Forces of Change

Political economy in the Biden era.

The extent of the break with neoliberalism initiated by the Biden administration will depend upon both the unfolding of Washingtonian politics and the impact of mobilizations from below. Yet in the background, impersonal forces will continue to affect the metamorphosis of capitalism through its successive stages. It is from these structural constraints and opportunities that the fabric of the current conjuncture is woven. What can contemporary political economy tell us about them? Beyond the sphere of mainstream liberal thought, an array of recent theoretical contributions have tried to diagnose the current moment by situating it in the long-term rhythms of capitalist development. They offer a fresh light, if not a magic key, for understanding the systemic shift represented by Bidenomics.

Such forces of change are routinely ignored by liberal economists. Market exchange is viewed as a sphere of activity that depends solely on itself; conscious collective intervention must not interfere with the invisible hand or spontaneous order. However, it is increasingly clear that this faith in self-equilibrating market adjustment cannot provide a general theory of rapid socioeconomic change, nor a specific explanation of our present political turbulence. Recognizing this limitation, The Economist recently rejected neoclassical equilibrium modelling and Friedmanite instrumentalism in favour of evolutionary economics, which ‘seeks to explain real-world phenomena as the outcome of a process of continuous change’. ‘The past informs the present’, it declared. ‘Economic choices are made within and informed by historical, cultural and institutional contexts’.

This intervention signals the weakened grip of neoclassical economics on the profession as a whole. Yet the evolutionary schema nonetheless retains a deep loyalty to bourgeois ideology, premised on the belief that Natura non facit saltum, ‘nature does not make jumps’. For this school of thought, evolution is always incremental. There may be pragmatic exceptions to this rule, such as when neoliberals embrace shock therapy to dismantle the remnants of the ‘unnatural’ socialist order in Eastern Europe, or launch a revolution against the French social model in the style of Emmanuel Macron. But this opportunistic voluntarism is rooted in the presupposition of the transhistorical virtues of the market; it neither relies on a theory of periods in capitalist history, nor on an explanation of its turning points beyond ad-hoc arguments.  

Four decades ago, John Elliott wrote in the Quarterly Journal of Economics that despite their opposed ideological commitments, Marx and Schumpeter agreed on the three salient characteristics of capitalism’s evolutionary dynamic: ‘It comes from within the economic system and is not merely an adaptation to exogenous changes. It occurs discontinuously rather than smoothly. It brings qualitative changes or “revolutions”, which fundamentally displace old equilibria and create radically new conditions.’ Pierre Dockès delineated this ‘mutationist’ perspective in his monumental work, Le Capitalisme et ses rythmes (2017): ‘mutation affects not an aspect or a character of the productive order, but the system itself: a change of state. From a certain threshold, there is percolation: the quantitative change of the elements crystallizes into a qualitative change of the state of the system’.

Still, the question remains: What is driving this percolation, and how exactly does it crystallize?  More to the point, which long-term trends are pushing the current mutation beyond neoliberalism?


To illuminate these issues, we can first turn to the rich intellectual tradition derived from Schumpeter and Nikolaï Kondratiev, which links technological change to multi-decade waves of capital accumulation. For this tradition, clusters of innovation are deployed during the expansionary phase up to the point where most profitable avenues have been exhausted. Then a depressionary phase fosters an intensive search for new business opportunities, sowing the seeds of a new potential expansionary phase. These shifts are long waves rather than cycles. While depressions are an ineluctable outcome of capitalist development, it is by no means inevitable that a fresh phase of expansion will be unleashed.

According to Ernest Mandel’s Long Waves of Capitalist Development (1980), ‘it is not technological innovation per se which triggers a new long-term expansion. Only when this expansion has already begun can technological innovations occur on a massive scale’.  This requires ‘both a sharp increase in the rate of profit and a huge widening of the market’. Because ‘the capitalist way of securing the first condition conflicts with the capitalist way of assuring the second’, Mandel argues that ‘changes in the social environment in which capitalism operates’ must intervene. In sum, while downturns are endogenous, upturns require exogenous ‘system shocks’ – wars, counter-revolutions, working-class defeats, the discovery of new resources – to allow capital accumulation to take off again.

