8/10/2019 Neo-Liberalism. the Crime and the Beneficiary
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Research oundation of SUNY
Neoliberalism: The Crime and the BeneficiaryAuthor(s): Grard Dumnil and Dominique Lvy
Source:Review (Fernand Braudel Center),
Vol. 25, No. 4 (2002), pp. 393-400Published by: Research Foundation of SUNYfor and on behalf of the Fernand Braudel CenterStable URL: http://www.jstor.org/stable/40241744.
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Neolberalism
The
Crime
nd
the
Beneficiary
Grard umnl
Dominique evy
FINANCE
N
POWER:
A
HISTORICAL
PERSPECTIVE
Whatever
terminology
s
used,
heview hat
ontemporary
eo-
liberal
olicies
re
the
xpression
f
he
ower
f finance"s
now
widelyccepted
n the eft.
espite
he
omplexity
f
events,
sometraits
may
e
clearly
dentified:
he
rise f nterest
ates,
he
fightgainst
nflation,
he
prominentosition
f
monetary
nd
fi-
nancial
markets,
orporate
overnance,
xplicit
rofitability
argets,
contempt
or he
poor.1
Our
nterpretation
f hese
henomena
s not
riginal.
ut nce
this irsttephas beenaccomplished,hy houldwe balkat the
second?
ointing
o the
power
f
finance,
e are
drivennto
dis-
cussion f
classes nd relations
f
production,
nd
their istorical
evolution.
f
we
furtherroaden he
cope
f he
nalysis
o
ncorpo-
rate he
view hat
arge
ransformations
f
capitalism,
uch
s the
transitionrom
Keynesianism
o
neoliberalism,
re
governed
y
major
tructural
riseswhich hake
p previous
lliancesnd
power
relationships
mong
lasses,
eareback oa
very
ld
frameworkf
analysis:
hat laborated
y
Marx n
themiddle f
thenineteenth
century.echnically,yassertinghat hese tructuralrises re
linked o the
historical
rends fthe
profit
ate,
we are
definitively
placed
withinhis
ramework.
The
structuralrisis f
the
ate
nineteenth
entury
rovoked
profound
utationf
apitalism:
he
eparation
etween
wnership
and
management,
ombinedwith he
diminished
utonomy
f
1
The
analysis
n this
rticle s
part
of
a
broader research
roject.
ee
[http://www.
cepremap.ens.fr/levy].
review, xv, , 2002,
93-400
393
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3/9
394
Grard
umnil&
Dominique
vy
workers ithin
he
workshop.
wo
expressions
re
used
in the
United tates o
designate
hese
ransformations.
he
"corporaterevolution"eferso the
egal
framework
the
orporation
ndthe
shareholders)
fthe
wnership
fthe
means
f
production,
nd
ts
relationship
o finance.
he
"managerial
evolution"
efers
o
the
expansion
f
the
business taff
managerial
nd clerical
ersonnel)
and the
new
Taylorist
r
Fordist)
rganization
f
production.
Particularly
elevant
o our
analysis
s the
fact
hat
arge
modern
financial tructures
riented
o
private
nterprise
perations
emerged
rom his
risis,
s
opposed
o the
traditional
tructures
primarily
inked o
the
financing
f
tates.
ramatic
rowth
f
the
monetaryndfinancialnstitutionsf apitalismapidlyollowedhe
separation
f
ownership
nd
management.
uring
he
wo
irst e-
cades
ofthe wentieth
entury,
he tocks
f reditnd
money
rew
to
extraordinary
evels,
nd the
tock
market
as
established
n
ts
modern
etting.
rom
he
utset,
he
lass
f
managerial
ersonnel
(managers
nd
engineers)
as
pitted
gainst
hat
fthe
harehold-
ers,
notwithout
ome
emotion
mong
apitalists.
ow would
he
maximization
f he
rofit
ate,
he
undamental
rinciple
f
apital-
ism,
e maintained?
espite
he
rise
f
managerial
ersonnel
nd
thestrugglefworkers,hesefirst ecadesweremarked ythe
dominant
osition
f
finance.
n
particular,
he ontrol
f redit
nd
financial echanisms
n
general
emained
he
unchallenged
riv-
ilege
f
finance,
arge
anks
cting
n
the
United tates
s
genuine
private
entral
anks,
oncerned
ith
he
tability
f
the
financial
system,
nd
of
prices.
As is well
known,
t
s theGreat
Depression
f
the
1930's,
nd
thefailure f
finance o
cope
with
he
risis,
hich
nsettled
his
framework,
pening
new
ra.
The
expression
he
eynesian
ompro-
mise s often sedto refero thisnew ocial onfiguration.ome
limitations
n finance ere
ut
n
place,
ut
n
general
his
ompro-
misedid not
affecthe
roleof
financial
nstitutions
ith
egard
o
the
enterprises.
hey
continued
o
issue
securities,
rchestrate
mergers,
nd
allot redits.
owever,
hey
ost ontrol
f
the
verall
stability
fthe
ystem
nd the
bility
o
determine
he
general
evel
of
ctivity.
nternational
ovements
f
capital
were
lso
regulated.
