The Economics of Global Turbulence

by Robert Brenner

For years, the discipline of economics has been moving steadily away from the real world towards formalized axioms and mathematical models with only a precarious bearing on actuality. Commentators seek to fill the gap as best they can, but in the absence of real background scholarship, journalism is vulnerable to the myopias of fashion and immediacy. The deeper enigmas of post-war development remain in either case largely untouched.

Bringing together the strengths of both the economist and the historian, Robert Brenner rises to this challenge. In this work, a revised and newly introduced edition of his acclaimed New Left Review special report, he charts the turbulent post-war history of the global system and unearths the mechanisms of over-production and over-competition which lie behind its long-term crisis since the early 1970s, thereby demonstrating the thoroughly systematic factors behind wage repression, high unemployment and unequal development, and raising disturbing and far-reaching questions about its future trajectory.

Genres: Economics, History, Politics, Nonfiction

369 pages, Hardcover

First published July 30, 1998

About the author

Librarian Note: There is more than one author by this name in the Goodreads database.

Robert P. Brenner is a Professor of History and Director of the Center for Social Theory and Comparative History at UCLA, editor of the socialist journal Against the Current, and editorial committee member of New Left Review.

He is also Visiting Professor in the Department of Economics at the New School University and author of many books and papers on the early development of capitalism and the current economic crisis. His research interests are Early Modern European History; economic, social and religious history; agrarian history; social theory/Marxism; and Tudor–Stuart England.

Reviews

[David M]

But, whether the reversal takes place with a whimper or a bang, economic slowdown and new turbulence still seem much more likely than a leap into a new long upturn.

This is the last sentence of the book, written a few years before the great crash '07-08. In hindsight, Brenner appears to considerably understate his case. The long downturn has now become all but impossible to deny, as we trek through another year of our non-recovery recovery. This book provides the best framework for understanding our situation. The base to our superstructure. While the Nobel committee continues to reward the bizarre fantasies of bourgeois economists, Robert Brenner has had it all figured out for a while now.

*
Robert Brenner - man of my dreams. No one else on earth knows more about capitalism... and why it must be destroyed

https://www.youtube.com/watch?v=krP6e...

(the book itself, to be honest, is not exactly easy going)

[Alexander · Rating 5 out of 5]

I almost can't believe I finished this book. It's so utterly outside my wheelhouse yet not only did I follow most of it (slowwwly), but I learnt a heap as well. In many ways this is a book of statistics disguised as a book of words - the number of variables kept track of here is staggering. But I definitely have a way better feel for 'where we stand in the world' now than before. The book’s narrative ‘ends’ in 2005 - although Verso is reissuing an updated 2021 version in September! - but there’s no doubt that the trajectory it charts is one we’re still on. Whatever limitations there are in its scope - Latin America, Africa, India, and most of Europe outside of Germany are virtually absent from this book - is made up for in almost soul-crushing depth with respect to the three countries it does focus on - the US, Japan, and Germany.

The basic thesis is actually pretty simple: the ‘advanced capitalist economies’ are going through a crisis of manufacturing. With the rates of profit trending down ever since the the post-war boom (’45-’70), these economies have been contorting themselves every which way in order to sustain themselves. From the Keynesianism of the 70s of the Monetarism of the 80s, the equity bubble of the 90s, to the housing bubble of the 00s(-?) - all the way to the present day of record low interest rates and sky-high valuations of companies making no real profit and funded entirely by debt - all of this, for Brenner, finds its ultimate roots in the ephemeral and actually shaky foundations of the ‘advanced capitalist economies’.

There’s a real sense of ‘looking under the hood’ here (glimpsing the grime beneath the shine, as it were), insofar as to take Brenner seriously - and it’s hard not to, given the meticulousness of his case - is to have to disregard a great many of the stories we’re often told about the modern economy. Far from periodic downturns and recessions testifying to localised bad actors and run-away sectors of the economy, for Brenner, our present crisis is global, systemic, and most importantly, endogenous (generated by means of its own, inherent dynamics, and not by ‘external’, non-market means, like say, pressure from labour). The point here is that what we’re in right now - world economy wise - is a protected rear-guard action, a clinging on for dear life, and anything but a smooth-sailing operation occasionally punctuated by exogenous crises.

Or in economese: this isn’t a matter of equilibrium occasionally interrupted by cyclical bursts of a self-cleansing market dynamic. It’s disequilibrium all the way down, repeatedly smeared-over with a thin veneer of ‘normal’ functioning on the top, and dragging ever more of the world’s population into the depths of capitalist hell as it does so. OK so not entirely in economese. Still, the deteriorating condition of labour is no less at the centre the story told here, while the increasing precarity of the world’s workforce (correction: the increasing precarity of the workforce in the global North) is made sense of as, once again, not merely an accidental offshoot of capitalism’s modern path of development, but as among its structural and necessary conditions.

