Determinism Capitalism

7/31/2019 Determinism Capitalism

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Socio-Economic Review (2011) 9, 59-81 doi:10.1093/ser/mwq026Advance Access publication November 11, 2010

Are there laws of motion of capitalism?

Robert Boyer *

CEPREMAP, Paris; GREDEG, Sophia-Antipolis, France

*Correspondence: [email protected]

This article takes seriously the conflict of paradigms between a market economyapproach and a capitalism approach. The first has recurrently shown its inability toexplain the major stylized facts of the last two decades. The second now receivesmore attention as a possible alternative but the field has been so underexploredby so few people that the task is somehow promethean. Is it possible to explicitlystate laws of motion of capitalism? Previous failed attempts justify somescepticism. A review of the multiplicity of meanings and conceptualizationsof economic laws suggests first that the existence of general quantitative

regularities, which economists are fond of, is quite unlikely. Second, it is possible

to identify explicit partial and temporary regularities that are indexed upon a giveninstitutional configuration of capitalism. Third, mobilizing the results of pasthistorical analyses and building upon the contributions of some key economistsand social scientistsMarx, Polanyi, Schumpeter, Kaldor, Wallerstein and Kindle-bergerthe article proposes seven conjectures about possible laws of motion ofcapitalism.

Keywords: capitalism, varieties of capitalism, markets, institutional politicaleconomy, regulation theory, financial crisis

JEL classification: B51 current heterodox approaches: socialist, Marxian, Sraf-

fian, B52 institutional, evolutionary, E02 institutions and the macroeconomy, O11macroeconomic analysis of economic development, P16 political economy

1. Introduction

The last decade has clearly shown the limits of mainstream economists

approaches. The panorama of ideas and theories has been enlarged after the

bursting out of the 2008 crisis and some key economists have been convinced

to study capitalism as a system. Actually, the major stylized facts of the 2000s

do not fit with the market economy doxa and seem to give a clear advantage tomethodologies that recognize the relevance of the notion of capitalism. In

order to enlighten this new intellectual environment, this article confronts four

major approaches.

# The Author 2010. Published by Oxford University Press and the Society for the Advancement of Socio-Economics. Allrights reserved. For Permissions, please email: [email protected]


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60 R. Boyer

Since the Second World War, economists have benchmarked their discipline

against the natural sciences and mathematics. Implicitly, they were looking at

the equivalent of the laws of physics. In retrospect, this grand project has been

disappointing. This is an invitation to investigate the various meanings of lawsin economics and by extension in social, political and historical disciplines(Section 2).

The term capitalism seemed to belong to a remote past of uncertain foun-

dations for the economic discipline and of hot ideological debates. Had not

the Marxist project of discovering the laws of motion of capitalism failed? There-

fore, the concept of market economy permeated the whole economic profession asa more decent and useful concept. Contemporary research does observe an oppo-

site shift towards the relevance of capitalism, as a multidisciplinary social sciencesconcept. Does it help in diagnosing regularities and the equivalent of laws(Section 3)?

One then encounters a striking paradox. Some heterodox economicapproaches had pursued an investigation of capitalism as a dynamic and evolving

socioeconomic system. One of their basic findings has been to point out the per-sistent variety/diversity of contemporary capitalisms but with few concerns aboutlocating the features common to all of these varieties. Quite on the contrary, each

configuration seemed to exhibit specific macroeconomic quantitative regularities.

This is the joint conclusion of the so-called rgulation theory and the Varieties ofCapitalism approach (Section 4).

Is it nevertheless possible to pinpoint other types of regularities? It is probably

the case if one adopts a more modest conception of regularities as qualitative dyna-mical patterns. In order to do so, it is crucial to revisit the main contributors to apolitical approach of capitalism and to test their conjectures against the stylized

facts that emerge from the bulk of economic and financial history researches.

Seven broad conjectures emerge out of this very preliminary survey (Section 5).

2. Does a scientific approach need explicit economic laws?

A French economist who specializes in the history of economic thought has

recently proposed a very illuminating survey of the concepts of law (Berthoud etal., 2008). It is possible to extract from his analysis at least seven proposals andconjectures and to extend them to the purpose of the present paper: can one

identify economic laws?

P1. First the duality of the concept of law in sciences is to be underlined: this termeither indicates a constant relationship between variable terms or it states acausality which is exerted under well-defined conditions. One seems to per-ceive in the evolution of the doctrines and economic theories a shift from


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the French economics of convention (le

their actions according to the context and the place (une cite

Are there laws of motion of capitalism? 61

the first to the second definition. If the classical economists sought to determine

the laws and principles that govern the creation of wealth, the majority of the

contemporary economists seem to be satisfied if they can exhibit any causality

between economic variables or between other variables and some economic

variables.

P2. It would seem that another dividing line is relevant to understanding thedifferent concepts adopted, respectively, by the macroeconomists who refer

to law as causes and the microeconomists who construct a law as a norm of

rational behaviour. The first group seeks causal mechanisms (for example

that happens if the Central bank raises its interest rate). The second one

rather clarifies what should be the rational behaviour of an individual under

the assumption that only resource allocation problems matter.P3. The standard theory which puts forward a positive approachimplicitly

research into the laws governing the economyis in fact mainly a normative

theory: how resources should be allocated in an economy that would function

according to the principle of full rationality at the individual level and effi-

ciency of markets. The permanent reference to the concept of optimality illus-

trates this typical primacy of the professional economist habitus. Some haveeven advanced that the standard economist was in fact a preacher of the

market (Marglin, 2008). The misadventures of the Washington Consensus

are there to show the pervasiveness of this conception of economics as a dis-

cipline. Today researchers in economic sociology and political economy are fol-

lowing a different and more promising strategy, basically a positive approach.

