The Future of Capitalism: What comes next?
1-2-2011With the current crisis in Europe, and with the defection of Famous People such as Jeffrey Sachs, perhaps the next event on the horizon will be speculation in the mainstream press on a post-neoliberal capitalism, a capitalist system which remains as it is now but has in some important way rejected the Washington Consensus. Here I’d like to suggest that there will be problems with that vision, as well, and that a full-scale collapse of the capitalist system is the most likely possibility.
OK: to clear the air about my thinking on these matters:
1) I am not advocating “socialism” in the form of the Soviet Union. I have purposely left as an open question the matter of what will come after capitalism.
2) Nor do I think of “capitalism” as some eternal system enshrined in “human nature.” Property, money, and trade are cultural manifestations developed in a small portion of the 200,000 long years in which human beings (of the genetically orthodox variety) have been on this planet. Their coming-together under the name “capitalism” is thus a cultural confluence, not an automatic result of “human nature.”
3) “Capitalism,” here, refers to an entire system dominated by businesses which seek to accumulate capital, by realizing the value of the surpluses created by wage labor. The businesses of the Roman Empire weren’t “capitalist” in the same sense as capitalist businesses are capitalist today, because the surplus tended to be “burned off” rather than being reinvested.
I feel obliged to reiterate these points because so many newbies confront me with them.
At any rate global capitalist system is a manifestation of a developing world-system that came about with Europe’s attempt to conquer the world, e.g. the European settlement of the Americas and Australia, England’s conquest of India, the humiliation of China, the partitioning of Africa, and so on.
Along with the “conquest” aspect of the developing world system post-1492, there has also been a developing technological complex, and a developing capitalist system. The developing capitalist system can be said to have several stages, as Kees van der Pijl points out in Transnational Classes and International Relations:
1. agricultural capitalism, in which the initial stamp of the commodity form was imposed upon the world, while the world economy became profoundly rooted in agricultural commodities trade. I suppose the quintessential version of this was infrastructure of the antebellum South, largely erected to export cotton, among other plantation economies centered on tea, sugar, coffee, and so on.
2. industrial capitalism, in which large populations of former peasants were obliged to work long hours at subsistence wages in factory conditions. This is of course the form of capitalism which attracted the literary critiques of Marx, Engels, Dickens, Zola. This is also the first form of capitalism which intensively used fossil fuels, specifically coal.
3. consumer capitalism, in which government re-invents itself as a guarantor of capitalist business through the “economic stimulus” promoted by John Maynard Keynes and his disciples. The period of fascination with this phase was without doubt the 1950s and 1960s, its objects of fascination including chemicals (“better living through chemistry”), automobiles, airplanes, electronics, and so on.
4. neoliberalism, in which a global economic overhaul begun in the 1970s accompanied a set of last-ditch attempts to commodify the world for profit. So we had the financialization of the profits system along with a revolution in communications technology (the Internet) and the expansion of industries such as biotechnology through technologies such as genetic engineering, and the exploitation of nanotechnologies made possible through innovations in quantum physics.
Now, the question at hand for today’s thinkers is one of whether we need to oppose just neoliberalism, the current predatory manifestation of capitalism, or is it necessary to oppose the capitalist system as a whole. Well, neoliberalism was inaugurated as an elite-generated “passive revolution” through the embrace of a global economy based on dollar hegemony (and through the global spread of neoliberal economic ideology). Capitalism in this form is parasitic — the demand for profits at the top is so high that it represents an ever-increasing drag on the system as a whole.
Could capitalism just continue “by other means”? Well, first you’d have to persuade the profitmongers which currently rule the world that they should drop their resistance to a proposed “post-neoliberal” capitalist system in which they would have to accept smaller profits, because the profits they’re making now are far ahead of the actual growth rate of the global economy, which has been slowing down from decade to decade since the mid-1970s.
Second, you’d have to restructure the system so that it can still be based on capital accumulation while avoiding a reckoning what James O’Connor called “the second contradiction of capitalism.” O’Connor’s idea is that capitalism tends to mess up the environment to an extent to which the accumulated environmental damage becomes a drag on the profit rate itself. This logic, in my humble opinion, also extends to resource production. We can see with various resources (most clearly metals) a trend in resource production — as supplies are exhausted, production processes require so much more energy to extract so much less in the way of good, solid resource. There is also the example of peak oil — what happens, though, is that as the supply of high quality oil “peaks” from oil field to oil field, there is a tendency for the oil “producers” to produce fossil fuels of lower quality, thus tar sands. Similarly, we can expect more pollution from the burning of lower-quality coal reserves in the future, as higher-quality coal reserves are burned to exhaustion presently.
