REVIEW OF POLITICAL ECONOMY, 2018 https://doi.org/10.1080/09538259.2018.1449480 Marx’s Legacy, Régulation Theory and Contemporary Capitalism Robert Boyer Institut des Amériques, Vanves, France ABSTRACT ARTICLE HISTORY The 2008 financial crisis has challenged the merits of standard Received 3 November 2017 economic theories and sparked surprising references to Marxist Accepted 20 February 2018 analyses. A monetary economy is prone to crises, the interaction KEYWORDS of competition with capital–labour relations launches relentless 1929 crisis; 2008 crisis; accumulation and over-accumulation crises exacerbate the built-in economic history; contradictions of the capitalist mode of production. Nevertheless, institutional change; Marxist until now, these imbalances have not unfolded into its rapid and theory; Régulation theory complete collapse. From the social and political struggles of labour and citizens, the 1929 crisis and finally the Second World JEL CODES War, new configurations emerge for the wage–labour nexus, the B22; B52; E11; E32; O43; P10 form of competition and the monetary and credit regime. These delineate an unprecedented accumulation regime, Fordism. In turn, Fordism enters a structural crisis and a dramatic change in institutionalized compromises favours a still different accumulation regime (finance-led) that evolved from one speculative boom to another till the 2008 American financial collapse. Thus the mobilization of Marx’s foundational hypotheses by Régulation theory allows a better understanding than most alternative theories of major contemporary stylized facts: productivity slow-down and social polarization in mature economies, tensions between capitalism and democracy, new industrial capitalisms and limits to globalization. 1. Introduction Contemporary economists used to be proud of the advances of their discipline far away from the impressionistic approach of classical political economy. If Smith and Ricardo are still mentioned as precursors of the analysis of a market economy or as the founders of international trade theory, by contrast Marx had been totally removed from the cursus of professional economists: is he not clear evidence of the danger in confusing ideology and science, historical narrative with analytical rigour (Samuelson 1971)? The early 21st century was celebrated as the entry into a new stage in the scientific endeavour of economists for understanding the functioning of contemporary market economies and delivering to policy makers the technical tools needed to monitor econ- omic activity (Lucas 1981) and enhance growth (Lucas 1988). The Real Business Cycle model was generalized into Dynamic Stochastic General Equilibrium models and they CONTACT Robert Boyer [email protected] Institut des Amériques, 60 Bld du Lycée, 92170 Vanves, France © 2018 Informa UK Limited, trading as Taylor & Francis Group 2 R. BOYER have been used by central banks to orient their policies (Smets and Wouters 2002). Exogenous shocks were supposed to drive the cyclical adjustment of the real economy with no reference to credit and in the absence of any financial market. Symmetrically, the progress of mathematical finance has fed the explosion of options and futures markets (Black and Scholes 1973) because they allowed their pricing by simple but erro- neous formula (Mandelbrot 2004) that assumed the full and instantaneous liquidity of all and interrelated financial instruments. This dubious alliance of a new classical macroeconomics without credit and finance and a theory of finance, without any link with liquidity at the macro level, experienced its day of reckoning on 15 September 2008: brutally, the liquidity vanishes and the frozen financial system triggers the blocking of economic activity (Boyer 2015). The pol- itical economic actors and policy makers are in disarray because their cognitive maps built upon the structural stability of a market economy and the positive role of derivatives in diffusing risk appears dramatically irrelevant. It is the Minsky moment: the endogeneity of a credit led accumulation cycle has to be recognized (Minsky 1986), and the need for a lender of last resort is recognized even among the market fundamentalists. But the more impressive reversal relates to the statement by some chief economists working for financial institutions: ‘Karl Marx is back!’ (Artus 2002, 2010). The media (BBC 2008) and movie makers (Barker and Weltz 2011) find a convincing narrative in his writings. This is not an oddity but evidence for the open crisis of standard economic theory, unable to capture the forces that shape the evolution of contemporary economies. The objective of the present article is therefore threefold. First, contrary to the beliefs of most economists, reading Das Kapital might define an enlightening starting point for the reconstruction of an alternative to a failed economic discipline. Clearly, the notion of a market economy is unable to capture the built-in instability that generates cycles and structural crises. This is explained by its benign neglect of money and credit, the reduction of the capital–labour relation to a mere market transaction and the misrepresentation of the role of investment in economic dynamics. By contrast, the concept of the capitalist mode of production takes seriously how the interplay of competition and the capital– labour relation sets into motion a relentless accumulation process, prone to minor or major crises. The whole society is therefore transformed by deeply-rooted historical pro- cesses and the project of pure economic theory has to be abandoned (Section Two). Second, Régulation theory was designed as a critical mobilization of Karl Marx’s foun- dational concepts in order to understand the transformation of capitalism since the 19th century. Basically, the two core capitalist social relations—competition and the capital– labour nexus—have been embedded into institutional forms such as the competition regime and the wage–labour nexus. They then must be compatible with a monetary regime led by credit creation, the extension and complexification of the economy–State nexus and, finally, the degree of integration into the international system. Therefore, there is no longer a unique reproduction scheme but a variety of accumulation regimes associated with each institutional architecture. The unique dynamics of the capitalist mode of production postulated by Marx are thus replaced by the repetition of economic cyclical crises that wipe out the tendency to over-accumulation, typical of this genuine socio-economic regime. Nevertheless, the contradictions inherent in accumulation mani- fest themselves by the endogenous destabilization of any accumulation regime: this implies a major crisis, when the viability of the institutional architecture that shapes the régulation REVIEW OF POLITICAL ECONOMY 3 mode, i.e. the adjustment processes that drive accumulation are at stake. All these notions are used to analyze the emergence, maturation and major crisis of the post-Second World War Fordist accumulation regime built upon an unprecedented capital–labour compro- mise facilitated by the political transformations generated by the 1929 great crisis and the 1939–1945 world war. These advances in Régulation theory show the strength of Marx’s heuristic when one tries to understand the long-run transformations of different capitalisms (Section Three). Third, all economic paradigms and approaches have to deliver an interpretation of some puzzling contemporary phenomena. Why the cluster of innovations brought by digi- talization has not generated a recovery of productivity? How to explain that financial inno- vations—supposed to diffuse the risk to resilient actors—have been the source of the near collapse of the American financial system? What interpretation is there for the widening of income inequality in most societies? Why has the feeling of belonging to a large middle class vanished and shifted towards the perception of an acute social polarization between winners and losers? How have the newly industrializing countries overcome the past development barriers erected by leading nations? The process of globalization is weakening and putting at risk the adhesion to free trade as an engine of growth: is it a tipping point in the history of international relations? Will national public opinions per- ceive an irreconcilable conflict between democratic principles and global capitalism? Stan- dard economic theory performs quite badly in a benchmarking of competing paradigms: all these puzzles are supposed to originate in external shocks and/or the violation of econ- omic rationality by governments or traders. Post-Keynesians and neo-Schumpeterians deliver some interesting insights but dramatically underestimate the social and political forces that transform present societies. By contrast, the Marxist tradition and heterodox contemporary political economy deliver suggestive and highly relevant interpretations and analyses about each of the quasi-stylized facts reviewed (Section Four). A short conclusion stresses the paradoxical reversal of fortune of orthodox and hetero- dox theories. The inability to explain the contemporary world destroys the pretence of orthodoxy to be more and more scientific (Caballero 2010), away from ideologies and vague descriptions: it is now clear that orthodoxy was built upon shaky and finally erro- neous foundations—the unwarranted belief that market economies are structurally stable (Stiglitz 2010). By contrast, the political approaches derived