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9

The Long Downturn

1
terms
4
notes

Srnicek, N. (2016). The Long Downturn. In Srnicek, N. Platform Capitalism. Polity Press, pp. 9-35

16

In the face of declining profitability, manufacturers made efforts to revive their businesses. In the first place, firms turned to their successful competitors and began to model themselves after them. The American Fordist model was to be replaced by the Japanese Toyotist model. In terms of the labour process, production was to be streamlined. [...] Companies were increasingly told by shareholders and management consultants to cut back to their core competencies, any excess workers being laid off and inventories kept to a minimum. [...] Yet these efforts met with counter-attempts by Japanese and German competitors to increase their own profitability [...] The result was continued international competition, overcapacity, and downward pressure on prices.

The second major attempt to revive profitability was through an attack on the power of labour. [...] The drivers behind this shift were to reduce benefits and liability costs, in an effort to maintain profitability levels. These changes inaugurated the secular trends we have seen since, with employment being increasingly flexible, low wage, and subject to pressures from management.

the postwar context

  • Germany/Japan destroyed by war, so US manufacturing dominated
  • eventually, due to the Marshall plan, both caught up with the US and started to compete with US firms
  • globally, there was overproduction that drove prices downward
  • as a result, US firms had profitability issues
  • via exchange rate manipulations, unprofitability crisis transmitted to Germany/Japan, resulting in crisis of the 1970s

the thing about this cost-cutting ideology (which is really the heart of liberalism) is that not only is it really bad for workers, it also just doesn't work in terms of long-term productivity ... it's intellectually dishonest

—p.16 by Nick Srnicek 2 years, 5 months ago

In the face of declining profitability, manufacturers made efforts to revive their businesses. In the first place, firms turned to their successful competitors and began to model themselves after them. The American Fordist model was to be replaced by the Japanese Toyotist model. In terms of the labour process, production was to be streamlined. [...] Companies were increasingly told by shareholders and management consultants to cut back to their core competencies, any excess workers being laid off and inventories kept to a minimum. [...] Yet these efforts met with counter-attempts by Japanese and German competitors to increase their own profitability [...] The result was continued international competition, overcapacity, and downward pressure on prices.

The second major attempt to revive profitability was through an attack on the power of labour. [...] The drivers behind this shift were to reduce benefits and liability costs, in an effort to maintain profitability levels. These changes inaugurated the secular trends we have seen since, with employment being increasingly flexible, low wage, and subject to pressures from management.

the postwar context

  • Germany/Japan destroyed by war, so US manufacturing dominated
  • eventually, due to the Marshall plan, both caught up with the US and started to compete with US firms
  • globally, there was overproduction that drove prices downward
  • as a result, US firms had profitability issues
  • via exchange rate manipulations, unprofitability crisis transmitted to Germany/Japan, resulting in crisis of the 1970s

the thing about this cost-cutting ideology (which is really the heart of liberalism) is that not only is it really bad for workers, it also just doesn't work in terms of long-term productivity ... it's intellectually dishonest

—p.16 by Nick Srnicek 2 years, 5 months ago

(or, Plaza Agreement) between France, West Germany, Japan, the US, and the UK, to depreciate the U.S. dollar in relation to the Japanese yen and German Deutsche Mark by intervening in currency markets, in 1985

19

A period of healthy manufacturing growth in the United States began when the dollar was devalued in the Plaza Accord

—p.19 by Nick Srnicek
confirm
2 years, 5 months ago

A period of healthy manufacturing growth in the United States began when the dollar was devalued in the Plaza Accord

—p.19 by Nick Srnicek
confirm
2 years, 5 months ago
23

In 1998, as the East Asian crisis gathered pace, the US boom began to stumble as well. The bust was staved off through a series of rapid interest rate reductions made by the US Federal Reserve; and these reductions marked the beginning of a lengthy period of ultra-easy monetary policy. Implicitly the goal was to let equity markets continue to rise despite their 'irrational exuberance', in an effort to increase the nominal wealth of companies and households and hence their propensity to invest and consume. In a world where the US government was trying to reduce its deficits, fiscal stimulus was out of the question. This 'asset-price Keynesianism' offered an alternative way to get the economy growing in the absence of deficit spending and competitive manufacturing. And it worked for a time [...]

and then we had the dot-com crash, then lower interest rates after 9/11 that resulted in the housing boom and thus financial crisis

—p.23 by Nick Srnicek 2 years, 5 months ago

In 1998, as the East Asian crisis gathered pace, the US boom began to stumble as well. The bust was staved off through a series of rapid interest rate reductions made by the US Federal Reserve; and these reductions marked the beginning of a lengthy period of ultra-easy monetary policy. Implicitly the goal was to let equity markets continue to rise despite their 'irrational exuberance', in an effort to increase the nominal wealth of companies and households and hence their propensity to invest and consume. In a world where the US government was trying to reduce its deficits, fiscal stimulus was out of the question. This 'asset-price Keynesianism' offered an alternative way to get the economy growing in the absence of deficit spending and competitive manufacturing. And it worked for a time [...]

