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A Regulation Approach Interpretation of the

Contemporary Crisis

Article in Capital & Class · June 1984

DOI: 10.1177/030981688402300103

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Michel De Vroey
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Michel DeVroey

A regulation
Drawing upon the

approach French tradition of

regulation theory -
most notably
associated with
interpretation of Aglietta- the author
describes the 'forms
of regulation' that
contemporary crisis have characterized
the various stages of
capitalism. He
∎ THE AIM OF THIS article is to offer a personal interpretation argues that while
of what has come to be known as the "regulation approach" to the the current crisis
current capitalist crisis .' It is associated with the work of authors consists of a
like Aglietta (1979 ; 1982a), Benassy et al . (1977), Boyer (1979a ; disruption of the
whole structure of
1979b), Boyer and Mistral (1983), Lipietz (1979), Mazier (1982), monopoly
Coriat (1979) and Lorenzi, Pastre Toledano (1980) . These regulation, it is not a
authors draw on a set of similar concepts, like "regimes of deathknell for
accumulation" or "forms of regulation" . Nevertheless it would be capitalism itself. A
incorrect to regard them as one homogeneous school of thought, way out of the crisis
would involve the
and in any case their ideas have sometimes changed over time . This development of a
is particularly true of Aglietta . While in his more recent work new form of
(Aglietta and Orlean 1982, Aglietta and Brender 1984) he still regulation, a new
defends the same thesis as in his Theory of Capitalist Regulation regime of
accumulation as a
(1979), it is no longer rooted in the basic marxian value-categories . given historical and
My analysis will be developed at a high level of generality, central institution
with no attempt to substantiate the assertions advanced with facts . of capitalism .
This is partly done in the above mentioned studies . Clearly, many
of my assertions will have to be worked out and perhaps amended in
further work . the study consists of five sections : 45
1 The crisis of which system?
2 The historical forms taken by the invariants : the concepts
of regimes of accumulation and forms of regulation.
3 The notion of crisis : its different meanings .
4 The contemporary structural crisis
5 Conclusion.
 Capital & Class

46 1 The crisis of As will quickly become clear, I do not think that the present crisis
which system? should be interpreted as a collapse of capitalism . I see it rather as a
mutational crisis . Nevertheless analysis must be rooted in a
perception of the basic features of capitalism, namely a market
economy and a wage system .
It is impossible and unnecessary to detail here all the
implications of this perception . Nevertheless a few points should be
stressed or recalled .

The basicfeatures of capitalism .

∎ Basic features of the market economy . In a market economy,
at least in a pure one, production decisions are made solely on a
private basis . All goods produced, all services provided, are the
outcome of individual private decisions . Those who take decision
do not know what others are deciding at the same time, although
the outcome of their own decisions is highly dependent on the
others . The system is opaque and uncertain . There is no a priori
guarantee that these private decisions are well-founded, i.e .
whether they will bring in a return or lead to a loss .
∎ The wage relation. Market economies are also class economies .
The class division follows from the fact that only a fraction of
economic agents are really able to take economic initiatives . It
groups together agents holding money and/or having access to
credit. In a simplified model, in which intermediary classes are not
taken into account, they form the capitalist class . The other fraction
consists of those who are unable to start a business venture on their
own, because of their lack of money . The only way in which they
can be socially integrated is by being recruited as wage-workers by
capitalists . Proletarians are thus passive agents, deprived of their
power of economic initiative . Their social integration depends on
decisions made by capitalists based on their interest in hiring in
wage-labour and starting a business venture . In other words,
proletarians do not decide to sell their labour-power, they are
compelled to do so . But capitalists are decision-makers . They are
not compelled to hire labour-power and if they choose not to do so,
proletarians remain "non-social beings" . This asymmetry explains
what seems to me to be the basic ambiguity of the wage relation . Let
me express it in a rather provocative way . Is it not better to
participate in social production albeit in a subordinated and
exploited position and thereby to have access to social consump-
tion, than to be unexploited but also excluded from society? Wage-
earners as individuals are therefore placed in a position of "forced
solidarity" with the particular capitalist unit which both employs
and exploits them . If the latter fails to make profits, they will soon
lose their jobs . It is thus in their interests to be exploited by highly
successful capitalists! The proletariat as a whole is in the same
 Regulation approach

captive position . Full employment is not a natural phenomenon and 47

it can be attained only in phases of high prosperity . Thus the
exploited class has a vested interest in the smooth functioning of
the system which, on the other hand, may be said to exploit it.

