The Rise of Third Wave Capitalism

The relationship between government and business became ever more intimate, and, correspondingly, the protections that the federal, state, and local governments offered the poor and the middle class began to fray.


| October 2016



third wave economy

The very vagueness of “Third Wave” turns out to be descriptive.

Photo by Fotolia/bCracker

In Third Wave Capitalism (Cornell University Press, 2016), John Ehrenreich documents the emergence of a new stage in the history of American capitalism. Just as the industrial capitalism of the nineteenth century gave way to corporate capitalism in the twentieth, recent decades have witnessed corporate capitalism evolving into a new phase, which Ehrenreich calls "Third Wave Capitalism."

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The Rise of Third Wave Capitalism

Since the 1970s, American capitalism has evolved into a distinctive third phase, Third Wave Capitalism. This third phase of American capitalism is marked off from the preceding Corporate Capitalist period by the dramatic growth of globalization. Capital markets were internationalized. Foreign trade and investment grew dramatically, and the new multinational corporations created globally integrated supply chains, uniting under the control of a single enterprise the extraction of raw materials, production of parts, assembly of final products, and sales, with each process occurring in a different geographic location. At home, U.S. manufacturing declined, its once proud place in the national economy taken over by service industries and the financial sector. Meanwhile giant nonprofit enterprises arose, coming to account for more than 10 percent of U.S. employment by the end of the twentieth century. Another wave of technological innovation, this time in electronics and materials, fueled another historic shift in production, communications, and transportation. Free market, highly individualistic ideologies flourished, promoted by a well-financed and self-conscious propaganda barrage from conservative business leaders and media. The relationship between government and business became ever more intimate, and, correspondingly, the protections that the federal, state, and local governments offered the poor and the middle class began to fray.

A word about my use of the term “Third Wave Capitalism” to describe this phase in American history. Many others have explored changes in the United States over recent decades (though not always focusing on the same changes or on precisely the same time frame) and have sought a way to name them. Each of the other leading candidates is deeply problematic, however. “Global capitalism” implies that the economic world is far more integrated than the real world actually is and falsely suggests that developments in the United States are closely mirrored in other capitalist countries, including not only the countries of Western Europe but countries such as China, Russia, and Brazil.“Finance capitalism” focuses on a very important shift in our economy, but financialization alone has little power to explain the many changes in U.S. politics, economics, and culture. “Late capitalism,” espoused by many in the humanities, is vague and leaves us with the problem of what we will call the inevitable next phase of capitalism (“later capitalism”?). “Neoliberal capitalism,” a favorite among many Left scholars to refer to the renewed popularity of laissez faire economic ideas, uses the word “liberal” in a sense completely opposite to historic American usage. In Europe, “liberalism” implies small government and laissez faire economics, but in the United States the word is virtually synonymous with strong government and support for the welfare state. None of these terms will do. “Third Wave Capitalism” simply sets off the current phase of American capitalism from the two earlier phases, with no obvious downside.

In a deeper sense, the difficulty in coming up with a more precisely descriptive label is itself telling. The Industrial Revolution was the overwhelmingly dominant force in shaping the era of Industrial Capitalism, and the rise of the giant corporation was equally central to the era of Corporate Capitalism. But no one institution or process dominates the changes in of recent decades. If anything, in Third Wave Capitalism the boundaries between institutions and between processes — between business and government, money and politics, profit and nonprofit, race and class, war and peace, police and military, private and public, cultural practice and commodification, male and female — are increasingly blurry. The very vagueness of “Third Wave” turns out to be descriptive.


Reprinted with permission from Third Wave Capitalism by John Ehrenreich and published by Cornell University Press, 2016.