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Is capitalism stuffed, or is it just me?

December 2, 2010

Because I get a little steamed up now and then, I do try to check my hyperbole meter from time to time. In my last post, I claimed that capitalism was experiencing ‘some kind of catharsis’. This is, in fact, the optimistic version. I don’t need much more hyperbole to suggest that capitalism is murdering its own children, driven insane by short-term greed.

But hold on a minute. In the privacy of my own head I ask myself, how true is this? I have to remember always that I like to entertain – too many of my missives have a rather doomy aspect to them – so the least I can do is try to raise a faint hyperbolic smile here and there between the anger and the irony. It is, however, a dangerous path to tread frequently, because it’s easy to end up all froth and no coffee.

I have a series of tests against which my more drastic remarks must stand (somewhat irregularly, I admit). The first is this: do I sound like my dad?

Bugger. Off to a bad start then. Let’s forget that one and move on:  Am I implying that capitalism was in better shape back in some previous, nostalgic past?

Crap. Who wrote these stupid tests? What’s the next one?: Am I moaning about something that, in fact, hasn’t changed since the bloody Romans went home?

Phew. I’m saved. You see, it’s not just another ‘end of the world’ bitchfest from a grumpy old man. There really is something different going on right now, something that capitalism has never experienced before. It has made it vulnerable in a way I don’t think anyone saw coming, and it’s why I think it may well fail, pretty much entirely, as an economic system. Either that, or a truly unspeakable alternative…

* * * * *

The nation-state is a mandatory component of democracy. Putting it baldly, it is the nation that grants us rights because the nation-state is the source of all legislation – bar the thorny development of legal instruments with wider scope. While governments can control fiscal policy and set tax rates, perhaps that gives some impression of national destiny, but history seems to suggest nations have always been susceptible to the fortunes of their neighbours. Borders define conflict, sometimes limit it, but often measure it against incursion or deprivation – think North and South Korea. But what happens when the borders melt?

The implication of the nation-state is that each is like a car, with its own driver. What happens the nations coalesce, like we’re all in one big car, nobody can agree who should be driving, but we are already moving at considerable speed?  This is what has happened to our economies, and it is a result of the desire to globalise trade.

Computers have made possible a convergence of interests and mechanisms that now operate at extraordinary speeds. The homogenisation of fiscal mechanisms, stock exchange and currency transactions, trade and capitalisation, banking and finance, all increase the inter-dependency even as these efficiencies yield greater profits and opportunities.

I can’t help but see this as a monumental machine built on very shaky foundations. Returning to my metaphor, the global economy used to stand on many pillars, each a nation with its modest independence. Now the entire world’s prosperity rests on the shoulders of a tired hero whose time has come, and an energetic giant whose domestic ambitions are as clear and precise as its newfound responsibility towards everyone else is confused and faltering. All the rest of us are subscribers to one or other of the economic and developmental paradigms the US and China represent.

Who is driving? Nobody really. The markets move independent of the world around them, inflating and speculating, depreciating and selling short. Governments watch, more or less helpless because the money reacts badly to interventionist policies; consequently, you don’t see too much of that going on except when bail-outs are required. Governments play with their armies because that’s one thing they can command  – sort of.

What they can’t control is money, and the employment it moves around the globe at a whim, ever in search of cheaper labour. Employment markets are destabilised. National economic fortunes become so volatile entire countries are written off as bad risk.

Ripples in a pond. Never before has a trader in Hong Kong been able at a push of a button to put an engineering firm in Bolton out of business. It is the butterfly effect, the small input of fractal mathematics whose eventual influence and the extent of it may be impossible to determine. Capitalism wished for this with all its heart – the unconstrained opportunities of global trade. They have joined up all the countries in the world, made every nation another regional sales opportunity, and every capital is just another branch office of Earth plc, all networked together so tightly there isn’t any real boundary at all, no nationality: since when did money speak any language except its own?

Who is running this giant corporation? Nobody. Look at our leaders squabbling among themselves. Is this the best we can expect of our leaders – a profound failure to actually do any leading? When I say capitalism is heading for a monumental train crash, perhaps you can see what leads me to this conclusion. Chuck in climate change, peak oil and exponential population growth, and it’s time to…Christ! Time to what? Leave the planet?