The stages of extensive and intensive accumulation 2 The historical

This section examines the historical forms taken by the basic forms taken by
invariable categories of the capitalist system . The course of the invariants
capitalist development is divided into the following stages :
mid-19th century : the establishment of the capitalist mode
of production or primitive accumulation ;
mid-19th century - WWI : extensive accumulation or competitive
regulation
interwar period : transitional phase
post WWII : intensive accumulation or monopolistic regulation
1950-1970 : golden age phase
1970- : crisis of intensive accumulation
The concepts of regimes of accumulation (either extensive or
intensive) and of forms of regulation (competitive or monopolistic)
are borrowed from French literature . The first distinction was
proposed by Aglietta (1979), the second one by the authors of the
CEPREMAP report (Benassy 1977) . It must be said that both terms
are misleading . The terms extensive and intensive accumulation
can be understood at three levels and it is not always clear which
one the authors have in mind . The first meaning is the most
common one. As Mazier puts it :
"Extensive accumulation implies a growth of the capital
stock which does not alter existing production techniques,
and which is accompanied by low productivity growth . In
intensive accumulation, the technical and social organization
of work is profoundly modified, the growth of investment is
better planned, and productivity growth is rapid" (1982 : 40)
At a second level, the notion of extensive accumulation refers to a
situation in which accumulation and technical change, occur pre-
dominantly in Department I, i.e . the production goods industries,
while Department II, i .e . consumption goods, remains largely
unchanged . Intensive accumulation, on the other hand, refers to
cases in which accumulation takes place simultaneously in both
departments . Finally, on a still broader level, these concepts could
refer to the entire social structure, the typical "gestalt" of a given
stage of development, where extensive and intensive accumulation
narrowly defined are only one element among others . The same
ambiguity is to be found in the other distinction . Narrowly defined,
the notions of competitive and monopolistic competition refer to
modes of price-formation, the former designating a flex-price
system, the latter a fix-price one . In a broader sense, they too
designate the structure as a whole .
Table 1 : The distinctive features of the two regimes of accumulation
A. Features of the wage-relation
1 . Mode of life of the wage-earning class
2 . Composition of the labour force
3 . Prevailing labour process
4. Legal organization of the wage relation
5 . Development of workers' movements
6 . Rationale for workers' acceptance of
the "rules of the game"
B . Commodity relations
1 . Relations between Departments of
production and main locus of technical
progress
Extensive accumulation or competitive regulation
partial wage-relation
traditional way of life (Al : 80)
- dominance of non-commodity relations over
commodity relations in the mode of consumption .
- commodities involved in the reproduction of labour
force are essentially non-capitalist .
- important role of domestic labour (G : 1)
- unemployed are cared for by the family or public
charity .
- in contrast to the primitive accumulation stage, women
and children are withdrawn from the social labour force .
introduction of taylorism (At : 113) .
individual contracts : law blatantly favours employers
emergence of the movement and fight for its recognition
the balance of power favours capital : need for a social
consensus is low
"disarticulated" or unequal accumulation : technical
progress is concentrated in Department I and does
not affect Department II to any great extent (At : 71, 104)
Intensive accumulation or monopoly regulation
fully-constituted wage relation
Fordism as a mode of consumption (Al : 82 and 155)
- dominance of commodity relations over non-
commodity relations.
- mass consumption of standardized commodities .
- diminishing role of domestic labour .
- increased importance of collective goods and
services .
- unemployed are cared for by a system of social
insurance, often managed under state control .
-women re-integrated into the social labour force .
-possible recourse to immigrant labour-force when
national labour force is inadequate .
taylorism superseded by fordism (Al : 116) .
collective bargaining (Al: 190) and reinforcement of
workers' rights.
integration of the movement in state and collective
bargaining institutions
necessity for social consensus, based on a regular
increase in real wages (Al : 197), the development of
public goods, the extension of paid holidays .
parallel growth of the two Departments (Al : 71)
2 . The spatial dimension of
commodity exchanges :
a) extension of markets
b) hierarchy of center and periphery
c) hegemonic country at the center
3 . Dominating price-formation process
4 . Monetary system
a) forms of the general equivalent
b) international organization
c) banking structure
C . Cyclical dimension
1 . Business cycle
2 . Mode of devalorization of fixed capital
3 . Price level
D . The state
1 . Domains of state intervention
2 . Prevailing doctrine and
tools of intervention
prevailing national boundaries transnationalization of production and exchanges .
surplus transfer from the periphery to the center within the the same transfer occurs without this context .
colonial context .
British hegemony (A n : 8-9) American hegemony (A u : 8-9)
market determinacy and price flexibility administered prices and downward rigidity
metallic basis with a convertible paper-money (A t : 332) uncovertible paper money (A 1 : 341)
gold-standard dollar-standard ; Bretton Woods monetary system ;
fixed exchange-rates .
- the central banks' role of lender of last resort is limited ; - central banks' role of lender of last resort increases
fragility of the private banking system which lies at the in importance
epicenter of crises (A l : 356) - nationally integrated private banking systems are
well-protected against losses of confidence
absolute fluctuations (G : 194) changes in rates of growth rather than
absolute changes
sporadic obsolescence emerging during crisis and recession permanent devalorization and over-amortization
phases of the business cycle (G : 223 ; A t : 106) (A 1 : 108, 313 ; DV)
fluctuations (cyclical inflation) (G : 229 ; Dv) steady but low increase (creeping inflation)
(A 1 : 336 ; DV)
the political sphere and the legal framework of - management of money
economic activities - management of the reproduction of the
labour force
- counter-cyclical policy
liberalism - "soft keynesianism" ; counter-cyclical and
supplementary action by the state is legitimized ;
institutional development producing the statistical
information and concepts necessary to support
that role .
10

