The market crash of October 1987 and the tremor of 1989 both prompted speculation that some replay of the 1929 crisis was in prospect. When the markets recovered, a cry of relief went up: ‘The Crisis Is Over’. But in reality the crisis has persisted now for more than fifteen years. The us election year just postponed the problems, and we are currently entering a new phase, with many difficulties. According to a well-known Gramscian dictum, a crisis means that the old is dying but the new is unable to be born. ‘The Old’ is the economic order which, since the Korean War and under the aegis of the Pax Americana, allowed the developed capitalist countries twenty years of unprecedented growth. This order has now broken down and the search for a new model of growth, for a new international order, has been proceeding by a process of trial and error. The financial crash of 1987 merely revealed the obstacles which made illusory the previously attempted solutions. In other words, it signalled the beginning of a fourth phase of the crisis, one whose contours are as yet uncertain.

The successes of the postwar period rested on two pillars.footnote1 On the one hand, a model of development based upon mechanization and a particular organization of labour, Taylorism, established itself more or less fully in the capitalist heartlands and made for very rapid productivity gains. Second, these gains were partly distributed to the wage-earning population through a tight network of collective agreements and the institutions of the welfare state. This model, sometimes called ‘Fordism’,footnote2 was thus primed by the growth of domestic consumption. International trade also grew, though at a considerably slower pace, so that the ratio of exports to domestic production declined to reach an all-time low in the 1960s. Thanks to its unchallenged productive supremacy, the United States compelled all the other countries to recognize the dollar as the universal means of exchange.

Towards the end of the sixties this order came apart as the Taylorist organization of labour, in which the producers were allowed no say in the organization and improvement of the processes of production, revealed itself to be increasingly irrational. Against a background of mounting rank-and-file protest, engineers and technicians could not halt a decline in the rate of productivity growth except through ever more costly investments. The result was a fall in profit rates which, in turn, caused a decline in investment, growth of unemployment and a crisis of the welfare state. In short, it was a ‘supply-side crisis’—or, in Marxist terms, a ‘classical’ crisis brought on by the rising organic composition of capital and a falling rate of profit.footnote3

At the same time, multinational companies deployed their productive apparatus across continents to boost productivity through economies of scale, and subcontracted production to a number of Third World countries in an effort to restore profitability. Over the next decade these would become the ‘newly industrializing countries’. World trade began to grow much faster than each country’s internal market, and the regulation of growth in both demand and supply increasingly eluded national governments. Three poles—the usa, Western Europe and Japan—became equivalent and competing powers. The oil shock of 1973 accelerated the dangerous coupling of national economies by compelling each one to export to pay for its oil—hence the appearance of a ‘demand-side crisis’.

In the first period, from 1973 to 1979, the old ‘demand management’ recipes prevailed as trade unions, governments and international experts sought to maintain the old order. Action by the us Federal Reserve to increase the Eurodollar money supply allowed internal adjustments to be postponed and opec surpluses to be paid. These dollars were recycled to the newly industrializing countries, which equipped themselves with credit in the hope of settling their debt through exports to the North where consumption was continuing to rise, albeit at a rate slowed by half. The Organization for Economic Cooperation and Development, the Trilateral Commission and the ‘economic summits’ of the seven major capitalist countries saw to it that each pole successively functioned as ‘locomotive’ of world demand.

Nevertheless, the neglect of the crisis on the supply side meant that this fairly cooperative management of world demand failed to produce any dramatic breakthrough. The decline in profitablity continued and social conflicts were unable to prevent the inflationary dissolution of redistributive gains. As the supply of the dollar rose to finance ever more unbalanced activity, its value collapsed and its holders turned to the deutschemark and other currencies.

Nineteen seventy-nine was the year of the 180 degree turn for ‘experts’ and governments alike who, no longer feeling it possible to sustain growth through demand management, resolved to restore confidence among creditors whose capital was melting away. They tightened credit to get rid of ‘lame ducks’, thereby favouring firms with a competitive future. They dismantled collective agreements and the welfare state in an effort to restore profits and ‘therefore’ investment. With a reorganization of the jungle, ‘natural selection’ would take its course and the invisible hand of the market would find a solution to the crisis! This second, monetarist phase of the crisis, led by the Federal Reserve, lasted three years and came to a screeching halt, just short of the abyss, in the summer of 1982. The austerity imposed on the American people no doubt reestablished the hegemony of the dollar but at the cost of a recession unprecedented since 1930. All the other capitalist countries had to toe the line, compelled to balance their trade accounts through competitive recessions and to prevent the flight of their savings through very high interest rates. The nics, finding themselves without markets just as their debt was exploding, were seized by the throat.