Contrary to Professor Kotz’s view that “the usual profit mechanism that drives accumulation no longer works in the normal fashion,” it is doing just that.
The neoliberal growth model generated intensifying contradictions over time. Household debt rose rapidly, eventually becoming unsustainable. The debt of financial institutions rose even more rapidly, giving rise to increasing financial fragility. Highly risky mortgage-backed securities spread throughout the financial system. The system became increasingly vulnerable to the inevitable deflation of an asset bubble. When the giant real estate bubble of the 2000s deflated in 2007, the major banks became insolvent. Households were no longer able to borrow and had to cut their consumer spending. Corporate managers slashed investment spending. The Great Recession and Financial Crisis had begun. The rate of profit in the U.S. bounced back quickly after 2009. In the following years it reached the highest level of the neoliberal era. This demonstrated that neoliberal capitalism continues to promote high profits, by maintaining capital in a strongly dominant position over labor. Yet capital accumulation did not respond to the rising rate of profit
The current pervasiveness of populist expression is inherently related to the institutional bases regulating economic activity under neoliberalism and, by extension, the type of systemic breakdown it gave way to after 2008. For instance, the proliferation of asset-bubbles, while crucial to avert declining profitability dynamics, served as well to foster increasing levels of household indebtedness which, in turn, were crucial to maintain rising private consumption levels in the face of widespread wage stagnation. Once these various contradictory trends could no longer be jointly reproduced, it was the whole institutional edifice regulating economic activity that crumbled down, rather than just one of its single components. Such a type of systemic breakdown was conducive to populist expressions of protest in its aftermath.
The problem with the current trend of idea-centered scholarship on neoliberalism is that it seeks to isolate, and elevate the importance of ideas and experts, giving them a causal primacy that supposedly operate independently from materialist economic forces, the distribution of class power and the conduct of class struggle.
What is the capitalist democratic state and how should it be confronted?