Anomalies or a new state of affairs
Today, 20 January 2017, Donald John Trump was sworn in as the 45th president of the United States. About six months ago, in the Brexit referendum, the British voted for the UK to leave the European Union. Only 52% of the Brits were in favour of the Brexit and Trump failed to win the popular vote (his victory came as the result of the electoral college system). Both victories surprised or at least, went against the opinion of many experts. That is why some consider the two events as mere anomalies. However, in this article, I suggest that we’d better view them as harbingers of a new era.
As the theoretical framework of my argument, I use the Social Structure of Accumulation (SSA) approach[i]. I begin by a brief introduction of two important concepts: the social structure of accumulation and the Institutional Structure (IS). Then, I outline the key features of the neoliberal era that commenced in the 1980s and argue that whether this era is a SSA or just an IS, the Global Financial Crisis (GFC) of 2008 marked the beginning of its demise. The Brexit and the election of Trump are key harbingers of this demise and two important steps in the restructuring of the socioeconomic sphere leading to the consolidation of a new SSA or a novel IS.
2. Social structure of accumulation
According to the SSA theory, the accumulation process in capitalist societies relies on a set of institutions, which can be “economic, political, ideological, or cultural in character” . These institutions are mutually compatible, generally supportive of the accumulation process, and as a whole, constitute a social structure of accumulation. When established, an SSA secures a relatively long-term profitability and stabilises the rate of return. Capitalists, now seeing a bright prospect of a profit return to their capital, begin to invest. The increase in the level of investment stimulates the economy and engenders growth and expansion.
The prosperous period, while usually long, is never indefinite. The economic expansion generates negative side effects. It may intensify the conflict between the capitalist and the working classes; it may increase the severity of competition between the capitalists; or, due to a high level of economic activity, it may eventually saturate the markets and thus, decrease the level of profit return.
These negative aspects constitute contradictions between the established institutions and the process of accumulation. Superficial contradictions can be mitigated by fiscal and monetary policies. However, deeply rooted accumulation-institutions contradictions may cause a long-term stagnation. To overcome the stagnation, a restructuring of the institutions becomes inevitable. The restructuring will establish a new social structure of accumulation and, hence, a new cycle begins. This cycle is schematically presented in Figure 1.
Figure 1 – A cycle of growth and crisis
3. Institutional structure
An Institutional Structure (IS) is a set of capitalist institutions of economic, cultural, ideological, and political nature. While an IS creates the structure for capitalist activity, it does not necessarily promote the accumulation of capital. In this sense, an IS is fundamentally different than a SSA, which mainly serves the purpose of establishing stability and promoting profitability, leading to the capital accumulation .
Kotz identifies two types of ISs, a liberal Institutional Structure (LIS) and a regulationist Institutional Structure (RIS). The differences between these two ISs can be categorised into four groups:
- State-economy relations: AN LIS supports the state of laissez-faire and the independence of economy from the state. However, an RIS reserves a more intervening role for the state.
- Capital-labour relations: In an LIS the capital has the upper hand in its relation to labour, while in an RIS they comprise a more cooperative relation.
- Capital-capital relations: In an LIS, the relation between capitalists comprises of intense and somehow excessive competition while in an RIS, the rivalry is more controlled and muted.
- Dominant ideology: The dominant ideology of an LIS is the free market. In contrast, an RIS highlights the dangers of the free market system and embraces an interventionist approach by the state.
According to Kotz, since the beginning of the twentieth century, there have been frequent alternations between ISs. The U.S., for example, has experienced two RISs (the Progressive Era of 1900-16 and the Post-World War II or Fordism of 1947-73) and two LISs (Post World War I of 1920-32 and the contemporary Neoliberal Era of 1980-now).
While the capitalist class may fare better during and LIS, RISs are better for capital accumulation. During LISs, the capitalist class obtains the most benefits, the class conflict intensifies, the intercapitalist rivalry increases, and instability ensues in the macroeconomic level .
4. Neoliberalism: SSA or LIS
The recent stage of global capitalism began to shape around 1980. It has key features similar to that of the period before the Great Depression, for example, the state of laissez-faire or the reluctance of the industrial, capitalist states in economic interventions. Due to these similarities and because the pre-Great Depression period was known as the liberal era, the recent stage became identified as the neoliberal era.
Neoliberalism has been an important and controversial topic in the SSA literature for many years. The main point of contention is whether neoliberalism is a new SSA established after the fall of Fordism or it is just an extension of the 70s and 80s crisis. An important reason for this contention is the low rate of growth (1.4% in productivity and 2.23% in GDP) in comparison to that of Fordism (2.8% in productivity and 2.97% in GDP) [3, 4].
Victor Lippit  argues that a new SSA began to shape in the 80s and 90s in the world. Neoliberalism constitutes the core ideology of this new SSA and seven key institutions contribute to is establishment:
“(1) the strengthening of capital relative to labor,
(2) a change in financial institutions favorable to investment,
(4) institutional changes in the nature of the corporation,
(5) limited government,
(6) an increase in international trade and investment, and
(7) capital markets favorable to small, entrepreneurial companies” .
