However, governments had certainly not completely given up intervening to limit the impact of crises on large capitals, nor had the most important capitalist sectors stopped demanding such intervention. This was shown by the way the US Federal Reserves stepped in to save the Long Term Capital Management hedge fund in 1998. A worldwide sample of "40 banking crisis episodes" in 2003 found that governments had spent "on average 13 percent of national GDP to clean up the financial system."15 Governments as varied as those of Scandinavia and Japan had rushed to prop up banks whose collapse might damage the rest of the national financial system-even if this involved nationalisation as a last resort.16 Governments took the costs of writing of losses away from particular individual capitals. But those costs had then to be covered from elsewhere in the system-either by taxation, hitting the real wages of workers or the profits of capital, or by borrowing which eventually had to be repaid somehow from the same sources. The benefits for those capitals which survived the crisis were limited as a result. The rising rate of bankruptcies only partially relieved the pressure on their profit rates.
Further relief came from a slower rise in investment compared to productive labour power (Marx's organic composition of capital). The slowdown in accumulation due to lower profitability played a role in this. So did continued waste expenditure, particularly military expenditure. This absorbed a considerably lower level of world output than in the 1950s and 1960s, let alone than during the Second World War. But it still absorbed a much higher amount than in the pre-1939 world. And there had been an increase in US military expenditure during the "Second Cold War" of the 1980s under Ronald Reagan, and again with the "war on terror" under Bush in the early and mid-2000s-and since US military expenditure was half the global total, this meant an overall increase across the system. One estimate is that by 2005 US military spending had risen to a figure equal to about 42 percent of gross non-residential private investment17-a big drain on resources that could otherwise have gone into accumulation. At the same time, unproductive expenditures in the financial sector soared, as we shall see later.
The effect of all of these forms of "waste" was much less beneficial to the system as a whole than half a century earlier. They could still reduce the downward pressures on the rate of profit from a rising organic composition of capital-it certainly does not rise as rapidly as it would have done if all surplus value had gone into accumulation: "The rate of growth of the capital/labour ratio fell in most countries" in the 1 990s.18 But the old industrial capitalist countries paid the price for a continued slowdown in productive accumulation and long-term growth rates.
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The New Age of Global Instability