Social Structure of Accumulation

A Theoretical-Historical Review

1.    Introduction

All theories have a perspective, which is derived from a position in social and political time and space (Cox 1981: 128). In this article, I explore the perspective of the Social Structure of Accumulation (SSA) theory by reviewing the social, political, and economic conditions that influenced its emergence, development, and application. Using the SSA publications, I demonstrate that Robert Cox’s view not only applies to the SSA theory but is also shared by SSA theorists who apply it to the real-world economic phenomena.

The present essay is structured as follows. In Section ‎2, I briefly describe the theoretical framework of the SSA school. Section ‎3 explores the historical and theoretical origins of the SSA. The approach of this section is indeed influenced by the historical materialist approach of the school. I finish the essay (Section ‎4) by presenting two examples of the application of the SSA theory to contemporary problems, the analyses of neoliberalism and of China.

2.    Theoretical framework

The main research area of the SSA theory is the long-term patterns of accumulation in the capitalist system. It focuses on the causes of the regular periods of prosperity and crisis that the capitalist system frequently experiences. To this aim, the researchers of this school take an interdisciplinary approach, employing the method and analytical tools from various sciences (e.g. sociology and history) as well as theoretical methods from other economic schools of thought (e.g. Marxian tradition, Keynesian school, institutionalism and long-wave theories) (Kotz, McDonough & Reich 1994).

According to the SSA theory, the accumulation process in capitalism relies on a set of institutions, which can be “economic, political, ideological, or cultural in character” (McDonough, Reich & Kotz 2010: 2). These institutions are mutually compatible and generally supportive of the accumulation process. When established, these institutions secure the determinants of profitability and promote growth and expansion. The prosperous period, while usually long, is never indefinite. With the passage of time, contradictions and conflicts arise within the system and eventually leads it to a crisis phase.

Figure 1 schematically presents the general components of a relatively long-term cycle of capitalism. A new social structure of accumulation is established with a set of key, mutually compatible institutions. The institutions are supportive of each other and the accumulation process as a whole. The presence of these institutions secures the long-term profitability and stabilises the rate of profit. Capitalists, now seeing a bright prospect of a profit return to their capital, begin to invest. The increase in the level of investment stimulates the economy and engenders growth and expansion. However, the economic expansion may generate negative side effects.  It may intensify the conflict between the capitalist and the working classes; it may increase the severity of competition between the capitalists; or, due to a high level of economic activity, it may eventually saturate the markets and thus, decrease the level of profit return.

Figure 1 – The cycle of growth and crisis according to the SSA theory

These negative aspects constitute contradictions between the established institutions and the process of accumulation. Superficial contradictions can be mitigated by fiscal and monetary policies. However, deeply-rooted accumulation/institutions contradictions may cause a long-term stagnation. To overcome the stagnation, a restructuring of the institutions becomes inevitable. The restructuring will establish a new social structure of accumulation and, hence, a new cycle begins.

This process will become clearer in Section ‎3.2 , in which I discuss the Fordist SSA in more details.

3.    Origins

3.1. Historical Settings

David M. Gordon
David M. Gordon (Source: Wikipedia)

The SSA theory emerged with the publication of Up and Down the Long Roller Coaster by David Gordon (1978). Gordon published the paper during the “Great Stagflation” period of the 70s, in which capitalism in the U.S. and all around the world was experiencing a severe economic crisis. The article was Gordon’s attempt in analysing such capitalist crises. He expanded this analysis in his subsequent publication, Stages of Accumulation and Long Economic Cycles (Gordon 1980). While these two articles created a tentative basis for the SSA theory, it finally acquired its name and a robust foundation by the publication of Segmented Work, Divided Workers: The historical transformation of labor in the United States (Gordon, Edwards & Reich 1982).

The simultaneity of the emergence of the SSA theory with the U.S. economy entering a new state of economic crisis was more than a mere coincidence. Gordon instigated its development to find an answer to the recurrent question that rose again during the crushing crisis of the 70s: why does not capitalism face a final collapse, as the conventional Marxism proposes, but, instead, goes through a series of relatively long cycles of growth and crisis.

A perfect example of such periods of growth is the post-World War II boom in the U.S. This era, widely known as Fordism, and its subsequent fall in the late 60s and 70s have been the topic of much research by the SSA writers. In the following sections, I briefly overview the rise and fall of this SSA.