The
state, .e.,
a new
group
f
government
fficials,
as
now
n
charge
f the entralized
xercise
f
control
nd
regulation.
fter
the econdWorld
War,
espite
he
xtreme
xperiences
f
he
irst
NewDeal, henew rameworkasdeemed olerabley inance,ut
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neoliberalism: crime
nd
beneficiary
395
it
represented
real etback-
financial
epression,"
twascalled-
which asneverrulycceptedy he inancialnstitutions.hisnew
power onfiguration
as inkedo
compromise
etweenhe
uling
classes
nd salaried
workers
n
general:
ising
eal
wages,
ocial
welfare
enefits,
he
ight
o
work,
nd trade-union
ights.
he
way
these
onquests
ere ealized
as often
een
described,
s
well
s
differences
n
various
ettings.
n
Europe,
he tate
ained
direct
control
f
arge
egments
fthe
conomy,
ncludinglanning
nd
subsidies,
r other orms
f
privileged
inancing.
The crisiswhich
egan
n
the1970's
undid he
Keynesian
om-
promise.
he restoration
fthe
power
f
finance- hich
ad been
prepared ordecades, n particularn the field finternational
finance-
asmade
possible
y
he
arge
nflationfthe1970's.
ts
climax,
imultaneously
eal nd
symbolic,
as the
great
hange
n
monetaryolicy
n
1979,
which
argeted
olicy
o
price
tability,
regardless
f
ts ost
n
unemployment.
his
volution as
onsider-
ably
einforced
y
he
ontinuing
nternationalization
f
production
within
ultinational
orporations.
Thedetailed
nalysis
f he
tages
nd
formsf hese ransforma-
tions
s lessrelevant
o
our
present
nalysis
han
he
discussionf
their ignificancend nature. ne fractionftheruling lasses,
finance,
hedirect
ncarnation
f
capitalist
wnership,
asrestored
its ontrol
ver he
ystem,
mposing
ts
ules ndnorms.tmust
e
clear,
however,
hat
inance id
not reverse heevolution f the
relations
f
production,
n
particular
he
eparation
f
ownership
and
management.
t is
power
which
s at issue
here,
n
corporate
governance
activity
o achieve
rofitability
nd thereturn
or he
shareholder),
s
well s
nthe ontrolf
he
macroeconomypolicies
concerningrice
tability).
What idfinancechieve?Muchharm oothers ndadvantage
for
tself,
s
may
e
expected
rom
ruling
lassnot
dedicated
oal-
truism.
his swhatwe
hall emonstrate
y
using
few
igures.
e
focus
n the
consequences
f the
change
n
monetary
olicy
ni-
tiated
n
theUnited
tates
n
1979.
The debt fThird
World
oun-
tries
rovides
major xample
f he
ppallingonsequences
f his
new
policy
utside he
United tates.
A
specific
urpose
f what
follows
s,
however,
ouse
the
xample
f heU. S.
economy
o doc-
ument
he
onsequences
f he ise f
nterest
ates,
ven
na coun-
try
here
irms
raditionally
idnot se
borrowing
s a
major
ource
of
financing.
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8/10/2019 Neo-Liberalism. the Crime and the Beneficiary
6/9
NEOLIBERALISM:
CRIME
AND
BENEFICIARY
397
It s
well
nown
hat he
negative
onsequences
f
hese ransfers
of ncome o enders erenot imitedoenterprises.llborrowers
were ffected.hecost f he
ublic
ebt,
whose
inancing
adtobe
renewed
t the
new
ates,
ecame
apidly
nbearable,
ccelerating
the
pressure
n
public
xpenses
while
he lows f
revenuelowed
down
s a result fdiminished
rowth
ates).
f
notfor heburden
of
nterest,
ublic
xpenses
ould
ave
enerally
emainedalanced
in most fthe
major apitalist
ountries
This ise
n
nterest
ates
harply
ffectedhirdWorld
ountries
carryinglarge
xternal ebt. his
fact asoften een
denounced,
but t s
important
o
measure he
mplitude
f the
phenomenon.The
apparent
ealrate f nterest2or ll
developing
ountries,
y
thedefinition
f the
World
Bank,
oaredfrom he
negative
ates
(which
ad made
possible
herise
of the
debt)
o
largely
ositive
rates
n the
1980's.
igure
shows
he hare f nterest
n
the
GNP
ofthese
ountries,
evealing
heir udden
ise,
imultaneouso the
change
n
monetary
olicy
hich aused
t.3
Whenmeasured
n
dol-
lars
corrected
or hevariation
f
prices
n the
United
tates),
he
collapse
f theGNP of
developing
ountries
ppears
ramatic.
y
1996,
thad
hardly
ecoveredhe evel
f1979.Not llof his an
be
blamed nthe ost fthedebt, utmost f tcan.
Figure
2
The Share
f
nterestn
theDebt
n
theGNP:
Developing
ountries
2
The ratio of
nterest
aid
to the stockof
debt,
corrected or
the
rate
of
variation
ofprices n theUnited States.
