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ECONOMY
28 THE WORLD FINANCIAL REVIEW APRIL MAY 2024
DEEPENING ECONOMIC CRISIS
IN ADVANCED CAPITALISM
In spite of the fundamental
role that it has played in
world history from the
colonial period onwards,
Kalim Siddiqui argues that
advanced capitalism has
no response to the key
challenges of our times.
by Dr Kalim Siddiqui
I. INTRODUCTION
In recent years, long-term economic growth has
fallen in all major advanced economies, which
is referred to as “secular stagnation” by main-
stream economists. The 2008 nancial crisis was
largely due to the policy of a new regime of accu-
mulation such as neoliberalism, globalisation,
or nancialisation. The main factors in deepening crises in
the advanced capitalist economies lie in the long historical
process that began in 1973, soon aer the Israel-Arab war,
which culminated by ending the longest “Golden Period” in
the history of capitalism (1945-72), i.e. post-war expansion,
when unemployment levels were low, and also poverty and
inequalities were dramatically reduced in all major advanced
capitalist countries.
The “Golden Period” of capitalism, when advanced capi-
talism had a steady upward growth for a quarter of a century,
had no such precedent in the past. This steady growth took
www.worldfinancialreview.com 29
place due to various factors, including the historical
reasons for huge post-war reconstruction, increased
recognition of the role of trade unions in wage disputes,
and recognition of the greater role played by the scal
policy intervention in the economy. Similarly in the UK,
the Beveridge Report supported the building of a welfare
state and achieving full employment as the main objec-
tive of the post-war Labour government. In other Western
European countries, too, post-war reconstruction was
given priority and, to achieve this objective, state inter-
vention and the role of the scal policy were seen as
important policy measures (Siddiqui, 2023).
The “Economic Outlook” published in January 2024
by the IMF is the most inuential report for the Western
media regarding the health of the global economy and
the report also forecasts about future growth prospects.
For this year, the IMF report projected global economic
growth at 3.1 per cent in 2024 and with a small change at
3.2 per cent in 2025. The January 2024 forecast of 0.2 per
cent is higher than the October 2023 World Economic
Outlook. If we analyse the US growth rates of 2020-3 and
compare them with the average growth rate of 2010-19,
the US performance was less than satisfactory. During the
previous decade, the US average annual GDP growth rate
was 2.2 per cent, while in 2020-2, the average fell to 1.9 per
cent annually (Tooze, 2024; Wolf, 2024).
If we compare China’s 5.2 per cent growth rate with the
rest of the advanced economies, the gap is even greater
than with the US. For instance, Japan grew 1.5 per cent in
2023, France 0.6 per cent, Canada 0.4 per cent, the UK 0.3
per cent, Italy 0.1 per cent, and Germany even witnessed a
negative -0.4 per cent. Moreover, China’s growth rates were
also higher than other large developing economies, such
as Brazil’s 2 per cent, Mexico’s 3.3 per cent, Indonesia’s 4.9
per cent, Taiwan’s 2.3 per cent, and Korea’s 1.4 per cent.
Only India and Russia performed better among the large
developing economies, at 7.6 per cent and 5.5 per cent
respectively (IMF, 2024; Wolf, 2024).
II. LONG-TERM SECULAR STAGNATION
AND RISING INEQUALITIES
The IMF forecasts that, by 2027, China’s economic growth
will be 4.6 per cent, which is somewhat higher than the
nearly 1.5 per cent average growth of advanced capitalist
Source: IMF.
Source: IMF.
https://www.ft.com/content/d304a182-997d-4dae-98a1-aa7c691526db
economies, of which several will most likely face recession
(IMF, 2024), as shown in gures 1 and 2. As a result, the gap
in growth will widen further. Moreover, it seems that the
inequalities within the economies will widen further.
Moreover, global inequalities among dierent income
groups have widened for the last four decades since the
adoption of neoliberalism by most countries (see table
1). According to the World Inequality Report (2023), the
Global inequalities among different
income groups have widened for the
last four decades since the adoption
of neoliberalism by most countries.
Figure 1: Average real GDP growth rate 2020-7 (IMF forecasts).
Figure 2: GDP growth of G7 economies (%).
ECONOMY
30 THE WORLD FINANCIAL REVIEW APRIL MAY 2024
poorest 50 per cent of the population own just 2 per cent of
total net wealth, an average of US$4,100 per adult in 2021.