and then we had the dot-com crash, then lower interest rates after 9/11 that resulted in the housing boom and thus financial crisis

—p.23 by Nick Srnicek 2 years, 5 months ago
32

[...] At one end, tax evasion and cash hoarding have left US companies--particularly tech companies--with a vast amount of money to invest. This glut of corporate savings has--both directly and indirectly--combined with a loose monetary policy to strengthen the pursuit of riskier investments for the sake of a decent return. And at the other end, tax evasion is, by definition, a drain on government revenues and therefore has exacerbated austerity. The vast amount of tax money that goes missing in tax havens must be made up elsewhere. The result in further limitations on fiscal stimulus and a greater need for unorthodox monetary policies. Tax evasion, austerity, and extraordinary monetary policies are all mutually reinforcing.

one could argue that this tax evasion/avoidance isn't really that serious since the amount of tax to be paid is arbitrary anyway, and if it's all legal, then why does it matter? the response to that is less moral (for which the answer is obvious: corporations benefit from government infrastructure and thus should attempt to pay the set tax rate in good faith) and more about long-term efficiency ... a corporation operating in a state that has lower tax revenues will 1) have shittier infrastructure and 2) put the average person through more hardship, meaning that not only are they less likely to be able to afford to buy products, they are (hopefully) more likely to rise up and demand change, potentially at a disastrous cost for the corporation

—p.32 by Nick Srnicek 2 years, 5 months ago

[...] At one end, tax evasion and cash hoarding have left US companies--particularly tech companies--with a vast amount of money to invest. This glut of corporate savings has--both directly and indirectly--combined with a loose monetary policy to strengthen the pursuit of riskier investments for the sake of a decent return. And at the other end, tax evasion is, by definition, a drain on government revenues and therefore has exacerbated austerity. The vast amount of tax money that goes missing in tax havens must be made up elsewhere. The result in further limitations on fiscal stimulus and a greater need for unorthodox monetary policies. Tax evasion, austerity, and extraordinary monetary policies are all mutually reinforcing.

one could argue that this tax evasion/avoidance isn't really that serious since the amount of tax to be paid is arbitrary anyway, and if it's all legal, then why does it matter? the response to that is less moral (for which the answer is obvious: corporations benefit from government infrastructure and thus should attempt to pay the set tax rate in good faith) and more about long-term efficiency ... a corporation operating in a state that has lower tax revenues will 1) have shittier infrastructure and 2) put the average person through more hardship, meaning that not only are they less likely to be able to afford to buy products, they are (hopefully) more likely to rise up and demand change, potentially at a disastrous cost for the corporation

—p.32 by Nick Srnicek 2 years, 5 months ago
34

The conjuncture today is therefore a product of long-term trends and cyclical movements. We continue to live in a capitalist society where competition and profit seeking provide the general parameters of our world. But the 1970s created a major shift within these general conditions, away from secure employment and unwieldy industrial behemoths and towards flexible labour and lean business models. During the 1990s a technological revoution was laid out when finance drove a bubble in the new internet industry that led to massive investment in the built environment. This phenomenon also heralded a turn towards a new model of growth: America was definitely giving up on its manufacturing base and turning towards asset-price Keynesianism as the best viable option. This new model of growth led to the housing bubble of the early twenty-first century and has driven the response to the 2008 crisis. Plagued by global concerns over public debt, governments have turned to monetary policy in order to ease economic conditions. This, combined with increases in corporate savings and with the expansion of tax havens, has let loose a vast glut of cash, which has been seeking out decent rates of investments in a low-interest rate world. Finally, workers have suffered immensely in the wake of the crisis and have been highly vulnerable to exploitative working conditions as a result of their need to earn an income. All this sets the scene for today's economy.

—p.34 by Nick Srnicek 2 years, 5 months ago

The conjuncture today is therefore a product of long-term trends and cyclical movements. We continue to live in a capitalist society where competition and profit seeking provide the general parameters of our world. But the 1970s created a major shift within these general conditions, away from secure employment and unwieldy industrial behemoths and towards flexible labour and lean business models. During the 1990s a technological revoution was laid out when finance drove a bubble in the new internet industry that led to massive investment in the built environment. This phenomenon also heralded a turn towards a new model of growth: America was definitely giving up on its manufacturing base and turning towards asset-price Keynesianism as the best viable option. This new model of growth led to the housing bubble of the early twenty-first century and has driven the response to the 2008 crisis. Plagued by global concerns over public debt, governments have turned to monetary policy in order to ease economic conditions. This, combined with increases in corporate savings and with the expansion of tax havens, has let loose a vast glut of cash, which has been seeking out decent rates of investments in a low-interest rate world. Finally, workers have suffered immensely in the wake of the crisis and have been highly vulnerable to exploitative working conditions as a result of their need to earn an income. All this sets the scene for today's economy.

—p.34 by Nick Srnicek 2 years, 5 months ago