World-System (1950-2080) US Capitalist Accumulation Crises

 

Reading between the lines in the Classical Capitalist Model (see Higgins, 1985, Chapter 4) and the Neoliberal Model, Capitalism and Inequality go together.  Higher concentration of wealth ensures that funds are available for investment in the unceasing drive to accumulate capital. Too high concentrations of capital result in the Crisis of Capitalism. Too low concentrations require Neoliberal Renewal of Unfettered Capitalism.

I can develop these insights by starting with Higgins Classical Model and adding a GINI Coefficient (0 = perfect equality, 1= perfect inequality) as an output of the Classical System State in the causal diagram above, O=(L,Q,T). By applying the ideas of Systems Theory, the Capitalist Error Correcting Controller (ECC) is now the major output. What this means is that the relationship between Inequality (GINI) and Capital Accumulation (K) has to be monitored in a Capitalist System. From the perspective of Systems Theory, this ECC is one way to possibly maintain Capitalist growth, by continuing to keep (GINI > K).

When I apply the Marxist and Neoliberal insights to the US (see the Measurement Matrix in the Notes below), we get three components: Classic1 is the overall growth in Capital, Investment and Inequality explaining about 96% of the variation. Classic2 is the important controller here, ECC2=( 0.80 GINI - 0.778 K) that explains only about 3% of the variation. Classic3 is another controller for Investment, ECC3 = (0.548 GINI - 0.795 I) and explains another 0.08% of the variation. What the small explained variance for the ECCs means is that, in the Post WWII period, it has not been necessary to exert much control over capital accumulation in the US. 

When we put Classic2 in a state space model (here), and construct an attractor path for the US, the result is presented in the time series plot at the beginning of this post. Numbers above zero (dark black line) indicate increasing Inequality available for capital accumulation. The attractor path (dashed red line) indicates that Inequality has been well below expected levels and has plenty of room to increase under the Trump II administration. But somehow, since the 1980s, the US has stayed fairly close to (GINI - K) = 0.

What is notable is that there was a Neoliberal accumulation crisis during the Reagan years (the start of Neoliberalism in the US) and an impending Marxist Overaccumulation Crisis starting after 2000. But still, the US is below the World System attractor path. 

The attractor path at the beginning of this post is driven by the World System, overall growth of the system, environmental effects on agriculture and world markets. The graphic above takes the World System out of the model and allows ECC2 to work as expected. 

European Neoliberalism after WWII was meant to reintegrated the World System after the shock of Fascism. The Trump II administration is signaling that Neoliberalism is at an end in the US and that some type of Right-Wing Authoritarianism is being planned along with Isolationism.

The World System attractor path reaches a steady state after 2060 which may signal an impending Crisis of Capitalism in the US or simply that there would now be enough inequality to ensure continued accumulation for ever. Although the current Trump II Administration is committed to increasing inequality to really high levels, it is also committed to detaching from the World System--contradictory policies that may cancel each other out. 

You can run the USL20_Capitalism model here. Other futures for the USL20 model are available here.

Notes

The Measurement Matrix above was constructed using Principal Components Analysis with standardized data from the World Development Indicators. The USL20 Capitalism model with input from the World System is stable and cyclical (Eigenvalues = (0.8023969+0.119491i 0.8023969-0.119491i) and it is the best model out of the ones tested [-285.6 > AIC = -254.2 > -231.5]). For the BAU model [-260.2 > AIC = -242.3 > -220.5].

The confidence intervals for AICs of the W-input and BAU model overlap and are not statistically different even though the W-input AIC is better. What this means is that, even though the outputs of the two models are very different, political forces within the US could easily switch back and forth between either model--another reason why the future is unknowable. In a future post, I will discuss the importance of the World System for Neoliberalism.

 The full USL20 Capitalism model is available here (both W-input and BAU).

Terms

   US = United States, K = Capital Stock, Q = Production, I = Investment, 

    GINI = Gini Coefficient [0,1], L = Labor,T = Technology, N = Population, 

    O = Output, ECC = Error Correcting Controller

    Neoliberal Accumulation Crisis = (GINI < K),   

    Marxist Accumulation Crisis = (GINI > K)

References

• Marx Collected Works
• Higgins Economic Development
• Slobodian (2020) Globalists: The End of Empire and the Birth of Neoliberalism

US Healthcare Expenditures: Three Futures

A few days ago, the New York Times (here) reported that the CEO of United Health Care (the US largest insurance company) was shot and killed on the street in New York City. A large manhunt is underway trying to find the shooter. The motives remain unclear. However, the assassination has brought to the surface wide discontent with the US Healthcare system (the shooter had written the words "delay," "deny," and "depose" on shell casing found at the scene).

Until we know more about the shooting and until the Trump II Administration takes office (promising, at minimum, to change the system), what do the data on US Healthcare expenditures say about the system. Comparing countries, the US HC System is the most expensive in the World due to higher medical prices in the US. From the historical data in the graphic above, the curve of US Health expenditures peaked sometime before the COVID-19 pandemic of 2020.

After 2020, my state space models generate these projections: (1) If Healthcare (HC) expenditures keep pace with government health care expenditures (the black line in the figure above), expenditures will peak at a high level sometime after 2020. (2) If HC expenditures are driven by the World system (WL20) or the US system (USL20), they will continue to decline until well after 2020.

The Trump II Administration, scheduled to take office in early 2025, seems to favor privatizing the entire system which in some way might not be very different from the current system and might well be worse if providers are allowed to charge whatever they want for procedures and medicines.

Notes

SH.XPD.CHEX.GD.ZS is taken from the World Development Indicators and standardized.

My recommendation is to control the US Healthcare system with policy wedges similar to proposals to control CO2 Emissions with policy wedges.