Global Leveraged Buyout or the “Longest Boom in Capitalist History”?: A Reply to Robert Fitch

Loren Goldner's reply to Robert Fitch's article on the crisis in New Politics magazine, containing his critique of fictitious character of 1982-2007 boom.

Submitted by Steven. on April 13, 2010

This article appeared in New Politics, issue 47, spring 2009. See for the article to which it is a reply.

Robert Fitch has, for more than four decades, charmed readers with his elegant writing style, his intellectual breadth and gift for metaphor. Nevertheless, style, breadth and metaphor are no substitute for content, and his “In Defense of Washington and Wall Street” (New Politics, issue 46), while making some good points about the unraveling of the world financial system, is seriously flawed.

It is a little surprising that Fitch’s article is New Politics’ sole statement so far on the biggest capitalist crisis in 80 years. Fitch seems almost indifferent to the theoretical legacy of the Russian Revolution, the theses of the early Communist International, and the further development of the Left Opposition (Trotsky and others) after the early 1920’s which were NP’s founding commitments. Whereas all these currents had in common the affirmation that capitalism had become by 1914 a decadent mode of production on a world scale, Fitch writes that, on the contrary, we are now seeing the end of the “of the greatest and longest global expansion in the history of capitalism going back to the first industrial revolution”. For him, apparently, world capitalism, at least until 2007-8, was still progressive, as it was in the period prior to 1914.

One would think this assertion would at least require some comparison with the longer and far more broad-based post-World War II boom (1945-1973). To take only one example, capitalist productivity, (however ambiguous a form of measurement, since it makes no distinction between e.g. productive and unproductive labor) in the developed sector in 1982-2008 only rarely reached the 3% annual average increase of the 1945-1973 period . Even the Financial Times of London routinely acknowledges this.

Fitch seems to miss the difference between a classical capitalist boom and a huge leveraging of debt built upon a far-reaching human retrogression that more than cancels out his Exhibit A for the ongoing health of capitalism: the emergence from poverty of about one-fifth of the populations of China and India (about which more in a moment).

In 1980, the total debt of the U.S. government since the American Revolution was $1 trillion. Less than 25 years later, it had become $4 trillion, underwriting a similar increase in the indebtedness of American corporations, state and local governments, and individuals, now unraveling.

This period (indeed starting ca.1960, during the postwar expansion) saw the disappearance of the single-paycheck working-class family in the U.S and a fair part of Europe , and thus the doubling (or more) of the hours of work per week required to maintain such a family. This fact alone, reversing the drift of capitalism since the mid-19th century to a shorter work week, decisively undermines Fitch’s Pollyannish boom scenario.

The only expansion on a world scale during the 1982-2007 period that resembles classical capitalist expansion took place in Asia. Yet Japan, the second largest economy in the world after the U.S., hit a wall in its 1990 meltdown and has struggled with stagnation every since, with an estimated 30% casualization of the work force. The 1997-1998 Asian financial crisis devastated South Korea, Thailand and Indonesia. In South Korea, 5% annual growth did return by the early 2000’s, but with 60% of the work force casualized and one paycheck away from the street.

What about Fitch’s showcases: India and, more importantly, China? Indeed, about 300 million people in both countries acquired (or did acquire) “middle-class” levels of consumption. But the 100 million Chinese laborers drifting from city to city in search of work experienced no boom. Nor did the 750 million back on the farm, increasingly driven from the land by poverty and land-grabbing party officials building golf courses. In 2008 alone, there were a reported 70,000 “incidents” (strikes, riots, demonstrations and other public protests) in China responding to this degradation of conditions.

In India, the accelerating poverty of the 750 million peasants blew the cover of “India shining” in the last elections. Bankrupted weavers hang themselves from their looms, and the once-marginalized and now revived rural Naxalite (Maoist) insurgency in various backward states (e.g. Orissa) was recently declared India’s biggest internal security threat.

But capitalist accumulation is world accumulation, and even this very uneven regional expansion is overshadowed (and then some) by net retrogression elsewhere, which was not the case during capitalism’s progressive phase.