Table 2 : The network of interdependent conditions backing up intensive accumulation in the advanced capitalist countries
Positive functioning
1) Coherence of the productive system - balanced expansion of the two departments sustained by a
permanent increase in productivity ;
- positive integration among the various stages of the
commodity life-cycle .
2) Wage relation increases in real wages linked to increases in productivity .
3) Supply of labour broadening of the social labour force through entry of a
secondary labour force (women and migrant workers) .
4) State intervention multi-level state intervention and increases in public
expenditures ("soft keynesianism") .
5) Price levels creeping inflation .
6) Profits and finance - despite gradual decreases in profitability, firms continue
to invest
- increasing indebtedness .
7) Terms of trade in raw materials globally advantageous for the center
Table 3 : post-war international cohesion and its crisis
The Cohesion phase
I The relative position of the us economy
1 . Degree of autonomy vis-a-vis international- high foreign demand for us industrial goods
trade and low penetration of the American market by
foreign products
2 . Relative productive position - us supremacy (technological advances and
higher vertical industrial integration)
0
Dysfunction
- exhaustion of productivity increases ;
- lack of take-over by the new branches after the
relative decline of those which underlay
post-war growth.
weakening of the social consensus .
high unemployment .
fiscal crisis of the state .
galloping inflation followed by stagflation .
the private debt structure becomes unstable and
priority is given to the restoration of the liquidity
position; generalization of a preference for
liquidity behaviour .
"oil shock"
The crisis phase
- increased foreign penetration and international
competition abroad
- loss of supremacy ; technical differences as a result
of the higher increases in productivity in Europe
andJapan
3 . Type of regulation
4 . Inflation
5 . us balance of payments
II Money
1 . Monetary organization
2 . Mode of creation of international liquidity - supply in international liquidity is tied to the
3 . Nature of the international
monetary constraint
4. us monetary policy
III The European position
relative position of European countries
IV The rest of the world
- the us is the leading country in the establishment
of fordism and intensive accumulation
- lower rate than abroad
- surplus in the balance on current accounts, only
minor fluctuations in basic balance (usually
in deficit)
- Bretton Woods system of fixed exchange rates
the dollar is the sole international means of payment
major role of central banks in controlling
foreign-exchange operations
evolution of the us basic balance
- necessity of settling deficits in the balance
of payments
- low interest rate policy
debtors favoured over creditors
-complementary situation between (1) countries with
high specialization, relatively low growth rates and
lower inflation and (2) countries with lower
specialization, a higher rate of growth and a higher
rate of inflation
- advantageous market-power of advanced capitalist - emergence ofJapanese economic power
countries vis-a-vis peripheral countries oil rent
- crisis of intensive accumulation
- inability to preserve a favorable inflation differential .
- mounting deficit in the balance on current accounts
deficit trend in basic balance and major variations
- Collapse of the Bretton Woods monetary system ;
flexible exchange rates
the dollar remains the means of payment but is no
longer a stable unit of account and is challenged by
other currencies in its reserve role
diminishing of central banks' regulation role
- "International debt economy"
-avoidance of increasing exchange rate misalignment
- shift towards a policy of control of monetary
aggregates and volatile interest rates
balance of power gradually shifting in favour
of creditors
-self reinforcing complementarity between
(1) countries with strong currencies and stagflation
and (2) countries with weak currencies and
galloping inflation
v2
 Capital E5 Class

52 Such ambiguities are regrettable . However, in the absence

of any appropriate new concepts, I shall have to fall back on the
existing concepts . The concept of regime of accumulation and form of
regulation will be treated as synonymous and should be understood
in their broad sense . Thus they designate the specific institutional
framework and social norms proper to various stages of capitalist
development. The underlying assumption is that the invariable
capitalist categories effectively take different forms over the course
of time . Table 1 attempts to synthesize these institutional con-
figurations. It describes the forms taken by the invariables
mentioned above, the wage relation and the commodity form, both
sub-divided, as well as by other basic categories, state intervention
and conjunctural pattern . The table should be read horizontally
and vertically . Horizontally, it describes one by one the evolution of
various stages . The vertical reading follows from the assumption
that in each phase, the different features are congruent, and form a
specific global institutional structure . Note that what is described
here are regimes of accumulation when they function smoothly,
and not in their crisis stage, an aspect which is dealt with later .
Obviously, the table is no more than a summary . Readers less
acquainted with the literature on `regulation' are referred to the
work available in English, where a more detailed analysis can be
found (Aglietta 1979, referred to as A t ; Aglietta 1982, referred to as
A II ; De Vroey 1984, referred to as DV ; and Gouverneur 1983,
referred to as G) .
Obviously, many comments could be made on this table .
However, I will limit myself to one remark concerning the
development of the wage relation (point A in the table) . Two stages
can be distinguished which I call the partial and the fully-constituted
wage relation . In the first case, workers are integrated in a capitalist
process of production - they produce commodities - while their
mode of life is still traditional . The reproduction of labour power
takes place mainly through domestic activities . What wages can
purchase serve only as a complement to this reproduction .
Moreover, most of the commodities that are bought are non-
capitalist . They are produced by independent producers rather
that by wage-labour . Thus at this stage, wage-earners become
integrated into the capitalist system through only one channel as it
were, the other channel (consumption) remaining non-capitalist .
Double or complete integration takes place in the fully-constituted
wage relation which could also be called the fordist stage . The
notion of fordism refers to a double, concomitant change : the first
concerns technical changes in the production system, characterized
by the introduction of semi-automatic assembly-line production
and leading to mass-production of standardized commodities . The
second concerns changes in the way of life, sometimes identified as
 Regulation approach

mass consumption. Reproduction of labour-power now operates 53

predominantly through large-scale consumption of capitalist
commodities . One consequence of this development should be
stressed. In the partial wage relation, wages are no more than costs
for capital. A cut in wages has no negative consequences for capital .
On the contrary, it increases profits, since the loss in outlets which
it involves does not affect capitalists but independent producers
and through them, rentiers . However this is no longer true in the
fordist stage . Wages are not just a cost but also an outlet for
capitalist production . Therefore, while wage decreases might
benefit capitalists by increasing profit margins, they have the
negative counter-effect of restricting demand . This new
development makes earlier solutions to decreases in profitability
impracticable .

