That was then, this is now : The post-industrial crisis paradigm and its problems Peter Schaefer Contact : peterschaefer@outlook.com
Abstract: The strength of 20th century capitalism laid in its capacity to constantly increase productivity via entrepreneurial innovation and to allow for an unprecedented social mobility and a middle class society. Industrial crises with the exception of the Great Depression in which political factors were very important, were largely due to a lack of new productivity-increasing technology (Kondratieff cycles) and only aggravated by failures in monetary management. Industrialism was seen as progressive by scholars as Weber and Veblen who welcomed its injection of long-term rational planning in economic affairs. With the advent of automation and globalization Western economies became post-industrial and the financial sector with its focus on short-term profit extraction and speculation grew massively in importance. During its rise, several of the regulations of the Bretton Woods era were abolished – regulations that had been designed by the Progressive Era reformers and their disciples to civilize capitalism and to avoid tensions between political communities. In this paper I argue that with the promise of middle class industrial capitalism gone, national political communities are increasingly engaged in beggar-thy-neighbor strategies which were typical for mercantilism, with the difference that then these strategies had their motive in military supremacy, whereas today internal stability is equally important as the power motive. Moreover, with financial institutions being internationally organized, I claim that we experience a dynamics which might be compared to the investiture controversy between the Catholic church and local princes during the middle ages and that monetary policy plays a crucial role in that dynamics. Politics and Finance are strongly interconnected, which makes it difficult for the state to define and implement long-term strategies, such as the containment of speculative bubbles or the reduction of the overall debt. I illustrate my argumentation with specific examples from medieval and renaissance history and lessons proposed by the schoolmen to overcome economic instability and to reduce the debt burden. I conclude with some considerations of the long term stability of Western capitalism and explain why the word 'crisis' will probably accompany us for many more years.
1