Anyway, I realise I’m late to the party on this book, but the fact that its powers of illumination remain no less dim a decade and a half after its publication testify precisely to its enduring status. For those whose interests are piqued: Verso’s September reissue is right around the corner!

[Billie Pritchett · Rating 4 out of 5]

I read Robert Brenner's Economics of Global Turbulence alongside Thomas Piketty's Capital in the Twenty-First Century, which made for great companions on how capitalist economies work. Brenner's book is an economic history of the developments in the world economies, and it basically tells the following story. World War II created a capital surplus for the advanced industrial economies because of all of the government subsidies dropped into military technologies which later became part of the private sector. The early 50s became a golden age when real wages were high and ordinary citizens, for example, in the United States could earn a decent living, have good jobs and nice homes and nice cars (if you were White).

Things really started to change in the 1970s, however, when in order to avoid possible economic stagnation, countries like the United States started to borrow money and invest in redundant industries and technologies. So what is happening is that basically corporations are taking out huge loans and trying to replicate already successful industries. The benefit here is that this allows for new economic bubbles given that these companies are bringing ever cheaper goods and services to the market and there are economic spikes for these companies and corporations when they invest overseas and open up new markets.

The problem, however, is that the bubbles eventually collapse. The market is oversaturated with the same kind of goods and services, the goods and services are as cheap as they can possibly be while still gaining profits, and when these goods and services fail to gain a profit either one of two things happen, or both: either the real wages for labor are kept down or workers' benefits are cut or, alternatively and perhaps simultaneously, the companies default on their loans because they can no longer afford to pay them back and so either collapse or need a government stimulus to get them from bankruptcy. Banks and other investors often lend these companies money at super-low interest rates, something ordinary citizens are often not privileged to.

One of the problems with the low interest rates is, especially when the companies can no longer pay the loans, the banks themselves collapse. And what is baffling is that this boom and bust cycle has not stopped, simply because in order to maintain this artificial economic growth and a return on profit industries already at overcapacity just continue to be invested in.

[Thomas Ray]

Wealth is now transferred upward not by making useful things but by persuading government officials to privatize, deregulate, forbear to enforce, loan to the rich at low rates, borrow from the rich at high rates, lower taxes, forbear to collect taxes owed, establish tax havens, and bail out too-big-to-fail bettors. The author explains in a 2019 interview: https://againstthecurrent.org/atc200/...

Dewey 330.9045

[Ггг Ггг · Rating 5 out of 5]

I read this in graduate school at the University of Chicago during a seminar course with Professor Moishe Postone.

Brenner's work is top notch. I ended up later reading several of his longer essays from Past and Present (sometimes while slacking off in the back when I was working as a shoe salesman at a department store).

[Stephen Thompson · Rating 4 out of 5]

This book is an attempt to understand the trajectories of the major capitalist economies of the world during the period from 1945 to 2000. It provides a theoretical framework that aims to explain the major shift that occurred during the 1970s, in which a period of rapid capital accumulation and wage growth from roughly 1945 to 1970 (referred to as the “long upturn”) was replaced by more languid macroeconomic performance from around 1970 to 2000 (the “long downturn”). The long downturn is explained by Brenner as a consequence of increased competition and overcapacity in the global economy after the 1960s.


The argument can be summarized as follows. During the late 1960s and early 1970s there was a huge fall in (pre-tax) profitability, from which the major capitalist countries never completely recovered. Since this diminished the incentive for investment in fixed capital, the result of the fall in profitability has been a long period of stagnation -- the “long downturn.” Because the fall in profitability was located almost entirely in the sectors where exported goods are produced, and occurred in all the major capitalist economies simultaneously, there is reason to suspect that it was caused by a change in the structure of the world economy. By means of a meticulously constructed historical overview, Brenner argues that this is exactly what happened.


Brenner shows that during the two decades following World War II, world manufacturing capacity expanded at a rapid pace, and at the same time, the global economy became much more tightly integrated. This process went on until a state of overcapacity and cut-throat competition was reached in the 1970s, which drove down the average rate of profit. From that point on, the different national economies of the world seemed to invest just enough to maintain a state of global overcapacity. This problem turned out to be very hard to remedy. As the average growth rate of the G7 economies fell, individual countries seemed to attain higher growth rates only for short periods, and only at the expense of other countries.


The key problem seems to be that capitalist economies can only remain healthy – and of course I am using the term “healthy” in a very narrow sense – when they are expanding. The kinds of labor-saving innovations that increase aggregate prosperity over time, and ensure competitive survival, generally can only be developed and implemented as rapidly as new capital equipment can be profitably installed. For this reason and others, there is a correlation between the rate capital accumulation and the growth rate of labor productivity. (This relationship is known as “Kaldor's technical progress function.”) So there is an inherent motivation to endlessly and rapidly accumulate capital, even when doing so only creates overcapacity in the world as a whole. When the basis for rapid capital accumulation disappears, the result is a downturn. Faced with such a downturn in the 1970s, governments scrambled to restore profit rates to their post-war-boom levels, hoping that doing so would bring back the high growth rates of the previous two decades; the result of this was strong downward pressure on both wages and social expenditures.