In short, I think that even if you could design a post-neoliberal system which was capitalist, it wouldn’t last for very long, because the new system would run up against a new set of problems of its own making. Remember how, during the “poison bloom” of the economy around 2006 or 2007, the price of gasoline went up to around $4.50/gallon? I can imagine a future spurt of economic growth (in some post-neoliberal capitalist system) pushing up gasoline demand, and thus prices, even further.
Of course, the end of the capitalist system is not going to bring about some sort of new system all by itself. Barring any new development, we can expect capitalism to undergo a number of ever-increasing convulsions, followed by catastrophe and collapse. But this is where we enter history — for it is up to us, and not merely our fearless leaders in the political class, to create the new, post-capitalist future.
Please check this video out:
Great find Mike, and some very sensible questions, in fact, the very questions that should be raised given what we can observe today.
By way of answering the question posed, first we have to consider that there has been a loss in the continuum of discovery regarding classical economics and capitalism, or more specifically, the capitalist mode of production.
Adam Smith’s “The Wealth of Nations” (circa 1776) was both a critique of mercantilism and a call to embrace free markets with the promise of equal opportunity for all, in a utopian classless system that was governed by free market forces, essentially unseating landed nobility and its lock on wealth distribution.
This was followed by Ricardo’s “Principles of Political Economy and Taxation” (circa 1817) wherein the concept of (free trade) comparative advantage was introduced, and the groundwork was laid for the basis of classic liberalism and the associated economic policies. This gained great traction, especially in the fledgling US, and was deeply integrated with American policy and politics laying the groundwork for globalization as a means of market expansion to feed the soon to be ravenous hunger of the American Capitalist Experiment.
But something happened.
Marx wrote “Capital” (circa 1867) in a series of three volumes (a fourth published under different title) not necessarily as a political treatise, but as a specific critique of Adam Smith’s “Wealth of Nations”. In it, he set out to consider the claims of Smith not in the context of free markets so vibrantly championed by the liberalist sensibilities of the times, but in the context of the means of production for which goods are brought to the free market, realizing that the means of production was far more significant than the means of trade.
In structuring his critique, he approached Smith’s thesis using the idealized and pure conceptual framework exactly as Smith himself described in “Wealth of Nations” ignoring any diluting effects of interventionalist policies or cheating on the part of participating capitalists, wanting to give full opportunity for Smiths’ concept to demonstrate under perfect conditions, what would be the best outcome that could be hoped for.
The conclusions were devastating.
Unequivocally, he showed over the 1200+ pages of Volume 1, that capitalism had severe and irreconcilable defects that would not only prohibit Adam Smith from ever achieving his utopian vision, but on the contrary, the best one could hope for was massive wealth redistribution with the beneficiaries no longer the landed nobility of feudal and mercantilist times, but the now newly formed bourgeoisie (capitalist) class. According to Marx (in a hotly contested conclusion) the much more likely outcome was a violent revolution by the proletariat (working class).
This had the effect of a nuclear bomb being dropped on the political and economic community, especially in America at the time, who had “gone all in” on liberalist policies and classical economic theory. An uproar was launched, largely challenging elements of Marx’s “Labor Theory of Value” as incomplete, inconsistent, and incorrect (parts of it likely were), and the associated mandate for capitalism to descend into a socialist state due to declining profit margins and worker revolt. The main complaint was the “mandate” part, this was published in advance of the industrial revolution and although “Capital” is quite specific on the use of machines and machine automation and the pass through considerations to the “socially necessary labor value” there were some weaknesses in the way he presented this work, and Marx’s detractors (and there were many) seized on these weaknesses and sought to discredit the entire work- a massive miscalculation.
In reality, these discrepancies affected maybe 10% of his work, and to my knowledge, no one has ever completed a competing fully integrated Labor Theory of Value that contradicts Marx’s conclusions, nor has his thorough rebuttal of Smiths’ “Wealth of Nations” ever been substantially challenged.
Moving on through the continuum to 20th century economics, Keynes was deeply influenced by Marx’s work, and sought to build on his conclusions and to attempt to design economic policies to anticipate and attenuate the inevitability of the disasters that Marx predicted. Keynes soon had his chance to prove the worth of his mettle, as the Great Depression hit and Keynes had opportunity to deploy Keynesian principles to try and address the crisis, which had only partial success, and this success brought with it its own foibles of imperfection which we struggle with today.
Enter other economists, Schumpeter, and of course the modern day free market soothsayer, Milton Freidman, who apparently never read Marx, or if he did, did not agree with him, who set out to blame the (once again) failing economic policies of the day on government intervention, sought (and succeeded) to establish free market economies in foreign countries where he and the so called “Chicago School” of free market evangelists could have a clean slate and using military force, overthrow non compliant governments such as Chile, and force into being an unfettered free market system with capitalism as a backdrop. These efforts also failed as Marx predicted, with much bloodshed, as the causation was never government influence but was always intrinsic contradictions within the capitalist mode of production.
