Theories of Late Capitalism in the World System Essay

Theories of Late Capitalism in the World System - Essay Example The global market was significantly expanding in the late 1960s and early 1970s, resulting to rivalry on both the US labor and capital. Moreover, the post-war long cycles of expansion saw the US manufacturers investing enormously in fixed capital and capacity building such that by late 1960s, profits margins for these investors were beginning to decline due to the significantly high capital-labor ratio of operations. Rephrasing this, the huge amounts of â€Å"sunk costs† especially in the form of plant, equipment, or fixed capital, had enormous eroding impacts on their profit rates. These changes in the realignment of the global market and the actual production conditions led to the abandonment of Keynesian economics, contrary to what Keynesian and liberal partisan claims. Actually, it was globalization of capital and then labor, making the New Deal-type and Keynesian economic policies loose their favor to capitalist profitability, paving way for Neoliberal and Ronald Reagan a usterity economics (Wallerstein 132). This is according to the theory of capitalist crisis, globalization, and theory of falling profit rates emphasized by Harvey and Frieden. The integral dynamics of capitalism lies at the center of the theory of falling profit rates. ... Part 2 With the falling profit rates, political leaders sought to make some amendments to capital accumulation laws and regulation with an objective of increasing or maintaining rates of profits. These changes came in as state policies seeking to regulate capitalism, essentially raising the living standards of the working class and their working conditions and increase capitalist profits (Harvey 168). Consequently, capitalist states introduced social welfare cuts, geographic expansion of capitalist production, and a series of mergers, acquisitions, and bankruptcy. These policies brought together led to the revival of profitability, particularly in the US beginning early 1980s. Lean production generalization through service and industry significantly increased the rate of exploitation (labor productivity). The series of mergers, bankruptcies, and acquisitions was the primary source of the financial sector growth, leading to desertion of old and inefficient operations. Political leader s also enacted regulations to reduce production capacity in some industries such as steel production, leading to a shift of investment to other fields of production (diversification of steel production into oil exploration). The boundaries of the world economy expanded due to the construction of global production chains, enabling labor-intensive operations shift to low-wage regions in the global south (Postone, 15). The economic policies of neoliberal capitalist states encouraged capital restructuring. The deregulation of labor and capital markets, together fiscal policies that focused on disinflation, enabled capitalist firms to respond to rising profits with more equipment and plant investment (majorly inventory systems