The World Economy: Where it Came From and Where it is Going

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This review of Leo Panitch and Sam Gindin's The Making of Global Capitalism and David M. Kotz's The Rise and Fall of Neoliberal Capitalism (Harvard University Press, 2015) first appeared in the December 2015 issue of Perspectives on Politics.



The contemporary international economic order has many characteristics whose combination raises important analytical questions. The level of economic integration is extremely high — almost certainly higher even than in the first era of “globalization,” from the 1870s to 1914. The extraordinary integration of global markets for goods and capital coexists with a level of government involvement in national economies that is unprecedented in the modern era. The system was largely constructed along lines laid out by the United States in the aftermath of World War II — the first time an international economic order was put into place by design. Since the end of the Cold War, the United States has been the unchallenged leader of the world economy. However, there is an extraordinary degree of cooperation on economic matters among leading states, and supranational institutions play a far greater role in managing international economic affairs than at any time in history.

Scholars from across the theoretical spectrum have attempted to analyze the modern world economy. These two books represent variants of Marxist approaches to the task, and go about it in very different ways. Both are useful as examples of the application of Marxist tools to the analysis of the international political economy; one is a much more ambitious, and much more successful, attempt to provide an integrated understanding of its origins and properties.

The Making of Global Capitalism, by political scientist Leo Panitch and Sam Gindin, former research director of the Canadian Auto Workers Union, is the more ambitious and successful book. Panitch and Gindin have tackled a massive undertaking: explaining how the modern world economy, understood largely as that which has prevailed since World War II, was constructed and how it has evolved over the decades. Their treatment is thorough and compelling, and should be read by everyone interested in understanding where the world economy has come from and where it may be going.

The book’s subtitle, The Political Economy of the American Empire, signals its primary analytical argument. Panitch and Gindin see the post-World War II international economy as largely the result of the projection of American patterns of capitalist development and governance onto the rest of the world. In service of this argument, two core ideas run through the book. The first is the centrality of the United States to the post-World War II international order. Although this is hardly controversial, the authors are particularly insistent on the extraordinary global influence of aspects of capitalist organization that were originally purely American. The second point upon which they insist is the importance of the American state, not just of American capital or the American economy. They place a great emphasis on the self-conscious attempts of U.S. policymakers to generalize the American experience to the rest of the world — largely with success. Their vision of the “American century” is one in which the United States took it upon itself to show the rest of the world how capitalism could be done, and then led the world toward doing it.

Their presentation of the process thus begins, quite appropriately, with a summary of American capitalism and how it developed over the course of the twentieth century, with special attention to the major reforms implemented during the Great Depression of the 1930s and World War II itself. They avoid oversimplifications, recognizing that the state has always played a role in the American economy. But the New Deal was a turning point that highlighted how, in their words, “the distinctive interdependence between the state and capital...would prove critical for the specific way [the United States] would play its emergent role as the manager of capitalism on a world scale” (p. 63).

After summarizing the New Deal and its aftermath within the United States, Panitch and Gindin identify and analyze several periods in the modern era. In each, they emphasize the central importance of American capitalism and the American state in promoting the developments that drove the world economy forward in a particular direction. First came the American “launch” of global capitalism: the Bretton Woods system of international finance. This led to the “golden age” of growth, from the late 1940s until the late 1960s. The success of this period in many ways set the stage for a period of crisis that lasted from the late 1960s until the early 1980s. The result was what the authors refer to as a renewal of America’s imperial capacity, as the United States led the rest of the world toward higher levels of economic integration over the course of the 1980s and into the 1990s. Since then, the world has largely been reordered along the globalizing lines pioneered by the United States. Globalization, despite its achievements, has been marked by a series of periodic crises that have threatened global economic stability and called forth further American leadership. The book ends with an excellent, detailed discussion of the global financial crisis that began in 2007.