The middle 40 per cent of people own 22 per cent of total
net wealth, an average of US$57,300 per adult in 2021. In
contrast, the richest 10 per cent of people own 76 per cent
of total net wealth, an average of US$771,300 per adult.
During the 1980s, when the neoliberal policy was
launched, developing countries faced a debt crisis. Then
the international nancial institutions such as the IMF and
World Bank proclaimed that the global economy would
“converge” with the adoption of neoliberal economic poli-
cies. Table 1 shows that national income shares of the
bottom 50 per cent have declined. Similar trends are seen
in other large developing economies such as Brazil, India,
Indonesia, and South Africa. In the last four decades,
rather than inequalities within the country declining, it
widened and there is massive data to show that conver-
gence did not take place (Wade, 2018; Siddiqui, 2019a).
Source: World Bank, 2021; Freeman, 2021, pp.101.
Source: Chancel and Piketty, 2021.
https://wid.world/document/longrunpaper/
Over the past four decades, inequalities within coun-
tries have increased and, if we exclude China, then
inequality between countries has also widened. Within
countries, the gap between the incomes of the top 10
per cent and the bottom 50 per cent has almost doubled.
Despite the rise in GDP in recent decades, the dierences
in average incomes between countries (excluding China)
have widened, and the world remains more unequal today
than a century ago when European empires ruled the
world.
Chancel and Piketty’s study (2021) on world income
distribution estimates from 1820 to 2020 that the level
of global income inequality has always been unequal,
reecting the persistence of a highly unequal global
economic system (Amin, 1977). Global inequality increased
between 1820 and 1910, in the context of the rise of Western
dominance and colonial empires, and then stabilised at
a very high level between 1910 and 2020 (as indicated in
gure 3). Between 1820 and 1910, both between-country
and within-country inequality were increasing. However,
within-country inequality dropped from 1910 to 1980
(while between-country inequality kept increasing) but
rose from 1980 to 2020. This was also the period when
neoliberal policy was adopted by most countries. It seems
that the early decades of the 21st century neocolonial
capitalism involved similar levels of inequality to early-
20th-century colonial capitalism, though it is based upon a
dierent set of rules and institutions. They found that the
share of global income going to the top rich 10 per cent of
the highest incomes at the world level was 50-60 per cent
between 1820 and 2020, while the share of the bottom poor
50 per cent of incomes was less than 10 per cent.
The data shows that neoliberal globalisation has
resulted in a rise in inequalities within the countries.
This contradicts the so-called “Kuznets Curve” hypothesis
(1966), which emphasised that, as an economy develops,
Table 1 : Share in national income of the bottom 50 per cent
of the population.
Country 1980 (%) 2019 (%) Change (%)
US 19 13 -30
UK 22 20 -7
Germany 23 19 -19
France 23 22 -5
Italy 26 21 -21
Japan 21 18 -16
Brazil 11 10 -13
China 25 14 -43
India 21 13 -38
Indonesia 18 16 -10
Russian Federation 29 16 -41
South Africa 13 6-56
Figure 3: Global income inequality, 1820-2020.
www.worldfinancialreview.com 31
the economic inequality will
rise in the beginning and then
fall; it would be a U-shaped
chart of inequality against
income level. This theory is
oen cited by mainstream
economists in support of the
“trickle-down” eect. They
hoped that ultimately the rise
in incomes of the rich invari-
ably would raise the incomes
of the bottom section of
society. But it did not happen.
Other studies on inequalities also have found that
inequality has increased since deregulation, privatisation,
and capital liberalisation were imposed (Stiglitz, 2024). As
Freeman, on neoliberalism, emphasises, “Neoliberal poli-
cies thus operated on two fronts: their principal eect was a
successful assault on the postwar gains of the developmental
global South, but they became better known in the global
North for their eects on the working and popular classes
in the heartlands. As the state retreated, many indicators of
social well-being have retreated with them, including public
health, elderly care, homelessness vulnerability, access to
justice, and, of course, freedom from poverty” (Freeman,
2021, p. 98). Under Keynesian policy in the 1950s aer the
Second World War, it was accepted that government should
invest in the education and health sectors, which capitalism
had failed to provide. It was largely agreed in advanced
capitalism that welfare policy was a necessary concession
to avert the danger of communism.