Before his death in 1995, Mandel identified the ‘total integration of the former USSR and the People’s Republic of China into the capitalist world market’, along with a ‘major defeat of the working class’, as preconditions for an upswing. This analysis was partially borne out: the expansion of global value chains and the increasing rate of exploitation resulting from neoliberal policies, plus the availability of a huge reserve workforce, were decisive changes that propelled the upturn of the global economy from the mid-90s up to the 2008 crash. But due to mounting overcapacity and anemic demand, a full expansionary phase led by the digital economy failed to materialize.  

Mandel’s theory is seldom mentioned nowadays, but one can nonetheless find some of his ideas in the influential work of Carlotta Perez and Mariana Mazzucato. In a 2014 joint paper entitled ‘Innovation as Growth Policy: the challenge for Europe’, they too sought to describe the conditions for an economic upswing. ‘Markets alone cannot return us to prosperity’, they wrote. ‘Investment is driven by innovation; specifically, by the perception of where new technological opportunities lie. Private investment only kicks in when those opportunities are clear; public investment must be directed towards creating those opportunities across all policy spaces and affecting the entire economy’. Perez and Mazzucato attempted to move beyond Mandel’s reliance on ‘system shocks’ by giving the state responsibility for the extra-economic factors necessary to launch an expansion. Desirable innovation should be made profitable through industrial policy – financial regulation, demand management, education, etc. – while adequate tax, fiscal and monetary policies should equip this active state with the necessary resources. 

Thus, the forces of change can lie outside the economic sphere. For Perez and Mazzucato, the ‘current problems are structural’ (read: endogenous) and date back to decades before the 2008 crisis. But, crucially, they believe that conditions to overcome them lie in the autonomy of policymaking. Policy can change structural conditions. This is an inescapable lesson from Communist Party-led Chinese catch-up, and the basic rationale for state capitalism’s return to grace.

If one accepts this argument, it is tempting to push it a step further by exploring the factors that might foster institutional change and reframe the conditions for capital accumulation. What immediately comes to mind is Karl Polanyi’s ‘double movement’. In The Great Transformation (1944), he writes that ‘while laissez-faire economy was the product of deliberate state action, subsequent restrictions on laissez-faire started in a spontaneous way’. If liberalization is a political project, the destructive impact of market forces is automatically ‘stopped by the realistic self-protection of society’. While Polanyi’s focus is on institutional change rather than accumulation waves, his analysis draws an unmissable connection between the two.

A recent contribution from the post-Keynesian school picks up where Polanyi left off, proposing an elegant endogenization of institutionally-driven class conflict in long-run economic fluctuation. In Michalis Nikiforos’s model, ‘The increase in the profit share is related to the domination of the self-regulating market and inevitably leads to a crisis. Society will mobilize to protect itself and there will be a counter-movement, which…shows up as an increase in the wage share’. For Nikiforos, ‘this counter-movement can also later lead to a crisis that will make the emergence of the self-regulating market more appealing and will lead to a change in the direction of distribution and an increase in the profit share’. He argues that the instability of income distribution is due to class struggle dynamics: the more power a class has, the greater its potential to appropriate a larger share of societal income. But the power of each class in turn rests on ‘its potential effects on the macroeconomic performance of the economy’. When excess profit begins to damage the economy in general, the political pressure mounts for an arrangement more favorable to wages. And vice versa.

This framework allows for a straightforward interpretation of the current conjuncture: ‘The recent crisis and the current stagnation are the result of the neoliberal institutional arrangements, which emerged as a response to the profit-squeeze and the crisis of the 1970s…The sudden rise of egalitarian political forces that were until very recently on the fringe of the political system, or the popularity of Piketty’s book, are all manifestations of society’s reaction against the institutional arrangements responsible for the crisis and the stagnation’. The unidimensional focus on the distribution of income is of course a limitation of Nikiforos’s model, but the advantage is that it provides an explanatory mechanism at both ends of the fluctuation.

Economists influenced by the so-called Regulation School have also tried to explain the recurrence of ‘structural crises’ which necessitate a major institutional restructuring and produce a new balance of class forces. In The Rise and Fall of Neoliberal Capitalism, published in 2015, David Kotz anticipated a movement toward a more regulated form of capitalism, defined by a stronger state influencing and constraining the market. He notes that ‘the current crisis is not the first but the third crisis of a liberal form of capitalism in the United States. Each of the previous two crises was followed by a regulated form of capitalism. Big business played an important role in the shift to regulated capitalism both in 1900 and in the late 1940s, with large social movements creating a context that led big business leaders to support or acquiesce in an expanded state role.’