OK, at least now we know what the question is.

(…and that unspeakable alternative? Well, thinking about Murdoch and Koch and BP and Mittal and Gates and big pharma and Wal-Mart…and you know how climate change deniers go on about unelected world governments…)

13 Comments leave one →
  1. December 2, 2010 11:18 pm

    The missing piece in the jigsaw of capitalist economics IMHO is that the market doesn’t take account of tomorrow, thats left up to speculators. In other words, whilst markets are excellent at ‘finding a price’ they will only find a price for the buyers and sellers of today. Future generations have no buying power in the capitalist economic model. Or am I missing something?

  2. December 3, 2010 12:56 am

    Mike, for Watching the Deniers, put me onto Gleesons, “Lifeboat cities” and coupled with a few others, has got me thinking about this problem.
    Firstly, I don’t think western societies are, at the core, fundamentally democratic (at least not any more). If you look at eco-footprinting, it quickly becomes clear that it’s very difficult to consume less. There simply is not the choice. As so much wealth cycles through the market, rather than the public sector, it emphasises inequality. It’s not for the people, but for the shares. It’s no longer by the people, but by the market.
    You’re right about chasing cheap labour. Sending most of your industry offshore produces a deficit, with money trickling outward – look at the debt of the US, the wealth of China and a world “made in China”.
    Rifkin has a great presentation on youtube, where he argues that capitalism has effectively hit the ceiling:
    Smil also has a great presentation on youtube looking into much of these problems, overproduction and the multiple issues facing the coming decades:
    I tend to agree with Rifkin and Gleeson – to weather the inevitable storm we must localise again and foster a new, moderate system (ie. deconstruct neolibertarianism). Many have been saying it for decades, if not longer, that you just cannot have a system which demands acceleration / growth were there is an upper limit to renewable resource output (and through landscape use changes, we’ve also reduced the capacity to regenerate further) and so many fundamental resources (ie. fossil fuels and plastics) are finite.

  3. December 3, 2010 11:20 am

    I have to agree with Hengist.
    An important point to make is that capitalism, whether modern or Roman, is based on an ever expanding market, something that is going to have to eventually come to an abrupt stop on a planet with finite resources.

  4. Birgit Kvarnstrom permalink
    December 3, 2010 11:43 am

    This is a good piece Graham. For me it is not so much the driver that is not decided but the direction.

  5. adelady permalink
    December 3, 2010 2:49 pm

    Oh I think it’s definitely the driver – and that driver ain’t governments.

    Anyone who’s seriously into these ideas should take some time offline and read a couple of John Ralston Saul’s books.

    In particular, The Unconscious Civilisation – my own view is that he over-idealises democratic processes but it’s absolutely terrific for making you refocus your thinking about economic activity – entrepreneurship in particular. And my personal favourite, a muuuch bigger read, is Voltaire’s Bastards. A brilliant, marvelous romp through history showing where our prevailing notions about reason, logic, organisation, and efficiency especially, really came from and how they’ve been misapplied.

    If your main interest is confined to recent events, try The Collapse of Globalism.

  6. December 3, 2010 4:19 pm

    Call me naive but i only recently found out that most so called free-market is well subsidised by governments. Most of time i am very busy fighting to live a simple life like mothincarnate says is very hard. We in the west can live our very luxury life only because millions around the globe do not.

    To stay with your example of the bus/car i see there is a driver but the driver does not steer that is done by many who stand around the driver pulling the chauffeurs arms and sleeves. While many of the bus passengers are screaming where to go but lacking directions.
    The bus has come on a round-about turning circles to confused to take a turn as to many conflicting interest are pulling the sleeves of the driver. The bus is one moment on the right of the round-about the next moment on the left of the round-about, but still turning circles.
    Some of us have climbed out of the windows on top of the bus and are ready to jump and walk, but the bus is going to fast.

    call me a dreamer but i am on top of the bus ready to jump my things are out there already and i know the bus is running out of fuel.

  7. Graham Wayne permalink*
    December 3, 2010 6:02 pm

    Nice comments folks…and thanks.