P4. Economic history does not have to refer to the concept of law since it is essen-tially a matter of interpretation: it would be a form of hermeneutics. Similarly,

conomie des conventions) brings

into play the plurality of justifications which the individuals may give of

in French)

and has coined the concept of test (preuves), whereby conflicting logics arestruggling to impose an outcome that will depend upon the idiosyncrasies ofplace and time. Thus one is far from the mechanicist concept of a causal

link restricted to the economic sphere. Since its inception, rgulation theoryhas pointed out how the historical time of structural change was orthogonal

to the time of expectations that is implicit to neoclassical theory which

assumes a stable institutional, technological and political environment.

P5. Consequently, what is the status of the pure economy? It aims to sustain arigorous analytical judgement. Thus the Walrasian model attempts to

capture the essence of a market economy via a thought experiment. The idea

of causality tends to dissolve into that of interdependence of individual beha-

viours coordinated by the price system. Whereas the Hayekian conception

assumes that the economic system functions as much with ignorance as with


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62 R. Boyer

informed action, standard theory sticks to the postulate that models are

designed like experiments of thought, for lack of a possibility of

experimentation at the required level, especially for macroeconomic issues. In a

sense, one could oppose the project of mathematization and of

axiomatization of the economy to that of the constitution of a social physics

that would study how configurations are reproduced and change sequentially

under the effect of a series of causalities.

P6. From a strict epistemological point of view, it is extremely difficult to makecompatible the laws conceived like causal mechanisms and the laws emanating

from humanly constructed norms and regulations. Via specialization, the

economist asserts a causal approach (what are the explanatory factors of

inflation, of unemployment?) but the normative approach is never veryfaraway insofar as he is tempted to see in the social norms, legal or ethical,

the sources of the prejudicial discrepancies from a model in which, for

example, unemployment would not exist and where price flexibility would

be guaranteed by principle. Other currents of research attempt to show that

it is rational to satisfy certain ethical standards because they may improve

economic efficiency. However, in any case, ethics and economics belong to

quite distinct domains. This tension between economic efficiency and social

values is very present in contemporary research and it brings many ambigu-

ities, or worse, major misunderstandings.

P7. Finally, Arnaud Berthoud advances the idea that economics should belong tothe field of art or technique, because it should be located at an intermediate

level between a pragmatic approach and pure science. This meso-level is fam-

iliar to rgulationist research which attempted to show that intermediate cat-egories are necessary to diagnose the existence of regularities, even if they

change through time and across space. Whereas the concept of law seems to

postulate invariants which cross the diversity of economic systems, would

not the task of the economist be rather to delimit with precision the conditionsunder which certain regularities are reproduced transitorily?

This brief survey suggests a quite cautious approach in the search of regularities

and causal relations in a social science such as economics.

3. Does the shift from a market economy to a capitalism

approach help?

Yesterday, economists were studying market economies, now all of them propose

to analyse the merits and limits of capitalism. Nevertheless, this does not mean

the emergence of an alternative and coherent paradigm. Even the definitions of

capitalism are quite diverse, because capitalism is a complex entity. Thus, capit-

alism is still challenging social scientists. Implicitly, at least, economists,


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sociologists and historians do not treat market economy and capitalism as

synonymous. What are the key features that distinguish these two visions of

economies and societies?

The adoption of the notion of a market economy implies that markets are the

dominant, if not totally exclusive, mechanisms for coordinating economic

activity. States, communities and civil society are a priori excluded and thismight be perceived as evidence of the limited ambition of the economist.

But as soon as actual observations contradict the hypothesis of self-

equilibrating markets, the neoclassical economists are prone to attribute the

related malfunction to an imperfection with respect to the ideal of a pure

market. Are such imperfections so widely present, for example for labour

and credit and why do they persist? Because these markets are embedded

into social, political relations that distort the mere pursuit of self (economic)-

interest and the convergence towards an equilibrium. Hence general equili-

brium theory is the implicitand frequently explicitbenchmark in many

empirical analyses by conventional economists. Contrary to frequent state-

ments, a market economy approach is not necessarily devoid of any value jud-

gement, since it assumes that efficiency is the key performance criteria and that

the markets are the less imperfect mechanisms of coordination between free

and independent individuals pursuing their own interests. Indeed, for somefundamentalists, markets are the only perfect mechanism. The normative

content of the notion of market economy should never be underestimated.

Last but not least, since Smith (1776 [1976]), the market is perceived by econ-

omists as an abstraction for the price mechanism itself. The power of the meta-

phor called the market is quite strong since its use has been extended to some

domains of sociology (the marriage market, the family, etc.) and sub-

disciplines of political sciences (the market for ideas, voting as a market, the

median voter, etc.).

The notion of capitalism unfortunately evokes an ideological construction that

is supposed to be sustained by the doctrine of liberalism, to follow feudalism

and to be opposed to socialism and communism. Actually, it can also be an

analytical tool. A synthetic definition would state that capitalism is a legalregime, an economic system and a social formation that unfolds in history andthat is built upon two basic social relations: market competition and thecapital/labour nexus. The differences with respect to a market economy arenot purely semantic (Table 1).

First, the market is only one component of a capitalist economy that does not

exclude other coordinating mechanisms and actors than markets and firms.

