Chapter 4 Notes: The Economy in a Global Age
- What are the main types of capitalism in the modern world?
- Why has neoliberalism become dominant, and what are its chief implications?
- How can economic globalization best be explained?
- To what extent has the modern world economy been 'globalized'?
- Why does capitalism tend towards booms and slumps?
- What have recent economic crises told us about the nature of global capitalism?
Economic issues have long been at the centre of ideological and political debate. For much of the nineteenth and twentieth centuries, the core battleground in politics was the contest between two rival economic models, capitalism and socialism. This nevertheless culminated in the victory of capitalism over socialism, registered in particular through the collapse of communism. As the market, private property and competition were accepted worldwide as the only viable ways of generating wealth, capitalism became global capitalism. However, capitalism did not cease to be politically contentious. In the first place, capitalism is not one system but many: different forms of capitalism have taken root in different parts of the world. How do these capitalisms differ, and what are the implications of these different forms of socio-economic organization? Moreover, a particular form of capitalist development has gained global ascendency since the 1980s, usually dubbed neoliberalism. What have been the chief consequences of the 'triumph' of neoliberalism? A further development has been a significant acceleration in the process of economic globalization, usually associated with the advance of neoliberalism. Has neoliberal globalization promoted prosperity and opportunity for all, or has it spawned new forms of inequality and injustice? These questions have become particularly pressing in the light of a tendency towards seemingly intensifying crisis and economic instability. Are economic crises a price worth paying for long-term economic success, or are they a symptom of the fundamental failings of global capitalism?
- Capitalism is a system of generalized commodity production in which wealth is owned privately and economic life is organized according to market principles. Enterprise capitalism, social capitalism and state capitalism nevertheless differ in relation to the balance within them between the market and the state.
- The advance of neoliberalism reflects the ascendance of enterprise capitalism over rival forms of capitalism. While supporters of neoliberalism claim that, in association with economic globalization, it is a reliable vehicle for generating global growth, its critics have associated it with widening inequality, financial crises and political 'shocks' of various kinds.
- Economic globalization is the process whereby all national economies have, to a greater or lesser extent, been absorbed into an interlocking global economy. However, there have been major debates about the extent to which economic life has been globalized as well as about the impact, for good or ill, of economic globalization.
- Despite its global success, capitalism has always been susceptible to booms and slumps. While Marxists have explained these crises in terms of an inherent tendency of capitalism towards over-production, Schumpeter drew attention to the business cycle, stemming from the disposition within capitalism towards 'creative destruction'.
- Modern crises and 'contagions' have derived from the trend, implicit, some argue, in neoliberal globalization, in favour of 'financialization'. This has created what has been dubbed 'casino capitalism', a highly volatile and unpredictable economic system that allows speculative bubbles to develop and then collapse, their impact extending, potentially, across the world.
- The origins of the global financial crisis of 2007-9 are hotly disputed, with disagreement about whether the crisis was rooted in the US banking system, in Anglo-American enterprise capitalism, or in the nature of the capitalist system itself. The crisis may have accelerated important shifts in global power, but it is far less clear that it will result in a major shift in favour of national or global financial regulation.