  8. December 4, 2010 3:27 am

    Contemporary capitalism is stuffed. No questions there. One question I’m still wrestling with is whether contemporary capitalism (called by some “hyper-capitalism”) is the only or the inevitable end result of capitalism. Are there paths we could have taken that would have been very different or are those different paths all outside capitalism? Of that I’m not sure. I have a friend working here in Edinburgh who is doing historical work in 18th Scottish economic theory who argues that capitalism could have been very different.

  9. adelady permalink
    December 4, 2010 2:36 pm

    If he’s working on Adam Smith and the like, he’s on the right track. You’ll find a lot of so-called conservative economists willing to quote _some_ of his pithier sayings, but not the ones putting obligations on society at large for the poor and disadvantaged.

    No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. ……… or ……….
    To feel much for others and little for ourselves; to restrain our selfishness and exercise our benevolent affections, constitute the perfection of human nature.

    Read more:

    Not heard many economists talk about the virtue of “restraining our selfishness”, perhaps I missed that.

  10. Greg H permalink
    December 4, 2010 8:23 pm

    Another thought-provoking post! I highly recommend this 2004 Canadian documentary called The Corporation.

    I found it very educational because it speaks to the relationship between Capitalism as a political philosophy and the corporation as an economic entity. Just off the top of my head, it seems very likely that either of them could have produced a different result if wealthy political interests in the US during the first half of the 20th Century hadn’t stripped the US of the legal and constitutional protections that kept corporations under control. An early instance of deregulation, perhaps.

    Given that Capitalist propaganda (nowadays we call it a “lifestyle”) is one of the main exports of the US, it’s no wonder that everyone else in the world MUST create huge corporate entities in their own defense. And every nation hosts a constituency for whom free market capitalism is the obvious arena for realizing their personal ambitions. In this milieu, most of the non-corporate enterprises not protected by regulation will be displaced by private entities who demand a share of common resources.

    What’s particularly disheartening (at least here in Canada) is the constant ranting from various quarters that laissez-faire Capitalism and the sacred primacy of the individual is not only the natural state of Man, but that the last 500 or so years of progress and democracy is somehow an aberration caused by whatever societal forces they consider to be “Socialism” (I don’t know what they mean when they hurl this epithet, but it is plainly Evil).

    Thanks for the Adam Smith quotes! I’ll see your Adam Smith and raise you one Ambrose Bierce:

    “Liberty: One of Imagination’s most precious possessions.”

  11. Greg H permalink
    December 4, 2010 8:25 pm

    (I should add that I take the Bierce quote to be sarcasm.)

  12. Graham Wayne permalink*
    December 4, 2010 10:04 pm

    I’d say the Bierce quote was more cynicism myself, in the style of GBS perhaps?

    Your ‘early instance of deregulation’ was, in part, a product of the depression. Vested interests are always quick to leverage such events, and promises of political support in exchange for the artificial stimulus of deregulation may have carried much weight.

    I’m speculating here, but I also suspect the MIC post WW2 had a profound influence on trade relations during the second half of the century – it was the driver for so much post war recovery, fed innovation into the private sector and provided huge employment demands that still play a major part in western economies. I don’t know enough about this aspect of economic history to put the arms trade in context, but the amount of taxpayer’s money that has gone into the cold war, into Vietnam and Cambodia, into the African cold-war proxies, into Nato and the Soviet military postures – these sums are so vast they don’t really bear thinking about. We often hear remarks about subsidies, but it seems to me that capitalism doesn’t really work very well when we have tax rates set to garner enough money to subsidise fossil fuels ($500 billion a year), several trillion a year in armed forces and their equipment – and once every few years the entire thing falls over and everyone loses their shirts.

    What the hell kind of system is this, anyway?

  13. December 5, 2010 6:19 pm

    What the hell kind of system is this, anyway?
    You missed a bit.

    once every few years the entire thing falls over and everyone loses their shirts
    Not everyone. Everyone except for the über-rich, who generally become even more rich.

    @Adelady: Yes Smith, but especially on one of Smith’s contemporaries called Adam Ferguson.

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