Has Anglo-American Capitalism Run Out of Steam?

Has Anglo-American Capitalism Run Out of Steam?


LYNN FRIES: Welcome to The Real News. I’m
Lynn Fries in Geneva. In this report, we look at the rise of a low-wage
economy and record inequality in the U.S. and U.K. And in so doing, we mark a 30-year
anniversary of the 1984-85 U.K. Miners Strike. Here to talk to us about this is George Irvin. George Irvin is Research Professor at the
University of London (SOAS) and author ofSuper Rich: The Rise of Inequality in Britain
and the United States. Welcome, George. GEORGE IRVIN: Thank you for inviting me, Lynn. FRIES: A major argument of your book is that
a 1970s crisis in Anglo-American capitalism, far from being resolved, has deepened, that
the Thatcher-Reagan era was itself a response to this ’70s crisis, a profit squeeze, particularly
acute in the U.S. and U.K. Why the U.S. and the U.K.? And what was done to restore profitability? IRVIN: The Reagan-Thatcher revolution was
really about destroying unions, destroying labor power, destroying the power of labor
to negotiate higher wages, which were squeezing profits. Secondly, there was a problem with
the internationalization of competition. Companies were seeing their profits squeezed increasingly
by the entry of–the industrialization of previously underdeveloped countries. Traditional
industry, both in the U.K. and in the U.S., were squeezed by the internationalization
of competition. Japan and Germany had much more modern economies. Postwar reconstruction
meant that the average age of their machines was considerably less than Britain or the
U.S. But one has to couple that with total failure
politically in the U.S. or the U.K. to modernize industry. Now, there was a period in the 1960s
and early ’70s when the Labour government in the U.K. was talking about modernizing
industry, the whole rhetoric of the white heat of technological revolution. But somehow
that failed when Labour left power and the Reagan-Thatcher era began. What’s important in the wake of the Reagan-Thatcher
revolution was that there was a great wave of private equity takeovers, in fact, takeovers
and mergers in general. The rise of private equity allowed groups to concentrate capital
and to pretend–I say pretend having chosen the words rather carefully, because there
was a pretense that industry was being modernized through private equity takeovers, but in fact
private equity takeovers were little more than an exercise in asset stripping. FRIES: And even before the Reagan-Thatcher
period, you contended, several things turned the U.S. and U.K. economies towards financialization–in
other words, helped finance capital get an upper hand over industrial capital. In your
book, you mention the 1971-72 Smithsonian Agreement as one such example. Tell us about
that. IRVIN: Yes. It’s important since we’re talking
about the history of these things to recall too that in the 1970s a number of things had
happened which deeply conditioned what happened in the ’80s and ’90s and the squeeze on workers’
wages–or, rather, the rise of the low-wage economy, to put it that way. I mentioned the Smithsonian Agreement which
effectively ended the Bretton Woods system, in which the world went onto floating exchange
rates. That helped the banking system in the sense that suddenly the whole business, the
whole trade in foreign exchange became a lucrative business. Just to give you an example of that,
today the annual flow of foreign exchange around the globe is estimated to be over $1,000
trillion. That’s $1 quadrillon. So there’s been a huge change in the way in which the
market works. And part of the power of the market is that by skimming a small percentage
of this, people can become vastly rich. And, of course, that is precisely what’s happened. FRIES: Yes. And, of course, London is a major
player in this market, so it’s not so hard to understand that Britain has come to cede
such economic and political power to the financial service sector. And what about the U.K. worker? IRVIN: The very poor have been made very poor
by the de-industrialization of Britain and by the rise of the cheaper end of the service
sector–the McJobs–the MacDonald’s, the Walmarts, etc., of this world which paid minimum wages.
Often they paid less than minimum wages and were allowed to do so. So there, instead of
a traditional working class which was protected by its unions, you had the rise of the very
rich on the one hand and the rise of what you might call an underclass on the other. Now, when you add the reform of the taxation
system which lowered the taxes on the rich and raised the incidence of indirect taxes,
one gets a recipe for growing poverty, a growing gap between the very rich and the very poor,
and also what’s important to recognize, a falling off of government service expenditure
because governments were being shrunk. The fall in tax revenue–or, rather, the relative
fall in tax revenue as a proportion of GDP meant that public services could no longer
operate on the scale which was true in the 1950s, ’60s, and ’70s in the U.K. but changed
entirely under Thatcher. FRIES: And your thoughts in conclusion? IRVIN: Where is the economy going from here?
Where is the economy going which no longer produces much in the way of real commodities,
a highly financialized economy in which the share of the financial sector has grown hugely
and the share of the industrial sector has fallen and most workers are now effectively
pauperized? Where do we go? If we no longer have a high-wage economy,
the only way aggregate demand can be kept going, apart from spending on military provision,
is for people to go into debt. Yes, we can extend growth for a while on that basis, but
it can’t be a long-term growth strategy. And that is the most important point to make,
really, that Anglo-Saxon capitalism, in particular, notably, the U.S. and the U.K., seem to have
run out of strategies for promoting growth. And shrinking the private sector–shrinking
the public sector, I should say, only makes things worse. You try to reduce public spending
in a situation where private consumer demand can only be kept going by increased indebtedness,
and you are in a quandary. And that is where we are now. We have no clear view, in the Anglo-Saxon
world, at least, of where we’re going. And if the U.S. declines, as well as the U.K.,
as a world power, which it surely will over next 20 years, it’s largely because of this,
it’s because of the underlying economics, which saw a postwar expansion, followed by
a squeeze on profits, followed by an immediate squeeze on wages and the shift to an increasingly
financialized, debt-driven economy, which is what we’re sitting in today. FRIES: George Irvin, thank you. IRVIN: Thank you for inviting me, Lynn. FRIES : And thank you for joining us on The
Real News Network.

