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This book examines “the great contraction” of 2007–2010 within the context of the neoliberal globalization that began in the early 1980s. This new phase of capitalism greatly enriched the top 5 percent of Americans, including capitalists and financial managers, but at a significant cost to the country as a whole. Declining domestic investment in manufacturing, unsustainable household debt, rising dependence on imports and financing, and the growth of a fragile and unwieldy global financial structure threaten the strength of the dollar. Unless these trends are reversed, the authors predict, the U.S. economy will face sharp decline.

Summarizing a large amount of troubling data, the authors show that manufacturing has declined from 40 percent of GDP to under 10 percent in thirty years. Since consumption drives the American economy and since manufactured goods comprise the largest share of consumer purchases, clearly we will not be able to sustain the accumulating trade deficits.

Rather than blame individuals, such as Greenspan or Bernanke, the authors focus on larger forces. Repairing the breach in our economy will require limits on free trade and the free international movement of capital; policies aimed at improving education, research, and infrastructure; reindustrialization; and the taxation of higher incomes.

About This Book

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The advent of economic neoliberalism in the 1980s triggered a shift in the world economy. In the three decades following World War II, now considered a golden age of capitalism, economic growth was high and income inequality decreasing. But in the mid-1970s this social compact was broken as the world economy entered the stagflation crisis, following a decline in the profitability of capital. This crisis opened a new phase of stagnating growth and wages, and unemployment. Interest rates as well as dividend flows rose, and income inequality widened.

Economists Gérard Duménil and Dominique Lévy show that, despite free market platitudes, neoliberalism was a planned effort by financial interests against the postwar Keynesian compromise. The cluster of neoliberal policies–including privatization, liberalization of world trade, and reduction in state welfare benefits–is an expression of the power of finance in the world economy.

The sequence of events initiated by neoliberalism was not unprecedented. In the late nineteenth century, when economic conditions were similar to those of the 1970s, a structural crisis led to the first financial hegemony culminating in the speculative boom of the late 1920s. The authors argue persuasively for stabilizing the world economy before we run headlong into another economic disaster.

Earlier this month we published a new book from Gérard Duménil and Dominique Lévy, both of whom are Directors of Research at the Centre National de la Recherche Scientifique in Paris. Duménil and Lévy are the authors of an earlier Harvard University Press book, Capital Resurgent: Roots of the Neoliberal Revolution, in which they showed that, despite free market platitudes, neoliberalism was a planned effort by financial interests against the postwar Keynesian compromise. In their new book, The Crisis of Neoliberalism, they examine the global economic collapse of 2007-2010 as an inevitable outcome of the rise of neoliberal economics. Unlike much that’s been written on this collapse, Duménil and Lévy focus not on villifying individuals, but on describing the larger forces at work. And, again unlike most other accounts, the authors offer concrete prescriptions for revitalizing our global economy and closing the door on the era of neoliberalism. With accessible language accompanied by well-designed graphs and charts, The Crisis of Neoliberalism is a useful new guide to understanding the world around us. Continue reading →

Filed at 6:31 a.m. EST on January 19, 2011

DUBLIN (AP) — A 1997 letter from the Vatican warned Ireland’s Catholic bishops not to report all suspected child-abuse cases to police — a disclosure that victims’ groups described as “the smoking gun” needed to show that the church enforced a worldwide culture of covering up crimes by pedophile priests. Continue reading →