Fordism: The Rise

After the second World War, the U.S. economy witnessed a relatively long period of prosperity. The boom period started in the late 40s and lasted until the late 60s and early 70s. This era is widely referred to as Fordism[1] and its exclusive features are assembly line production and mass consumption by the working class (Kotz 1994: 85). During this “golden age”, the U.S. economy experienced exceptionally successful growth rates, the significance of which becomes clearer when compared to those of the next period. During the Fordist period, the average rate of productivity growth was %2.8 per year (1948-1973) but subsequently fell to 1.4% (1973-1995) (Lippit 2010: 49). The rate of growth in GDP on average was %2.97 in the 60s but plunged sharply to %2.23 in the 70s (O’Hara 2010: 376).

The SSA theory attributes the prosperity of the Fordism to the stability in the economic and social structure that was, in turn, the result of the establishment of several key institutions, including (Gordon, Weisskopf & Bowles 1996: 141; Wolfson 1994):

  • Capital-labour accord

A fundamental contradiction in capitalism is between capital and labour (Wolfson 2003: 258). During the Golden era, this conflict was temporarily alleviated through a tacit accord between labour and capital. This accord stabilised their relation and secured employment and higher wages for the workers in exchange for almost exclusive management control of the business by the capitalists.

  • Pax Americana

Pax Americana, another term for the hegemony of the U.S. in the world after the second world war, stabilised the relation between the American ruling class and groups and classes in other countries. This unique and privileged status, which was partly depicted in the strong dollar at the time, provided the country with a cheap and reliable supply of raw materials and secured stable and growing markets for American products.

  • Capital-citizen accord

Mainly based on the Keynesian interventionist approach, the relationship between the capitalists and citizens was stabilised through “military spending, government subsidization of key industries, and the maintenance of a welfare state” (Kotz 1994: 94). The business accepted to provide basic elements of the welfare state, e.g. social security, Medicare, and full employment (Full Employment Act of 1946), and in return, it secured more autonomy and less intervention in the business by the public. The Great Depression in the 30s and the fear of radical changes contributed to these “concessions” by the capitalist class (Lippit 2010: 59).

  • Muted intercapitalist rivalry

The World War II destroyed infrastructures and capacities of most advanced industrial countries. Thus, during the Golden era, the American capitalists confronted a minimum rivalry from foreign businesses. The combination of the lack of international competition with an oligopoly in the U.S. markets provided the American capitalists with a secured business and high profit rates.

  • The financial system

The prosperity of the post-war SSA was partly due to several fundamental changes that, in the late 30s and early 40s, applied to the financial institutions. These changes remedied the structural and institutional issues that caused the Great Depression. They succeeded in stimulating growth by securing stability, increasing profitability, and decreasing class conflict (Wolfson 1994: 137).

These changes, in general, pursued two important objectives: to restrict the level of competition and enforce the role of government in preventing future failures (Wolfson 1994: 135). They were in direct contrast with the state of laissez-faire and excessive competition that governed the economy of the 30s. The most notable institutional changes in the U.S. financial markets were the separation of commercial and investment banking, “compartmentalisation”, higher profitability, and restrictions on the entry.

The financial restructuring on an international level also helped the growth of the American economy. Most importantly, the Bretton Woods agreement established the U.S. dollar as the reserve currency and supported the international trade.

The superimposition of these factors, some of which instigated even before the war, buttressed the new social structure of accumulation, stabilised the accumulation process, and continually supported the growth for more than 20 years. However, the foundations of this prosperous SSA eventually eroded and the economic boom turned into a crisis with growing contradictions and conflicts and the key institutions losing their initial purpose.

Fordism: The Fall

The factors that I mentioned in the previous section as promoting growth in the post-World War II era, especially the first four, were the “institutional embodiments of the United States capitalist domination of other classes and groups” (Kotz 1994: 95). The rising resistances of the dominated groups in the late 60s radically challenged the hegemony of the American capitalist class and triggered the fall of the post-war SSA.

At the national level, the increasing dissatisfaction of the U.S. working class destabilised the capital-labour accord. Social movements demanded better working conditions and higher wages for the workers. Emerging environmental movements also shed light on the destructive and unsustainable aspects of capitalist production.

At the international level, anti-capitalist and anti-imperialist movements of the 60s undermined the U.S. global hegemony, which substantially curtailed the U.S. access to cheap raw materials. Moreover, an increase in the competition between the U.S. capitalists and the industrialised capitalists of other countries reduced the margin of benefit.

3.2. Theoretical background

·       Institutionalism

Probably the most obvious source of theoretical influence is the institutional economics. Similar to this school, the SSA theory views economics not as an independent, timeless science, but a resultant of social factors. It considers each state of the economy dependent on social and historical forces meeting at that specific point in time and place. This dependency is through the social institutions which constitute the structure of each economy.

