The Revenge of the Capitalist Class: Crisis, the Legitimacy of Capitalism and the Restoration of Finance from the 1970s to Present

Abstract

In the 1970s, US capitalism suffered a legitimacy crisis as the economy was mired in high inflation, unemployment, and slower growth. The rate of profit had been decreasing since the late 1960s and by the mid-1970s Wall Street was in poor shape. Capitalists politically mobilized in the 1970s to restore the rate of profit and to restore power to economic elites. In this article, I examine changes to the American economic system with special focus on the perspectives of capitalist elites. While the rate of profit in industry was not restored by the “neoliberal” era, the rate of profit in the financial sector (albeit sometimes volatile) has increased beyond what it was prior to neoliberalism. Thus, the capitalist political mobilizations of the 1970s inadvertently put Wall Street back into power.

Money Supply, Class Power, and Inflation

“…Inflation ate up workers’ wage gains, but workers benefited from full employment policies, welfare benefits tied to price indexes, and devaluation of their debts in real terms. In contrast, the crisis hit capital by decreasing their real interest income and real asset value (Volscho forthcoming). Amid the stagflation crisis of the 1970s, income inequality declined rapidly in most advanced countries to its lowest level in the postwar era, as did the income share of the wealthiest (Alderson and Nielsen 2002; Piketty 2014).…”

Financialization and income inequality: bringing class struggle back in

“…This tug of war created occasional episodes of ‘wage-price spirals’, in which higher prices prompted demands for wage increases, which in turn led firms to raise prices even more and so on (figure 3). In this sense, the inflation of the 1970s can be viewed as a ‘monetary expression’ of class struggle (Volscho, 2017).…”

“…However, inflation was a major cause of concern for financiers and investors, as it eroded the value of their financial assets and reduced the returns on their investments (Volscho, 2017). These concerns were articulated by the famous investor Warren Buffet (1977: 253), who complained over the pages of Fortune Magazine that ‘inflation is a far more devastating tax than anything that has been enacted by our legislatures’.…”

Oligarchical Restoration and Full Neoliberalism Reloaded: An Essay on the Roots of the Twin Crises and the 2016 Coup D’etat in Brazil

“…Isto pode ser explicado, entre outros fatores, por aproximadamente um quarto de século de evolução política relativamente progressista e democrática fora das institu-ições burguesas formais existentes, em que a melhor organização dos trabalhadores e das classes médias intelectualmente sofisticadas conseguiram promover cada vez mais os seus interesses no interior do estado capitalista e participar de coalizões políticas vitoriosas. Ou seja, a tendência capitalista de concentração de riqueza e poder e de abolição democrática foi apenas brevemente revertida no Brasil no início do século XXI, e agora, com o golpe de Estado, o padrão de longo prazo está sendo retomado, com reformas profundas na tentativa de recuperar o tempo (e a renda) perdido e reposicionar o país ao longo do zeitgeist neoliberal mundial de concentração de renda e riqueza consolidação da plutonomia (Volscho 2015, Oxfam 2016, Foster e Holleman 2010.…”