The modernisation theorists view globalisation as
a panacea for global poverty and inequality, while the
critiques, namely the dependency theory, claim that
it will widen the gap between rich and poor countries.
An analysis of the global economy points out the role of
international institutions in sustaining inequality and the
status quo. The neoliberal globalisation policy contrib-
utes to global poverty and inequality between countries
by promoting global production and trade. Moreover,
within developing countries, inequality has risen through
overseas borrowing, trade liberalisation, and increasing
external vulnerabilities, while undermining self-reliance
and domestic resource mobilisation, thereby sustaining
structural inequalities. Inequalities between countries are
maintained by unfair trade laws that put poor countries in
a position of disadvantage. The
IMF’s Structural Adjustment
Programmes forced upon the
countries in seeking loans
is based on the "Washington
Consensus", and the IMF condi-
tionalities ignore the complex
specic situation of individual
countries.
The critics argue that the
advanced countries benet
disproportionately at the
cost of the poor countries,
which exacerbates inequali-
ties between countries. Within a poor country, inequality
is also fostered by the process of globalisation, as it
strengthens socioeconomic dierences. However, the
proponents of globalisation claim that it will benet all,
without any empirical evidence. It is claimed that globali-
sation has levelled the competitive playing eld between
rich and poor countries. Mainstream economists ignore
the existing global unequal relationship between rich and
poor countries, but the truth is that the rich countries
(former colonisers) through international institutions
imposed free trade, technical supremacy, exchange, and
globalisation to benet themselves (Amin, 1977).
For three decades, with the collapse of the Soviet Union
and the integration of the global economy under a US-led
unipolar world, neoliberal globalisation has brought
major structural change, and the world today is deeply
integrated into the global supply chain, goods character-
ised by product dierentiation and technical change and
The modernisation theorists
view globalisation as a
panacea for global poverty
and inequality, while the
critiques, namely the
dependency theory, claim that
it will widen the gap between
rich and poor countries.
ECONOMY
32 THE WORLD FINANCIAL REVIEW APRIL MAY 2024
employment structures and services gaining more impor-
tance than manufacturing.
In recent years, China has sharply increased its share
in the global economy and its performance has become
critical for the global economy. Mainstream economists
argue that a target of over 5 per cent of annual growth will
be dicult to achieve for China, because China’s working
population is falling, meaning there is less availability
of cheap labour to boost output. However, the increased
output does not just depend on a rising labour force but
even more on technical innovation, rising productivity,
and workers’ skills. It is also said that China has huge
debts, including local governments and real estate sectors.
This will eventually lead to bankruptcies and a debt melt-
down or would compel the central government to squeeze
the savings of Chinese households to pay for these losses
and that would reduce growth rates.
In contrast, China increased investment in state-owned
industries and infrastructure to compensate for any slow-
down due to the over-indebted property market. Indeed,
it is China’s capitalist sector (based mostly in unproductive
areas) that is in trouble, while
China’s massive state sector takes
the lead in economic recovery.
Mainstream economists argue
that China’s model of development
is not sustainable, as it is over-re-
liant on the manufacturing sector
and state-led investment in infra-
structure to increase household
consumption. Their solutions are
that China should break up too
large a state sector, reduce taxes
on private enterprises, and dereg-
ulate to allow the expansion of
the private sector.
But the question arises, since
the 1980s the advanced economies adopted the neoliberal
policy which raised growth rates over the expansion of
services, including real estate, resulting in the 2008 global
nancial crisis. It also led to a further rise in inequalities
and households’ debts, while real wages stagnated in most
of the advanced economies. In contrast, China’s average
real wages steadily rose over the last four decades. China’s
success in recent decades is much to do with its policy
departure from neoliberalism to “globalisation”. China
has carefully combined both state-led and market-based
Source: Financial Times; World Bank.
policies, according to its specic developmental needs.
However, its rapid growth was achieved at the expense of
environmental and domestic inequalities.
On average in advanced economies, investment and
employment in services have increased and a vast diversi-
cation of consumer goods has taken place (see gure 4).
The share of imports has risen, reducing the impact of
an increase in consumer spending on the growth rate.
