Obviously Strachey was wrong in predicting capitalism's imminent demise. According to Marxist economist and founding editor of the Monthly Review Paul Sweezy, the massive "financialization" of the US economy served as an eighty year life support system to keep capitalism going a little longer. In 1966 Sweezy and economist Paul Baran first set out what they describe as "stagnation theory" in their book Monopoly Capital. According to Sweezy (and many others), it was only the massive economic boost of World War II military spending that saved capitalism in the thirties and forties. There was a brief post war boom in the fifties and sixties, as consumers rushed to buy goods that were unavailable during the war. When the sixties ended, stagnation set in again, accompanied by a marked slowing of profits and growth. Neither declined to 1930s levels, according to Sweezy, thanks to the "financialization" of the American economy.
In their 2009 book The ABCs of the Economic Crisis Magdoff and Yates describe "financialization" as the process of creating profits without actually producing a product or service. In the US this process injected massive amounts of money (the nice word is credit, but it's really debt) into the economy in three ways: massive government spending and indebtedness (to private financial interests), a massive increase in consumer indebtedness and an explosion of the financial industry itself.
From 1980 to the 2008 crash, the banking, insurance and investment industries became the largest growth sector of the US economy. Beyond financing unprecedented levels of consumer, business and government debt, they also engaged in massive outright speculation. In addition to commodities and derivatives trading, there was also an epidemic of leveraged buy-outs of productive sector companies with borrowed money, which were then loaded with more debt and sold at a profit. Former Wall Street economist Michael Hudson points out that the takeover of health care by private insurance companies was part of this massive ballooning of the financial sector.
As Sweezy describes, the enormous "wealth" created by the financial sector helped to drive the "real" or productive economy. However he also warns as far back as 1982 that it's basically a Ponzi scheme. That when the economy inevitably ceases to grow, this speculative bubble will burst, resulting in a collapse as bad or worse than the Great Depression.
The Current Economic Crisis
Political economists Fred Magdoff and Michael Yates elaborate on Sweezy's analysis in The ABCs of the Economic Crisis. They point out that stagnation continued during the 1980s and 1990s, despite the life support provided by "financialization." GDP growth dropped from 4.4 to 3.3 percent in the 1970s, with a further decline to 3.1 percent in the eighties and nineties, and to 2.2 percent in 2000.
They use the example of the auto industry to describe why stagnation is inevitable under end stage monopoly capitalism. Immediately after World War II, consumers bought a lot of cars and trucks, which were unavailable between 1941 and 1945. However by 1970 all Americans who wanted cars or trucks had them, and the world's poorer nations didn't have a mass market large enough to take the excess of cars being produced. Obviously the same was true of other durable goods (refrigerators, washing machines, dishwashers, vacuum cleaners, etc)
And as consumer buying slowed, so did profits and GDP growth. Magdoff and Yates argue that major social service cuts occurred under Reagan, Bush I, Clinton and Bush II not because these men were more conservative than the presidents who preceded them but because a steady downward trend in growth and profits meant the US no longer had the resources to support generous social programs enacted during the boom years of the fifties and sixties.
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