Second, capitalism is not by nature only an economic system, since it requires

legal rules and a precise type of political power that respects and defends


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64 R. Boyer

Table 1 From market economy to capitalism: a major paradigm shift

Market economy

Concept of Pure economic abstraction of supply andmarkets demand adjustments

Horizontal coordination among equals

Ideally self-equilibrating

Links between Ideal of a total disconnection of thevarious economic sphere (pure economy)

spheres

Capitalism

A nexus of social relations

Both horizontal (competitionamong firms) and verticalrelations (capital/labournexus)

Propagation of an unbalancedcapital accumulation

The interdependence ofeconomy, society and polity

is intrinsic to capitalismNature of Implicit conception of a natural equilibrium Accumulation is the norm,

evolution and changing social andeconomic relations preventany static equilibrium

At best, kinematical time Sense of historical timeUniqueness/ Ideal of Pareto optimality . . . and . . . Succession of historical stages

diversity benchmarking and competition reduced and coexistence of variousvariety brands of capitalism

property. Empirical observations exhibit more diverse social, economic and

political configurations than would a mere economic system. This explains why the

literature on capitalism stresses so much the existence of stages of capitalism

(commercial, industrial, financial, cognitive) as well as the variety of its brands in

the contemporary world.

Third, the interplay of market competition with the conflicting nature of the

capital/labour nexus promotes the accumulation of capital as a systemic con-

straint. This is a process full of disequilibria, contradictions and crises, at oddswith the smooth equilibrium typical of the static world captured by the notion

of a market economy. Capitalist economies are dynamic systems, putting into

motion structural change and innovation, i.e. history. The authors working

along these linesMarx, Sombart, Veblen, Schumpeter, in a sense Keynes,

Braudel and Galbraith among othersdo recognize the historical nature of capi-

talist configurations and the interdependence between the various spheres

(economy, polity, society) that are kept disconnected by market economy

approaches.

Finally, these two different research programmes should be distinguished, evenif the reference to capitalism is not, by far, a sufficient condition for capturing the

essence of contemporary economies. It might explain why a significant fraction of

former orthodox economists have adopted a dynamic approach to capitalism


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instead of refining models of pure and static economies. Can one find laws of

motion of capitalism or are they the nave illusion of Marxism?

4. How to overcome the legacy of two decades of studies about thepersistent diversity of capitalisms?

This was precisely the aim of seminal research upon the long-run transformations

of American capitalism (Aglietta, 1982). This was the starting point of rgulationtheory and the related large research programme based on the multiplication oflong-run historical analysis of various national economies. This was complemen-

ted by a series of contemporary international comparisons of institutional archi-

tectures (Jessop, 2001; Boyer and Saillard, 2002; Amable, 2003). Their resultsconverge with those of similar institutional analyses (Aoki, 2002; Fligstein,

2001; Hall and Soskice, 2001; Yamamura and Streeck, 2003; Streeck, 2009a).

4.1 The search for time- and space-specific regularities: rgulation theory

Two assumptions were at the core of the seminal analyses about the emergence,

maturation and crisis of Fordist growth that was the starting point of rgulation

theory.

On the one hand, it is necessary to specify the precise configuration of basic social

relations prevailing in a capitalist economy in order to understand the nature of

the growth process, its stability or fragility, the prevalence of inflation or defla-

tion, under-employment or over-employment. The nature of the capital -

labour relations and the form of competition shape the accumulation regime

that is propelling long-term growth. These two institutional forms along with

the monetary regime also define various rgulation modes, which shape the

dynamic pattern according to which actors adjust to their environment(Figure 1).

On the other hand, capitalism features a relentless transformation of technol-

ogies, products, organizations and institutions. Therefore, the concept of equi-

librium is devoid of meaning since the accumulation process generates

endogenously recurring imbalances that can be either self-correctingperi-

odic recessions are the methods for re-equilibrating accumulationor the

source of the break down of the past architecture of institutional forms: this

then is a major or structural crisis. In such circumstances, the previous regu-

larities vanish and the apparent economic determinism is replaced by an open

process of social and political conflicts, trials and errors, in order to build new

institutional forms and possibly restore the viability of an emerging accumu-

lation regime.


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66 R. Boyer

Figure 1 Starting from Marxian theory in order to understand the institutions of capitalism:regulation theory in a nutshell.

Thus, traditionally, rgulation theory explores an intermediate space betweengeneral laws that could be derived from the basic features of a capitalist mode of

production and the simple observation of empirical regularities. Between grand

theory and pure description, the formalization of models and the test of the

related modes of accumulation and modes of rgulation seek to build this meso-level analysis. Possible regularities are to be observed at this level. The develop-

ment of this research programme has more and more downplayed the possibility

of precise quantitative economic laws. Here are some examples.

Contrary to the early works on the United States and France, the Fordist

accumulation regime has appeared much less general than expected. This is

the central result of systematic international comparisons concerning

various European countries, Japan and Korea (Boyer and Saillard, 2002).

The diversity is still more pronounced when the sample of countries is

extended to Latin America (Quemia, 2001).

The modes ofrgulation themselves are far from having converged towards acanonical model even if national economies became increasingly interdepen-

dent. When they are facing identical shocks, they react differently because

their institutional configurations are not interchangeable. When these econ-

omies finally enter into a structural crisis, the objectives of the economic

policy and the recombining of the institutional forms continue to differ.

Long-run historical analyses confirm that possible economic regularities are

restricted to a period of a few decades. This is the case for productivity

regimes or for wage formation because the potentialities of a rgulation mode


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tend to become exhausted because of its maturation and very success. Essentially, the

crisis of a configuration is, in its initial stages, in the repetition of the business cycles

which lead to a slow deterioration of the structural parameters of the

accumulation regime out of its stability zone (Lordon, 1997).

