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Chapter 6: Crisis, Underconsumption, and Social Policy
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Crisis, Underconsumption, and Social Policy 159 Chapter 6 Crisis, Underconsumption, and Social Policy Caglar Keyder I This chapter seeks to analyze the reasons for the chronic problems experienced by the crisis-prone world economy and points to a possible future. As the greatest burden of globalization is borne by the poor, whose fortunes have worsened since the 1980s, any ethically desirable scenario for the future should seek to enhance their chances of securing a livelihood. In both the North and the South, there is a new poverty suffered by those segments of the population who are either not employed or employed at low wages, in precarious positions, and without security. Their incomes have stagnated, and premarket sources of household reproduction, such as recourse to peasant production or occupying public land for the construction of informal housing, are no longer permitted in an environment of full market dominance. Agricultural subsidies in the countryside and urban subsidies toward the city poor, which were integral components of Fordist and developmentalist regimes, have fallen by the wayside as governments have redirected their economic policies toward global competition . While these populist measures are being abandoned, more formal mechanisms of “welfare” provision, designed to protect the vulnerable against risks and exclusion, to secure minimum-income guarantees, and to alleviate poverty to some extent, are still in place. Contrary to 160 Keyder popular belief, the programs of the welfare state have not been dismantled in advanced capitalist countries. In fact, more formal welfare policies have been adopted in some middle-income states to increase the overall impact of social expenditures. The scenario proposed in this chapter is the coming together of various strands of reaction against the ravages of neo liberalism to form a “double movement,” in the sense described by Polanyi;1 the primary object of this double movement would be to institute global and national social policies in order to redistribute global income toward the poor.The argument is that such a redistribution would also remedy the imbalances in the global economy and establish a more sustainable balance between an ever-expanding global production capacity and the effective demand for consumption that a more equitable distribution of global income would generate. The present crisis has been described as the first crisis of globalization , due to its scope and the rapidity of its transmission to all geographies of the world.There is, however, a more fundamental sense in which the crisis is global: it can be understood properly only if the explanation takes the global economy as the unit of analysis. Furthermore, remedies also, at least to some degree, have to be global in order to counteract the tendencies leading to crisis. We are in the midst of an underconsumption crisis, which means that, given the prevailing income distribution, the capacity for consumption is inadequate to make investment attractive.2 In other words, capitalists are reluctant to invest because they feel that there will not be sufficient demand for the eventual products. This is not a situation that characterizes one country only or a few. If that were the case, the country in which there are excess investable funds (say, the United States) could become a net creditor and invest in another part of the global economy (say, Asia) where there is demand for consumables, thus contributing to the overall deepening of capitalism. But if there is an underconsumption tendency generally in the world economy, meaning that the income distribution is bad everywhere and not conducive to bringing about widespread consumption, then such exports of capital cannot address the problem. This is why a global analysis (and a global cure) is called for. What I argue in this chapter is that the bloating and the crisis of the financial sector are symptoms of underlying problems and that a superficial diagnosis that focuses attention on the financial sector cannot address [3.80.131.164] Project MUSE (2024-03-28 10:45 GMT) Crisis, Underconsumption, and Social Policy 161 these problems. Success in unclogging the financial pathways does not magically revive investment and employment. The policies intending to combat the crisis, as long as they remain at the level of “making credit flow again,” will at best postpone a reckoning with the deeper imbalances and conflicts inherent in the global political economy. Such imbalances grow out of the lopsidedness in class balances and, by extension, in global income distribution. Because the period starting in the 1980s witnessed the defeat of the workers in the First World and the...