Fixed investment share in GDP has fallen, while private
spending and household borrowing have risen sharply. As
Galbraith notes, in the 1980s gradually, “The share of manu-
facturing of consumer goods in US
employment declined, with losses
attributable to waves of deindus-
trialisation provoked by recessions
and high interest rates, productivity
growth, to oshore outsourcing
and to changes in consumer habits
and patterns of demand as incomes
rose and households move out
along an ’Engel Curve’ to enjoy not
only higher material standards but
also dierent patterns of expend-
iture. Correspondingly, shares in
expenditure on purchase of mate-
rial goods declined, while those
devoted to healthcare and higher
education increased, as well as travel and leisure time and
personal services" (Galbraith, 2021, p. 350).
III. THE US ECONOMIC DECLINE
US economic performance declined in comparison
with that of its chief rivals, the EU and Japan. The chief
measure of competitiveness is a country’s ability, under
Figure 4: Share of global manufacturing value added, 2004-20 (%)
30
20
10
02004 2004 2012 2016 2020
China
Japan
India
EU
US
On average in advanced
economies, investment
and employment in
services have increased
and a vast diversification
of consumer goods has
taken place. The share of
imports has risen, reducing
the impact of an increase
in consumer spending on
the growth rate.
www.worldfinancialreview.com 33
Source: Hadley Centre, Our World In Data.
1880-2020 based on sample of 27 advanced and 27 emerging economies,
weighted by GDP at purchasing power parity. 2021-2023 = all advanced and
emerging economies
Source: IMF
fair market conditions, to “produce goods and services
that meet the test of international markets, while simulta-
neously maintaining or expanding the real income of its
citizens”. According to Competing Economies, the US fails
on both counts. Its share of world manufacturing exports
has declined since the 1980s, while its share of imports has
risen (Siddiqui, 2020b). The US share in the international
markets has declined, given that the US began in post-1945
as the world’s richest country. During this period, Western
Europe and Japan performed better than the US and began
challenging the US global economic hegemony, while the
US focused on ghting and isolating the Soviet Union. Only
in the late 1980s, US manufacturing improved, thanks to
huge investments in computers, biotechnology, and aero-
space (Siddiqui, 2020a).
The recent past showed that the global economy suered
due to the pandemic, two ongoing wars (in Ukraine and the
Middle East), an unexpected surge in ination, and an asso-
ciated “cost of living crisis” (Siddiqui, 2022c). Moreover,
these disturbances followed not long aer the multiple
nancial crises of 2007-15. The IMF (2024) revised its own
GDP growth forecast for Russia to 3 per cent this year, a
1.5 percentage point rise over what it had predicted last
October (see gure 5). The Russian economy’s resilience
has stunned many economists, who had believed the initial
round of sanctions over the invasion of Ukraine nearly two
years ago could cause a catastrophic contraction. Now the
IMF argues that Russia has spent its way out of a recession
by evading Western attempts to limit its revenues from
energy sales and by ramping up defence spending.
The environment is being destroyed and it is an irre-
versible experiment with the biosphere, largely, but not
exclusively, concerning climate. As the human economy
grows, so does its impact on the biosphere likely to expand,
too. It will take a big eort to avoid the destruction of the
environment (see gure 6). So far, capitalism has failed to
reverse the trends and so the environmental crises will
deepen (Siddiqui, 2024c).
Over decades, debts, both public and private, have
risen sharply. If anything causes a big shock to such expec-
tations, mass bankruptcy might trigger deep depressions,
with extreme economic and political consequences.
Current high indebtedness (see gure 7) for an extended
period may lead to high interest rates, which might trigger
economic chaos.
The market can only absorb the commodities at prices
that are below their cost prices. Overproduction is rela-
tive; there is “an excess at particular prices”. Mainstream
economists argue that there could be overproduction in a
short period but, in a long period, there could be no over-
production. Say’s law states that production creates its
own demand, since every producer is as much a buyer as
Figure 5: Real GDP growth (%).
Figure 6: Global temperature, 1850-2023 (degrees C).
Figure 7: Sovereign debts of major economies as a % of GDP, 1880-2020.
General government debt as a % of GDP
ECONOMY
34 THE WORLD FINANCIAL REVIEW APRIL MAY 2024
a seller. The colonisation of other countries solves market
questions, where it cannot resolve the fundamental
conict between limited purchasing power and unlimited
productivity at home. Purchasing power depends upon the
distribution of income. Given the anarchy of production,
the individual entrepreneur may not know how much
others are producing, so he may end up overestimating
the demand and producing too much. The declining share
of the working class in the national product, relative to the
share of the capitalist class, results “in a chronic dispro-
portion between production and consumption”.
