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The 1970s were a pivotal decade for the US economy: deindustrialization broke the power of the labor unions and made possible the redistribution of income in favor of corporate profits; globalization and offshore investments opened alternatives to domestic nonfinancial capital accumulation; domestic productivity growth declined; and labor-saving technology empowered superstar corporations to rapidly gain market share. This book argues that the persistent fall in profitability, leading to the stagflation crisis, was a direct result of the transition from the Fordist phase of capital accumulation, based on large-scale manufacturing, to the neoliberal phase and the rising power of finance. Neoliberalism restored the power of rentiers but not the profit rates of nonfinancial corporations. Falling accumulation rates weakened the growth capacity of nonfinancial corporate firms and secular stagnation became the norm. Neo-Keynesian economists, Larry Summers and Paul Krugman, explained the persistence of secular stagnation with arguments borrowed from Alvin Hansen in the 1930s, such as the declining birth rate or the falling relative prices of investment goods, hence a shortfall of demand. In the Classical paradigm, profitability drives capital accumulation and falling profitability slows down growth. As the accumulation rate declined and the capacity growth diminished, breakdowns in supply links, due to the COVID-19 pandemic, prevented large infusions of purchasing power to find matching levels of supply, hence the stagflation crisis returned. The book will be a great asset to researchers and scholars interested in the development of Classical Political Economy concerning issues related to inflation, stagnation, growing inequality, and the next phase of neoliberalism.
List of contents
1. Introduction 2. Classical Economics: Growth and the Stationary State 3. Profitability and the Limits of Fordism 4. Productivity and Wages: The Scissors Effect 5. Production, Labor, and Income Trends 6. The Deindustrialization Quagmire 7. Falling Interest Rates, Banking, and Financial crises 8. Keynes and Secular Stagnation 9. The Neo-Keynesian Retreat 10. The Classical Advance: Schumpeter and Grossman 11. From Secular Stagnation to Stagflation
About the author
Ascension Mejorado is Clinical Professor and Economics Faculty Chair in the Liberal Studies program at New York University, USA. She is co-author with Manuel Roman of Profitability and the Great Recession: The Role of Accumulation Trends in the Financial Crisis (Routledge).
Manuel Roman taught economics at New Jersey City University, USA, for over 25 years and is now retired. He is co-author with Ascension Mejorado of Profitability and the Great Recession: The Role of Accumulation Trends in the Financial Crisis (Routledge). He is the solo author of Heterodox Views of Finance and Cycles in the Spanish Economy and Growth and Stagnation of the Spanish Economy: the Long Wave, 1954-1993.
Summary
The 1970s were a pivotal decade for the US economy. This book argues that the persistent fall in profitability, leading to the stagflation crisis, was a direct result of the transition from the Fordist phase of capital accumulation, based on large-scale manufacturing, to the neoliberal phase and the rising power of finance.