The main difference between the SSA theory and the traditional institutionalism is the former’s more welcoming attitude towards generalisation with regards to the changing forces.

·       Keynesianism

The key theoretical link between the SSA approach and the Keynesian school of economics is the notion of investment. The SSA approach considers investment a factor that stabilises a SSA and contributes to future growth. However, the difference between the two schools of thought is at the importance they ascribe to the demand side. While the Keynesian school puts a significant emphasis on the demand side, the SSA approach rejects such exclusive focus and considers the supply and cost parameters as important.

There is also a historical aspect to the connection between the two economic frameworks. The Keynesian interventionist approach was one of the core elements of Fordism, the fall of which undermined the capability of Keynesian interventionist approach. Thus, one of the main research topics the young SSA theory, which emerged right after the beginning of the crisis, was why Keynesianism did not work.

·       Long-wave theories

The long-wave theories, especially the works of Schumpeter and Kondratieff, have influenced the SSA theory, mostly through the work of David Gordon. Both the SSA and long-wave theories attempt to understand the mechanism behind the long cycles of growth and crisis in capitalism. The main difference between the two is that the SSA school does not share the technological and economic determinism of the long-wave theories (Kotz, McDonough & Reich 1994: 4).

·       Marxian tradition

The relation of the SSA theory with the Marxian tradition has been more complicated and was, indeed, quite ambivalent for a while. Some of the SSA authors, e.g. David M. Kotz, used to view the SSA theory more Keynesian than Marxian, especially compared to the Francophone Regulation theory (Kotz 1994: 89). However, as the SSA theory matured it further embraced the Marxist theories. By 2010, the mentioned relation was reversed and it was now the SSA theory that demonstrated closer fidelity to the Marxian tradition (McDonough 2010: 30).

There is, however, one significant exception to what Kotz and McDonough claim. The work of David Gordon, the founder of the school of thought, always kept a close connection with the Marxian tradition. In Gordon’s Accumulation Theory: The Highest Stage of Stadial Theory, Terrence McDonough argues that Gordon’s theory is an extension to the theories of imperialism by Hilferding, Bukharin, and Lenin. He also demonstrates that these theories are genealogically linked through the work of Ernest Mandel on late capitalism and the Monopoly Capital School in the U.S (McDonough 1999: 7).

No matter on which side of this debate, you can find the traces of many Marxian ideas in the SSA literature, including:

  • Economic crises
  • Exploitation
  • Historical materialism
  • Surplus value
  • Class conflict
  • The endogeneity of the crises, that the socio-political and economic characteristics of a system eventually leads to its crisis
  • The interdependence of social, political, ideological, and economic features of a system

4.    Contemporary applications

Since its emergence, the SSA theory always kept a commitment to the application of theory to the problems of the time and in doing so, evolve the theory itself. Moreover, the SSA theoreticians did not restrict the theory to its place of origin, the U.S., but applied its analytical method to various regions of the world. They have explored the social structure of Africa (Heintz 2010), Japan (Lippit 2010), Australia (O’Hara 2008) and China (O’Hara 2006) as well as the neoliberal world (Kotz 2003; Lippit 2005; Lippit 2010; O’Hara 2010; Wolfson 2003). In the following sections, I briefly present the application of this school of thought to two recent phenomena.

4.1.                      Neoliberalism

The recent stage of global capitalism, commonly referred to neoliberalism, has been an important and controversial topic in the SSA literature for many years. The main point of contention is whether neoliberalism is a new SSA established after the fall of Fordism or it is just an extension of the 70s and 80s crisis. An important reason for this contention is the low rate of growth (1.4% in productivity and 2.23% in GDP) in comparison to that of Fordism (2.8% in productivity and 2.97% in GDP) (Lippit 2010: 49; O’Hara 2010: 376).

Refusing to view neoliberalism as a new SSA, David M. Kotz introduces the notion of Institutional Structures (ISs). An IS is a set of capitalist institutions of economic, cultural, ideological, and political natures. While an IS creates the structure for capitalist activity, it does not necessarily promote the accumulation of capital. In this sense, an IS is fundamentally different than a SSA, which mainly serves the purpose of establishing stability and promoting profitability, leading to the capital accumulation (Kotz 2003: 264).