That, in a nutshell, is Brenner's explanation of what was happening in the global economy from 1945 to 2000. The book did persuade me that the crisis of the 1970s was caused by a change in the structure of the world economy, rather than by social/political conflicts happening within each country separately – and this is not a trivial point – but there are several major points in the book that I would criticize. I am not totally convinced that increased international competition remained the biggest factor in the long downturn after the initial crisis. Crucially, as Brenner's data show, a lot of the slowdown in labor productivity growth took place in sectors that do not produce exported goods. Brenner pieces together some different reasons why this might have happened in different countries individually, but this ad hoc approach does not give a satisfying explanation for the persistence of the slowdown in the G7 countries taken as a whole.

[Tiarnán · Rating 5 out of 5]

The best book by a Marxist since Marx

[Dillon]

Brenner tells the story of the global economy from 1950 to 2005. It’s the story of countries trying to keep their economies stable despite low-profit rates that have persisted since the 70s because of overproduction: demand hasn’t kept up with supply. Brenner attributes this overproduction not to a broader Tendency of the Profit Rate to Fall, but rather a tendency of fixed capital to act as an exit barrier preventing firms from leaving their lines. Sunk investments in large sums of fixed capital incentivize firms to remain in their lines even as their profit rates are undercut by the emergence of lower-cost producers. They remain in the line as long as their earnings are enough to make an average rate of return on their circulating capital. This tendency leads to overproduction, and, on the wider scale of competition of production blocs between different nation-states, leads to a global economy in which the newly emerging productive economies prey on the older ones. As the vulnerability of fixed capital lowers the profitability of already well-established productive economies as they are replaced by newer, lower-cost productive economies (for instance the United States’ decline in profitability as more time passed from its initial post-War period of high profitability), they seek alternatives to maintain their economic status without (successfully) addressing the overproduction that is undermining their profitability in the first place. These actions taken in response to a lower profit rate can explain the history of the global economy over the past half-century, and that’s exactly what Brenner does. Repeatedly throughout the story, the US acts as the stimulator of that demand, and in turn, other countries have become dependent upon US consumer demand to stabilize their export-oriented economies.

Basically, the US will go into account deficits with massive federal spending in order to stimulate demand and give more purchasing power to US consumers, who use that increased purchasing power to buy more goods on the world market, which allows the economies of the countries exporting those goods to grow. The export economies provide the credit that allows the US to maintain these deficits because doing so is essentially subsidizing their own growth. But the US, by continuously going into deficit (while these export economies maintain surpluses), inevitably pushes the value of the dollar down relative to these exporting economies. The fall in the value of the dollar then decreases US consumer demand and the method of stabilizing the world economy ends up undermining itself, leading to economic crises across the globe.

This is the story Brenner tells over and over again, decade by decade, business cycle by business cycle since the initial collapse in profitability in the 1970s that the world economy never recovered from. It happened under Reagan when he provided an unprecedented Keynesian stimulus to the US economy in the form of record-breaking federal spending and deficits, it happened in the 90s, only that time demand came from increased consumer borrowing stemming from an overvalued stock market bubble that inevitably ended up bursting (which was only made possible by the deregulation of finance). In the 2000s instead of using their stock values to increase their borrowing, consumers used their rapidly increasing home values to increase their borrowing. Brenner recognizes this even though the book was published years before the housing bubble actually burst.

Based on the story he tells of the past 50 years of the global economy, it’s hard to see anything but a global economy in terminal decline. Every passing business cycle seems to have less and less dynamism. The underlying problems of the economy are never resolved, but rather, bubbles just pop up to mask them (until they pop). Capitalism is destroying itself from the inside by undermining its own long-term growth prospects in pursuit of shorter-term growth and stability for companies and the competing nation-states they are a part of.

[Manuel · Rating 5 out of 5]

A fine critical examination of the postwar economic boom (late 1940s to 1973) and the subsequent long downturn (1973 onwards). Prof. Brenner's detailed work explains this curious trajectory of the world economy that eventually led to the crash of 2007-2008 in the United States.

[Pmacdougald · Rating 5 out of 5]

Brenner isn't the greatest stylist, and the organization of the book could be improved (he ends up repeating himself a good deal), but 5 stars because it is probably the best single book that one could read on the history of the global economy since world war 2

[dimwig · Rating 5 out of 5]

wwii -> keynesianism -> monetarism -> asset-price keynesianism [-> secular stagnation??]

[Steven · Rating 5 out of 5]

banger

[Albert Medina]

meh