There are several factors at play in that big shift in the regulation of capitalism. Of course, we are still in the sequence of the 2008 crisis. The 2010s were a decade of mismanagement, poor economic performance, and social and political tensions through the Global North. For this reason, when the pandemic struck, it accelerated changes that were already in the making.

The most obvious element is the fact that after several decades in which price stability was the main concern of central bankers and policymakers, full employment came to the fore as the priority of government. What happened in the United States, with an explicit orientation in favor of a “high pressure” economy, was symptomatic of this changed configuration. The question is, Why did policymakers and governments decide to shift away from the centrality of low inflation, which was in fact a war on labor, resulting in lower wages for decades?

I would say that there are at least three factors, perhaps more. Firstly, the financial system is now very highly leveraged. Because of this high level of debt, there is a great risk of instability. For governments, that means it’s no longer possible to significantly raise interest rates.

That in turn means that you have no choice other than to try and accelerate your economy in order to produce some dynamism. It is more and more difficult to pursue the course of attacking labor. This came in the wider context of a long-term tendency toward economic stagnation, and a willingness on the part of governments to overcome that tendency.

The second factor is China. International geopolitical tensions are working in favor of labor. If nationalistic tensions are rising, governments need to secure more internal consent, and being more open to the aspirations of labor can be seen as one way to build such consent.

But there’s also something more direct at work. In order to build up the country’s industrial capabilities so the United States can face Chinese competition, the US government needs to be more involved in organizing businesses and technological innovation. In that sense, China is working against neoliberalism, because you cannot just say “let the market take care of innovation.”

In practice, of course, that was never completely the case in the United States — they never left it entirely to the market — but there was a discourse of this kind, at least. Now there is a need for government to be more seriously involved in the organization of the economy.

The third factor, perhaps, is the ecological crisis, which brings a new emphasis on issues of infrastructure and structural change, which the market is not good at delivering. For these three reasons — high levels of debt that block any return to austerity and impose a need to foster growth, the rise of China, and the ecological crisis — there is a new landscape in which the bargaining position of labor has dramatically improved.

That doesn’t mean, of course, that the US government has turned anti-capitalist in any meaningful sense. But there are structural constraints that force them to try and figure out a new social compromise. This situation opens some strategic space for labor.

I’m not based in the United States, so other people would know much more about the daily details and the development of Joe Biden’s policies. But, from the other side of the Atlantic, I can say the following.

First of all, we have the shift to “high pressure” economics, and we can see the consequences of that in terms of rising wages and lower unemployment, and also what some have called the “general strike of labor” in the United States, with a new assertiveness and ability of labor to refuse some kinds of work or working conditions that are not considered acceptable. In that sense, the most dramatic move by the Biden administration was probably its decision, early in 2021, to push forward with public spending.

The second thing that I think is important about Biden is a question of ideological discourse. There have been some declarations, for example, in favor of unionization, or in favor of wage increases, or in favor of expanding the welfare system. Even if this rhetoric is not matched by action — and I know the practical outcomes of this agenda have been pretty weak so far — in terms of general orientation, I think that it’s meaningful. It sets the tone for a new context on the Left, which is interesting after decades of neoliberalism and Clintonite politics.

It’s a big success of the Left: years of organizing and political mobilization have finally had some impact. Due to the situation in the US Congress, it was necessary for the new administration to try to find a balance with the left wing of the Democratic Party. This is a kind of victory. Much more has to be done, but we need to underscore the success of the Left in recent years, even if, of course, the situation now remains unsatisfactory in many ways.

The main difference is that there has been no immediate return to austerity policies. We are seeing the beginnings of this kind of discourse in France and in Germany, for example, with the idea that “debt will have to be paid off” and so on, and we can be worried about the possibility of a rapid shift. Until now, however, the mainstream political discourse has acknowledged that they made important errors during the Eurozone crisis that they don’t want to repeat.

That’s why there was a strong rebound of the economy in Europe. Of course, it could be short lived, but it was a very rapid expansion, which was meaningfully different from what happened in 2010, for example. One important aspect as well was the scale of the socialization of the economy, especially in France, which was completely unexpected from a self-styled neoliberal such as Emmanuel Macron.

