David M. Kotz — Neoliberal Capitalism, Its Crisis, and What Comes Next

Neoliberal capitalism had, at its core, a basic contradiction: Rising profits spurred economic expansion, but at the same time the source of the rising profits—the suppression of wage growth—created an obstacle to expansion. With wages stagnating, and with government spending rising more slowly, who would buy the output of an expanding economy? For a while, this simmering “demand problem” was forestalled, as risk-seeking financial institutions extended credit to the hard-pressed families whose wages were stagnating or falling. Debt-fueled consumer spending made long expansions possible despite the stagnation of wages and of government spending. Big asset bubbles provided the collateral enabling families to borrow to pay their bills.

The economic crisis of 2008 marked the end of the ability of the neoliberal form of capitalism to promote stable economic expansion. In the wake of the massive housing-bubble collapse and financial crash, the previous debt-and-bubble-based growth machine cannot be revived. The banks continue to find new speculative ventures and corporate profits remain high, but this process no longer brings normal economic expansion.…

Triple Crisis
Neoliberal Capitalism, Its Crisis, and What Comes Next

David M. Kotz | Professor of Economics at the University of Massachusetts Amherst

See also

David Kotz on Neoliberalism’s Crisis and What Comes Next

This is a link to a two part series at Dollars & Sense posted at MNE earlier.