Panitch and Gindin’s story of the rise of finance is straightforward and compelling. The US was a financial and manufacturing powerhouse by the end of WWI but lacked the vision and institutional capacity to play a leading role in the global economy. Through the New Deal, World War II, and the formation of Bretton Woods, the US developed this capacity and emerged, at war’s end, a superpower ready to re-launch global capitalism.
Coming out of World War II, “The explicit long-term goal of the American state was to create the material and legal conditions for the free movement of capital throughout the world.” Panitch and Gindin argue that a key element of this project for an American empire was the regulation and expansion of US finance. By the 1950s US finance was growing in step with (and often ahead of) US manufacturing, “deepen[ing] markets at home, expand[ing] abroad, and lay[ing] the basis for the explosion of global finance that occurred in the last decades of the twentieth century.”
But as finance got stronger, the cradle of Bretton Woods turned into a cage. The regulatory framework of the New Deal became a barrier finance sought to overcome. US banks followed US companies overseas, setting up shop outside the US to avoid restrictions. At the same time the contradictions of Keynesianism (strong capital plus strong labor) intensified. Profits for US corporations declined amidst new competition from Europe and Japan, and US workers grew unruly, demanding (and getting) increased wages and benefits. By the late 1960s the Bretton Woods system of fixed exchange rates and capital controls was strained to the breaking-point.
As the crisis of stagflation and dollar devaluation increased during the 1970s the US state fumbled around for a solution. To overcome what Panitch and Gindin call a “crisis of business confidence” the US needed to show that it could resolve the contradictions of Keynesianism at home and Third World nationalism abroad. Ultimately it did, through Volcker’s ‘shock and austerity’ campaign.
The imposition of class discipline to break the great inflation and the wage militancy of US labor strongly confirmed the American state’s commitment to property, the value of the dollar, and the inviolability of its debt. The way in which this was achieved – high interest rates, a deep recession, and the liberalization of markets – also laid the basis, not only for the new age of finance, but also for the restructuring of US industry.
In addition to the Volcker shock, Congress phased out ‘Regulation Q’ ceilings beginning in 1980, continuing an ongoing policy of deregulation to keep pace with developments in the private financial sector. Cutting the New Deal apron strings enabled finance to develop its global capacity further, while Volcker’s monetary shock swiftly re-directed capital flows toward the US, re-establishing Wall Street as the center of the global financial world.
But Gindin and Panitch don’t define the 80s and 90s by the rise of finance as many scholars do. Instead, they see the rise of finance as one of a number of transformations occurring at the time, along with the “restructuring of manufacturing, the explosion of high-tech, the ubiquity of business services, and the profound weakening of working-class organization and labor identity.” Collectively, these transformations “re-constituted the material base of American empire,” enabling a deep restructuring of the US economy to restore competitiveness and profitability. In the process a truly global capitalism was made.
The machinations of the US state revived corporate profitability with a vengeance. But, it also created a volatile global economy dominated by the whims of finance. There were seventy-two financial crises in the 1990s alone. To keep the whole thing going the US state had to increase its capacity for regulation and rescue. The US Treasury’s ability to “control contagion and orchestrate supplemental interventions,” along with the Fed’s function as “lender of last resort,” were increasingly called upon as global financial crises (Mexico, East Asia, Argentina) got bigger and bigger.
The 2007 US financial crisis was the mother of them all, and pushed the US state’s role as container of crises further: it became “market maker of last resort.” Yet, the crisis wasn’t a sign of systemic breakdown. Instead, Panitch and Gindin argue that the crisis actually strengthened the US empire, that the ability of the US to rein in the crisis demonstrated its centrality to the functioning of global capitalism. Muted criticism of quantitative easing, and the continued Treasury bond feeding frenzy, showed that the US was the only game in town. The power of finance was also bolstered by the crisis: “[I]n spite of the widespread anger at the role of Wall Street in causing the crisis, US finance emerged not only more concentrated, but also still encompassing the general interest of capital amid a broad neoliberal consolidation of class power.”
So if we sum up the properties of global capitalism according to Panitch and Gindin, the system is locally volatile but globally stable. Why? The global ruling classes (North and South) benefit from and support the system, and the global working class is in a state of near total defeat, eliminating the greatest potential source of change. Until the working classes rebel and put new political systems in place the US Empire isn’t going anywhere. And as for finance: