Abstract
Twenty-five years ago in The End of Organized Capitalism we tried to capture some profound transformations beginning to sweep across ‘western’ societies (Lash and Urry, 1987). This book did well and generated significant citations, debates and even a prize. We are grateful to our WES colleagues for their comments on this book and we reflect upon aspects of their assessment.
First, though, what was our ambition? It was to capture the declining significance of what we called ‘organized capitalism’. Central to this were large corporations that developed particularly in the USA within the leading industrial sectors, especially around motor vehicles. These corporations organized production, employment, promotion, savings and some welfare significantly on a ‘national’ basis. They were staffed by ‘corporation men’ (Jay, 1975) working for long periods within vertically integrated organizations (Davis, 2012). These organizations were closely interconnected with regional and national banks also mainly operating within their national territories, as well as with national states. Organized capitalism was characteristic of what we called the North Atlantic rim societies.
But with the ‘disorganization’ of western capitalism beginning first within the USA we documented key changes. First, the American-type or German-type industrial corporation became increasingly fragmented, with ownership more often located with financial institutions concerned with short term ‘shareholder value’. Sennett later lamented the resulting decline in long term commitment and ‘character’ that this disorganization ushered in (1998). Moreover, manufacturing industry increasingly moved from rustbelt to sunbelt states and subsequently much was offshored to countries offering cheap and non-unionized labour as well as less regulation and lower tax regimes (see Froebel et al., 1979). The industrial working class was subject to a profound ‘disorganizing’ even as global inequalities were mushrooming.
Crucial to disorganization was the growing structural significance of ‘finance’. This occurred under the guise of efforts to turn back Keynesianism, beginning with the first meeting of the Mont Pèlerin Society in 1947 significantly organized by Swiss banks. Various changes laid the foundations for the dominance of finance from 1980 onwards. During the 1950s a new market for finance had developed, the ‘Eurodollar market’ located in a sense offshore. This market exploded during the 1960s and 1970s and helped to re-establish the power of the City and especially of the Bank of England. In 1963 the Eurobond market was established. The Governor of the Bank of England proclaimed that ‘exchange control is an infringement of the rights of the citizen’. Its fateful elimination was more or less the first act of the Thatcher government in 1979.
We noted how Euromarkets ‘meant the beginning of an important shift from international financial relations being conducted through the official channels of the Bretton Woods system towards the private markets of the Eurodollar system’ (Evans, 1985: 109). Through these markets finance developed vast offshore flows, unlike some manufacturing industry and many consumer services which tended to remain onshore.
Anti-Keynesian discourse became a flood from around 1980 as progressivism and state-ism were rolled back especially in the disorganizing USA and UK. The term ‘big bang’ is apposite to capture this break as capitalism ‘disorganizes’. There is the rapid growth of banks that grew into behemoths that are too big to fail. What developed was ‘a fully fledged international credit system, deterritorialized and beyond regulation by any sovereign state’ (Aglietta, 1982: 25). The power of finance thus spun off from forms of national regulation and of rules which especially separated investment from high street banking. These interlocking developments magnified the probability of system failure as current Bank of England economist Haldane (Guardian, 2012) notes.
Disorganized capitalism thus saw the ending of many barriers to the flows of money with the growth of massive offshored financial markets and ‘products’ including many involving tax avoidance and evasion on an industrial scale (see Shaxson, 2011). These flows are central to the enormous shadow banking system, such that by 2010 the total value of foreign currency transactions is US$955t, 15 times more than world GDP (see http://www.spiegel.de/international/business/out-of-control-the-destructive-power-of-the-financial-markets-a-781590.html, consulted 14 November 2012). These flows generate a ‘dictatorship of financial markets’ redistributing income and rights away from the ‘real economy’ (Latouche, 2009). This is central to the emergence of a significantly untaxed, ungovernable and out-of-control ‘casino capitalism’, more like gambling than banking according to Strange, whose brilliant analysis we drew upon (1986).
Thus The End of Organized Capitalism documented the fragmentation of the national paradigm and its displacement by global neoliberalism, which first emerged at the end of the 1970s. This power of disorganizing casino capitalism was being ‘assembled’ around us in the 1980s and whose contours we tried to ‘fix’. We might describe our analysis as ‘It’s finance, stupid!’ Our analysis seems especially prescient given how capitalism in the ‘West’ developed, certainly differently from the much more economistic and manufacturing-oriented ‘post-Fordist’ framework that other analysts were developing in the 1980s.
