Mark Blyth never disappoints with his trademark one-liners. An excerpt from
The crisis of globalisation: interview with Mark Blyth
What you’re saying is there has been, obviously, some very severe instability at the heart of the capitalist system, and what is described as a crisis of globalisation is basically just a political expression of that crisis of capitalism?
Yes, but there’s also something specific about globalisation. Earlier in my career I spent a long time thinking about economic ideas and how they spread. I’m hardly the only person that’s puzzled over the spread of neoliberalism, but the more that I think about it now the less that I think about neoliberalism as a set of ideas and more of a set of practices. Those practices are to liberalise, integrate, privatise, otherwise knock down barriers to competition, etc.
When you do this with what were essentially national labour markets and national financial markets that were relatively closed—let’s say homogenous states that looked the same, made the same stuff and occasionally traded with each other but kept their finances separate—once you change that, through the practices of neoliberalism, and you become one big market in the [Polanyian] sense of integrated finance and capital movements etc, a couple of interesting things begin to happen.
The first one is labour’s ability to command its share of the surplus declines to zero. The strike becomes a meaningless weapon. Strikes decline to function—like to zero—in the western world. And you get prolonged wage stagnation, because essentially all the surplus goes to capital. There’s no reason for it not to. So labour’s ability to push up wages goes to zero.
But there’s also something interesting that’s happening in financial markets and product markets at the same time. It’s like the second-order effect of neoliberalism. Which is the following. We dumped about 17 trillion dollars—yen, euros and everything else we could get our hands on—and we’re continuing to do so in Europe through QE-type programmes, through central banks, because of the financial crisis. And the weird thing is there’s no inflation anywhere. In fact, Europe is still deflating. It hasn’t hit its 2 per cent target in almost a decade. So there’s no [structural] inflation, despite a massive, absolutely unprecedented monetary injection. That’s also weird.
Then think about the third section, which is competitive product markets. Think about the price of a computer. Think about the price competition going on in all sectors. If you look at words called ‘mark-up’ and ‘margin data’ across firms, what you find, particularly in the US but not exclusively, is that if you’re a digital monopoly you’re making 50 per cent to 60 per cent profits. If you’re a small or medium-sized firm and you’re in global competition, your margins are tiny, your profits are tiny and you’re very resistant to push[ing] up wages, because that literally could drive you out of business.
Add this all together and you’ve got a very, very strange world that we haven’t experienced before. One in which you’re going to have [structurally] low interest rates because there’s no inflation to combat. Then you’ve got a world in which labour markets [can have] full employment but it does nothing for wages, which means sustaining and perhaps making worse the inequalities that are already there. Then in product markets you have a winner-takes-all dynamic, whereby quasi-monopolists get monopoly rents and everybody else [gets to return to perfect] competition.
That seems, in a very abstract sense but in a very real sense, to characterise a world we haven’t been in before, and the consequences of thinking through that world are quite profound.
You also mentioned some of the big tech companies. As these tech giants spread they are using, basically, their quasi-monopoly power in one sector to muscle into another. In the United States there’s a discussion about what big-tech company is going to disrupt healthcare next year, because that’s a big share of GDP that is utterly inefficient in the United States. Market segmentations that used to shield or at least structure competition seem to be disappearing. At the same time you have the user-network effect, that gives these tech giants a big advantage to use these disappearing boundaries to go after all sorts of different market segments—or what used to be market segments. The inequality tendencies that are not least the result of this, are they likely to get worse before it gets better? Or what kind of policies do you think need to be implemented in order to address these issues?
Well, this is where Europe once again has disappointed, unfortunately. The whole point of [the General Data Protection Regulation] (GDPR) wasn’t about data protection. It was essentially scaring Facebook and Apple and the rest of them into paying some taxes—basically saying: ‘If every time that you switch on your platform you have to click through 12 screens of approval you know you’re going to lose 80 per cent of your users. Most of your business is data accumulation from your users.’ Particularly on the Amazon and Facebook side of things. ‘So you really need to wise up and play ball.’ It seems that, with the intervention of the Dutch and the Estonians and a few others who love tech, that’s gone by the wayside. We’re going to have some nominal taxation and they’re going to be able to continue doing what they want.