The notion of crisis can be understood at two levels : the micro- and 3 The notion of
the macro-level . The latter in turn will be divided into two sub- crisis: its different
categories : the cyclical or conjunctural crisis and the structural meanings
crisis .
The notion of micro-crisis refers to the situation of particular
social units when they encounter losses . The units concerned may
be firms, branches or nations (seen as bundles of specific branches) .
Micro-crises, a normal and permanent feature of market econ-
omies, express changes in leadership, management failures, shifts
in demand, etc . They can occur in a high prosperity context when
no crisis prevails at the macro-level . However the reverse is not
true : though micro-crises do not imply macro-crises, the latter
derive from an extension of the former . In a macro-crisis, firms
which in prosperous times were already in or on the threshold of a
micro-crisis naturally experience a worsening of their lot . On the
other hand, the notion of micro-prosperity should be contrasted with
that of micro-crisis . It refers to the situation where particular units
of capital experience above-average profit rates, and remain un-
touched by macro-crises (Andreff 1982) .

Forms of crisis
The distinction between cyclical and structural crises is by
no means new, but its meaning needs to be clarified . Structural crisis
is a dysfunction of the specific institutions and social processes
forming a given regime of accumulation . Cyclical crisis refers to the
more traditional conjunctural evolution : a particular phase of the
cycle, manifesting itself in the reverse of a set ofbusiness indicators,
such as employment, production, the stock market, etc . . . . The
 Capital C Class

54 difference between them bears on what is called into question

through the crisis . In a structural crisis, the functioning of a given
set of institutions and social norms is at stake. On the contrary, in a
cyclical crisis they are not threatened . The latter has a more limited
object, namely halting past rhythms of development when their
cumulative effect is excessive . This check supposedly occurs with-
out broad institutional changes .
In this century the most striking example of a structural
crisis is obviously the crisis of the thirties, which may be seen as the
crisis of the inability to establish fordism through the failure to
establish the necessary underlying conditions .' As technical
progress gradually spread to Department II, the development thus
generated encountered deficient purchasing power so that in-
creased production lacked an adequate outlet . This in turn resulted
from the absence of an appropriate institutional setting : on the one
hand, the development of contractual relations between capitalist
managements and working class organization, to form a social
framework in which real wage increases could be planned in
accordance with rises in productivity ; on the other hand, a
qualitatively new type of state intervention in the economy .
Turning now to the present crisis, the regulation approach
contends that it too is a structural or mutational crisis, linked this
time to the exhaustion of fordism and of intensive accumulation .
However, as long as the process continues, no definitive assertion
can be made .
Before developing this view, one more comment on cyclical
crises is in order . The cyclical crisis must be viewed in the right
perspective . In particular, it should be noted that it may or may not
be a symptom of a structural crisis . If it is not symptomatic of
structural crisis, I will speak of a cyclical crisis `reduced to itself
This is a distinctive feature of extensive accumulation (Gouverner
1983 : 194-196), and as we know, its existence should be associated
with over-investment. This `creative destruction' is emphasised by
Marx and by orthodox economists: after the massive devalorization
of capital and the elimination of `lame ducks' which it entails, the
crisis restores the conditions for further accumulation . In intensive
accumulation things are different . Two features must be stressed .
First, during what may be called its golden age, stretching from the
beginning of the 1950s to the beginning of the 1970s, business
cycles appear to have been watered down . It was a period of
sustained growth, witnessing changes in the rhythm of develop-
ment but no clear-cut absolute moves . It is clear that the business
cycle has been made obsolete by counter-cyclical policies .
According to my interpretation (De Vroey 1984), the role once
played by crises is now taken by another process, namely creeping
inflation . I now come to the second feature . At the end of the
 Regulation approach

`golden age' phase, it became clear that the cyclical dimension was 55
buried too early . However it re-appears, in a different form . Now
the cyclical crisis is no longer a phase condensed in time ; instead it
appears constrained and to some extent latent . On the one hand, its
cumulative effects are avoided : open financial crises do not arise .
On the other hand, the crisis does not resolve itself, and it becomes
protracted . Both the appearance and the meaning of cyclical crises
have therefore changed . One can no longer speak of a cyclical crisis
`reduced to itself' . In fact it is the indicator of a deeper phenomenon,
in this case the structural crisis .'

The present structural crisis may be understood at two levels : 4 The

national and international . On the one hand, most of the advanced contemporary
capitalist countries experience a parallel dysfunction of intensive structural crisis
accumulation though each has a specific character . On the other
hand, on the international scene, we notice a weakening of the
American hegemony, shifts in the hierarchical structure among
national economies, and disruptions in the international monetary
system. These two dimensions will be treated in turn . For each, I
contrast a period of harmonious functioning which will be called
the `golden age' and which stretches roughly from the 1950s to the
start of the 1970s, and a period of crisis, starting in the beginning of
the 1970s and still continuing .'

