But in recently, in the US and China, it is public investment that has been the driving force.
How has capitalism been doing in its “globalised” phase?
Beginning with the 1980s but gathering force from the 1990s.
It is when global capital managed to reduce almost all restrictions and regulatory constraints on its activities.
New forms of ownership were strengthened, like intellectual property rights.
This in turn created other monopolies and forms of surplus extraction.
Public sectors across the world were eroded and states withdrew from the provision of important physical and social infrastructure.
Tax rules led to reduced rates and loopholes that enabled MNCs to pay very little tax, even when their profits soared.
Therefore,
How did global capital respond to this immensely supportive configuration?
Given the favourable conditions the past three decades should have experienced an explosion in private corporate activity.
Instead, the average rates of growth have been declining over the half-century.
The average investment rates plummeted in the first decade of the current globalisation.
Overall, the performance was not significantly better than the “stagflationary” 1970s or the crisis-ridden 1980s.
How has East Asia fared?
East Asia became really significant in terms of investment in the 2000s, equalling both the US and EU.
After 2007, China’s capital formation soared well beyond that of these two major capitalist economies.
China alone accounted for 77% of the increase in East Asian gross capital formation between 2007 and 2019.
Inherent dynamism of capital suggests that when the more advanced regions show signs of saturation, capital moves to newer, lower-income geographical areas.
This then allow these newer areas to expand rapidly.
The regional shift to East Asia is seen as the example of this dynamism.
Is this claim valid?
The argument that of China’s growth is an example of Capitalism assumes that it is really private capital has been the major driver.
But it turns out that the opposite is true.
WDI data shows that throughout this entire period, private capital provided only the smaller part of gross fixed capital formation in US & China.
The share of the private sector investment in total fixed capital investment was even smaller in the US.
Most of the fixed investment that is essential for capitalist accumulation and growth was undertaken by the public sector.
Public investment accounts for more than 4/5th of total fixed capital formation in the US and more than 2/3rd in China.
This underlines the fact that global capitalism is on life support provided by governments.
The central bank intervention through massive creation of liquidity is essential to maintain economic functioning in the advanced economies.
Even the investment that does occur is mainly because of public sector activity, with private investment playing at best a supporting role.
