In his review of The Long Twentieth Century, Robert Pollin advances three surprising criticisms.footnote1 All three criticisms concern what I have called ‘systemic cycles of accumulation’. These cycles consist of two phases: a phase of material expansion, in which profits come primarily from investments in the purchase, transformation, and sale of commodities (as encapsulated in Karl Marx’s formula of capital M→C→M'), and a phase of financial expansion in which profits come, not from the further expansion of trade and production, but from borrowing, lending and speculating (as encapsulated in Marx’s abridged formula of capital M→M'). The first criticism concerns the mechanisms that bring about the change of phase from material to financial expansion; the second concerns the mechanisms that sustain financial expansions over long periods of time; and the third concerns the method used in constructing these cycles. I shall respond to the three criticisms in this order.

So far as I can tell, Pollin has no quarrel with the contention that at the roots of every change of phase from material to financial expansion we can detect a system-wide crisis of over-accumulation. He even approvingly quotes my diagnosis that these recurrent crises can be traced to the fact that ‘every material expansion of the capitalist world-economy has been based on a particular organizational structure, the vitality of which was progressively undermined by the expansion itself.’ But he complains that I do not maintain my focus on this idea, as witnessed by my disregard of the literature on the hostile take-overs of the 1980s, widely held to be the expression of ‘growing inefficiencies of the corporate form of organization’.footnote2

I find this criticism surprising because, the way I see it, almost the entire analysis of The Long Twentieth Century is in fact focused on the organizational structures in which systemic cycles of accumulation are embedded. I agree with Pollin that I should have dealt with, or at least mentioned, the literature on the hostile take-overs of the 1980s. But his very reference to this literature betrays a misunderstanding about the kind of organizational structures that are most relevant to the analysis of systemic cycles of accumulation.

These are cycles of the world capitalist system—a system which has increased in scale and scope over the centuries but has encompassed from its earliest beginnings a large number and variety of governmental and business agencies. Material expansions occur because of the emergence of a particular bloc of governmental and business agencies which are capable of leading the system towards wider or deeper divisions of labour. These divisions of labour, in turn, increase returns to capital invested in trade and production. Under these conditions, profits tend to be ploughed back into further expansion of trade and production more or less routinely, and knowingly or unknowingly, the system’s main centres cooperate in sustaining one another’s expansion. Over time, however, the investment of an ever-growing mass of profits in the further expansion of trade and production inevitably leads to the accumulation of capital over and above what can be reinvested in the purchase and sale of commodities without drastically reducing profit margins. Decreasing returns set in; competitive pressures on the system’s governmental and business agencies intensify; and the stage is set for the change of phase from material to financial expansion.

In this progression from increasing to decreasing returns, from cooperation to competition, the relevant organizational structures are not those of the units of the system but those of the system itself. Thus, with specific reference to Pollin’s criticism, the account of the material expansion of the 1950s and 1960s proposed in The Long Twentieth Century focuses on the organizational structures, not of the vertically-integrated, bureaucratically-managed corporations—which were only one component of the bloc of governmental and business agencies that led world capitalism through the expansion—but on the organizational structures and contradictions of the Cold War world order in which the expansion was embedded. Among these contradictions, particular importance is attached to two closely related tendencies: the tendency of the material expansion to intensify competitive pressures on us corporations, and the tendency of us corporations to hoard the profits of the material expansion in extra-territorial financial markets. Already in evidence in the late 1960s and early 1970s, these were the tendencies that triggered the change of phase from material to financial expansion. The wave of hostile take-overs of the 1980s, in contrast, is an event that belongs not to the change of phase but to the financial expansion itself—the object of Pollin’s second surprising criticism to which I now turn.