“Modern militarism” is one of the ways through
which the surplus can be realised. The home market
gets constricted because capitalist production destroys
the peasant economy and small-scale enterprises. The
law of capitalist production is constantly growing prot
(Luxemburg 2003: 49). Capital’s real purpose of existence
is to direct prots into capitalisation and accumula-
tion. Accumulation is extending capitalist production to
non-capitalist countries to provide a market for capitalist
production and provide raw materials for extended capi-
talist production (Luxemburg, 2003).
Globally inequality in income and wealth has increased
phenomenally since the 1980s. Financial globalisation and
the freer mobility of capital lowers the bargaining power
of workers, with the threat that industries would move
overseas. This means that there is a tendency for capital’s
share in total product to rise, and correspondingly the
share of wages to fall. And there is a demand constraint
in advanced capitalist countries as well as in developing
countries, where the existence of a huge reserve army of
labour keeps wages low.
IV. HISTORICAL RELATIONSHIP BETWEEN
THE GLOBAL NORTH AND THE GLOBAL
SOUTH
The Brandt Commission’s Report (1980) presented the
relationship between the rich Global North and the poor
Global South countries, and how these poor countries are
dependent on the North for their development. The report
emphasised crucial issues such as food, aid, energy, trade,
and the international monetary system. The Commission
popularised the terms “Global North” and “Global South”,
the former mainly comprising those countries where
capitalism has been established and accounts for less than
18 per cent of the world’s population, and the remaining
82 per cent are the "Global South" (as shown in gure 8). In
1980, the North’s average income was 11 times higher than
the South, which was twice as high as in 1950 (Brandt, 1980)
and, excluding China, since then the average income gap
between rich and poor countries has further widened.
Global North (i.e., advanced economies) is highlighted in blue
Global South (i.e., developing countries) is highlighted in red
Karl Marx in his writing did not elaborate on imperialism
in detail, i.e., about the core-periphery relationship and its
importance in capitalist accumulation. In Capital, Volume 1
(1976), Marx discussed how under-price raw materials from
the colonies were important sources for the capital accu-
mulation process. Furthermore, Marx presented a more
detailed view on the importance of colonies for Britain’s
capital accumulation in his articles in the second half of the
19th century in the New York Herald Tribune.
Capitalism is about the accumulation of capital, but
this is not straightforward and is subject to recurrent
crises arising from its contradictions. State assistance
is needed as, when capital accumulation is not possible
through markets, then such market interventions by the
state could lead to tension, even if such intervention aims
to restore capital accumulation and rescue capitalism
from the brink of disaster.
Capitalism needs exogenous stimulus to save from
decline and instability. The extraction of surpluses
through unequal exchange and oen using brutal force
was visible in the early phase of capitalist development.
Figure 8: Economic classication of countries by UNCTAD.
www.worldfinancialreview.com 35
Rosa Luxemburg (2003) discussed in detail the role of
the periphery in providing markets through the destruc-
tion of their local industries, which became an external
source of demand and was a prerequisite for accumulation
under capitalism (Perelman, 2000). State expenditure and
innovations could be other sources of stimulus to capi-
talism. Innovations and changes in technology could be
an important source of exogenous stimulus to capitalism.
Schumpeter (1961) recognised the importance of innova-
tion in taking capitalism out of downturns. Investments
in R&D for new products and tech-
nology could be carried out by
private businesses and the state.
The role of the state in innova-
tion means rejecting Say’s law that
“supply creates its own demand”
and recognising that capitalism is
prone to deciency in aggregate
demand and the state has taken
active measures to invest and raise
aggregate demand. This means that
achieving growth would require
exogenous stimuli to increase the
size of the economy, including the
size of capital stocks.
A more recent study by Patnaik and Patnaik (2021)
argues that the expansion of capitalism and relative
stability cannot be fully understood by ignoring the role
of primitive accumulation and imperialism in its devel-
opment. The expansion of capitalism was driven by the
requirements for markets and supply of raw materials to
continue accumulation and, for this, colonies were used
for new markets by destroying their handicra industries
and plundering their natural resources. They argue that
capitalism inherently by its nature needs underdeveloped/
non-capitalist regions to sustain
expanded reproduction. According
to them, “not only has capitalism
always been historically ensconced
within a pre-capitalist setting from
which it emerged, with which it
interacted and which it modied
for its purposes, but additionally
… its very existence and expansion
are conditional upon such interac-
tion” (Patnaik and Patnaik, 2021,
preface). Under imperialism,
primitive accumulation can indeed
proceed through non-economic
mechanisms implemented by the
state (taxes and debt servicing, wars, etc.), or with the help
of the state (privatisation, property speculation, crony
capitalism, etc.). It also involves market mechanisms such
as unequal exchange between petty commodities and capi-
talist production. Unequal exchange was one of the rst
forms of primitive accumulation in pre-capitalist econo-
mies, largely due to the skills of experienced merchants
and usurers (Perelman, 2000; Siddiqui, 2022b).