3
The data are from he World Bank.
The series
s
not
available fter 996.
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7/9
398
Grard
umnil&
Dominique
vy
These
xamples
f he
major
hocks
aused
y
he
olicy
f
high
interest
ates nd ow
nflation ust
e understood
n
the
ontext
f
a more
general
ransformation.he
ability
f hareholderso con-
trol
management
as estored.ublic
xpenses,
n
particular
elfare
programs,
ere onstrained.he
newneoliberal
uleswere
radu-
ally
ut
n
force
hroughout
he
world,
sing
he
mergency
itua-
tions reated
y
hedebt risis r
offinancialrises
n
general.
ro-
longing
he
risis,
inance
erpetuated
ll
of ts
ffects,
n
particular
the
pressure
laced
n
abor osts.
One
possible
bjection
s that
ll
categories
f
agents
uffered
from
he
risis,
ncluding
enders,
nd that
obody
eally
enefits
from nfavorableircumstances.hat ollowshows hat recisely
the
pposite
s true.
uring
he
1970's,
share f he
urden
f
he
crisis ad
been
placed
n
enders,
ut
henew ourse
f
monetary
policy
eversedhe ituation
o their
dvantage.
n the arlier
ec-
ades,
henet
flow f
monetary
nterest
hat
hefinancial
ector
e-
ceived
its
main ource
f
profits)
epresented
bout
3 or
4%
of
GNP.
At
he
eginning
f he
980's,
his
ercentage
ose
gradually,
reaching
or
6%
during
he 990's.
A similar
icture
s observed
or
the ractionfhouseholds
olding
ecurities,
oans,
nd
hares,
.e.,
thewealthiestractionfthepopulation.nthe1970's, he lowsf
interestnd dividendshat
hey
eceived
mounted
o
12%
of
the
total ncome
f
households;
his
ate
reached
8%
n the
1990's.
Following
he
979
hange
n
monetaryolicy,
he
atio
etween
he
profit
ate ffinancial
orporations
nd
nonfinancial
orporations
was nverted.his s shown
n
figure
.4
Before he
ate
1980's,
he
profitability
fthefinancialector
was
ignificantly
nferior
o that
of henonfinancial
ector,
hen
trose
uddenly,
ell
bove
he
ro-
fit ates
chieved
n thenonfinancial
ector.
Asalreadyrgued yboth he lassicalconomistsndMarx,n-
vestmentsre influenced
y
profit
ate
differentials
mong
n-
dustries. s
expected,
nvestors
ushed
nto the
financial
ector,
attracted
y
he
arge
rofit
ate.
his s shown
n
figure
,
which
is-
plays
he
ratio f
thenetworth
f
financial
orporations
o
the
net
worth fall
corporations.
hisratio
rovides
measure
fthe
rel-
ative izeofthe
inancialectors
excluding
unds)
n the
conomy,
in
terms
f
capital
nvested.
n about
en
years
his
atio
rew
rom
4
The
figures
orthe
financial ector xclude
funds.
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NEOLIBERALISM: CRIME
AND
BENEFICIARY 399
about
13%
to
23%,
true
explosion."
s s
well
known,
he
growth
ofmutual ndpension unds asbeendramatic.
Figure
Profit
ate
%):
U.S.,
Nonfmcial
-
)
and
Financial
orporations
)
Figure
Ratio fthe
NetWorth
f
Financial
orporations
to that f
Nonfinancial
orporations
%):
U.S.
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9/9
400
Grard umnil&
Dominique
vy
IS
AN
OVERALL
ASSESSMENT TILL
PREMATURE?
This
rapid
alance f the osts nd benefitsfneoliberalisms
unequivocal-
osts
or ne fractionf
the
population
nd benefits
for nother.
nd
he
nderlying
ariable
s that
f ocial lasses
nd
levels f
development
mong
ountries.
o
doubt
nuances
hould
be addedto
this
eneral
ssessment.
inance
s nvolved
n the or-
mation fthenew tructures
f the
production
ector
fthe
con-
omy
which re
presentlymerging.
hese
tructures
robably
lay
a role
n
thenewfeatures
f technical
hange
which
re
presently
emerging
the
rise fthe
utput/
apital
atio).
The main eficiencyfthis valuations thatt gnoreshe ssue
of financial
nstability.
ndeed,
he
recent
inancial
rises
n
Asia,
Latin
America,
nd Russia
re a
major
omponent
f the
osts
f
neoliberalism.
n
addition,
hedramatic
rowth
f
he
inancial
ec-
tor
escribed
n
figure
,
n
combination
ith he
ise nd
fall
f he
stock
market,
ose
a serious hreat
n
the
stability
f the
world
economy.
ne shouldnot
forget
ere he
Great
epression
fthe
1930's,
which ollowed
he
previous
egemony
f
finance,
lso
n
a
period
f
emerging
ew
rends
f
technology.
he
points
hetwo
periods ave n common revery trong.
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