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Jacobin - March 21, 2022

Many people have prematurely announced the demise of the neoliberal economic model in the past few decades. But global capitalism has experienced an unprecedented shock over the past two years as a result of the COVID-19 pandemic. This came on top of the problems still left over from the crash of 2008, and the worsening climate crisis.

Are we about to enter a new economic era? French economist Cédric Durand believes that the answer is yes, and that the conditions for struggle by workers in defense of their interests are likely to improve dramatically.

Cédric Durand teaches at the University of Geneva and is the author of Fictitious Capital: How Finance Is Appropriating Our Future. This is an edited transcript from an episode of Jacobin’s Long Reads podcast. You can listen to the episode here.

Daniel Finn:
In an article published last year, you argued that “2021 will be remembered as the moment when global capitalism was reorganized beyond neoliberalism, a tectonic shift that will irrevocably alter the terrain of political struggle.” What was the reasoning behind that argument?

Cedric Durand:

There are several factors at play in that big shift in the regulation of capitalism. Of course, we are still in the sequence of the 2008 crisis. The 2010s were a decade of mismanagement, poor economic performance, and social and political tensions through the Global North. For this reason, when the pandemic struck, it accelerated changes that were already in the making.

The most obvious element is the fact that after several decades in which price stability was the main concern of central bankers and policymakers, full employment came to the fore as the priority of government. What happened in the United States, with an explicit orientation in favor of a “high pressure” economy, was symptomatic of this changed configuration. The question is, Why did policymakers and governments decide to shift away from the centrality of low inflation, which was in fact a war on labor, resulting in lower wages for decades?

I would say that there are at least three factors, perhaps more. Firstly, the financial system is now very highly leveraged. Because of this high level of debt, there is a great risk of instability. For governments, that means it’s no longer possible to significantly raise interest rates.

That in turn means that you have no choice other than to try and accelerate your economy in order to produce some dynamism. It is more and more difficult to pursue the course of attacking labor. This came in the wider context of a long-term tendency toward economic stagnation, and a willingness on the part of governments to overcome that tendency.

The second factor is China. International geopolitical tensions are working in favor of labor. If nationalistic tensions are rising, governments need to secure more internal consent, and being more open to the aspirations of labor can be seen as one way to build such consent.

But there’s also something more direct at work. In order to build up the country’s industrial capabilities so the United States can face Chinese competition, the US government needs to be more involved in organizing businesses and technological innovation. In that sense, China is working against neoliberalism, because you cannot just say “let the market take care of innovation.”

In practice, of course, that was never completely the case in the United States — they never left it entirely to the market — but there was a discourse of this kind, at least. Now there is a need for government to be more seriously involved in the organization of the economy. ...
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