Over Christmas I went back to Capitalism Unleashed: Finance, Globalization and Welfare by Andrew Glyn. It is simultaneously a sparse and a sprawling book. The text has fewer than 190 pages, and yet it covers an immense amount of territory. I returned to the book to look for clues.

Glyn’s broad argument is that the post-Second World War period is a game of two halves.

During the 1950s and 1960s western industrialised economies experienced an unprecedented period of stability and growth during which the division of economic output was renegotiated – in the face of full employment and better worker organisation – away from profits and towards wages.

The crisis of the 1970s was followed by an extended period during which these gains for labour were eroded in the face of austerity politics, economic restructuring, globalisation, deregulation and privatisation. Glyn notes that capital account deregulation and financial innovation, in particular, reduced national autonomy, increased disruptive economic volatility and created dysfunctional incentives for senior management. He uses the now-famous example of the failure of Long-Term Capital Management and the contagion experienced during the Asian financial crisis to illustrate some of the key points. Environmental degradation sits ominously in the background as possibly placing an upper bound on future economic growth.

Glyn notes that the post-1980 marketising and liberalising policy agenda was not notably successful in improving the performance of the relevant economies. It was, however, successful in reordering the beneficiaries of the fruits of economic activity. There was a rebalancing away from wages and towards a greater share to profits. More income was also derived from property. These changes led to increasing inequality.

Glyn’s key observation is, however, about the resilience of social institutions, although he doesn’t quite frame it in those terms. Over an extended period there has been a cross-national policy agenda – sponsored by International Organisations – directed at welfare retrenchment. However, the institutions of the welfare state have proved remarkably robust, particularly in continental European countries. Glyn sees this as a positive sign. He argues that the welfare state is worth fighting for. It is the most effective means of mitigating the “market inequality” exacerbated by liberalisation and of providing adequate social insurance.

The book finishes with a brief discussion of the possibilities for introducing a Basic Income for all citizens. This is a means of moving away from the pernicious effects of means-testing benefits. It is also a means of coping with the fact that achieving adequate living standards will not require everyone to work full time, and that there is more to life than paid employment. Achieving this goal is not an economic impossibility. The barriers are primarily political.

You may be asking why, specifically, I was revisited Glyn’s book. What sort of clues was I looking for? [Read more...]