4.2 The economist: a modern Sisyphus?

If one acknowledges these premises, a double-paradox threatens economic

analysis.

The first points out that economists end up understanding the features of a

growth regime or the success of an economic policy at the time when they

enter into crisis and erode the effectiveness of the public interventions that

were so effective yesterday.

The second paradox builds upon the opposition between the kinematic time of

the dynamic models of the economist and the historical time of the transform-

ation of the techniques, institutions, laws and political coalitions. By methodo-

logical convenience, the economist postulates the equivalent of a stationary

state, for example a static macro-economic equilibrium or a steady growth

path. In such a configuration, representations, expectations and behaviours

coalesce into a smooth economic equilibrium that makes them mutually com-patible. In such a case, the knowledge of the economist is not fundamental

since the economic agents themselves seem to have discovered the economic

characteristics of the prevailing model. It is the charm and evident limit of

the rational expectations assumption. But then crises come as totally unex-

pected and wildly surprising events, in any case caused by exogenous factors.

But it is precisely that a capitalist economy is never stuck in a stationary state since

it is affected by the process of accumulation, the recurrence of social conflicts,

major crises and the impact of radical innovations. In such a context, the econom-ist cruelly lacks the tools needed in order to determine the consequences of a

radical innovation: will it, or not, end up generating an unprecedented configur-

ation? The errors of the profession in assessing the consequences of the Euro, the

temporal horizon of the New Economy or the Great Transformation of the Soviet-

type societies, are there to show the difficulty of the task. When it is important to

analyse an emergent potential regime, the economist is far from being adequately

equipped. The profession does not have a list of the laws supposed to govern great

economic transformations. At most, the neo-Schumpeterians imagine the recur-

rence of episodes in which a bunch of innovations, primarily technological, trans-

forms the economic system and feeds a new process of accumulation. But they are

not so relevant for analysing institutional, financial and political innovations

without which technological innovations would not be viable.


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68 R. Boyer

4.3 Contrasted national trajectories and diversity of contemporary capitalisms:where is the theory?

At this stage of the presentation, the logical conclusion seems to be that the searchfor general laws for capitalisms is pointless. It is especially so for the rgulationistresearch agenda: Can one find laws of capitalism? It is probably an impossible

mission! Nevertheless, it might be time to come back to the status of this

theory and try to capitalize upon a cumulative research programme and, inciden-

tally, to reply to frequent criticisms. If economic regularities are indexed upon

accumulation regimes, then this is not at all a theory but a mere post hoc descrip-tion. Actually until now, no quantitative regularity could be derived from the

comparison of the five accumulation regimes that have been observed in US

capitalism (Table 2). Similarly, if these accumulation regimes are self-defeating,the related regularities are time-dependent and it is another limitation of the

theory. Can one clever observer diagnose, in real time, a given accumulation regi-

mes entry into structural crisis? This would be necessary to cope with the deter-

minist criteria typical of a large part of the natural sciences.

Similarly, at a given historical period, various forms of capitalism may coexist.

It was recurrently shown for OECD countries: their Social Systems of Innovation

differ drastically (Amable et al., 1997), as do their wage labour nexus (Boyer and

Saillard, 2002). When the sample of countries is extended, the number of keyconfigurations of capitalism is enriched, for instance from four to five

(Amable, 2003) and unprecedented configurations are pointed out in Latin

America (Quemia, 2001) and Asia (Inoue and Yamada, 2002). It is important

to stress that the brands of capitalism are far less numerous than the size of the

sample of the countries. The related taxonomy is the starting point for building

relatively simple models with a multiplicity of regimesthis is done according to

key parameters directly related to the nature of the institutional architecture. This

is a first necessary step in order to get away from the implicit conception of con-

ventional neoclassical theory according to which only one canonical form of

capitalism exists (one size for all) . . . with only marginal national variations.

But unfortunately, the rgulationist analysis is more complex and no generalpolicy recommendation can be derived from this body of research.

Thus, the economic profession usually prefers a united and simple, but inher-

ently false, theory to an eclectic and much more complete construction, one less

prone to inaccuracies! It could then be interesting to try to explore the founding

blocks of a general theory. Two strategies are available: the first reviews all the

findings obtained within the rgulationist research agenda itself; the secondmakes advancements to the past literature on the theorizing of capitalism, aswell as the contemporary research that treats the dynamics of capitalism as

the central issue.


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Table 2 The American capitalism: the succession of five different accumulation regimes over 150 years

Regime

Extensive with Intensive without

limited insertion of mass Intensive with mass Extensive with widen-

Components labour consumption consumption ing inequalities Finance-led

Organization of Large manufacture Taylorism, then Large increasing returns to Exhaustion of the pro- Delocalization in search forproduction Fordist assembly scale ductivity gains and shift shareholder value

line towards servicesWage -labour Fragmented and Still competitive but Institutionalization of pro- Decentralization, indivi- More flexibility in employ-

nexus competitive growth of ductivity sharing and con- dualization and decline ment and remuneration,population wage-earner stitution of welfare of collective privatization and financiali-

systems agreements zation of welfare systemsIncome Strong reserve army Shift in favour of Stabilization ex ante of the Decline of the wage share Stabilization of a high rate of

distribution impact profits wage share and then stabilization return on capital forshareholders

Nature of From farming com- Increasing share of Leading role of consumption More and more differen- Credit boom as a substitutedemand munity, middle- wage-earner of wage-earners tiated according to level for real income of

class, public civil consumption of income wage-earnersservants

Historical period Second half of the Inter-war period After Second World War 1980 to mid-1990s Mid-1990s to 2007nineteenthcentury


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70 R. Boyer

5. What could be the general and common features of capitalisms?

Informed by the present survey, one should follow two principles. On the one side,

it would be erroneous to look for static properties of capitalism, since it is bynature a constantly evolving regime. The possible laws of motion should be at most

dynamic patterns. On the other side, the possible regularities are quite unlikely

to imply quantitative variables because until now the search for them has been

quite unsuccessful. Thus the properties of dynamic patterns should be

essentially qualitative.