There was a very high level of wage socialization, with schemes that gave workers their income even though they were inactive. Profits and losses were also socialized. The state stepped in to guarantee the income of private corporations through loans. In fact, there was virtually no risk of failure for businesses. In spite of the huge decrease in GDP last year, France had the smallest number of business failures in its recent history. This was the main outcome of the massive public intervention, which made it possible to preserve the existing structure of the economy.

The third element, which is very interesting, is what happened at the financial level. The European Central Bank intervened massively, just as the Federal Reserve did in the United States. It stepped in to buy not only public debt but also private debt from the bigger European corporations, which enabled financial assets to increase their value dramatically during that period. March 2020 was probably the most surprising moment, when you had a huge decrease of economic activity due to the lockdowns, but there was already a strong rebound of market capitalization in the Global North.

However, the main fault lines of the European Union are still there. They have not been resolved. There is still no agreement in terms of state making, in terms of a unified level of taxation, in terms of fiscal policy at the European level. There have been some small steps in this direction, but they are not very meaningful from a macro point of view.

This is due to the persistence of huge disagreements, so far as the EU is concerned. We have seen that play out in the tension with Poland, for example, concerning the place of EU law in relation to national law. But you also have a debate about that question in Germany and in France. There is still no clear path toward a true federal state in Europe, which means that the fault lines of the previous crisis are still there, and we cannot exclude the possibility of further crises in the coming years.

Personally, I like Minsky very much. I think his work is very impressive in terms of its ability to understand the inherent instability of capitalist finance. The basic idea of Minsky is as follows: At the beginning of any financial cycle, you have low risk in the system, because people will be able to repay their loans and interest payments. But as soon as there is growing confidence of actors in the stability of the economic situation, people start taking on more risk, to the point where they won’t be able to pay back their debt or the interest, and then you have a financial crisis.

Minsky’s main point is that the cycle I have just described is not merely a question of private actors taking greater risks. Regulators and public authorities also take greater and greater risks over the course of the development of the financial cycle. Here you have a paradox that I think is very interesting. The more instability there is in the system, the more the state intervenes to contain that instability. The more effective the state is in containing instability, the greater the risk that builds up.

You can think about the recent history of capitalism along these lines. You had financial crises in the 1990s, mostly in developing countries, followed by the dot-com crash of 2000. Then you had the big crash of 2008, and more recently the corona crash. Of course, that was not directly caused by financial instability, but it came at a time when there was a lot of fragility in the system. At all these points of vulnerability, central banks and governments stepped in to bail out banks and stabilize the market, buying financial assets to ensure there was global liquidity.

The problem is, as a result of this process, we have a growing weight of financial assets in relation to the real economy. This mega-bubble is building up and up with no end in sight. At this point, we reach the limits of Minsky, because he does not really help us to understand what this huge increase in the value of financial assets signifies. Here I think that we can use a concept developed in particular by Susan de Brunhoff, a French Marxist who specialized in the field of money and finance.

Brunhoff stressed that public authorities, through their actions in supporting the financial system, are engaged in a process of pre-validating social labor. All the public guarantees that we are seeing today can be understood as a way for the state to guarantee to the owners of financial assets that they will receive the incomes they are expecting from those assets. The state is stepping in to guarantee that the returns they are expecting will materialize.

However, this is becoming more and more difficult, because you have a disjunction between this valorization of finance and the real dynamic of the economy. Now we are at a moment where we don’t know how this pre-validation can be sustained for a longer period of time. This is a problem that Brunhoff considered, thinking about the risk of pseudo-validation — the fact that these financial assets cannot deliver the returns that they were supposed to bring to their owners.

What can we say about the risk of pseudo-validation today? One option would be to have a financial crash: at some point, central banks and authorities decide that they cannot support such high levels of indebtedness in the global economy any longer. Financial assets need to be reduced in scale, so they will allow some kind of financial crash to happen. I doubt that this will occur, because it would initiate a huge wave of instability in society beyond the realm of financial markets.

