Here comes the rub. The reason why governments and families had to be provided with ample credits is both nefarious (yes, greed and debt bondage) and clearly vital to capitalism. In the more distant past, capitalism was an elite operation catering to the fabulous consumption of higher classes and the expensive wars waged by states. In twentieth century capitalism, for the sake of large-scale market demand as well as political legitimacy, came to rely on popular mass consumption. Moreover, the twentieth-century experience of popular involvement in politics and reliance on the state set limits to how deep human misery could go without producing a disruptive backlash. This proved to be what is called the “ratchet effect” in the historical tendencies of the growing state functions in modern society.
Democratization has been a real, if not inexorable trend over the past two hundred years. This means that a great many people, including those most loyal to the existing order, came to expect three things in the course of their lives. The first is long years of education, the second is stable and reasonably rewarding employment, and, finally, pensions in older age. Housing could be added to this list of expectations, and efforts to provide housing have also been expensive. The widespread privatizations of housing in recent decades shifted financial burdens to the individual homeowners while transforming them into small capitalists who voted accordingly. But this shift inevitably led to ballooning mortgages while denying the prospect of home ownership to younger generations. The 2008 crash in the housing markets of many countries rendered this contradiction untenable.
States, on their side, needed skilled and reasonably healthy citizenry as workers, compliant taxpayers, and patriotic military recruits. In time, these historical trends would inescapably put pressure on private profits. Western capitalists responded to pressure with their own rebellion. The renewed market conservatism became its ideological platform and market globalization its main strategy. The political-economic ideology of New Right demanded that capitalists, through deregulation and government austerity, should be left to deal by their preferred means with the economic upheavals that began in the 1970s and never really abated. Globalization, first and foremost, meant the flight of large capital beyond the regulated confines of national states. Capital flight and pressures on tax revenues left the majority of governments with three unappetizing choices: printing money, going into debt, or unleashing repression by direct police brutality and slower economic suffocation. Each of the choices was fraught with its own dilemmas. Even repressing the poor, marginal, and rebellious required a lot of money to keep the loyalty of those morally consenting to repression and especially those actually doing it. But where would the governments get the money when so much of their financial flows were already committed to oligarchic interests?
Such were the main political and economic parameters of recent decades. If anything, the same dilemmas are bound to get worse in the short to medium run. Wallerstein’s theory of self-limiting capitalist aggrandizement thus parallels Mann’s argument on the present-day limits to geopolitical aggrandizement. In the absence of organized and effective opposition, the accumulation of financial resources at one pole can reach exorbitant proportions. But just as the military monopoly of the United States could not be exploited anywhere near its full potential in order to reach its imperial objectives, so the financial monopoly inevitably had to falter at some point like a house of cards. The accumulated sums of nominal money could not be used productively and thus were proven fictitious.
This big picture relates mostly to the West and former Soviet bloc. Would it change substantially if we bring in the rest? Of course, the miracle of China looms here very large. Some of us, however, are old enough to remember the times when the experts in economic development were generally dismissive of East Asia’s prospects. Their rising stars were rather the Philippines, the Shah’s Iran, or Nigeria and Senegal with their Western-modeled institutions, modern infrastructure, sizable domestic markets, educated technocrats, and middle classes. By contrast, the embattled “garrison states” of South Korea and Taiwan or the relic porto franco colonies of Singapore and Hong Kong were found lacking in almost everything: national sovereignty, middle classes, natural resources, and modern education. The East Asian states seemed to contemporary experts weighed down by overpopulation, destitute refugees, endemic cronyism and corruption, and other such allegedly immobile Asian traditions. Communist China, with its mad Maoist experiments and fanatical guerrilla cadres, was dismissed outright, virtually like North Korea now. Ironically, the same factors would be later cited as standard explanations for East Asia’s success: its abundant cheap labor, the shallow domestic markets suggesting openness to export opportunities, the fortuitous absence of a “resource curse” like oil, and moreover the same Asian values of discipline, hard work, support networks, and obedience to authority. Even these regimes’ authoritarianism somehow turned out to be stabilizing, or adaptable and even visionary, rather than cronyist and corrupt.
Randall Collins in his earlier research pointed to the indigenous medieval origins of East Asian capitalism growing from the organizational economies of Buddhist monasticism.[2] It is now firmly established that East Asia for a thousand years or more has been a world region or world-system of its own, boasting some of the most extensive and dynamic markets of the epoch. The inherited skills, assets, and social networks of East Asia reemerged during the twentieth century in a variety of contingent and often violent pathways. It was the expansion of Japanese imperialism prior to 1945, and later the American wars to contain communism, that fostered in their wake a series of developmentalist dictatorships. Georgi Derluguian shows that the ultimate joining of continental China into this export-oriented capitalist dynamic was occasioned essentially by the conjuncture of international and domestic political accidents, albeit the sort of accidents that were structurally waiting to happen.
Free-market ideologists seek to enlist recent East Asian examples as their major proof of unfettered markets eliciting a wonderful burst of entrepreneurship. Such claims lack historical analysis and empirical evidence. East Asia has long been the prime example of regulated corporatist states. If the policies of neoliberal deregulation had anything to do with the reemergence of East Asia, it was by draining even more productive activities from the West and sending them into locales with cheaper labor. However, this does not mean that labor was not regulated at the new investment destinations. There are many other countries with large impoverished populations willing to accept, as a start, working long hours for low wages. But labor first had to be organized and disciplined in order to be put to work. The ambitions and greed of local elites had to be organized and disciplined as well. This is where the coherence of formal state institutions and less formal infrastructural capacities to regulate the social realm through accepted practices and networks could make a crucial difference. Corruption scandals reveal a central element in corporatist state compacts. The kickbacks from businesses in such states form a major part of officials’ remuneration. Yet, as the old-time New York politician George Washington Plunkett famously put it, there is “honest graft, and there is dishonest graft.” State capacity in this case largely turns on its ability to select officials on the merits of performance, including loyalty to the hierarchy and paternalistic sharing via “honest” graft. This provides a predictable sort of institutional environment that capitalists find attractive.
2
Randall Collins,