This strategy delivers the following conjectures. Just to help the reader to

capture the essence of each of them, they have been attributed to past economists

or present social scientists . . . but of course, only the author is responsible for such

a labelling. Fortunately, some conjectures are common with other recent contri-butions in the search for general features of capitalism (Streeck, 2009b, c). A dis-tinctive feature of this article is to stress the dialectical nature of these

conjectures: few permanent trends but on the contrary a succession of contrasted

evolutions caused by the expression of the same contradiction.

5.1 Marxs conjecture: capitalism implies a dynamic accumulation process and the

succession of booms and crises

Even if the term of capitalism was not invented by him, it is quite logical to start

with the author of Das Capital. As soon as goods become commodities, i.e. pro-duced for their exchange value and no longer for their specific use, the very

process of economic activity is transformed. Each economic entity has to

create more value than is consumed in the commercialization or productive

process and the competition triggers a built-in constraint and incentive to gener-

ate more value in order to accumulate capital. Modern theorizing suggests that it

is not necessary to adopt labour value theory to generate such a dynamic pattern.The institution of a monetary/credit regime generates the autonomy of economic

entities and their search for exchange values, hence competition of all against all

(Benetti and Cartelier, 1980; Aglietta and Orlean, 1998). On top of the polariz-

ation of the successful accumulation by some firms at the detriment of others

incurring deficits and finally bankruptcy, the opposition between capital and

labour sets into motion a permanent change. With the transformation of

labour force into a commodity, the process of accumulation experiences a new

dynamism, which is precisely described by Karl Marx in Das Capital. Capitalaccumulation becomes the engine of growth and the vector of society-wide trans-

formation, since anything can then become a commodity.

If one follows this argument, it is erroneous to try to build a static theory of

capitalism because essentially this socioeconomic regime puts human history into


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motion, thus paraphrasing Marx. This might be the main weakness of

JohnMaynard Keynes General Theory: in order to win the battle against Pigou, he

restricted his analysis to the stability of a purely static equilibrium with involuntary

employment. In contrast, Michal Kalecki was more in line with a realist theory

of investment as a dynamical process. Imagining that capitalism would converge

towards a steady state is a contradiction in terms.

A second consequence of the domination of commoditization under pressure

from the profit motive is to introduce a radical uncertainty about the reproduc-

tion of the economy. Says law is basically false since each commodity has to find

its way to the market. Sectoral crises are thus inherent to capitalism. Furthermore,

the iron law of accumulation implied by competition leads periodically to over-

production, which is a typical new feature of this mode of production in contrastto the previous ones (Braudel and Labrousse, 1976). Thus, macroeconomic crises

are inherent to the process of capital accumulation within capitalism. Until now,

any time when overconfident economists have reached conclusions about the end

of the business cycle and the impossibility of a major structural crisis, this very

belief has generated the seeds of a new crisis. Quite a surprise for them but not

for any one acquainted with Marxist theory!

5.2 Schumpeters conjecture: capitalism means the permanent search forinnovations that once again trigger accumulation and its crises

The previous mechanisms are sufficient to explain the succession of boom and

crises, more or less severe, according to the precise institutional setting of the

related capitalism regimes. But Marx adds that capitalism brings about perma-

nent innovation in terms of work organization, products, techniques, legal

forms, contracts and social values. Actually, this method of creating new oppor-

tunities for accumulation simultaneously increases the degree of uncertainty that

is typical of capitalism, since it is by definition impossible to forecast the successor failure of any radical innovation. Endogenous innovations thus reinforce the

Marxist conjecture about the unbalanced nature of the process of accumulation.

Observing a very specific phase of manufacturing capitalism, Marx thought to

have proved that the tendency of the rate of profit to fall was a basic and permanent

dynamic pattern of capitalism. Unfortunately, the demonstration of volume III of

Das Capital (Marx, [1867] 2008) was not correct: contemporary economists haveshown that innovations, instead of implying a deepening of the relation between

constant capital and variable capital, actually tend to increase the average rate of

profit as soon as capitalists only introduce profitable innovations (Okishio, 1961;

Bowles, 1981). Therefore, the second stylized dynamic pattern has to be attributed

to Joseph Schumpeter: by pointing out that accumulation needs to be restarted

periodically by bunches of innovation, he identified a basic feature of capitalism.


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72 R. Boyer

An innovator takes the risk of a new product, a new technique, a new market. If

initially successful, heisimitatedby followerswho progressivelyerode hisinnovation

rents. The economic system is progressively transformed until it reaches the full

maturity of the innovation and sees the levelling off of the innovators extra profit

(Schumpeter, 1911 [1983]). The sequence may start again with a new cluster of

innovations.

Consequently, Joseph Schumpeter argued that economic development cannot

be disentangled from the sequence of long booms followed by more or less severe

depressions. Paradoxically, his argument is also converging towards the same con-

clusion as Karl Marx concerning the long-run erosion of the virtues of capitalism

as caused by its own success. When the heroic individual entrepreneur is replaced

by a more collective process of innovation and with the rise of middle classes, thedynamism of economic development is bound to slowdown (Schumpeter, 1954).