A. The crisis of intensive accumulation

The exceptional growth of the post-war period has often
been associated with the progress in economic policy brought
about by Keynesian economics . The regulation approach thesis is
however that it results from the conjunction of a broader series of
conditions forming a specific institutional structure . The current
crisis in turn results from their exhaustion . These conditions are
listed in table 2 which also summarizes specific feature in the
functioning and in the dysfunction phases .
Let us first comment on the table along its horizontal axis
and look at the evolution of the various factors involved .

1) The productive system

As already pointed out, the golden age period of intensive
accumulation was based on a balanced expansion of the two
departments and on a sustained generalized increase in pro-
ductivity. Some consumer branches, such as automobile, housing
and durable goods, play a leading role . Productivity is the keystone,
not only of growth but of the whole institutional setting . However it
should be understood not in a narrow technical sense but as a
global management matter, integrating technical, commercial,
 Capital E5 Class

56 financial and social aspects . Moreover, a series of sub-conditions

need to be fulfilled. For example, the temporal horizon in which
decisions can be taken with confidence must be long enough to
allow the launching of long-term investment projects ; the various
phases of product life-cycles, stretching from research and
development to large-scale production, have to be properly in-
tegrated ; the supply of new lines of products to the market must
coincide with appropriate purchasing power . The dysfunction of
the system is brought about by a slowing down of productivity in its
broadest sense . Leading branches have reached the end of a certain
line of technical progress, while further improvements will require
profound qualitative changes, such as the move from assembly-line
to robotization (Aglietta 1979 : 122) . For the firms concerned, this
represents a strong challenge in terms of innovation, investment,
changes in social relations within factories . A profound change in
the industrial structure of these branches is at stake . Establishing a
new mode of production is thus a long and painful process .
Moreover, it is far from certain that, even if they succeed, these
branches will resume their previous vanguard role . On the other
hand, other branches which might take on this role, such as tele-
communications, electronics or bio-industry, have not yet been
able to actualize their growth potential .

2) The wage relation

In most countries, the golden age was a period of social
consensus, interrupted only by short phases of social upheaval .
Capitalist societies had not of course foregone their invariable
features : exploitation and domination were still present . However,
the two main classes, employers and wage-earners, had come to a
mutually advantageous compromise. Workers benefitted from a
stronger institutional and political collective position . Regular
increases in wages gave them access to a consumption pattern
undreamt of by their parents . Unemployment was low, while
workers were provided with insurance systems and a network of
collective goods and services . Despite revolutionary rhetoric, in
practice this was seen as sufficient compensation for darker aspects
of the wage status : submission in the workplace, increases in
labour-intensity, exploitation . For the capitalist class, the ad-
vantages were obvious : the attainment of social peace and class
collaboration, minimizing halts in production and gaining outlets
for the increased production . The cornerstone of the consensus
was the linking of real wage increases to improvements in
productivity .
Once these weakened, things could no longer go on as
before . As it turned out, several countries, at least European ones,
failed to perceive immediately the gravity of a slowing down in
 Regulation approach

productivity . Wages continued to rise, while productivity increases 57

were almost at a stand-still . Hence distributive shares shifted
(Mazier 1982 : 50) . Real wages were the first to slow down, then to
stop and eventually to reverse, while, on the other hand, after a
stage of overheating of the economy, unemployment was un-
leashed . Thus the basis of consensus has broken down . The
balance of power between classes has also shifted . The established
rights of workers and unions are gradually called into question .
The branch or firm solidarity between employers and workers, of
which I spoke in section I, is reinforced and corporatist tendencies
predominate within unions . Splits within the wage-earning class
become more pronounced. They divide, on the one hand, workers
(mainly indigenous male workers) who have kept their jobs, who
still benefit from advantages gained before, and who are strongly
protected by their unions ; on the other hand, the unemployed and
the secondary labour force, the young, female and immigrant
workers, who have fewer advantages and a lower level of protection .
The overall limitation of union power also becomes clearer, where
it was once easy to delude oneself. In particular it appears that,
despite their formal participation in a series of decision-making
centres, they have no power at all on the most crucial economic
decisions : those bearing on investment, and determining effective
demand and the level of employment . Here the rules of the game of
the pure market economy are still at work : the money-holding
agents (or those having access to credit) decide sovereignty over the
use of money-capital, over borrowing and investment decisions .
The discrepancy between the particular interests of rentiers and
speculators and those of society, so often evoked by Keynes, is
again relevant.

3) The supply of labour

This variable requires less comment. In the `golden age'
phase, labour was scarce because of high demand and demographic
factors . However, deficiencies in the traditional supply (indigenous
males) were met by recourse to female and immigrant labour . In
the crisis phase with its huge rise in unemployment, governments
try to find ways, preferably not too brutal, of sending this secondary
labour force back to where they came from .

4) State intervention
The `golden age' phase was a period of unprecedented state
intervention in the economic sphere : management of the labour
force, management of money, provision of a wide range of collective
goods, counter-cyclical policies . Public expenditures have
increased enormously . This is partly the result of the spreading of
Keynesian ideas (in their soft version, as will be argued presently)
 Capital E5 Class

58 but also partly the unexpected result of conjunctural decisions

which progressively generate irreversible (in the short run at least)
and cumulative involvements. As long as the rate of growth was
sufficiently high and the unemployment rate sufficiently low, the
situation was tolerable . But when these conditions vanished, the
fiscal crisis arose . Hence, the latter cannot be seen as the cause of
the overall crisis, but rather as a result of it.
At the crisis stage, it became clear that the public sector was
witnessing some malfunctions which however it was unable to
solve : low productivity, over-investment etc . Moreover, the crisis
itself has induced higher state expenditure : the social security
financing requirements have rocketed and the state has taken on
new expenditures linked to the crisis, such as industrial policy and
financial aid to corporations in difficulty. Increasing deficits cause
concern not, as so frequently asserted, because of their inflationary
impact, (since at a time of stagnation, the latter should be weak) but
because of the cost of financing deficits when interest rates are
high . Governments are thus left with very little room to manoeuvre
and are caught in a dilemma: how can deficits be reduced without
generating cumulative deflation?

