."

Not that monetarism more narrowly defined has 
been consistently pursued by governments. Huge 
budget deficits were run up in the US in the 
1980s as military spending rose without a 
corresponding rise in taxes or growth in the 
economy. Ironically, this contrasts with the 
heyday of Keynesianism in the 1950s and 1960s 
when governments did balance their budgets on 
average despite increased spending on the welfare 
state.

"Huge budget deficits don't necessarily revive 
economies. Japan is an example of where deficits 
failed to haul the economy out of its stagnation 
over the last 15 years because on their own they 
did not bring the higher investment on which 
growth crucially depends. But government budget 
deficits in the US clearly did have some pump 
priming effects in the 1980s and again more 
recently.

"But we also see in the US today a second 
stimulus to the economy dragging it forwards and 
that's the growth of private sector debt, which 
has spiralled with the liberalisation of the 
financial system. If the 1980s saw a right wing 
military Keynesianism, the new century has seen 
the growth of a sort of private sector 
consumer-led Keynesianism. Nonetheless, the 
prevailing philosophy has been to lower 
expectations of what the state can do to benefit 
labour and to insist that the market cannot be 
bucked."

Glyn argues economic and political conditions 
have pushed labour into retreat over the last 25 
years, citing the very low levels of industrial 
action over the last 15 to 20 years. "In Britain 
the decisive turning point I believe was the 
defeat of the great miners' strike of 1984-5. I 
didn't want to admit it at the time, but I think 
this drove the trade unions onto the back foot 
and enabled successive governments to push 
through privatisation and deregulation to a far 
greater extent than in other countries, like 
Germany, where there wasn't that kind of 
significant defeat of a major section of the 
labour movement.

"Trade union strength has also been adversely 
affected by structural changes. The more strongly 
unionised industrial sectors have declined and 
the rising private service sector is far less 
unionised. Unionisation has grown in the public 
sector which has to some extent offset declines 
elsewhere. But that also explains, to my mind, 
the continuing drive to extend privatisation in 
the public sector. Its main economic rationale is 
to try and drive down wages by weakening union 
organisation.

"Aspects of globalisation have also affected 
trade union militancy. Capital is more mobile and 
internationalised making workers more insecure. 
At present investment from the industrialised 
countries in new factories and so on in the low 
wage economies of the South is only about 4 
percent of their investment in their home bases 
in the North. As yet this is a trickle. But the 
image of the new owners dismantling machinery at 
Longbridge and shipping it off to China is very 
striking. And the threat from globalisation does 
not just come from relocation of investment. 
Purchasing parts by subcontracting to Southern 
producers has the same effect. Either way, the 
jobs of workers in the North are threatened.

"The trickle of investment from North to South 
now could become a flood. What makes this such a 
difficult issue is that this is the very same 
process which is bringing rapid capitalist 
development to some very poor parts of the world. 
If globalisation has helped to weaken the labour 
movement, it also has potentially profound and 
profoundly disruptive effects on the world 
economy.

"In this respect, one of the most important 
changes is the access world capitalism now has to 
huge sources of cheap labour in Russia, Eastern 
Europe and, above all, China. I used to argue 
very strongly that the changes claimed by 
globalisation theorists were much exaggerated in 
relation both to trade and investment. These 
claims were being used by politicians to claim, 
falsely, that the traditional aims of the left 
were no longer realisable. However if recent 
trends continue we really will be in a new 
situation.

"The really significant development here is the 
extraordinary growth of China. Over the past 50 
years or so we have seen the rise of Japan and 
subsequently the South East Asian Tigers. Their 
rise has not been completely unproblematic either 
for Europe and the United States. Indeed there 
have also been stresses and strains for both 
Japan and the Tigers. Japan has seen 15 years of 
stagnation since its bubble burst in 1990 and the 
Tigers suffered a severe shock in the late 1990s. 
However broadly speaking their emergence has been 
absorbed by Europe and the US.

Economic shift

"The growth of China is an economic shift of a 
completely different order. Its labour force is 
nearly ten times the size of Japan and Korea 
combined. China already runs a big balance of 
payments surplus and the value of the dollar is 
now dependent on the Chinese monetary authorities 
buying dollars. Should there be a change of 
sentiment within the Chinese government, the 
dollar would plummet and the US would have to 
raise interest rates to halt the dollar's decline 
and prevent inflation taking off.

"It's very difficult to think clearly about the 
potential impact of the stellar growth of the 
Chinese economy. Wages are starting to rise, 
which will make China less competitive, but will 
also reduce the bonus enjoyed by consumers in the 
North from cheap Chinese goods. It is difficult 
to see how Europe and the US could absorb the 
competition coming from China. If the attraction 
of cheap labour turns the present trickle of 
investment from the rich countries into a flood, 
this would threaten stagnation in the North.

"A second major disruptive factor is the 
explosive growth in the financial sector, 
threatening serious instability. The Bank for 
International Settlements, which is supposed to 
regulate as well as monitor the international 
financial system, has produced a number of 
reports showing they are very worried. Those who 
would justify financial deregulation claim that 
risk is increasingly spread across the system and 
that this encourages real investment in the rest 
of the economy. In fact real investment has 
remained relatively stagnant throughout the 
industrialised world, with the temporary 
exception of the internet boom in the US at the 
end of the 1990s.