Fitch’s silence on the Third World outside parts of Asia is near-total. Between 1970 and 2000, the average external indebtedness of the countries of Latin America (to American and European banks) had increased by no less than 30 times. Third World debt has largely disappeared from the headlines in recent years, not because it has disappeared in reality or still does not weigh heavily on the non-development of 80 countries, but because the old “Third World” is now, in bourgeois ideology, called “emerging markets” and because much of that debt has been rescheduled or written off as uncollectible. Only recently, Ecuador’s threat to stop payments on its $30 billion debt had them sweating on Wall Street and the City of London (above all as a precedent for dozens of other countries) until attention was…somewhat diverted by the crisis of $55 trillion in global derivatives and hedge funds.

Retrogression? Take Mexico. In the wake of the Latin American debt crisis of 1982, the living standards of the Mexican population were reduced by 50%. Then, with the skillful marketing of Mexican President Salinas in the late 80’s and early 90’s, Mexican financial markets (but not living standards) recovered and the Wall Street Journal was touting Mexico as the “next Korea”; the 1994 “tequila crisis” of the Mexican bond market (requiring a $50 billion bailout of US investors by the Clinton administration) reduced the living standard of average Mexicans by another 50%. From then until the end of the 1982-2007 period, Mexico’s economy lived from the forced emigration of millions of workers to the U.S. in search of badly-paid work, from oil, and most importantly, from the drug trade. The recent closing off of job opportunities in the US and the collapse of world oil prices knocked away two of those three sources, leaving only the drug trade.

The drug trade is now estimated to constitute as much as 40% of the Mexican economy, reaching of course deep into the U.S. itself. 7000 people died in drug-related killings in Mexico in 2008, more than died in the same year under the U.S. occupation of Iraq. The drug cartels have an estimated half to one million men under arms and are more than a match for the Mexican state, which they have also largely infiltrated and paralyzed. Mainstream Mexican political discussion is no longer about being the next Korea, but the next Afghanistan. Similar gangs from the “muscular democracies” of Central America (created by U.S, counter-insurgency in the 1980’s) also reach into the U.S., and continue their killing sprees in L.A. barrios and California prisons.

A similar story can be told about Brazil (also restructured in the 1982 debt crisis) and the resulting “lost decade” of the 80’s; this was followed by the less-touted lost decade of the 90’s under H.F. Cardoso’s neo-liberalism, and finally by Brazil’s return to the good graces of Western bankers under Lula. But in Brazil, as well, 20-30% of the population still lives on the extreme margins of the official economy. The drug cartels control many of the slums around Rio and Sao Paolo, are (like their Mexican counterparts) better armed than the state, and in summer 2006 took over downtown Sao Paolo in armed riots commanded from prison by drug bosses on their cell phones. They even fund health care, schools and summer camps for kids. Most recently, they funded their own coup in Guinea-Bissau, a stepping stone to the European market.

Argentina was the “A+ student” of the neo-liberal “Washington consensus” in the 1990’s, until its collapse in 2001, Buenos Aires is surrounded by a ring of ex-industrial suburbs filled with closed factories and semi-Lumpenized workers from what was (until the 70’s) the best-paid and most militant working class of the Southern Cone, ground up (like the workers of Chile and Uruguay) under the military dictatorships established in 1973-1976, where neo-liberalism was first tested.

A lot of other people were left out of the boom too. How about Africa, where the almost continent-wide war of 1994-1998 (following the 40-odd wars of the early 90’s) killed more people (4 million) than any war since 1945? The 800,000 who died in Rwanda’s genocide missed the boom too. How many IMF “structural adjustment programs” led to similar retrogression? 6 million children (one Holocaust) die every year (not to mention adults) of diseases that are eminently curable, if only someone could make a profit selling them the medication or providing public health infrastructure. Jeffrey Sachs, (who organized some retrogression himself in Bolivia, then in Poland and in the Baltic states) talks about that regularly.

The geopolitics of retrogression since the early 1980’s would also include the non-oil states of the Islamic world (where millions of marginalized youth have been drawn to jihadi politics, from the Algerian civil war via Gaza and Lebanon to Afghanistan and Pakistan.

They would further include Eastern Europe, Russia, and the ex-Soviet Republics of Central Asia (in the latter the fall of living standards was on the order of 70% after 1991).