That is the first option. The second option is, of course, the return of high levels of inflation, which could be a way to de-leverage the economy, reducing the weight of debt, both private and public, through the effect of rising prices. Then you also have a third option, which would be for the state to step in on an even greater scale to guarantee the returns of financial owners.

That could be the paradigm of BlackRock, for example. BlackRock is a universal owner now, and it wants to be sure of getting returns from its assets. In the meantime, however, the firm is well aware of the limitations on its ability to generate returns in the medium to long term, because of the slow dynamic of the economy. In the face of such challenges, BlackRock is calling for the state to intervene more.

First of all, it is asking for central banks to directly buy securities, including the shares of companies. But firms like BlackRock can also ask the state to guarantee returns through forms of public-private partnership. Such firms want to be directly connected to infrastructure, and to receive regular fees from it.

They want to be able to invest in the Global South, for example, through so-called green investment. But as the returns on these investments are not safe, they want the state to guarantee them. Daniela Gabor has done a very good job of explaining the dynamic of what she calls the Wall Street Consensus, where the state is guaranteeing private returns to over-accumulated financial capital.

Since 2008, the financial sector has been dependent upon state support, and financial assets have been persistently inflated by pro-corporate fiscal and monetary policies. Under this regime, finance is dependent on the state, not the other way round.

Before the financial crisis, states used to be terrified by the prospect of market liquidity drying up. However, the configuration has now been completely reversed. The financial community is on a permanent public lifeline to ensure liquidity, market clearing, and the provision of assets. In this sense, you have a reversal of the power relationship between finance and the state, due to the role of the state in supporting finance since the 2008 crisis.

I think this is a very useful concept, because it tells us something about the dynamic of capitalism. The dynamic of capitalism is not one of equilibrium. It is precisely a dynamic — one which is not linear, not even, not stable. It goes up and down.

Those ups and downs are the result, of course, of the investment behavior of capitalists. But this behavior is embedded in a context of technological opportunities and institutional settings. The theory of long waves is based upon that. It looks at the opportunities that are opened up by new technologies and institutional settings and the ways that capital can take advantage of that to invest.

However, at a certain point, this configuration is exhausted. Once a configuration is exhausted, you have a lack of opportunities and dynamism in the system. The key point, according to Ernest Mandel, is that there is no automatic return to an upward, expansionary phase of the long wave.

Somebody like Carlota Perez agrees with Mandel on this point, although she does not quote him. She has explained that, in order to launch a new expansionary wave, you need adequate policies for generating technological opportunities in order to offer capitalists opportunities for investment. I think this framework is, in broad terms, highly relevant in helping us to figure the various stages or epochs in the development of capitalism.

One thing that I think is missing from this framework is the fact that capitalism is aging. By that I mean that the social and natural, geographical space available for the expansion of capital accumulation is exhausted, in the sense that capitalism is truly global nowadays. But capitalism is also aging in the sense that all the previous contradictions are building up in the system. When we use the long-wave framework, we must not forget that there is also this dynamic of aging going on.

To what extent do we have an opportunity to relaunch a long wave? People like Carlota Perez have been waiting a long time for a phase of deployment based on the opportunities opened up by the new information technologies, biotech, and so on. However, in their view, there is a bright prospect, with room for compromise between social groups, to allow for this expansionary phase to unfold.

Of course, this is not really the case. There is no easy way to move in that direction. In particular, they do not take into account the big decline of labor’s relative bargaining power during the previous period, which limited the scope to establish a compromise in the new situation. The other limitation is that you have a huge amount of over-accumulated capital due to financialization and overinvestment in core manufacturing activities worldwide. This is not something that can easily be resolved, even with adequate institutions to relaunch an expansionary phase of capitalism.

However, the relative success of Chinese state capitalism in recent decades, in spite of its weaknesses, argues in favor of the idea that, with some specific institutional settings, you can constrain or control the main contradiction of the process of capital accumulation, at least for some time. Of course, everybody is well aware of the weaknesses of that system, in particular so far as the housing and financial sectors are concerned. Yet there are some specific features of the Chinese form of capitalism that could offer other countries an alternative to the neoliberal model and could therefore provide a route to the further expansion of capitalism, although I would not bet on this possibility.