Dos Santos, a dependency theorist, argues that the
global capitalist system is characterised by unequal
exchange, where the Global South relied on exporting
primary commodities while importing high-value indus-
trial products. The Global South is trapped in a cycle of
poverty and dependence. “The relation of interdepend-
ence between two or more economies, and between these
and world trade, assumes the form of dependence when
some countries (the dominant ones) can expand and can
be self-sustaining, while other countries (the dependent
ones) can do this only as a reection of that expansion”
(Dos Santos, 1970).
Nonetheless, the claim that there has been a reversal
implies that capital and technology from the Global North
Capitalism needs
exogenous stimulus
to save from decline
and instability. The
extraction of surpluses
through unequal
exchange and oen using
brutal force was visible
in the early phase of
capitalist development.
ECONOMY
36 THE WORLD FINANCIAL REVIEW APRIL MAY 2024
are being transferred to the Global South through capital
investment, transfer of technology, and expansion of
the industrial sector. However, Utsa Patnaik and Prabhat
Patnaik (2021) argue that the key feature of contempo-
rary capitalism is asymmetrical, including rising costs of
supply, currency value uctuations, and income erosion.
At present, capitalism is marked
by increased nancialisation of the
economy, where nance dominates
productive capital (Siddiqui, 2019b).
V. CONCLUSION
Imperialism is dened as a period of
capitalism in which capital accumu-
lation does not simply take place by
dispossession but spread on a world
scale. This led to a more polar-
ised world with more unequal and uneven development.
Beyond accumulation by dispossession, to the draining of
a signicant fraction of the surplus value that results from
the “super-exploitation” of wage workers in the periphery,
where there exists a huge reserve army of the unem-
ployed labour force, particularly in the production of raw
materials, plantation and low-wage industrial production
which is a central strategy of the big global corporations
to make super prots. According to David Harvey, we are
presently witnessing “a shi in emphasis from accumu-
lation through expanded reproduction to accumulation
through dispossession … at the heart of imperialist prac-
tices” (Harvey, 2003, pp. 176-7).
For the last four decades, neoliberalism has been a
predominant policy measure, according to which, if the
markets are le alone, it will operate eciently and will
achieve prosperity for all. They support policies such as
deregulation, privatisation, and trade liberalisation. This
is also known as market fundamentalism, which is a
new version of the more than a century old laissez-faire.
However, over-reliance on market forces does not take
account of market imperfections, distribution, and
matters of social justice. The results of neoliberalism over
the last 40 years have been disastrous in achieving a stable
economy, high growth, low unemployment, and increasing
prosperity for all through the "trickle-down" eect. As
Stiglitz notes, “Neoliberalism did not deliver. Rather, it was
associated with lower growth than during the pre-neolib-
eral era; and what growth did occur went to those at the
top of the economic ladder. Predictably, in the advanced
countries, trade liberalisation between advanced coun-
tries and developing countries led to increased inequality.
Financial liberalisation led to the deepest downturn in
three-quarters of a century – again
the predictable outcome of dereg-
ulation, showing that unfettered
markets were not only inecient but
also unstable” (Stiglitz, 2024, p. 2).
The 2008 global nancial crisis
triggered by US mortgage securities
led to the economic collapse in 2009,
following which President Obama
committed to increasing the role of
the state to sustain growth. The state
took measures to bail out Wall Street
banks. Soon aer, the US brought the
largest scal stimulus in US history,
which was coordinated with other advanced economies.
Despite all these measures, the world’s economic growth
by 2016 was modest and did not show any sign of recovery
(Siddiqui, 2022a). In the EU, the euro crisis led to a severe
austerity measure imposed on Greece, Italy, Portugal, and
Spain. There was a sharp fall in global commodity prices in
2014, which led to a dramatic fall in the export incomes of
many developing countries. The global economy continued
to face recession and only returned to pre-nancial growth
level a decade later by 2017 (Tooze, 2024).