This long-term prognosis has been invalidated by the dynamism of innovation

after the Second World War . . . this shows again how difficult it is to point out

general trends that would transcend the succession of historical epochs, i.e.

accumulation regimes in the rgulationist taxonomy.

Nevertheless, the Schumpeterian conjecture about one of the mechanisms

governing capitalist development is still relevant: the surge of information and

communication technologies (ICT) has given a new example of such a sequence.

After the subprime crisis, financial markets themselves are screening all emerging

innovations in order to try to detect which could be the next engine of accumu-

lation and growth. It is important to note that if the turning point from boom to

depression is endogenous and largely determinist, this is not the case for the

emergence of innovations powerful enough to restart accumulation.

5.3 Polanyis conjecture: capitalism displays a built-in tendency to extend market

relations to the whole society and to destroy its implicit permissive conditions

Marx had already pointed out the pervasiveness of the process that can transform

any good or service into a commodity even if it has no contribution to value cre-

ation and accumulation. In a sense, Karl Polanyi extended this feature from the

economy to the whole society. In other words, any market economy tends to

push towards a market society where any relation is finally monetized and then

organized according to a market. This conjecture was derived from the observation

of the long-run evolution of the English economy and it pointed out the shift from

typical commodities to fictitious commodities and the related danger of a collapse

of the entire society under the pressure of pure economic forces.

Thus, when, for instance, labour is transformed into a typical commodity,

capitalism runs into the danger of destroying one of the very conditions of its via-

bility, i.e. the long-run reproduction of the workers who are the bearers of labour


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that is not a pure commodity. Similarly, when the monetary regime is no longer

the foundation of market relations but is itself invaded by the profit motive and

intense competition among banks, this second pillar of a capitalist economy

might collapse. Finally, when nature is exploited and destroyed without any con-

sideration for ecological reproduction, the dynamism of accumulation might be

halted by the exhaustion of the natural resources that feed the production of

commodities.

The evolution of capitalism since the publication of The Great Transformation(Polanyi, 1946 [1983]) has provided another example of a new wave of the com-

moditization of labour relations, the privatization of the credit and the monetary

regimes and the predatory and destructive impact of the diffusion of capitalism

on global public goods such as financial stability and climate. These are evidenceof a major crisis in the Polanyian sense, since the logic of the market destroys its

implicit permissive conditions: decent work and wage for labour, monetary stab-

ility and long-term sustainability of the interactions between the economy and

the ecological system.

5.4 Wallersteins conjecture: the capitalist accumulation process tends to spill over

across political frontiers and thus progressively builds a world economy

Clearly, the viability of capitalism requires some basic conditions that it cannot

produce within its own logic. A credible monetary and credit system, legal settle-

ments concerning property rights, contracts and capital labour relations are

usually set by political powers that, by definition, are local. But the inner logic

of market relations and the incentive to permanently innovate challenge these

domestic institutions. Historical evidence suggests that early commercial capital-

ism started by organizing long-distance trade, which in turn has required differ-

ent legal rules and institutions. For instance, merchants created their own private

money quite independently from the fiat money created by the prince or politicallocal authorities. Thus, this very first form of capitalism structurally organized

trade between different political spaces (Wallerstein, 1979, 1980, 1989).

Capitalism is transnational by essence . . . and contemporary globalization is

part of a long-term process. This trend towards the crossing of political bound-

aries by entrepreneurs, commodities and financial assets takes a new form with

the rise of industrial capitalism, especially in England and continental Europe.

The conventional contemporary vision imagines that development takes place

first at the domestic level and then the economy is progressively opened up to

world trade, productive capital and finance. At odds with this vision, the

British trajectory shows that the first industrial revolution required a surge of

exports for quite structural reasons: the internal imbalance in income distri-

bution between wage and profit called for an extraversion of the process of


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74 R. Boyer

accumulation (Sternberg, 1950 [1956]). Therefore, the dynamics of the tra-

ditional textile industry in India became dependent on the drastic competition

exerted by the modern methods of production implemented in England.

Similarly, the erosion of Fordism thatquite exceptionally basically relied upon

the domesticmarketcomes fromthestrategyoffirms that struggle fornew markets

abroad in order to adjust the dynamism of production capacities to a domestic

market that progressively becomes too narrow or less profitable due to labour con-

flicts implying a profit squeeze. Contemporary financial deregulation was initiated

back in the sixties when large American firms created xeno-dollar markets abroad

and it culminated with the emergence of numerous fiscal paradises. Not to

mentionthedelocalizationofmature unprofitable industries to attractive new indus-

trializing countries (NICs). Finally, two decades later, these NICs are themselvesclosely dependent on world trade and flow of productive and financial capital.

To sum up, the unbalanced nature of accumulation regimes triggers a recurring

trend towards the disconnection between the domestic political arena and the

process of accumulation that is operating more and more at the international

level. But since the constitutive institutions equivalent to the one constructed at

the national level are non-existing or weak, frictions and conflicts among firms

and States, and between States, challenge the viability of the internationalization

process. After 2008, the diffusion of the subprime crisis to the rest of the world and

the subsequent difficulties in finding a global solution to the systemic and struc-

tural crisis are still further examples of the plausibility of Wallersteins conjecture.

5.5 Kaldors first conjecture: the long-run dynamics of the world economy are

derived from the interactions between the industrial and the primary

commodities sectors

Can the analysis make one step further and characterize how such an

interdependent international economy evolves in the long run? Maybe, if one

takes into account the fact that typical capitalist economies interact with rentier

States that deliver the raw materials necessary to the manufacturing industries.

