Notesale: Turn your study into money

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Capitalism in/is crisis?
What is capitalism?
•
•
•

Like globalisation it is many things, understood as a process

Two key components:

• Capital - aims to reduce costs and maximise profit

• Labour - aims to improve conditions/wages

“Capital…is a process of circulation, not a thing
...
” (Harvey, 2011)


How does production work?

Labour power = ability
to work

Means of production =
factories, offices, etc
...


• To grow and circulate

• 3% compound growth is minimum for healthy capitalism

• This requires consumption - e
...
Bush had to go on live tv and tell people in
the US to get back out and spend after they stopped going out and spending
after 9/11

• To innovate

• Increases efficiency and profit

• For example, adapting the labour process (Taylorism and Fordism), fixed
capital investment (investing in factories, technology)

What problems does it face?

• Tensions with interests of labour

• Capital and labour require each other while having opposing interests dialectical relationship

• Rates of profit tend to fall

• New innovations become standardised, losing their edge

• Over time, profit rates tend to go down


Fordism’s golden age and decline
Fordism and capitalism’s ‘Golden Age’

• Reliant on mass-production and mass-consumption


•

• ‘Just-in-case’ production, vertical integration, tasks streamlined, etc
...
Cheaper labour costs (variable capital)

2
...
Preferential exchange rate (helps exports)

USA threatened

• Crisis of over-production begins

• Prices forced down as the market is flooded with products form the US

• US struggled

• Higher wages given Fordist compromise

• Mass production was cumbersome

• How to respond?

1
...
Copy successful competitors

Post-Fordism

• Promoted ‘flexible’ and ‘lean’ production - ability to change what is being produced
quickly

• Highly skilled labour force - workers as an ‘active force’ rather than as a ‘passive
factor of production’

• ‘Total Quality Management’ - build in quality from the beginning rather than checking
for faults at the end

• From ‘automotion’ to ‘automation’ - ‘self-working’ assembly line, machines with selfstopping mechanisms, increasing worker efficiency (Lecture 9)

Post-Fordism vs Fordism

• ‘Just-in-time’ not ‘Just-in-case’

• Eradicates inventories/over-production

• Batches vs long production runs

• Enabled by just-in-time and skilled workforce

• Short changeover times

• Flexibility and differentiation of products - end of mass-consumption

• Cheaper, more nimble production - needs technology

• Standardisation = rate of profit falls again, more over-production


Birth of neoliberalism
•
•

Long standing, yet fringe ideology (Harvey, 2005)

• Pounced at the profitability crisis, offering a range of ‘solutions’

• Two great supporters in Reagan and Thatcher

Often seen as the death of the state, though it does still play a role

• US economy is one of the most protected/tariffed


Neoliberalism

• 3 pillars:

1
...
Deregulate

• Decrease mobility constraints on capital

• Remove state controls

3
...
g
...
Return to normal/resolve

2
...
A craving or addiction


•

Emphasises the contradictory, and crisis-ridden nature of capitalism, but also its
inherent spatiality


Spatial Fix 1: resolve issues

• NIDL aids profitability through:

• Cheaper labour

• Potential of less militant workforces (need the labour more so less demanding)

• Fewer taxes/regulations (attracts FDI)

• Outsourcing reduces welfare costs - pensions, maternity care, etc
...
g
...
g
...

is cheaper - difficult as production networks are increasingly complicated (Lecture 4)

• Has driven great innovations and slashed the price of commodities, but runs into
similar problems of spatial fix 2

Neoliberalism as spatial/technical fix

• Managed to (temporarily) restore profitability, but…

• One-off injection of cheap labour?

• Lucky to coincide with the boom of China’s population (USSR and India also)

• At the cost of living/working conditions or much of the world

• Precarious/flexible labour, low wages, un(der) employment

• Cheaper goods offset declining real wages

• But consumption and demand still declined

• Challenges circulation of capital, presaging next crises


1990s and
...

• Not directly involved with production
• Existed for long time, and intimately linked to industrial capital (e
...
loan to build
factory)
• But…became increasingly dominant in late 20th/21st century
Investment in the 1990s
• Declining profit in manufacturing drives investments
• Low interest rates = risky investments as no value investing money into a bank
• Emergence of ‘venture capital’ - risky investments, if successful, see high
returns
• ‘Dot
...
g
...

• All 3 types of spatial fix at once
The role of mortgages
• Low-interest rates made mortgages more appealing for people
• Combined with wage stagnation
• Two immediate consequences:

•

1
...
Increases size of asset-backed market
Riskier ‘sub-prime’ mortgages emerge
• Lending mortgages to people who don’t have good credit ratings
• Fuelled by demand and financial returns (high risk, high reward)

Unstable growth
• Economic growth increasingly dependent on (fictitious) asset prices - not certain
• Growth is stimulated, but at what costs?
• Economy is more reliant upon debt and credit
• Low interest rates drive increasingly riskier investments, making the whole
system less and less stable
• Personal consumption more reliant on credit
• Creates bubbles; bubbles pop
• Many (most) investments fail
2008 crisis
• Earlier ‘major crises’ averted
• But, smaller crises emerging all over the world = less resilient economy
• Interlinked problems emerge:
1
...
Wage decline = less consumerism and mortgage non-payment
• Crises can no longer be shifted/ridden out
• Hedge funds collapse, then Lehman Brothers (one of the biggest investment
companies) defaults (French et al
...
g
...

• Although currency devaluation is aiding (some) manufacturing as become
more competitive on the global market
• Despite globalised economy, there are clear regional and national differences
Conclusions
• Is capitalism in crisis? Or is it crisis?
• Still works well for those who benefit from it - richest 8 people in the world own
the same as the poorest 50%
• Incredible power to get round its limits - but can this continue indefinitely?
• Clear spatiality to the process - it is uneven and multi-scalar



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