One of the strengths of the Regulation School, inherited from its Althusserian ascendency, is that its theorization of the succession of accumulation regimes is not limited to the regulated/liberal dichotomy. Each mode of regulation is organized under the constraint of a specific institutional form that weighs on the other components of the system. This allows for a serious engagement with capitalism’s qualitative evolution through its successive stages. Under this framework, competition, the capital-labor nexus and finance have each played prominent roles in different historical periods. Looking ahead, Robert Boyer sees the current conjuncture as open to producing three potential forms of regulated capitalism: a bio-capitalism centered around anthropogenetic activities; a platform capitalism associated with the rise of large digital companies; and a neo-dirigist state capitalism linked either to the Chinese model or to what he calls ‘democratic populism’.

The downside of the Regulation approach, however, is that the precise mechanisms of change tend to be overlooked. While mounting dysfunctionalities in the accumulation regime lead to a structural crisis, the process by which a new regime emerges is unpredictable – depending on trouvailles (incidental discoveries) rationalized ex-post by policymakers, theoreticians and social actors. The fascination with capitalism’s capacity to resuscitate itself after crises comes at the cost of an impoverished political imagination.

The most promising extension of the Regulation School – which comes closer to formulating a coherent theory of institutional change – can be found in Bruno Amable and Stefano Palombarini’s The Last Neoliberal (2021), an incisive analysis of Macron’s France. For Amable and Palombarini, macroeconomic dynamics, institutions and political mediations exist as a totality. Society’s institutional architecture stems from the historical sedimentation of macro-social compromises which are the result of irreducibly conflicting political processes. Those political processes are themselves determined by economic dynamics through the evolving expectations of various social groups. Following Gramsci, the neorealist approach places a clear emphasis on the autonomy of politics. Social expectations are not fixed in a crude expression of interests but proceed from moving ideological representations that respond to a specific political elaboration.

Macron is swimming against the international tide, toward an intensification of neoliberal restructuring. Amable and Palombarini’s theory provides a powerful interpretation of this phenomenon. The progressive disarticulation of the strongly coordinated national model, which took place over four decades of incremental neoliberal reform, disappointed the expectations of popular classes. This led to a disaggregation of the traditional right-wing and left-wing blocs, paving the way for a full-bloodedly neoliberal-bourgeois movement, embodied by Macron. However, the lack of popular support for this movement hinders is ability to pursue radical neoliberalization. This was forcefully demonstrated by the gilet jaunes, even before the Covid-19 crisis rendered the neoliberal playbook obsolete.


There is much to learn from these various iterations – Polanyian, post-Keynesian, Regulation, Gramscian – of the historical stages approach: the non-linearity of change, the contingency of technological-economic expansion on adequate institutional settings, the socio-political reactions to the destructive forces of markets, and the qualitative changes to the system brought about by its mutations. These insights help us to decipher the current conjuncture and forecast its possible directions. However, we must also keep sight of the cumulative effects of  successive developmental stages. Contradictions do not just exist within each phase; they also build up from stage to stage, as the dynamics of one accumulation regime conflict with its forerunners. Capitalism, as a system, is ageing.

With the globalization of manufacturing, overcapacity continues to mount and spatial fixes continue to exhaust themselves, making the internal contradiction of the process of accumulation manifest at a truly global level. It remains doubtful that services industrialization and its international fragmentation could create opportunities large enough to absorb this mass of overaccumulated capital. In the meantime, what James O’Connor described as the second contradiction of capitalism is gaining steam. For O’Connor, a key obstacle to capitalist development arises not within the accumulation process per se but ‘between capitalist production relations (and productive forces) and the conditions of capitalist production’, due to ‘capitalism’s economically self-destructive appropriation and use of labor power, urban infrastructure and space, and external nature or environment’. The ecological crisis, the rising price of healthcare and education, the deterioration of physical infrastructure – all this indicates increasing costs on the supply-side that could further hamper the accumulation process. Dealing with these issues is by no means out of reach of human agency. But it would be foolish not to ask whether the additional systemic constraint of profit-making may have set the bar too high.

Read on: Ernest Mandel, ‘The Industrial Cycle in Late Capitalism’, NLR 1/90.