5) Price levels
Redistribution of income and wealth lie at the heart of
inflation (Aglietta and Orlean 1982, ch . 3 ; De Ville 1984) . Under
creeping inflation, as in the `golden age' phase, these transfers were
relatively small scale and their effects not immediately apparent .
Moreover they were growth-inducing (to the extent that inflation
socialized obsolescence losses) (De Vroey 1984) . Transfers from
households to firms took place, as well as from rentiers and
creditors to debtors . But at the end of that phase, inflation became
cumulative . Awareness of its redistributive consequences led
strong social groups to protect themselves by indexation measures .
Furthermore, in the overheating period, at the end of the golden
age, cyclical demand-pull interacted with an already high under-
lying, permanent inflation. The result was galloping inflation,
which could not be left unchecked for several reasons . It generated
a generalized suspicion against money, a very serious threat, once
one admits that money is the key institution of a market economy .
Galloping inflation also makes economic calculations and con-
sequently investment decisions, increasingly unreliable . Despite
huge nominal cash-flows, firms may nevertheless be unable to meet
the production costs of their long-term projects . Another dys-
functional aspect of inflation concerns inflation differentials : the
comparative position of countries with permanently higher rates
weakened . For all these reasons, governments felt the necessity to
react to inflation and to initiate restrictive policies which naturally
 Regulation approach

hindered their attempts to cure deflationary tendencies already at 59

work.

6) Profits andfinance
Profitability began to decline during the golden age (Aglietta
1979 : 287 ; Mazier 1982 : 55), and the productivity slowdown
exacerbated this situation . However, business reacted in an
offensive and optimistic way, 6 and fostered investments . As we have
indicated above, the stake was seen not just as a marginal im-
provement in production conditions but as a radical transformation,
in the form of robotization and the development of entirely new
lines of production. These changes entailed huge financial com-
mitments and they occurred just when cash-flows were low . On the
other hand, as inflation increased, financial intermediation pro-
gressively deteriorated . Large amounts of savings were diverted
from productive investment to speculative operations generating
rapid nominal gains . In the face of a scarcity of financial resources,
the only option left open to firms was to increase their indebted-
ness . At this point (the beginning of the 1970s), despite declining
profitability, the economic situation did not give cause for alarm .
Demand was steady . Business prospects were good. Banks could
readily increase credit . As a result, demand for production goods
reached a peak and bottlenecks began to develop . As classical
theory suggests, precautionary demand for stock, also financed on
credit, built up too. All this naturally fuelled inflation . However,
after this period of euphoria and rapid exhaustion, perspectives
soon became gloomier . Over-capacity started to appear . It gradu-
ally became clear that a series of new investment decisions were
blatantly misconceived . Under-utilization of capacity forced sales
revenues down and difficulties in repaying debts arose . While the
conditions for a financial crisis were present, it did not acually
break out, as it would have in extensive accumulation . Central
banks played their role of lender of last resort . Debts were re-
scheduled . Governments supported lame ducks in order to prevent
cumulative deflation . Nevertheless, priorities were to change
deeply, both for banks and for business . Now the first priority was
to restore liquidity ratios . Consequently, investments fell, pro-
duction slowed down and unemployment rose sharply .

7) Terms of trade in raw materials

Again, this variable requires little comment . During the
golden age, advanced capitalist countries benefitted from ad-
vantageous relative prices for their raw material inputs . From 1973,
the creation of "oil rent" changed this situation, at least for one
crucial input, with the familiar effect of a considerable rise in
industrial costs of production . However, contrary to the widely held
 Capital & Class

60 view, one cannot consider the oil shock as the cause of the crisis .

This last remark brings us naturally to the other way of

looking at table 2, namely through a vertical reading . As the
comments above have already shown, the various factors com-
plement each other in each of the two phases . Productivity is the
key to the whole structure . In the period of smooth functioning,
productivity increases allowed growth which in turn permitted
social consensus, state intervention, avoidance of losses, low un-
employment . However, productivity cannot be considered a prime-
mover since it is itself the result of other factors . The elements
comprising the structure thus lie in a circular relationship . They
form a network and mutually reinforce each other, whether posi-
tively or negatively . Discussions on the cause(s) of the crisis must
take this into account . This article argues that the crisis consists of a
disruption of the whole structure of intensive accumulation, each of
its components being weakened in parallel . Partial exhaustion is
transmitted to other factors, so mono-causal explanations are
inadequate . The `oil shock' may have been a catalyst but, even
without it, intensive accumulation would have been in difficulty .
Consequently, any policy which ignores this interdependence and
which tries to act on one variable in isolation, is bound to fail .