Some comments from our critics thus somewhat miss the mark of this book, which is not mainly concerned to explain ‘postmodern culture’. We are also criticized for a baffling complexity and no clear explanation of change. But our plan was to avoid economic reductionism, to capture the open nature of change and to show that capitalism was taking a dangerous turn as many deterritorialized processes were wreaking havoc with national capitalisms and their power to intervene and to regulate markets. Markets were being disorganized before our eyes and the consequences for welfare states, national policies, inequalities, organized opposition and global climates we now know have been catastrophic.
Also we are taken to task for an over-ruptural thesis which minimized the analysis of ebbs and flows. But unlike almost all subsequent studies we did examine variation in the forms of organization and disorganization through a detailed comparative sociology of the USA, the UK, France, Germany and Sweden, especially noting the decentralization of industrial relations stemming from the varied class power of workers and of the emerging service class. Our text did try to explain the forms of disorganization in terms of the previous levels of organization of national systems.
A couple of further points though are pertinent here to update our analysis. First, outside of the West another regime of accumulation is emerging. There is the rise of China as a ‘post-disorganized’ capitalism. One way to understand China and post-neoliberal possibilities in the West is in terms of ‘externalities’. The assumption of neoclassical economics is that exchanges of economic actors result in unintended consequences ‘external’ to economic action, whether this action is an exchange or a productive act. These can be positive externalities such as the ‘Silicon Valley effect’. But such thinking privileges the neoclassical economic actor at the heart of the economic act as exchange or production. In China Constructing Capitalism: Economic Life and Urban Change it was found in China that the assumption of the neoclassical economic actor who is individualist, disembedded from social processes and follows the goal-directed logic of the economic act does not hold (see Keith et al., 2013). In China there are not individual actors and unit acts but a web of more relational economic activities. Affect and gift exchange is part and parcel of commodity exchange where the external, the web of activities, the absence of clear and distinct property rights is dominant, while the notion of the neoclassical economic act is subsidiary.
And we might just wonder if something similar is happening in the West. This potential new regime is neither organized nor disorganized but self-organized. As self-organized it breaks with neoclassical equilibrium and emerges as complex, path dependent, far from equilibrium systems. These are not entropic systems, but are instead meta-stable and often negentropic. This is connected to various sorts of complexity processes which are in turn reflected in the rise in importance of what was previously an externality, whether in the natural or social environment. Hence, there is the new importance of environmental economics, of complexity thought, of evolutionary thinking and of a network analysis of innovation.
At the level of the world economy and many positive feedback loops there is no reorganization or return to equilibrium. Complexity thinking breaks with the linear assumptions of much of mainstream social science and analyses instead far-from-equilibrium systems. At stake here is less an organized capitalism or a disorganized and fragmented capitalism than self-organized far-from-equilibrium forms of life. This may open up a positive space of negentropic self-organization. There is some thinking for example in the European Commission of the bankruptcy of neoliberalism, thinking that breaks with the pure dominance of utilitarian economic value and looks at a parallel production of social value through the innovation of hybrid economic coalitions of local state, private firms and non-profit organizations. Innovation we increasingly understand is non-linear, systemic and often unpredictable.
It typically involves some combination of existing pieces of machinery, text, technology, materials, organizations. It is the combination which is key. Innovation should not be viewed as technological or economic or social or political but as all these. In particular, innovation stems from ‘synchronization’ occurring between many different agents whose actions stretch across local, national and global levels (see complexity physicist Strogatz, 2003). Synchronization is effected between many different agents that generate some idea or machine or system which then becomes fashionable. Much existing innovation literature and policy has insufficiently examined the complex self-organizing or synchronization processes. There is a new regime struggling to emerge here and we have tried to examine its potential for generating a whole new cluster of low carbon systems so as to mitigate the otherwise locked in climate change (see Urry, 2011). Yet for the moment in the West the enduring consequences of the financial collapse of 2007–8 may be many years of entropic and darker futures. Much is up for grabs with deeply uncertain futures as various complex systems are struggling for dominance.