> Hang on, maybe I'm missing something here. The standard causal accounts of
> the crisis seem to fit into the overcapacity problem perspective - at least
> in my reading of it. The overcapacity problem seems to be, for Brenner, the
> deus ex machina which caused all of these policy measures and institutional
> arrangements, both national and international, which gradually began to
> create a highly unstable environment (the freeing up of finance, minimising
> labour costs through FDI - which presumably fueled international production
> but not consumption, liquidation of social services etc.). My understanding
> was that his underlying, if under-developed idea, was that it was the basic
> dynamic of overcapacity which he believes he has located is necessary to
> understand the structural reorganisations which were necessary for this
> crisis.
>
Certainly financialization is one of those structural reorganizations, as you say, that blossomed after the crisis of the 1970's. But in some ways it preceded the crisis - e.g., the development of Eurodollar markets in the 1960's. And there's hardly a consensus that the 1970's crisis was caused by overcapacity in the first place, though of course that's Brenner's position. (Personally, I think the 1970's crisis would have been much less of a crisis if there had been some institutional mechanism to prevent the inflation that accompanied the relative rise of working-class strength.)
> Who are the "capitalists" here? Are the people receiving the extra pay not
> to be considered members of the capitalist class and is it not, at the end
> of the day, the profits of the capitalist class that matter rather than
> corporate profit?
Yes, that's a good point. That's what I was talking about here: http://mailman.lbo-talk.org/pipermail/lbo-talk/Week-of-Mon-20090223/002775.html
> What I mean is that is it not quite likely that much of
> these pay boosts are not going to stimulate aggregate demand, but are
> instead being used as capital and are being channeled into the financial
> sector in order to realise even higher profits? If this were the case then
> not only would the problem of aggregate demand not be "solved" but the very
> money that should be going toward aggregate demand would be being used,
> essentially, to further the growth of the over-inflated financial sector.
>
When income is redistributed upward, it can result in a situation where the rich save more and everybody else borrows more (from the rich). This might be what happened over the past few decades. But if it happens, it won't depress aggregate demand as long as the non-rich are borrowing enough to offset the greater saving of the rich. All that borrowing might make the financial system more fragile, though.
The larger volumes of saving and borrowing will also expand financial-sector balance sheets and thereby redistribute income toward employees and shareholders of financial-sector firms. But it will not (necessarily) result in the allocation of more labor or capital goods toward those firms. In other words, it doesn't reduce the capacity of the non-financial sector to produce output, but it does increase the ability of individuals in the financial sector to appropriate the output that is produced.
SA