Kotz identifies two types of ISs, a liberal Institutional Structure (LIS) and a regulationist Institutional Structure (RIS). The differences between these two ISs can be categorised into four groups:

  • State-economy relations: AN LIS supports the state of laisseze-faire and the independence of economy from the state. However, an RIS reserves a more intervening role for the state.
  • Capital-labour relations: In an LIS the capital has the upper hand in its relation to labour, while in an RIS they comprise a more cooperative relation.
  • Capital-capital relations: In an LIS, the relation between capitalists comprises of intense and somehow excessive competition while in an RIS, the rivalry is more controlled and muted.
  • Dominant ideology: The dominant ideology of an LIS is the free market. In contrast, an RIS highlights the dangers of the free market system and embraces an interventionist approach by the state.

According to Kotz, since the beginning of the twentieth century there has been frequent alternations between ISs and the U.S. has experienced two RISs and two LISs. During the LISs, e.g. neoliberalism, the capitalist class obtains the most benefits, the class conflict intensifies, the intercapitalist rivalry increases, and instability ensues in the macroeconomic level (Kotz 2003: 265).

By a similar analysis, Wolfson (2003: 257) rejects the idea that the institutional structure of the neoliberal era represents a new SSA. In this period, Gross Domestic Product (GDP) has been increasing at a rate significantly lower than that of the post-war golden era. Thus, the neoliberal institutional structure has failed to boost growth, which is the main result of a SSA. Based on this analysis, Wolfson (2003: 261) concludes that a new, regulationist SSA will soon replace the neoliberal structure. The recent events, e.g. Brexit and the election of Trump as the president of the U.S., may be harbingers of Wolfson’s prediction.

On the contrary, Victor Lippit (2010: 65) argues that a new SSA began to shape in the 80s and 90s and started in 1995 in the U.S. Neoliberalism constitutes the core ideology of this new SSA and seven key institutions: “(1) the strengthening of capital relative to labor, (2) a change in financial institutions favorable to investment, (3) deregulation, (4) institutional changes in the nature of the corporation, (5) limited government, (6) an increase in international trade and investment, and (7) capital markets favorable to small, entrepreneurial companies” (67).

By analysing the economic performance of different regions, Phillip O’Hara concludes that neoliberalism has not created a set of key institutions that support long-wave upswing and therefore, a global neoliberal SSA has not emerged. However, during the same period, countries like China have engendered important and stimulating institutions that can support growth for a relatively long period (O’Hara 2010: 381). In the next section, I further explore the case of China.

4.2.                      China

While some SSA thinkers, such as Reich (1997: 1), view the SSA framework as essentially institutional and qualitative, others have attempted to operationalise the theory and add a quantitative aspect to its method. A notable example is David Gordon who, during his later works, sought to develop a macromodel based on the SSA analysis of the post-war period. His main goal was to illustrate and test the dynamic aspects of the theory (McDonough 2010: 24).

In a recent attempt, O’Hara (2006) evaluates the SSA of the Chinese economy with a mix of quantitative and qualitative approach. For this purpose, he considers various institutions of the Chinese economy and applies to them the Index of Performance and Potentiality (IPP). The IPP consists of ten variables, each assigned a value between 0 to 10. They include labour productivity, investment, global power, markets, rural to urban, capital productivity, innovation, pollution, and the standard of living.

Based on this evaluation, O’Hara predicts a relatively long upswing for China that continues at least to 2020. He gives the Chinese economy (at 2002-2003) the actual score of 37 out of 100. This score locates the current state of China in the “emerging economy” group. O’Hara also gives the economy a potential score of 58 out of 100. The potential score, projected for 2020, puts the economy in the “main industrialisation” phase. The actual score in contrast to the potential score indicates that the economy is in the upswing phase, potentially continuing to 2020.

O’Hara identifies five key institutional characteristics of the Chinese economy that support its expansion:

  • The establishment of institutions securing the global power and presence of China
  • The great potential of the Chinese domestic market
  • The rise of the labour market and the easing of the labour flow restrictions
  • The rising but limited standard of living of the Chinese
  • The efficient evolution of the Chinese governance system

Despite these supporting factors, there is one important aspect of the Chinese economy that may hinder its development. According to O’Hara, the environmental impact the growth can impose serious costs on the Chinese economy. However, he does not consider these costs as severely affecting the Chinese institutional tendency to economic growth.

5.    Concluding remarks

In this essay, I briefly studied the Social Structure of Accumulation school. I examined the theoretical framework against its historical and theoretical background. By analysing the theoretical elements, origins, and influences as well as outlining the historical settings, this essay demonstrated how the SSA theory was shaped. By presenting the application of the theory to its own origin as well as to two contemporary question, I tried to show that the SSA school, despite its relative youth, has great potentials in the political economic analysis.