Ironically, what had been the butt of jokes during the late 19 century at the dinner table of the landed nobility, chuckling as the foolish capitalists blamed their woes on external forces such as government intervention, recalcitrant workers, and excessive regulation, the better educated (they had read Marx) nobility knew the intrinsic reasons and laughed at the ignorant bourgeoisie. Fittingly, fast forward a couple of hundred years, and these “jokes” are now being considered as not only proper reasoning but actionable political redress, to explain what we can observe by looking out the window.
So I don’t know what the next steps are, but I’m pretty sure none of them are worth the powder to blow them up if a full accounting of Marx’s principles is not revisited “tout de suite”, and the precautions and axiomatic conclusions fully integrated into whatever the go forward plan is. I guess I’m of the opinion that just combating neo-liberalism is too little too late, we are in nth stage collapse as predicted, and rather precisely, in “Capital”.
I don’t think I’ve told you what a pleasure reading you can be for a little while now …
Here are the books in question: –
Adam Smith ~ Wealth of Nations
An Inquiry into the Nature and Causes of the Wealth of Nations (generally referred to by the short title The Wealth of Nations) is the masterpiece of the Scottish economist and moral philosopher Adam Smith. First published in 1776, it is a reflection on economics at the beginning of the Industrial Revolution and argues that free market economies are more productive and beneficial to their societies. The book, written for the educated, is considered to be the foundation of modern economic theory.
Karl Marx ~ Das Kapital ~ Volume One
Capital, Volume I, published on September 14, 1867, is the first of three volumes in Karl Marx’s monumental work, Das Kapital, and the only volume to be published during his lifetime. Marx’s aim in Capital, Volume I is to uncover and explain the laws specific to the capitalist mode of production and of the class struggles rooted in these capitalist social relations of production.
Karl Marx ~ Das Kapital ~ Volume Two
Capital, Volume 2, subtitled The Process of Circulation of Capital was prepared by Friedrich Engels from notes left by Karl Marx and published in 1885. It is divided into three parts :
1. The Metamorphoses of Capital and Their Circuits
2. The Turnover of Capital 3. The Reproduction and Circulation of the Aggregate Social Capital Part
3. Is the point of departure for a topic given its Marxist treatment later in detail by, among others, Rosa Luxembourg.
Karl Marx ~ Das Kapital ~ Volume Three
Capital, Volume 3, subtitled The Process of Capitalist Production as a Whole was prepared by Friedrich Engels from notes left by Karl Marx and published in 1894. It is in seven parts :
1. The conversion of Surplus Value into Profit and the rate of Surplus Value into the rate of Profit
2. Conversion of Profit into Average Profit
3. The Law of the Tendency of the Rate of Profit to Fall
4. Conversion of Commodity Capital and Money Capital into Commercial Capital and Money-Dealing Capital (Merchant’s Capital)
5. Division of Profit Into Interest and Profit of Enterprise, Interest Bearing Capital.
6. Transformation of Surplus-Profit into Ground Rent.
7. Revenues and Their Sources.
The work is best known today for part 3 which in summary says that as the organic fixed capital requirements of production rise as a result of advancements in production generally, the rate of profit tends to fall. This result, which orthodox Marxists believe is a principal contradictory characteristic leading to an inevitable collapse of the capitalist order, was held by Marx/Engels to, as a result of various contradictions in the capitalist mode of production, result in crises whose resolution necessitates the emergence of an entirely new mode of production as the culmination of the same historical dialectic that lead to the emergence of capitalism from prior forms.
~ VF ~
Thanks for the scholarly responses DK and VF.
I had to laugh at this line from a recent MSM news article:
“…if U.S. businesses keep prospering while Americans are struggling, business leaders will lose legitimacy in society…”
The Neolibs are taking their show on the road in search of new hosts.
The deveopling middle class societies in these emerging market countries are being encouraged to fill their wallets with credit cards.
Maybe you know about this one already, maybe not…: http://www.amazon.com/After-Capitalism-New-Critical-Theory/dp/0742513009
Who knows what the uncertain future will bring. Put you egalitarian theory to action and trade citizenship with a Cuban.
The theory that can absorb the greatest number of facts, and persist in doing so, generation after generation, through all changes of opinion and detail, is the one that must rule all observation.
Adam Smith, 1776
Put you egalitarian theory to action and trade citizenship with a Cuban.
Just a wild guess on my part: I’ll bet you never read any of the material referenced above. If you did so, do you have any specific critical thoughts? Indoctrination — of any stripe — is the unwillingness to consider new ideas.
If you won’t trade citizenship with a Cuban, your own answer is my critique. I don’t have a scholarly piece to share but we can both make an observation to see how many people prefer to live in the capitalistic West by foreign immigrants trying to enter as opposed to the other way around.
Wether they are making a mistake is open to debate but they all disagree with the system they’re trying to leave behind, whatever they’re called.