Together with the collapse of the Soviet system, China’s and India’s opening up to the global markets have added 1.5 billion new workers to the world’s economically active supply of wage-labor. This meant almost a doubling of the global labor force and a reduction of the global capital-labor ratio by half. With intensified pressures of unemployment looming everywhere, wage earners had witnessed a race to the bottom not only of their wage remunerations, but also of their social rights and work conditions. Complemented with the neoliberal policies invoking flexibility and privatization, global wage-labor had suffered serious informalization and vulnerability, consequent deterioration of income distribution, and increased poverty.
Global unemployment hit, first and foremost, the young. The International Labor Organization (ILO), for instance, reported in its 2016 World Employment and Social Outlook that open unemployment among the youth (ages 15-24) has reached to 71 millions as of 2016. Of these 71 million of young unemployed, 53.5 millions reside in the newly emerging market economies –the so-called dynamic manufacturers of the global factory. In these economies the rate of youth unemployment is estimated to be 13.6%, while world average stands at 13.1%
Problems of the young are not limited to the threat of being unemployed. According to ILO’s precautions, poverty stands out as a further serious threat among those young who could have found a job. ILO reports that currently 156 million young workers live under conditions of absolute poverty. ILO’s researchers have drawn the limits of absolute poverty at “3.10 US$ per day”, and disclose that this figure amounts to 37.7% of those who are employed; i.e., one-third of every young employed is currently working under conditions of absolute poverty.
Ironically,employment creation has dropped off the direct agenda of most central banks just as the problems of global unemployment, underemployment and poverty were taking center stage as critical world issues. (See James Heintz, 2006and also the papers in Epstein and Yeldan, 2009 for an evaluation of inflation targeting episode from a heterodox perspective). The priorities of the macroeconomics profession, likewise, were destined to the straightjackets of fiscal austerity and inflation targeting. Fighting inflation and fiscal discipline have become the new fetishes of the globalized search for austerity, while chances of global capital were diverted to the game tables of casino capitalism. Concepts such as “credibility”, “governance”, “transparency” entered into the jargon of economics, as the term “developing economies” was replaced by “new emerging market economies”, and concepts such as “industrial bourgeoisie” or “finance capital” were pushed aside to be replaced by the neutral concept, “players”.
Over this history, the roles of the falling profitability of industrial capital and a global tendency towards de-industrialization were rampant. Faced with the overall tendency for the rate of industrial profit to fall, centers of global capital found it pertinent to divest into areas of speculative finance to compensate for the loss of profitability with speculative rentier returns.
Various indicators and levels of evidence had been advanced in the literature to account for these facts.Orhangazi (2008), for instance, rested his theories of financialization of the US economy on his calculation of the profit rate in the nonfinancial corporations over the post-War era. Orhangazi reports a secular decline of the profit rates of the nonfinancial corporations starting after the second half of the 1980’s. After an extended period of restructuring over the 1980’s under the supply side economics of Ronald Reagan and Paul Volcker, the profitability was observed to rise. Orhangazi’s findings were also resonated in Duménil, G and D. Lévy (2004) “The Real and Financial Components of Profitability (USA 1948-2000)”, Review of Radical Political Economy, Vol. 36, pp. 82-110. In their analysis of capital’s profitability in US and Europe, they also reported that the behavior of the rate of profit (as measured by the ratio of net product minus total cost of labor to the value of the stock of physical capital) had first declined and then rose after 1980. Yet, their data suggest that it is actually the rise of financial returns that pulled aggregate profitability over the post-1980 neoliberal restructuring era. As stagnation of the industrial profit rates deepened, the rise of financial profit opportunities compensated for such losses. Financialization was, then, the major response of capital in its quest for expansion, for profits, and again for expansion…
In the meantime, with the advent of financialization the short termist and highly volatile expansionary nature of hot finance was vividly present. With the ascendance of finance over industry, loanable funds were destined to the expansion of lucrative products of speculative finance; investment expenditures on fixed capital stagnated forming the bases for faltering productivity gains and expanding structural unemployment. Increased poverty, worsened income distribution, and intensification of social exclusion and social violence had been the unavoidable outcomes, as de-industrialization became a real threat for the future viability of the global economy. All these were documented in the recent UNCTAD’s 2016 Trade and Development Report.
In the words of Samir Amin’s (2003) Obsolescent Capitalism, global capital has been unable to govern the world without resort to violence and open warfare.
I attest that the recent advent of “Industry 4.o” can as well be seen as an end result of the popular quest for handling these questions. As a popularized futuristic concept for the 21st Century, “Industry 4.o” reveals a Messiahitic expectation of a technological revolution encompassing the utilization of advance techniques of digital design and robotics for the production of “high value added goods”. It doesn’t matter in this conjuncture, nor of relevance, to ask what the characteristics of the first three episodes of industrialization were, and why do we conceptualize the revealed fourth industrial advance with a digitalized mark (4.o), rather than in plain English? It seems what matters now is the urgent need for creating an image of vibrant capitalism serving its citizens that embrace globalization.
Yet, even if we take the “industry 4.o” transformation as real, we cannot help thecongregationof many heretical questions on our desk: given the transformation of the technological order based on robotics, to whom will the ownership rights of the robots belong? States as owners of public (-?) capital? Private ownership as organized along trans-national corporations under the post-imperialist phase of global capital? Men and women of the scientific community who in the first place designed and projected them? Or perhaps, a de-centralized, democratically operating societal network, above and beyond nation states?
Some of these questions were already raised and a set of answers in the social democratic tradition were pursued in Marc Saxer’s Social Europepiece dated 9 June, “The Human Economy: Creating Decent Livelihoods In Digital Capitalism”. In this instance, however, there remain further questions to be addressed, in particular within the centers of global capitalism: for example, should the migrants (travelling, or forced to travel from one geography to another, for whatever reason) be granted any such rights of ownership? Or would they and their families be rather converted into the proleteriatized reserve army of global unemployed, constantly threatened by the robots for finding jobs?
Socially relevant answers to these questions are definitely very important, resonating for us the famous dictum of Marx stating that “capital is not a technological, but a social relation of production”.
(This article was originally published in the Social Europe, August 7, 2017.)