On the contrary, Kotz  and Wolfson , contend the idea that the institutional structure of the neoliberal era represents a new SSA. In this period, Gross Domestic Product (GDP) has been increasing at a rate significantly lower than that of the post-war golden era. Thus, the neoliberal institutional structure has failed to boost growth, which is the main result of a SSA. Based on this analysis, Wolfson  concludes that a new, regulationist SSA will soon replace the neoliberal structure.
In a similar attempt, by analysing the economic performance of different regions, Phillip O’Hara concludes that neoliberalism has not created a set of key institutions that support long-wave upswing and therefore, a global neoliberal SSA has not emerged. However, during the same period, countries like China have engendered important and stimulating institutions that can support growth for a relatively long period .
5. Concluding remarks
Whether the neoliberal era represented a new SSA or it was only a LIS, the Global Financial Crisis of 2008 seems to have undermined it to a great extent. Radical changes are emerging that target the core elements of the neoliberal institutional structure. Most notably, globalism and free-trade are being seriously challenged. A closer look at the implicit or even explicit messages of the campaigns for the Brexit and Trump’s presidency better highlights these changes.
- Closing the borders
Leaving the EU will impose more restrictions on crossing UK’s borders. While the negotiations will further hammer out the details, we can safely assume that the citizens of weaker European economies will face harsher obstacles to travel to the UK.
During his campaign, Trump took a less subtle, more aggressive approach. He advocated a literal closure of borders by suggesting to build a physical wall on the borders with Mexico. This message and the strategic focus on the issue of illegal migrants, particularly from the south, resonated really well with the working class.
Although we might be able to rule out a real, physical wall, we can anticipate a stronger, metaphoric wall to be erected against the inflow of immigrants and asylum seekers, especially for those from poorer nations.
- Opposing the free trade
Again, one of the most important messages of Trump’s campaign was to take a more aggressive attitude towards China, especially due to the loss of manufacturing jobs to that country.
While the Brexit does not directly address the free-trade, it may significantly affect the country’s trade in the short-term. Most notably, the UK has to renegotiate agreements and regulations that applied to the trade within the union.
By deciding to leave the EU, the British re-stated their difference from the rest of the continent. This sense of otherness is not the consequence of the Brexit but, indeed, one of the of its major causes. The Brits always had the tendency to distance themselves from the rest of the Europeans. That is why, the “Exit” campaign intensely focused on the entrance of other EU citizens into the UK, taking the jobs from the locals, and taking advantage of the benefits that were supposed to be exclusive to the British.
A similar attitude was prevalent on the other side of Atlantic, during Trump’s campaign. Many Americans joyfully cheered his ceaseless insulting comments on the minorities in the US and even the citizens of other countries. They praised his “bravery” in disposing of “political correctness” and openly targeting Muslims, Latinos (especially Mexicans), Jews, and Asians (more specifically, the Chinese).
Trump took advantage and at the same time, reinforced the idea of otherness. At the first level, he distinguished the whites from all other races. But he did not stop at this point but further limited the boundary of the accepted to men by blurting out insulting remarks about women. No wonder why, according to the Independent, 63% of white men and 52% of white women voted for Trump while 80% of black men and 93% of black women voted for Hillary Clinton.
- Opposing the establishment
On both sides of the Atlantic, one point of focus of the winning campaigns was to oppose the “establishment”. They succeeded to win the vote of the (perceived) marginalised people by blaming the elite and the professional politicians. By doing so, they implicitly blamed the current state of affairs and undermined key institutions such as the globalisation, tolerance, and free-trade.
The Brexit and the presidency of Trump have encouraged and will continue to encourage the right-wing groups in other countries to follow suit. They will have less incentive to demonstrate prudence and will be more comfortable with their offensive remarks[ii]. Unfortunately, in the years to come, we might witness more discriminative policies implemented all around the world.
- McDonough, T., M. Reich, and D.M. Kotz, Contemporary capitalism and its crises: Social structure of accumulation theory for the 21st century. 2010, Cambridge: Cambridge University Press.
- Kotz, D.M., Neoliberalism and the social structure of accumulation theory of long-run capital accumulation. Review of Radical Political Economics, 2003. 35(3): p. 263-270.
- Lippit, V.D., Social Structure of Accumulation Theory, in Contemporary capitalism and its crises: Social structure of accumulation theory for the 21st century, T. McDonough, M. Reich, and D.M. Kotz, Editors. 2010, Cambridge University Press: Cambridge. p. 45-71.
- O’Hara, P.A., After Neoliberalism: A Social Structure of Accumulation or Mode of Regulation for Global or Regional Performance? Journal of Economic Issues, 2010. 44(2): p. 369-384.
- Wolfson, M.H., Neoliberalism and the social structure of accumulation. Review of Radical Political Economics, 2003. 35(3): p. 255-262.
“We are still in a deleveraging period,” he said. “We will be in a deleveraging period for ten years or more.”
[ii] The bloated confidence of Pauline Hansen, the rise of her One Nation party, and the temptations to launch a new conservative party, with more discriminative agenda, are just a few Australian examples among many around the world.