"The fragility of the financial system is the 
most likely triggering factor for a major 
economic crisis. We have already seen, in recent 
years, major shocks to the financial system when 
the hedge fund Long Term Capital Management 
(LTCM), with two Nobel prize winning economists 
on its board, went under and again with the 
collapse of the currencies of the Tiger economies.

"Something must be amiss when the famous US 
investor Warren Buffet calls financial 
derivatives 'financial weapons of mass 
destruction', when a respondent to a Financial 
Times survey calls banks' lending to hedge funds 
the 'crack cocaine of the financial system' and 
when the European Central Bank bizarrely likens 
the collapse of hedge funds to a bird flu 
pandemic."

I asked Glyn whether he thought states still had 
the power to intervene to try to overcome these 
potential financial shocks. "In Capitalism 
Unleashed I recounted how the US Federal Reserve 
made available huge sums of money to prevent the 
LTCM crisis from having catastrophic 
consequences. However there is no guarantee that 
such interventions will always be so successful. 
The financial elastic has thickened, and this can 
help absorb smaller shocks, but it is also being 
stretched exceedingly tight. Who can guarantee 
that it won't snap?

"Over the last 20 years there has been a very 
significant retreat for labour. Wages have 
stagnated and profits have been substantially 
restored. The pay-off from the point of view of 
orthodox economics should be an upsurge of 
investment and a restoration of rapid growth and 
higher employment. Yet this has not occurred to 
any significant extent. One reason for this must 
be fears of instability.

"There is a real paradox here, because in terms 
of economic growth, the 1990s were actually the 
most stable post-war decade in both the rich 
countries and in the world economy as a whole. 
Yet individual firms deciding when, where and how 
much to invest, seem to be faced with greater and 
greater uncertainties. Exchange rates have 
fluctuated wildly and long established industrial 
giants lost market share. Investing to expand 
production is not simply a question of current 
profits being at a high level, but of the 
capitalists' having confident expectations about 
the future. 'Animal spirits', in Keynes' vivid 
term, are currently at a low ebb."

Glyn does not believe that individual states are 
in a position to successfully impose controls 
over financial flows because of their size, but 
he does believe they can successfully impose 
higher taxes to pay for welfare. He rejects the 
argument beloved of New Labour politicians that 
higher taxes in Britain would discourage 
investment and "enterprise". "A much higher tax 
regime exists in Sweden alongside relatively high 
levels of economic growth and with the apparent 
support of much of the population, enabling 
Sweden to support a much higher level of welfare 
spending than in Britain."

Glyn is reluctant to make firm predictions for 
the future. "The world economy is too complicated 
and there are too many different causal factors. 
I don't believe, as I used to, that Marx's 
concepts should be applied too literally to 
economic data. I prefer the view of the Japanese 
Uno school that Marx's analysis should rather 
inform one's way of looking at the world and the 
questions one asks. The first volume of Capital, 
for example, provides a brilliant framework for 
understanding what is happening in China today."

Although the future is uncertain and the 
predictions tentative, Glyn nonetheless believes 
some outcomes are more likely than others. In 
particular, as he puts it in Capitalism 
Unleashed, "having beaten off the challenges of 
the 1970s the capitalist system in the North has 
not reached the 'end of history' where growth and 
stability are assured."

He singles out three major problems for world 
economic growth over the next few years. Firstly, 
productivity growth is likely to slow over the 
next few years with the secular shift towards 
services where it is more difficult to innovate. 
An ageing population compounds the problem.

Secondly, there are likely to be increasing 
environmental constraints on the world economy. 
Already there is evidence of this in rising oil 
prices and depletion of other essential materials.

Thirdly, the benefit to the North from low wage 
production in China will decrease as wages 
inevitably rise in China, as the precedents of 
history suggest always happens as labour reserves 
dry up.

These three factors presage very slow rises in 
average living standards. Slower economic growth, 
especially when combined with growing inequality 
in incomes, could generate much increased 
conflict over distributional issues.

"In the old days, unskilled workers could get 
relatively well-paid jobs in manufacturing. Now 
the only jobs are poorly paid in the service 
sector, many of them servicing the rich who have 
seen their own incomes rise enormously. This will 
bring to the fore again the issues of inequality 
and redistribution. Will we face a dystopia in 
which very large numbers of less qualified and 
poorly paid people exist to service the 
consumption needs of the rich? Or can we gain 
mass support for much higher taxes on the best 
off sections to redistribute income and develop 
welfare services to mitigate rising inequality 
and slow growth in living standards?"

Capitalism Unleashed contains a wealth of 
argument, analysis and facts about the world 
economy over the last 30 years and is very 
accessible to the general reader. You may not 
agree with everything Glyn says, but socialists 
will benefit greatly by reading and engaging with 
it.




Capitalism Unleashed by Andrew Glyn is published 
by Oxford University Press,16.99. It is 
available from Bookmarks - phone 020 7637 1848 or 
go to www.bookmarks.uk.com.

http://www.socialistreview.org.uk/article.php?articlenumber=9792


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