B . The international dimension :

the crisis of the post-war international order under
American hegemony'
Table 3 below summarizes what seem to me the main
elements of the international evolution . Here, too, two historical
phases can be distinguished : a period of positive functioning and
one of mutational crisis . During the first, American industrial
hegemony was apparent. On the monetary side, a series of
supposedly clear-cut and stabilizing rules of the game prevailed .
However this order was to be progressively disrupted. American
industrial hegemony was called into question and the earlier
monetary order fell apart to be replaced by a noticeably more
ambiguous and less stabilizing system .
Comments on Table 3 will be sketched as follows .' Post-war
international cohesion rested on two foundations, leaving aside the
advantageous market situation of advanced capitalist countries
vis-a-vis peripheral countries . The first was a specific combination
of industrial hierarchies and complementarities . At its peak, the us
position was based on a series of linked factors mentioned in this
table : a high degree of autonomy vis-a-vis international com-
petition, technical supremacy, large-scale production coupled to a
wide internal market, a pioneering role in the establishment of
fordism, and, of course, the fact that it had not been hurt by the war .
 Regulation approach

One consequence of this bundle of factors was that until the end of 61
1960s, the us had a surplus on current account. The second
foundation was the Bretton Woods monetary system . Among the
several conditions for its success, two are worthy of attention : first,
the working of what Aglietta calls the "international monetary
constraint" and, second, an adequate supply of international
liquidity . These will be examined in turn .
The notion of `monetary constraint' (ignoring, for the time
being, the adjective `international') is one of the basic rules of the
game of the market system . It states that economic agents must
respect the contracts which they undertake . They must pay for
what they purchase and repay debts by the fixed deadline .
Procedures must exist for enforcing this rule . Correcting and
penalizing mechanisms must be available to deal with agents who
fail to honour their commitments, an inevitable consequence of the
uncertain character of the market system . Without the constraint of
rules for payment and sanctions against offenders, the market
system could not work . The `international monetary constraint' is
an extension of the notion to international exchanges where it
supersedes the private constraint without eliminating it. It is now
applied to countries and hence governments . How did it operate
during the golden age phase? In a very straightforward and drastic
way through adjustments in balances of payments . Central banks
had to settle deficits in dollars by drawing from their dollar reserves .
The subsequent dimunition in the reserves restricted internal
macro-economic policy, which led in turn to absorption of the
deficit. Note that the constraint was doubly asymmetric . First, it
acted on the rest of the world and not on the us . Second, while the
constraint was clearly binding on deficit countries, its impact on
surplus countries was less clear-cut, in so far as the latter were able
to neutralize the surplus by sterilizing the increase in their reserves,
in which case their internal macro-economic policy was not
affected . This system (in which, incidentally, central banks played a
major role) had the globally positive result of avoiding a polarization
of surpluses and deficits, i .e . a cumulative process in which both
deficit and surplus countries move deeper and deeper into their
respective situations. This feedback mechanism meant that deficits
were not allowed to grow in importance, except of course in the us .
Thanks to this mechanism, fordism was allowed to develop in the
different countries without the disturbances brought about by
systematic financial tensions .

I turn now to the second condition for the successful

functioning of the international monetary system, namely the
supply of international liquidity . By the end of the 1950s, this
 Capital & Class

62 emerged as an Achilles heel: initially, liquidity supply was tied to

the us official settlements balance but this link was a double
disadvantage . First, it rested on a pyramid of conditions described
by Aglietta as follows :
`Regulation of the basic balance [in the New Left Review
translation : "the underlying base"!] therefore essentially
required that the structural trade surplus should be suf-
ficiently high to allow the return of dollars delivered to
non-residents . This, in turn, depended above all on high
foreign demand for us industrial goods and low penetration
of the American market by the product of foreign industries .
Such a condition could only be temporarily satisfied, for it
presupposed a major differentiation between American and
foreign industries within a process of internationalization
that tended to spread American methods of production and
mass consumption' (Aglietta 1982 : 16) .
Secondly, even when these structural conditions were satisfied, the
system oscillated permanently between dollar-gluts and dollar-
shortages, for discrepancies were likely to arise between us
requirements for national macro-economic regulation and demand
for international liquidity . In other words, the supply of liquidity
was only partially endogenous .
Thus from the start the international post-war order con-
tained seeds of disruption, which then came about through three
transformations . In Aglietta's terms :
`The crucial difference between the early sixties and the
second half of the seventies is to be found elsewhere : in the
dramatic shift of the United States from a basic balance in
surplus with only minor fluctuations to a deficit trend dis-
playing major variations; in the systematic polarization of
large surpluses and deficits, against the balances of the first
half of the sixties which represented only a small proportion
of world trade ; and in the gradual emergence of privately
organized international credit which eludes monetary
regulation by any central bank and essentially operates in
dollars (so that international use of the dollar is disconnected
from the waning preponderance of the us economy) . Thus,
the decisive decline of the cohesive factors provided by us
hegemony may be precisely located in the second half of the
sixties .' (Aglietta 1982 : 12-13)
The two foundations of the earlier order are shaken . On the one
hand, American industrial supremacy is called into question, in
particular because of the exceptional advance ofJapanese industry .
On the other hand, the international monetary system has been
profoundly altered and is much more fragile as a result of a double
 Regulation approach