The truly damaging thing here with these companies is what they do to innovation. If you’re running a start-up company here—I was talking to someone yesterday about exactly this—the ambition for their company is to be annoying enough to be bought by Amazon. Then Amazon will do what they did in the 1930s with critical technology, such as beryllium and others at that point in time for steel. Which is you simply put them on the shelf and you don’t roll them out, because you don’t want the competition to ever [get an edge].
This is all market preservation and killing innovation by buying it and putting it on the shelf. This is exactly what monopolists do. Now, we’re meant to know what to do with this. It’s called bust them up. But there seems to be no political will to do this.
Why are there so many political parties?
Now, go back to the story about globalisation and how it emerged. The first thing neoliberalism did, in a sense, was to globalise labour markets and thereby render labour’s ability to command its share of national income obsolete. Then you have that product-market effect, and it [eats through product] markets. In a sense what happened was all of the little cartel structures, corporatism in Germany—let’s think product-market coalitions, all that sort of stuff, that kept the national economy insulated, all the little rules about who could buy your stocks on the stock market etc—all of that was stripped away.
Once all that was stripped away and everything really did go global, then you’ve got a question as to what happens to the political-party structures. Because what made all those little labour-market cartels and cushy arrangements possible, what made all those product markets safe for domestic companies and all the rest of it, were the political classes that mediated that post-war compromise—that were based everywhere on either a two-party system, Labour and Conservative, or a majoritarian coalition system of the type that you have in Germany.
Now you’ve destroyed the labour-market cartels. You’ve destroyed the product-market cartels. You’ve globalised everything. What’s the point of the existing parties? They don’t really have one. They were there to stabilise structures that no longer exist. Which is why they’re strangely clueless about what’s going on.
Mark Blyth had good news for the German SPD back in 2016. This is vintage Mark.
Well, the first thing that they should do, to quote—I think it was Planck, the physicist, that said this—‘Society evolves one funeral at a time.’ Let them die. I think you’ve got to start from scratch. When I had to give a speech at the SPD [Stiftung] in 2016 I said: ‘You are two electoral cycles from extinction.’ And I think I was exactly right. You might get three. But they’re dead. So there’s no point in trying to renovate something that’s dead.
What do you think will happen once populists are in government? Look at Italy right now.
Yes. This is the really interesting one. When the Italian thing came up I said: ‘Look, here’s your real problem. It’s not this government. It’s what happens when this government fails.’ Because at the end of the day what populism has going for it is the notion of sovereignty.
Chris Bickerton, a political scientist at Cambridge, had a really nice observation about this. There’s a book he did a few years ago called [European Integration: From Nation-States to Member States]. Sovereign states have their own printing press. They can devalue. They can default. They can do all these things. Once you join the euro you can’t. It’s off the table. Essentially, you enjoy the backing of the ECB, who will back your sovereign debt and thereby backstop your credit markets, so long as you play by the rules. Hence the importance of rules in the system.
But those rules really don’t work for large, consumption-based economies like France or in particular Italy. They work for the ones that can globalise their supply chains through eastern Europe, and then sell their stuff to the rest of the world and suck in demand from abroad. That’s Germany, the eastern Europeans and some of the north. So you have a real north-south split on this.
The populists come to power in Italy. They may even come to power in France. They’re going to find out unless they leave the euro there’s not much they can do. But if they leave the euro they will destroy probably somewhere in the region of 40 per cent of national savings while trying. That’s not a good option. So you’ve now got people in charge who said: ‘Screw them all. We will change everything.’ And they’re not going to change anything. What does that do to democracy and people’s faith in democracy?
And Blyth ends with:
My point is this: if you’re waiting for a bunch of superannuated, septuagenarian social democrats to save your arse start looking elsewhere.
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