In their nuanced and sophisticated analysis, Panitch and Gindin pay due attention to the role of powerful special interests, and also emphasize the pressures that policymakers face when confronted with problems that threaten structural stability. They are also able to integrate electoral pressures on democratic governments into their narrative. The book serves as a welcome reminder of the importance of domestic socioeconomic and class relations for an understanding of international economics and politics, and of the centrality of the United States for this understanding. For those who remember the somewhat stylized and overheated debates among Marxists between structuralists and instrumentalists in the 1970s, the analytical maturity and complexity of this book will be something of a revelation. The Making of Global Capitalism should, I believe, demonstrate to people on the Left that there is a great deal to be learned from the mainstream, “rationalist” approach that most scholars of international political economy practice today. At the same time, it should remind mainstream IPE scholars of the foundational contributions of Marxist political economy to what should, and can, be a common analytical enterprise.

Panitch and Gindin have written as balanced and sensible an interpretation of contemporary capitalism as one could imagine. Scholars, students, and other observers of international economic affairs will all gain from a reading of this authoritative and comprehensive book.

David Kotz’s goal in The Rise and Fall of Neoliberal Capitalism is somewhat more limited. Kotz is a member of the country’s leading group of “radical economists.” His purpose in this book is to explain how and why the capitalist world embraced “neoliberal capitalism,” understood broadly as the strongly market-oriented approach associated with Ronald Reagan and Margaret Thatcher, and why this embrace has lasted so long.

Kotz’s analysis is based on the notion of a “social structure of accumulation,” a structure that stabilizes the conflict between capital and labor so as to allow capitalists to make profits. He divides the modern era into two periods. The first dates back to the 1930s and 1940s. Like Panitch and Gindin, then, Kotz regards the New Deal and its aftermath as a crucial turning point. In Kotz’s telling, this period established a new social structure of accumulation. From World War II until the 1970s, he argues, capitalist societies settled on a managed form of capitalist development. In this “regulated capitalism,” relations between big business and organized labor were generally pacific and cooperative, overseen by a managerial state. But over the course of the 1970s, he argues, “big business shifted from support for regulated capitalism to endorsement of neoliberal transformation” (p. 46). After a decade of struggles, neoliberal capitalism was firmly in place.

Kotz regards this neoliberal capitalism as inherently unstable. He sees the crisis that began in 2007 as more than a simple cyclical macroeconomic crisis. Rather, he regards it as a fundamental structural crisis of neoliberal capitalism, one which cannot be resolved by changes in policies or new political compromises. And yet neoliberal capitalism seems to have survived largely intact. To explain this apparent puzzle, Kotz invokes the role of ideas — the coherence of neoliberal theory and the strength of its ideology, along with the collapse of communism. He also argues for the importance of business satisfaction with the current order (pp. 121–22).

The Rise and Fall of Neoliberal Capitalism addresses a central issue in the modern international economic and political order: the decline of more managed capitalist systems and the rise of more market-oriented ones. It makes a series of arguments for these developments and their persistence. Most scholars, whether in IPE or in economics, are likely to find the arguments theoretically and empirically dissatisfying. Nonetheless, Kotz provides a critical and radical overview of contemporary capitalism.

Although this is pure conjecture, I would venture to guess that Panitch and Gindin would be skeptical about many aspects of Kotz’s arguments. They would probably argue that today’s capitalism rests just as strongly upon the regulating role of the state as did previous versions — that regulation is now different, not necessarily less. They would also probably point to a more varied series of causes of broad trends in capitalist organization than ideology and business interests.

Both books illustrate different aspects of modern Marxist analysis. Kotz’s Rise and Fall of Neoliberal Capitalism is relatively limited in its analysis, and makes largely polemical points. Panitch and Gindin’s Making of Global Capitalism is an impressive synthesis of theoretical argumentation and empirical evidence, and its conclusions are both distinctive and powerful. The latter book, I believe, better shows the way forward for other Marxist and radical scholars who would like to better understand the working of the modern international economy. 

Copyright © 2015 American Political Science Association. Reprinted with the permission of Cambridge University Press.

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