During the severe economic crisis of 2008–09, it seemed to many that neoliberalism was finished.footnote1 The major us banks were facing collapse and survived only through state bailouts. Economic activity plummeted, along with employment. According to conventional wisdom, none of this was supposed to be happening: free-market capitalism would be eternally stable, bringing an end to the era of state intervention in the economy. Everyone would swim or sink on the basis of their own efforts and abilities. These claims were belied by what then unfolded in clear view of the whole world. When the crisis that couldn’t happen broke out, the us Treasury and Federal Reserve swiftly jettisoned their free-market dogma and used all the mechanisms at their disposal to halt the collapse. Internationally, the major capitalist states of the G20 followed suit with fiscal-stimulus programmes, while their central banks flooded the economy with money and drove interest rates to near zero. Wags noted, ‘In a crisis, we are all Keynesians.’ There was an expectation in the air of looming change in institutions and policies, although working people were expected to rely on their own devices as Washington concentrated on saving bankers and giant corporations, while homeowners facing foreclosure got little help.

The so-called Keynesian moment was short-lived. By 2010, neoliberalism had returned in the guise of austerity policy. The misery and insecurity of the Great Recession helped to fuel unexpected political developments—a rise of right-wing nationalism and renewed support for some kind of ‘democratic socialism’. Interpretations of the 2008 financial crisis and its aftermath inevitably rest upon differing assessments of the political economy of the preceding period: did neoliberal restructuring from 1979 onwards succeed in resolving the economic crisis of the 1970s, or did that malaise continue in new forms? The argument here is that the new institutional form of neoliberal capitalism did indeed succeed for a while in restoring capital accumulation and a rising profit rate, albeit at lower levels than those achieved by the ‘regulated capitalism’ of the post-war era. Moreover, if accumulation and profit rates have not been stellar, in some respects neoliberalism was much better for capital than the previous economic regime, in directing a far greater flow of wealth to the capitalist class.

The events of 2008–09 were not just a severe financial crisis and sharp recession. They marked the beginning of a structural crisis in the neoliberal form of capitalism that had taken shape after 1979—that is, a crisis that emerges from the structural features of a capitalist regime of accumulation, which cannot be resolved without the construction of a new institutional regime. The current structural crisis has taken the form of stubborn stagnation despite unprecedented monetary stimulus, with slow economic growth, a low rate of capital accumulation, stagnating real wages and worsening economic insecurity for working people—conditions that have helped to produce new political polarizations. The analysis here rests upon a theory of long-lasting institutional forms of capitalism, or ‘social structures of accumulation’. The institutions and dominant ideas of each regime serve to promote capital accumulation by bringing into being conditions that will foster a high rate of profit, growing total demand and long-run productive investments. However, the contradictions of each regime eventually bring about a structural crisis and a period of struggle over the restructuring of the political economy, leading to a new social structure of accumulation.footnote2

What follows presents an overview of the two accumulation regimes that prevailed in the us after the end of World War II, ‘regulated capitalism’ and ‘neoliberal capitalism’. It shows how the latter led first to a period of long and relatively stable economic expansions—and then, in 2008, to a financial crisis and deep recession. I analyse the forces that gave rise to that crisis and examine the evidence that it is structural to the accumulation regime, concluding with a brief consideration of possible future directions of change. The analysis focuses on the us, which—as the hegemonic capitalist power—played a central role in the emergence and spread of neoliberal restructuring. The crisis of 2008–09 also emerged mainly from the us economy. However, capitalism and its institutional forms have a global dimension, and where appropriate I take account of developments in other places and at the global level.

The main features of post-war capitalism in the advanced economies are well known. The state actively regulated businesses and market activity, Keynesian policies aimed to maintain a relatively low unemployment rate, trade unions played a significant role in labour markets and workplaces, social programmes expanded and there was large-scale state investment in public goods like education and infrastructure. In the us, all this more or less went into reverse from around 1979. The trilogy of liberalization (that is, deregulation), privatization and stabilization became the watchwords, the latter aimed at low inflation rather than high employment. Trade unions came under attack from corporations and the state, social programmes were cut back or eliminated, education was squeezed and infrastructure investment declined. The tax burden was shifted away from high-income earners and corporations, toward middle-income earners. In the global economy, the us and the international financial institutions replaced the somewhat regulationist Bretton Woods system, which allowed barriers to capital movement, with a push for free trade in goods and services and trans-border capital flows, setting off a trend of deepening global economic integration. The deregulation of the financial sector helped to spur its expansion, leading to a transformation of its role in the economy that has become known as financialization.