change : the introduction of flexible exchange rates and the emer- 63

gence of what Aglietta calls the `international debt economy' .
Together they alter the nature of the international monetary
constraint .'
The new feature is the gradual emergence of a privately
organized international credit market, operating mainly but not
exclusively in dollars . It is much less dependent on the us official
settlements balance and is not subject to central regulation . No
monetary sovereignty exists to impose a discipline on this system .
As a result, the role of central banks is short-circuited . Although
they are very active in the new markets, they are de facto operating
as private agents . An important consequence of this new monetary
structure is that it allows a general debt consolidation : debtors are
freed from some of the pressure from creditors . Indebtedness
increases dramatically . This development entails an important
change in the international monetary constraint, which Aglietta
summarizes as follows :
"For countries with convertible currencies, the problem of
financing the balance of payments is passing into a foreign-
exchange problem" (1982 : 24)
The international monetary constraint is weakened . It is not longer
as abrupt as before, but more diffuse and elastic . Deficits no longer
exert a systematic pressure for their own elimination, since they can
be turned into increased indebtedness . Therefore, national macro-
economic policies of deficit countries become more independent of
foreign constraint, but at the cost of a misperception of their own
liquidity position and of a decrease in credit worthiness, Instead of
being financed, the deficit is increased. On the other hand, the
constraint is also less asymmetric - in the sense of the second
asymmetry noted above . Due to the short-circuiting of central
banks, current-payment surpluses can no longer be neutralized,
and they directly affect national macro-economic conditions . The
earlier autonomy of surplus countries is affected . However the
change in constraint concerns only its form . It does not amount to
its suppression . Once exchange rates misalignments become too
important, adjustments must be made and the constraint is re-
imposed . But the positive re-equilibrating result is no longer
reached, and systematic polarizations of large surpluses and
deficits take place instead .
The international monetary system has thus become
extremely fragile . If a generalized international financial crisis has
been avoided, it is only because the international banking com-
munity has been able to exhibit enough self-control, absence of
panic, and flexibility in debt-rescheduling .
 Capital f5 Class

64 5 Conclusion The analysis presented here can be contrasted with two opposed
interpretations of the crisis . The first would see the origin of the
crisis as the result of an `accident', like the oil shock, or of a series of
accidents . The second would see it as an expression of the death-
throes of capitalism . My view lies somewhere in between the two . I
think that the crisis is calling into question a certain historical form
of capitalism but not capitalism itself . At the same time though, it is
also more than a conjunctural accident . What is involved when one
speaks of a way out of the crisis is the establishment of a new regime
of accumulation, replacing intensive accumulation as a given
historical and central institution of capitalism .
The aim of the article was to sustain this thesis . It has
focused on the introduction of new concepts and assumptions
while neglecting several important aspects : national specificities
have not been taken into account and only a general and therefore
somewhat standardized model has been developed . No empirical
verification has been attempted . The article has focussed on the
origins of the crisis without dealing with what Margirier has called
the `crisis as a self-contained unit' (1983) . Its different con-
junctural phases and rhythms and the successes and failures of
public policies have therefore been left unexamined . 10 Finally the
article has neither entered into such crucial and controversial
questions as the prospects for a possible way out of the structural
crisis nor has it considered the analysis advanced . Hopefully these
questions will be dealt with in subsequent research ."

Acknowledgement
This article is based on a communication presented at a colloquium
on the economic crisis, held at the University of Amsterdam in May
1983 . I thank R . Deschamps and Ph . De Vile for their comments
on an earlier draft.
The article has been translated by the author with invaluable
help from Judith Eversley
Notes 1. The term `regulation' is rather unfortunate as it could be applied to
almost every economic theory . According to Boyer, it can be defined as `the
way in which a system as a whole functions, the conjunction of economic
mechanisms associated with a given set of social relationships, of in-
stitutional forms of structures' (1979b : 100) .
2. A third possible sub-category is left out, namely the breakdown
crisis of capitalism . The distinction between the two types of macro-crises
can, of course, be made using different terms . For example, Mazier calls
structural crises `mutation crises' and cyclical crises `regulation crises'
(1982 : 41) . Boyer speaks of `major crises' as opposed to `minor crises'
(1979a).
3. Aglietta's analysis of the Great Depression may be found in the
following passages (1979 : 85-87, 95, 99, 356-365).
4. While a cyclical crisis does not always reflect a structural crisis, the
latter always expresses itself through the former .
 Regulation approach

5. This temporal sub-division is approximate, first because different 65

countries evolved at different rates, and second because the origins of the
crisis were not a single-shock event but a gradual process .
6. The following analysis is based on Aglietta (1979 : 370 seq .) .
7. This section draws heavily on Aglietta (1982) . A more descriptive
account is to be found in CEPII (1983) . See also Mistral (1982) .
8. My comments will be limited to the first two points : the us postion
and the international monetary system . For more details on the European
configuration the reader is sent back to Aglietta (1982 : 16-19, 27-30) .
9. The notion of `international debt economy', like that of'inter-
national monetary constraint' is an extension of an analysis first framed
within the context of a closed market system. The `debt economy' desig-
nates a market system in which all money is credit money, be it a public or a
private monetary creation (Aglietta and Orlean 1982, ch . 2 ; De Vroey
1984) .
10 . These lacunae can be partially filled by consulting Aglietta (1979),
Boyer and Mistral (1983), CEPn (1983), Margirier (1983) .
11 . Some elements of the answers can be found in Aglietta and Oudiz
(1983), Aglietta and Brender (1984), Boyer and Mistral (1983, ch.7)
Lipietz (1984) .

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 Capital & Class

66 DE VROEY Michel (1984), The Double Dimension of Inflation: Price

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