I’m not a specialist on China, but I am struck by three elements. The first is that the Chinese strategy is very well rooted in a theory of uneven development. The fact that China was suffering from uneven development allowed them to deploy a strategy of catch-up. They were aware of their advantages as a latecomer, which enabled them to skip or leapfrog some stages and catch up very rapidly with the more developed economies.

From an institutional point of view, two elements are decisive. One is that the Chinese leadership appears to be seriously taking into account Vladimir Lenin’s theory of the New Economic Policy (NEP). In fact, they have been using a key concept of the NEP by not losing control of the strategic heights of the economy all through the reform period.

You have state control of the banking sector, most of the telecommunication sectors, the construction sector, and so on. There is very strong state involvement in the core sectors of the economy. This is a crucial element if you want to understand how the Chinese leadership has been able to deal with capitalist contradictions and maintain growth for such a long period.

The third element is something more specific about the advantages of planning and the use of the party bureaucracy. In China, you still have a planning bureaucracy that is playing a role at two levels. Firstly, it allows both management and business leaders to anticipate steps toward a possible growth pathway, which helps them to make decisions. It is a way to reduce uncertainty.

In addition, due to the persistence of a very harsh political regime, you have a way to react very rapidly to the political decision-making of the leadership. I will try to be more concrete. If you want to be a successful leader in China, not only must you succeed as an economic manager on market terms but you must also be able to propose your own interpretation of the strategic orientation of the party leadership and deploy that interpretation.

These two channels of legitimacy and the interplay between them give the Chinese government a wider range of tools than are available in Western economies. We need to better understand what’s going on at this level in China, but there is definitely something specific about this social formation, and these specificities explain its exceptional success in terms of capital accumulation.

I am rather cautious about the prospect of inflation. On the one hand, I think that a lot of these pressures are linked to the immediate aftermath of the pandemic, and now the war in Ukraine. From that perspective, they should be resolved sooner rather than later. However, you have to keep in mind that there are more structural aspects.

One is simply the fact that anticipation about inflation is building up right now, and thus increasing the possibility of further inflation. The second element is that you have some factors — in particular, the cost of the ecological transition — that could push up the prices of several key commodities further, with spillover effects for the whole economic system. There are some possibilities for the rise of inflation.

I think the most interesting part of your question concerns what is going on socially, and to what extent it is different from the 1970s. The inflationary surge right now is mostly being driven by business taking advantage of healthy conditions on the demand side. This is completely different from what happened in the 1970s, when there was a cost shock propelled by the rise of oil prices, pushed up further by a wage-price inflation spiral, because the labor movement was strong enough at the time to bargain for wage increases.

This is not the case today, in spite of the fact that we are seeing some wage increases. The strong actor right now is business. What we are seeing this time is profit-price inflation. Businesses are taking advantage of some bottlenecks and of very strong demand to increase their prices and their margins. At the same time as they are increasing their margins, they are spreading this inflationary pressure.

This diagnosis is very important, because if you take that point seriously, it means that governments need to discipline business if they are serious about their willingness to limit inflationary pressures. Isabella Weber has made this point very well recently. Price controls should be a good way to reduce inflationary pressures — much better than a rise in interest rates or a turn to austerity, which would have very serious negative consequences for employment and labor conditions.

It has excellent implications. I think the prospects for the labor movement right now are much better than they have been over the past three decades. During that time, we saw the fall of the Soviet Union, the opening of the developing world to global markets, and the conversion of China to globalization. All those forces are now in retreat.

Secondly, finance is now completely dependent on the state. It cannot be as politically assertive as it used to be. Finally, we are beginning to see a reduction of the labor army on a global scale. The diminishing pressure of unemployment should also help labor to organize and rebuild confidence in the possibility of collective struggles. The general picture of structural constraints is improving.

That is what I mean by excellent conditions. On the subjective side, however, the articulation of an alternative to capitalism is still very weak and there is a huge amount of ideological work to be done in order to reconstruct that project.