The dynamic of the world economy may result from the interaction of two

contrasted but interdependent logics (Kaldor, 1963, 1967).

On one side, the evolution of manufacturing production is the outcome of the

mobilization of significant dynamically increasing returns to scale. Thus, only

two factors limit such a growth engine: an insufficient demand, or the scarcity

of labour and natural resources. The first factor is crucial in the reversal from

boom to recession, thus sustaining the viability of the accumulation regime via

an adequate regulation mode. Concerning the second one, given the large pool

of labour at the global level, the main hindrance to an unlimited growth of


17/23


manufactured goods production is the limitation of natural resources that

have no capacity to grow at the same pace.

On the other side, at a given period of time, declining marginal productivity is

typical of the production of natural resources. The time lag between any surge

of demand and the ability to satisfy it is usually much larger in natural resources

production than for manufacturing. Therefore, an industrial boom encounters

the limit of rapidly rising prices of natural resources that hurts profitability,

hence the investment and productive capacities. The industrial slow-down

that follows induces a reduction of the demand addressed to rentier sectorsand/or countries, and therefore the relative price of manufactured goods and

raw materials stops deteriorating . . . and a new cycle may take place.

In a sense, this is the reinterpretation of the old prognosis of classical economists,

such as Ricardo. He was anticipating the long-run convergence of economies

towards a steady state, where the rentiers would finally appropriate the totalityof the surplus to the detriment of the rate of profit of manufacturers. Kaldor pro-

vides a dynamic model that takes into account the structural differences between

the two sectors in terms of productive techniques and time lags. However abstract

and simplified this model might seem, it provides some intelligibility to the recur-

rence of this very specific dynamic pattern of the world economy. Therefore the

successive oil shocks that are supposed to be exogenous by conventional nationalmacroeconomic approaches are largely endogenous. Similarly, it explains why it

is not realistic to extrapolate a cumulative and permanent rise of oil and other

natural resources, since this would induce a drastic recession in the short term,

and renewed efforts in order to find new locations of natural resources.

Two recent macroeconomic episodes seem to confirm Kaldors model. At the

end of the speculative Internet boom, one of the limits encountered by the Silicon

Valley start-ups was the spectacular rise of house and land prices. What was one

of the early warnings about the tensions created by the subprime bubble and the

spectacular Chinese accumulation regime? The acceleration of prices of oil and of

most natural resources required by manufacturing was the primary factor that

caused the American down-turn in 2007. But this does not capture the totality

of the mechanisms that shape contemporary international relations. Actually,

the wide diffusion of finance all over the world introduces another set of interde-

pendencies: the rentier economies come to play a major role in financialintermediation.

5.6 Kindlebergers conjecture: major economic crises derive from a weak andlagging collective control over powerful private financial innovations

In the capitalist mode of production, finance tends to evolve faster than the

economy and periodically it tends to become autonomous with respect to the


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76 R. Boyer

slow process that governs the formation of the rate of profit. The related specu-

lation ineluctably runs against the macroeconomic constraints of the real

economy and this generates a financial crisis. It is more or less severe according

to the nature of the accumulation regime and its degree of dependence on

financialization. There is a long-lasting tradition in standard economic theory

to attribute these recurring crises to the irrationality of individuals, the greed

and corruption of some financiers or even the adverse impact of public

regulations.

It can be argued, quite on the contrary, that the occurrence of crisis is a per-

manent and structural feature of financial markets facing radical uncertainty

(Orlean, 1990). A review of all the major financial crises since the seventeenth

century confirms the generality of the mechanisms that are mixing the Schumpe-terian general hypothesis with the specificities of financial innovations intensively

studied by Kindleberger (1978). The sequences from the innovator to economic

crisis can be easily summarized. The next step aims at understanding why econ-

omic actors and especially public authorities cannot learn from this impressive

succession of financial crises. One apparent reason relates to the fact that each

precise financial innovation is by definition without precedent and its proponents

can argue that it is so new that previous regularities are no longer valid. Remem-

ber the belief in the financial community about ICT and the related end of the

business cycles or the self-confidence of Wall Street about the absolute security

provided by securitization. De facto, beneath the absolute novelty, Kindlebergersdynamic pattern still applies. Either the innovation miserably fails and is forgot-

tenthe Laws systemor public authorities design regulations and new rules of

the game in order to make the benefits of the innovation compatible with finan-

cial stabilitythe modern commercial banks (Boyer et al., 2004). The history ofbank runs shows that they disappeared after a trial and error process of financial

regulations (Figure 2).

The contemporary crisis is a new example of the relevance of Kindlebergersconjecture: the financial laisser-faire strategy adopted by the American public

authorities has definitely contributed to the severity of the ongoing crisis.

5.7 Kaldors second conjecture: structural crises exhibit a generational shift in

the conceptions about the relations between State and the economy, from laisser-faire

to interventionism and vice versa

This last dynamic pattern builds on the conjunction of Polanyis and Kindleber-

gers conjectures. The dynamism of innovation may trigger a rapid and finally

unstable accumulation that unfolds into a structural crisis. Then, the restoration

of the viability of the credit system calls for public intervention. When the deploy-

ment of the strategy of individual capitalists leads to the collapse of the pillars of


19/23


Figure 2 Financial crises: the outcome of private innovations dynamism versus lagging collective

control.

capitalism, it is up to collective actors such as States to introduce countervailing

forces in order to curb their opportunism. Rhetorically, political discourse then

legitimizes State interventions by the fact that financial stability and social

peace are public goods (Rajan and Zingales, 2003).

