Abstract
Soon after the economic collapse in 2008, it seemed that neoliberal capitalism must surely be dead. Deregulation, household indebtedness, and rampant speculation in the financial sector culminated in the implosion of U.S. banking, insurance, investment, and auto firms supposedly “too big to fail.” The federal government reversed years of neoliberal policy by bailing out firms in these sectors. Millions of people’s jobs and retirement savings were written off in the deep recession that followed; no comparable rescue operation was carried out for them. The financial sector quickly rebounds with record profits while stagnant wages create increasing income inequality in the United States. Surely this inequitable scenario justifies neoliberalism’s demise. But instead, proponents of neoliberalism have—if anything—strengthened their position since the Great Recession. The purpose of David M. Kotz’s book, The Rise and Fall of Neoliberal Capitalism, is to expose this apparent paradox and explain why it cannot hold much longer.
Kotz starts by stating that crises in a neoliberal economy cannot be fixed by tinkering around the edges of policy. Rather, he asserts neoliberal capitalism itself, as a social structure of accumulation, is inherently problematic. Social structures of accumulation, for Kotz, balance complicated relationships that extend through and beyond the economy, including those of the state and market, and capital and labor. Neoliberalism’s social structure of accumulation includes minimalist state interference in markets, a down-scaled state and privatization of its assets, speculative financial activities, strong opposition to organized labor, and environmental deregulation, among others. These supply-side actions are supposed to bolster corporate profits while creating more jobs for workers. Kotz makes the case that neoliberalism failed to deliver its promises to everyone except the wealthiest U.S. corporations and residents, however.
According to Kotz, social structures of accumulation change. He notes there were prior epochs of liberal capitalism in the United States supplanted by other structures. The author compares the current iteration of neoliberalism, for example, with its preceding structure of accumulation that he calls “regulated capitalism.” Kotz is referring to Keynesianism that occurred from after World War II to the late 1970s. Keynesianism was largely about demand-side management through a suite of state interventions in the market aimed at keeping unemployment low and consumption of domestic goods high. They include fiscal policies to stimulate growth through public expenditures, a strong welfare state, protecting domestic industries through tariffs, and endorsing the power of organized labor to make compacts with capital. Kotz says most indicators suggest that Keynesianism, prior to its stagnation, created more equitable and lasting economic growth than its neoliberal successor.
The difficulty with neoliberalism, according Kotz, is that it features three problematic principles for spurring corporate profit at the expense of workers: depressed wages, speculative asset bubbles, and high rates of household debt (credit cards, second mortgages). These trends are hard on U.S. workers and their families, but Kotz notes most people do not take to the street, despite the efforts of the Occupy Movement. Rather, many people adversely affected by the crisis blame government overspending rather than reckless corporate actors, and call on their elected officials for renewed, fiscally austere forms of neoliberalism. However, Kotz maintains neoliberalism cannot continue on course.
The author believes the U.S. electorate will not tolerate growing inequality and another asset bubble-turned-collapse. Kotz ends his book with a chapter that details what he sees are possible social structures of accumulation that may emerge from significant resistance to neoliberalism. The first is a business-regulated capitalism where industry begins to regulate itself in the wake of growing public unrest. Second, a social-democratic capitalism could arise featuring substantial public input in decision making, improved power of organized labor, enhanced green investment, and decreased inequality across society. Third, the author suggests the remote possibility that a socialist economy could emerge that would primarily produce public goods and increase the standard of living across society.
In summary, The Rise and Fall of Neoliberal Capitalism is an excellent book accessible to a variety of readers. Academics and lay audiences seeking a critical economic perspective on neoliberalism will find it invaluable. The book truly provides a cogent analysis of forces operating within neoliberal capitalism that may lead to its eventual undoing. It is refreshing that Kotz suggests (albeit too briefly) possible alternatives to neoliberal capitalism—some quite radical. The structure and flow of the book is generally coherent, too. The sixth chapter, titled “Lessons of History,” seems out of place, however. The chapter addresses the shifting landscape of social structures of accumulation, but it comes too late in the author’s thesis. Moving the historical chapter toward the front of the book would have been a good opportunity to address what makes contemporary liberalism “neo” in the context of previous liberalized social structures of accumulation in the United States. There are just a few additional topics in the book that could also use further treatment.
For example, it is not clear how Kotz’s social structure of accumulation compares to Aglietta’s (1979) regulation theory mentioned early in the first chapter. Students of political economy are likely interested in such distinctions that potentially advance/alter debate around structures that manage capitalism’s contradictions. Instead, the reader gets a vague impression that they are somehow similar theories. Perhaps this gets at a need early in the book to make the description and discussion of social structures of accumulation more precise. To be fair, however, such a discussion could distract from the purpose of the book and risks pedantry—especially for readers less interested in political economic theory. More important, the book does not make clear enough how neoliberalism is a project to consolidate upper-class power. Kotz does write about new alliances between factions of capital that result in the suppression of organized labor, wage stagnation, and growing income inequality. But Harvey (2005) notes the neoliberal shift away from regulated capitalism is more about consolidating upper-class power in the state apparatus than it is about factions of capital colluding to facilitate profits. Consolidation of power in the upper echelons of U.S. society, therefore, alters the political landscape in profoundly disempowering ways for regular people. Little mention is made by Kotz of how this shift in the balance of power toward the wealthy might inhibit the development of a new and more equitable social structure of accumulation. But it is the elephant in the room and therefore needs to be addressed going forward.
None of these criticisms are meant to discourage readers from picking up this thoroughly researched and well-written book. Far from it, people should read it carefully and use its detailed argument to imagine and scrutinize alternatives to neoliberal capitalism that emphasize social, political, and economic equity. It seems this is a central goal of Kotz’s book.