18 Comments on "Has Anglo-American Capitalism Run Out of Steam?"


  1. The Reagan/Thatcher "revolution" was a REACTION, not a revolution.  It was about opposing the democracy movement of the last decade.  This is nothing new.  Sam Huntington pointed out that it happens about every 40 years in the US: 1890, 1930, 1970, 2010.  We're in the middle of one right now and the elite are panicking along with the right-wing just as expected.  The left will win this fight, as usual.  Hopefully this time we will KEEP WINNING!

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  2. Why consider any further strategies when the current panoply of tactics is doing so well? Damn the cultural torpedoes, full speed ahead with fiscal consolidation. & Let Us have no more of this talk of We: You are not to be involved. You may starve, and problem solved.

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  3. Put so any fool can understand it. Well said prof.
    All that's needed now is to get the MSM whores to air it.
    (Don't hold yer breath.)

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  4. Congratulations Lynn & Real News Team. This latest interview is officially a little gem…which grants it automatic entry into my favorite videos playlist, with all the other enlightening little gems… 

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  5. Seems like the UK and USA are destined for 3rd world status if their respective governments don't come up with a plan soon. …Or a revolution!

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  6. More economic revisionist history.  Yay!
    Remind me, what were the average happiness of people in the 1970's vs 1980's?  Much happier in the 80's?  Strange.  What about polls of how happy people were with the economy in the 70's vs the 80's?  Landslide in favor of the 80's.  Regan actual got re-elected strictly by pointing to the work he did with the economy, and how happy people were with the turn around?  And that's AFTER interest rates went up to 20%?

    What about the 88 banking crisis vs the stagflation? You remember stagflation, the phenomenon which was absolutely IMPOSSIBLE under Keynesian theory.  The banking crisis was barely a blip on the radar compared to the impact and misery of the 1970's stagflation? 

    Regan was TIED with Kennedy for presidential approval ratings at 63%.  And only 3 points less than Clinton!  Yep the entire country sure hated how Regan handled the economy.  Way to fox news historical accounts TRN.

    So take lessons from the time when people were unhappier in general AND with the economy?  Brilliant.

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  7. In the end Thatcher got it incredibly wrong. Her lack of intelligence along with her lack of compassion has created the situation we find ourselves in today.

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  8. The anglo-american govts already have a plan ! Its called " ME FIRST ! ITS ALL FOR ME ! ". Same as always.

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  9. a succinct and accurate analysis of how we got here, and summary of the hole we are in, thanks. The only way out is to tell companies to stop insisting on such high profit levels and force them pay their workers more, in return for the large productivity gains they have already had. Then those workers might be able to buy some of the stuff they produce, without having to buy it on credit.

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  10. poverty destroys the middle-class if the middle-class disappears then democracy will not survive if democracy doesn't survive civilisation ass wee no eat will knit survive

    Reply

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