ABSTRACT
Several analysts have suggested that the dominant cause of capitalist economic crises depends on the institutional structure of capitalism at a particular time and place (Wright, 1979; Wolfson, 2003; Kotz, 2008). Some have suggested that the highly regulated form of capitalism in the post-World War II decades was particularly vulnerable to the reserve army (or profit squeeze) crisis tendency, while in today’s neoliberal form of capitalism over-production relative to demand is the main cause of periodic economic crises (Wolfson, 2003; Kotz, 2008). In the reserve army crisis tendency, economic expansion drives the unemployment rate to a low level, increasing workers’ bargaining power so that the real wage rises faster than labor productivity, resulting in a decline in the profit share and the rate of profit, setting off an economic crisis (Marx, 1967: Chapter 25; Sweezy, 1942: Chapter 9). This crisis tendency may be associated with regulated capitalism because its institutions tend to promote workers’ bargaining power.2 By contrast, under neoliberal capitalism workers have little bargaining power, making that crisis scenario unlikely. Instead, various features of neoliberal capitalism should produce expansions in which production outruns demand (Crotty, 2000; Wolfson, 2003; Kotz, 2008). The literature cited above makes a strong theoretical case for such a connection between crisis tendencies and institutional structures. However, those claims have not been subjected to a comparative empirical analysis for the regulated and neoliberal institutional forms of capitalism. This chapter offers such an empirical analysis. The second section develops a methodology for identifying which crisis tendency or tendencies are responsible for an economic crisis (or recession). The third section applies that methodology to data for the US economy in the eras of regulated and neoliberal capitalism. The final section offers concluding comments.