6.    References

Cox, RW (1981), ‘Social Forces, States and World Orders: Beyond International Relations Theory’, Millennium: Journal of International Studies, vol. 10, no. 2, p. 126.

Gordon, DM (1978), ‘Up and down the long roller coaster’, In, US capitalism in crisis, New York, Union for Radical Political Economics, pp. 22-35.

Gordon, DM (1980), ‘Stages of Accumulation and Long Economic Cycles’, In Wallerstein, I & Hopkins, TK (eds), Processes of the World-system, Beverly Hills, California, Sage Publications, pp. 9-45.

Gordon, DM, Edwards, R & Reich, M (1982), Segmented work, divided workers: The historical transformation of labor in the United States, Cambridge, Cambridge University Press.

Gordon, DM, Weisskopf, TE & Bowles, S (1996), ‘Power, Accumulation, and Crisis: Crisis: The Rise and Demise of the Postwar Social Structure of Accumulation’, In Lippit, VD (ed), Radical political economy: Explorations in alternative economic analysis, New York, M.E. Sharpe, pp. 226-244.

Gramsci, A (1992), Selections from the Prison Notebooks of Antonio Gramsci: Ed. and Transl. by Quintin Hoare and Geoffrey Nowell Smith (11th ed), International Publishers.

Heintz, J (2010), ‘The Social Structure of Accumulation in South Africa’, In McDonough, T, Reich, M & Kotz, DM (eds), Contemporary capitalism and its crises: Social structure of accumulation theory for the 21st century, Cambridge, Cambridge University Press, pp. 267-285.

Kotz, DM (1994), ‘The regulation theory and the social structure of accumulation approach’, In Kotz, DM, McDonough, T & Reich, M (eds), Social structures of accumulation: The political economy of growth and crisis, Cambridge, Cambridge University Press, pp. 85-97.

Kotz, DM (2003), ‘Neoliberalism and the social structure of accumulation theory of long-run capital accumulation’, Review of Radical Political Economics, vol. 35, no. 3, pp. 263-270.

Kotz, DM, McDonough, T & Reich, M (1994), Social structures of accumulation: The political economy of growth and crisis, Cambridge, Cambridge University Press.

Lippit, VD (2005), Capitalism, New York, Routledge.

Lippit, VD (2010), ‘Social Structure of Accumulation Theory’, In McDonough, T, Reich, M & Kotz, DM (eds), Contemporary capitalism and its crises: Social structure of accumulation theory for the 21st century, Cambridge, Cambridge University Press, pp. 45-71.

McDonough, T (1999), ‘Gordon’s accumulation theory: The highest stage of stadial theory’, Review of Radical Political Economics, vol. 31, no. 4, pp. 6-31.

McDonough, T (2010), ‘The State of the Art of Social Structure of Accumulation Theory’, In McDonough, T, Reich, M & Kotz, DM (eds), Contemporary capitalism and its crises: Social structure of accumulation theory for the 21st century, Cambridge, Cambridge University Press, pp. 23-44.

McDonough, T, Reich, M & Kotz, DM (2010), Contemporary capitalism and its crises: Social structure of accumulation theory for the 21st century, Cambridge, Cambridge University Press.

O’Hara, PA (2008), ‘A social structure of accumulation for long wave upswing in Australia?’, Journal of Australian Political Economy, The, no. 61, p. 88.

O’Hara, PA (2010), ‘After Neoliberalism: A Social Structure of Accumulation or Mode of Regulation for Global or Regional Performance?’, Journal of Economic Issues, vol. 44, no. 2, pp. 369-384.

O’Hara, PA (2006), ‘A Chinese social structure of accumulation for capitalist long-wave upswing?’, Review of Radical Political Economics, vol. 38, no. 3, pp. 397-404.

Reich, M (1997), ‘Social Structure of Accumulation Theory: Retrospect and Prospect’, Review of Radical Political Economics, vol. 29, no. 3, pp. 1-10.

Wolfson, MH (1994), ‘The financial system and the social structure of accumulation’, In Kotz, DM, McDonough, T & Reich, M (eds), Social structures of accumulation: The political economy of growth and crisis, Cambridge, Cambridge University Press, pp. 133-45.

Wolfson, MH (2003), ‘Neoliberalism and the social structure of accumulation’, Review of Radical Political Economics, vol. 35, no. 3, pp. 255-262.

[1] Antonio Gramsci (Gramsci 1992: 279) first coined this term.