In recent decades, advanced capitalist economies
have witnessed huge structural changes, which was only
possible aer the defeat of workers’ unions, curtailing
worker rights, and corporations threatening to move
overseas. The nancial gap between capital spending and
internal funds for big corporations, which had averaged 1.2
per cent of the GDP over the two decades (i.e., 1980-2000)
has disappeared due to lower wage costs globally. These big
corporations slowed investments, which was far less than
their high prot rates, and as a result, a corporate saving
glut emerged. On the other hand, since the late 1990s in the
US and the EU, high household consumption continued,
despite stagnation in real wages, through increased indebt-
edness, which inated housing markets, and these proved
to be important reasons for the deepening crisis.
The study nds that since the early 1980s, the adoption
of neoliberalism saw a rise in inequality within the country,
The study finds that
since the early 1980s,
the adoption of
neoliberalism saw a rise
in inequality within the
country, and the worst
impact was witnessed
in Latin America, Africa,
and South Asia.
www.worldfinancialreview.com 37
and the worst impact was witnessed in Latin America,
Africa, and South Asia. The Keynesian policy focus on full
employment was replaced by targeting ination, which
led to “stagation”. Thereaer, capitalism entered a new
phase known as “secular stagnation”. In this new phase,
the growth has been very low, accompanied by a rise in
inequalities and an environmental crisis and, to all these
challenges, advanced capitalism has no solution.
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14. Siddiqui, K. (2024) "Revisiting the Japan’s Economic Stagnation",
The
World Financial Review
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15. Siddiqui, K. (2024) “Climate Change, Capitalism, and Invisible Hands
of the Market: A Critical Review”,
The World Financial Review
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16. Siddiqui, K. (2024) “The Performance of the UK Economy since the
mid-1990s: A Critical Review”,
World Review of Political Economy
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17. Siddiqui, K. (2024) “Neocolonialism: An analysis of international factors
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World Financial Review
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Dr Kalim Siddiqui is an economist specialising in International Political Economy, Development
Economics, International Trade, and International Economics. His work, which combines
elements of international political economy and development economics, economic policy,
economic history and international trade, often challenges prevailing orthodoxy about which
policies promote overall development in less-developed countries. Kalim teaches international
economics at the Department of Accounting, Finance and Economics, University of Huddersfield,
UK. He has taught economics since 1989 at various universities in Norway and the UK.
ABOUT THE AUTHOR
20. Siddiqui, K. (2022) “Capitalism, Imperialism, and Crisis”,
The European
Financial Review
, June-July.
21. Siddiqui, K. (2022) “Problems of Inflation, War in Ukraine, and the Risk of
Stagflation”,
The World Financial Review
, April-May.
22. Siddiqui, K. (2020) “Can Global Imbalances Continue? The State of the
United States Economy”,
Argumenta Oeconomica Cracoviensia
, 23(2):
11-32.
23. Siddiqui, K. (2020) “The US Dollar and the World Economy: A critical
review”,
Athens Journal of Economics and Business
. 6(1): 21-44, January.
24. Siddiqui, K. (2019) “The Political Economy of Inequality and the issue of
’Catching up’”,
The World Financial Review
. July-August.
25. Siddiqui, K. (2019) “Financialisation, Neoliberalism and Economic Crises
in the Advanced Economies”,
The World Financial Review
, May-June.
26. Siddiqui, K. (2018) “Capitalism, Globalisation and Inequality”,
The World
Financial Review
, November-December.
27. Stiglitz, J. (2024) “Neoliberalism, Keynesian Economics and Responding
to Today’s Inflation”,
Review of Keynesian Economics
, 12(1): 1-26, Spring.
28. Tooze, A. (2024) “The IMF is an anchor adrift in a changing world
economy”,
Financial Times
, 26 January. https://www.ft.com/content/
bd95f714-dc1c-4ee0-ba1b-af89c224c9ff
29. Wade, R. (2018) “The Developmental State: Dead or Alive?”,
Development
and Change
, 49(2): 518-46.
30. Wolf, M. (2024) “The dangers lurking in our messy and unpredictable
world”,
Financial Times
, 23 January , London. https://www.ft.com/
content/c92f0836-9d8d-49fc-b1c8-44eb478034c2