This is the beginning of a search process aimed at realizing a redesign of the

institutional configuration, acceptable politically and viable economically in

terms of the resilience of the accumulation regime. Generally, the previoussources of financial and economic instability are thus removed, but the maturing

of this new regime ineluctably triggers new opportunist strategies that finally

destroy the coherence of the new accumulation regime and the mode of rgu-lation. The legacy of the previous structural crisis is only embedded into the insti-tutions and the legal system but no more in the memory of economic actors. It is

then tempting to attribute the blocking of accumulation to the excessive con-

straints imposed by regulations and public controls: deregulation becomes

quite a tempting strategy since it fulfils the objectives of the most powerful

actors. The previous regulations are interpreted as arbitrary devices that were

only generated via ideological and political struggles: economic actors as well

as politicians forget that they emerged out of the collapse of a laisser-faire

approach to capitalism. Actually, one observes the succession of laisser-faire

periods, followed by a structural crisis; new regulations are then enforced and

they generate a relatively stable accumulation pattern until it itself enters into a

genuine form of crisis. The frequency of crisis follows the same pattern (Bordo

et al., 2001; Boucher, 2003).

Thislooks like a Kondratieffwave but the mechanisms are quitedifferent fromtheones contemplated by the Russian economist. According to Nicholas Kaldor, one of

the rare convincing explanations of these long cycles is to be found in the succession

of intellectual conceptions about the functioning of a capitalist economy.


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78 R. Boyer

One generation experiences the large social, political and economic costs of a

major crisis, a consequence of liberalization. Remember the trauma associated

with the American Great Depression that legitimized new political compromises

and a totally different vision of the relations between State and market, the polity

and the economy. Extensive regulations had, in the end, been quite favourable to

the stability and dynamism of the Golden Age. When the dynamism of this con-

figuration eroded, the inefficiency of the Keynesian policy mix called for search-

ing for alternative forms of organization, and the relations between the State and

the economy were reassessed. The generation exerting the power in the political

and economic spheres had no direct experience of the interwar crisis: they

implicitly assumed that if John-Maynard Keynes is wrong then Milton Friedman

is necessarily right! Deregulation became quite attractive, at least, within allsocieties that cannot manufacture new social pacts. For instance, the Glass -

Steagal Act that organized the separation of commercial and investment banks

was abandoned in 1999. Most people had forgotten that this Act was passed

after the 1929 - 1932 collapse for quite serious reasons: preventing catastrophic

financial collapses due to speculation. Quite soon, the fragilities of this form of

accumulation manifested themselves in various initially limited crises (October

1987 stock market crash, LTCM collapse, ENRON bankruptcy, etc.) but all the

disequilibria kept piling up until the collapse of Lehman Brothers. The melting

down of the American financial system is the direct consequence of this obliv-

iousness towards history. Can it happen again? was what Hyman Minsky

(1982) was asking about the Great Depression. The response is yes! in confor-

mity withNicholas Kaldors second conjecture (Kaldor, 1987).

6. Conclusions

This article proposed to take a serious look at the comeback of the concept of

capitalism but also to reassess the notion of laws in the social sciences. It delivers the

following provisional conclusions.

C1. Two decades ago, the term capitalism was perceived as quite ideologicalindeed. Nowadays, a wider fraction of the economic profession refers again

to this notion/concept. Is the change real or cosmetic and simply transitory?

In any case, it seems to mean that the concerns of economists have shifted.

First from static to dynamic analyses, second from more and more

micro-studies to tentative analyses of the interdependences typical of anentire economic system. Clearly, technological, organizational and insti-

tutional innovations are more and more recognized as key factors in the

long-run dynamism of capitalism.

C2. Nevertheless, the failure of orthodox Marxism in identifying general laws ofmotion of capitalism should be acknowledged. Rgulation theory has emerged


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Aglietta, M. and Orle


as a critical appraisal of this Marxist legacy. It has proposed to define preciseconfigurations for the five basic institutional forms that make accumulationpossible according to different regulation modes. It has shown that quantitative

economic regularities themselves are transformed via a complex process of struc-tural crises and collective reconfigurations of these institutional forms. For

instance, productivity regimes are specific to a given productive paradigm,

wage formation reflects the nature of social compromises and the interest

rate is closely related to the nature of the monetary and credit regimes, and

so on.

C3. This central finding ofrgulation theory meets the conclusions of recentadvances in economic methodology and the history of economic theories. Econ-

omic laws have many different meanings in the social and natural sciences. Forthe former, they are basically the unintended outcome of human and collectiveactions in the design and redesign of economic institutions. Any regularityhas to be related to a broad type of accumulation regime. These regimes

vary in time and space and do not have any long-term stability since they

trigger adverse trends that unfold into a series of cyclical and structural crises.

C4. Thus, it seems far too ambitious to look for generic quantitative laws govern-ing all types of capitalism. But it might be interesting to check whether capit-

alisms may share some common qualitative dynamic patterns that would not beinvalidated by the stylized facts gathered by economic historians and contem-

porary comparative analyses about the diversity/variety of capitalisms.

C5. This article proposes such possible qualitative dynamic patterns inspired bysome key contributors to the understanding of the logic and dynamic of thecapitalist mode of production. These are, respectively, the conjectures made

by (or attributed to) Marx, Polanyi, Schumpeter, Kaldor, Wallerstein and

Kindleberger.

C6. These conjectures are calling for a renewed interest in the social sciences for

capitalisms as complex and dynamic social systems. Not only an updating ofconcepts, methods and hopefully results is required from the economic pro -fession, but this should also be a typical interdisciplinary project that could

mobilize the expertise of economic history, political economy, economic soci-

ology . . . and many other disciplines.

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