What happened in Eastern Europe, like Argentina (until very recently) a showcase of neo-liberal triumphalism? After 1989-1991, its industry, previously oriented to the defunct Soviet Union, not surprisingly, proved worthless in global competition. But capital poured in from the West, above all Germany (for Poland, the Czech Republic and Hungary) and Sweden (for the Baltic states). For sustained, broad-based development? Hardly. After Sachs-type “shock therapy” (much shock, little therapy) killed off or marginalized the older populations whose pensions became worthless, such capital poured into real estate speculation and “services” employing the better-educated youth (or those who did not emigrate to western Europe at the first opportunity), leaving the old industrial working class to stagnate in ex-industrial towns throughout the region. The 1998 Russian default (which almost brought down world capital markets) was followed by Putin and a certain stability, built again not on any real development but oil revenues, and the export of Russia’s other valuable natural resources, fueling a frenzied yuppie-type consumption in showcase cities (Moscow, St. Petersburg) while those left behind flocked to red-brown National Bolshevik groups and nostalgia for Stalin. And we shouldn’t forget those Mafia-type oligarchs who moved the Western aid money to their Swiss bank accounts.

In the “advanced” countries, finally: western Europe labored for most of the 80’s and 90’s with 9-10% unemployment, and in the U.S. 80% of the population saw living standards fall (working, once again, twice as many hours per week per family) by at least 20%.

The minimum wage in the U.S. in 1973 was $3.25 per hour; today it is $6.15, and it would have to be raised to $18 to recover the purchasing power of the 1973 level. The U.S. routinely scores 20 out of 20 “advanced capitalist” countries in comparative testing of high school students. U.S. life expectancy is 42nd in the world, rivaling…Jordan, and many semi-developed countries have lower rates of infant mortality. In order to satisfy the demands of big pharmaceutical companies and insurance companies, health care takes 14% of the artificial GDP figure, much higher than most other OECD countries with better (and universal) systems. 40 million Americans have no health insurance at all. Between 1 and 2% are awaiting trial, in the prison system, or on parole, an exponential increase from 35 years ago.

Current estimates of the requirements for rebuilding U.S. infrastructure are conservatively $1.6 trillion, and we need only recall New Orleans under Hurricane Katrina to grasp, in extreme form, what this has meant generally as social retrogression.

Thus, in summary, Fitch, for all his erudition, could reacquaint himself with Marx’s concept of “expanded social reproduction” introduced at the end of vol. II of Capital, and think more about the difference between the paper expansion of GDP (which has after all increased more than 10 times since 1973, and Fitch himself would not say we are any richer) and the real material reproduction of the world. Given his framework, Fitch may well think that capitalism will recover from this crisis, and a further ensuing boom will be “progressive” too.

Some Suggested Further Reading:
Cohen, Stephen F. Failed crusade : America and the tragedy of post-Communist Russia / 2000
Davis, Mike. Planet of Slums. 2006.
Henwood, Doug. After the New Economy. 2003.
Kirk, Donald. Korean crisis : unraveling of the miracle in the IMF era. 2000.
Ost, David. The defeat of Solidarity : anger and politics in postcommunist Europe. 2005.
Prunier. Gerard. Africa’s World War. 2009.
Tudor, Gill. Rollercoaster. The Incredible Story of the Emerging Markets. 2000.
Urquidi, V.L. Otro siglo perdido. Las politicas de desarollo en American Latina (1930-2005). 2005.

This text is from the Break Their Haughty Power web site at



14 years 2 months ago

In reply to by

Submitted by Steven. on April 13, 2010

Loren sent us this, with these comments:

After a "decent interval" following its publication in New Politics No. 47, I have posted my article

"Global Leveraged Buyout or 'the Longest Boom in Capitalist History'?
A Reply to Robert Fitch"

critiquing Fitch's inability to distinguish between a phase of decadence in which capital expands while social reproduction contracts, from the actual expanded reproduction of society that characterized booms in capitalism's ascendant phase.

See the Break Their Haughty Power web site

Fitch's article to which I reply is linked in mine.

Comments/critique appreciated.

so please comment away