Since the end of the 1970s, the United States has seen a dramatic increase in economic inequality. While the United States has long been among the most unequal of the world’s rich economies, the economic and social upheaval that began in the 1970s was a striking departure from the movement toward greater equality that began in the Great Depression, continued through World War II, and was a central feature of the first 30 years of the postwar period.
Despite the magnitude of the rise in inequality, the political discourse in the United States refers only obliquely to these developments. The public debate generally acknowledges neither the scale of the increase in inequality nor, except in the most superficial way, the causes of this sudden and sustained turn of events.
This short essay seeks to provide an alternative view of the postwar period in the United States, particularly of the last three decades. My argument is that the high and rising inequality in the United States is the direct result of a set of policies designed first and foremost to increase inequality. These policies, in turn, have their roots in a significant shift in political power against workers and in favor of their employers, a shift that began in the 1970s and continues through today.

Globalisation is the result of economic growth and technical progress. Production systems have attained global reach. However, the rules and institutions that regulate the systems’ relations of production and exchange are still mostly national. Furthermore, national regulation systems have been drastically eroded in the past three decades of deregulation, liberalisation and privatisation. The present global economic crisis is clearly the result of this inconsistency or contradiction.
We could say with Marx in the famous Preface to the Contribution that the global ‘material productive forces of society [have] come into conflict with the existing relations of production […] From forms of development of the productive forces these relations turn into their fetters.’
For Marx this should mark the ‘beginning of an era of social revolution. The changes in the economic foundation lead sooner or later to the transformation of the whole immense superstructure.’ Be that as it may, many — including many members of the economic and political establishment — seem to agree on the necessity of new, global rules and institutions for the management of the largely unregulated global economic and financial system.

This essay is about the crisis of US automobile management and the difficulties that management educators and practitioners in America have had facing up to that crisis. It focuses on Detroit’s Big Three but it also looks at the role Japanese firms played in transferring JMS (Japanese Management Systems) to America, particularly the transfer of TPS (the Toyota Production System) to Georgetown, Kentucky. It opens (I) with a discussion of the triumph of a science-based “New Paradigm” in business school management education and in industry, with reference to its critics, in order to establish the institutional framework within which US automobile management expanded and operated after World War II; then (II) a more general discussion ensues in which U.S. managerialism and JMS are compared, and the pathways and barriers to the transfer of JMS to America both to US firms and to Japanese transplants are explored, before in the last part (III) the focus narrows to a specific case of transfer: H. Thomas Johnson’s analysis of Toyota’s successful alternative Production System (TPS) at Georgetown and how it supersedes in theory and practice the managerial methods of the Big Three.

In a broader historical context, capitalist crises are functional and strategic. These crises signify the culmination of one process and the beginning of another. In a continuous, latent process of transformation, all of the subterranean, conflicting forces come to the surface and bring to light the very paradoxes of history itself. Through the dynamics of catharsis and reconstruction, capitalist crises provide the material basis by which profitability is restored once again. The “slaughtering of capital values”, to paraphrase Marx, is a necessary, though irrational means which allows the restructuring of production to establish the material and technological basis for yet another phase of accumulation. The recovery, however, is neither automatic nor entirely endogenous. The outcome will ultimately depend upon the complex relation of class forces. As Dobb quite perceptively contends: “To study crises was ipso facto to study the dynamics of the system, and this study could only be undertaken as part of an examination of the forms of movement of class relations and of class revenues which were their market expression” (Dobb, 1937: 81).

This paper applies Hyman Minsky’s approach to provide an analysis of the causes of the global financial crisis. Rather than finding the origins in recent developments, this paper links the crisis to the long term transformation of the economy from a robust financial structure in the 1950s to the fragile one that existed at the beginning of this crisis. As Minsky said, “stability is destabilizing”: the relative stability of the economy in the early postwar period encouraged this transformation of the economy. Today’s crisis is rooted in what he called “money manager capitalism”, the current stage of capitalism dominated by highly leveraged funds seeking maximum returns in an environment that systematically under-prices risk. With little regulation or supervision of financial institutions, money managers have concocted increasingly esoteric instruments that quickly spread around the world. Those playing along are rewarded with high returns because highly leveraged funding drives up prices for the underlying assets. Since each subsequent bust only wipes out a portion of the managed money, a new boom inevitably rises. Perhaps this will prove to be the end of this stage of capitalism—the money manager phase. Of course, it is too early to even speculate on the form capitalism will take. I will only briefly outline some policy implications.

The International Monetary Fund (IMF) presented a response to CEPR’s latest paper, which looked at the macroeconomic policies of 41 countries that currently have agreements with the Fund. Our paper had found that 31 of the 41 countries had implemented pro-cyclical policies, that is, either fiscal or monetary policies that would be expected to exacerbate an economic downturn, when such downturns were occurring in these countries.

The collapse of neoliberal economics, with its worship of the “self-regulating market,” has had among its most significant consequences the revival of the great English economist John Maynard Keynes. It is not only his writings that make Keynes very contemporary. There is also the mood that permeates them, one that evokes the loss of faith in the old and the yearning for something that is yet to be born.
Aside from their prescience, his reflections on the condition of Europe after the First World War resonate with our current mix of disillusion and hope: In our present confusion of aims, is there enough clear-sighted public spirit left to preserve the balanced and complicated organization by which we live? Communism is discredited by events; socialism, in its old-fashioned interpretation, no longer interests the world; capitalism has lost its self-confidence. Unless men are united by a common aim or moved by objective principles, each one’s hand will be against the rest and the unregulated pursuit of individual advantage may soon destroy the whole.

The first thing that comes to mind as one follows the debate among economists about the crisis is that economic theory was locked into a bubble that has now burst. The reactions have either been to ignore this and just to wait for the crisis to pass or to herald the return of one of our old heroes, Keynes. Economists seem to be victims of extremely short memories and an inability to anticipate the next theoretical development. We periodically come to believe that we have hit upon the “right model” and that all previous efforts can be consigned to the wastebasket of history. When the current model turns out to be completely at odds with reality, the reflex reaction is to go back to the previous model and to chide the modernists for having lost sight of it. A number of economists have tried to add a little historical perspective (in particular Reinhart and Rogoff (2008) have argued that this crisis is but one of many similar events), but the debate overall remains very short-sighted and ideologically motivated.