Capitalism Is Broken — Just Look At The Great Recession. But Can Anybody Fix It?

Child Labor: Breaker Boys, Pittston, PA, USA, 1911.

Economic cycles do this thing in a capitalist society. They … ummm, cycle.

The question is, why? Is it just something that we have to accept is a part of the economic system that we live in, or is there a better way? (And yes, I’m aware that we don’t live in straight capitalism. More on that in a bit).

The Great Recession beginning in 2007 was one of those cycles. And it won’t be the last.

Hell, just look at what’s happening in China’s stock markets, as they teeter on the edge of tanking like they did less than a decade ago.

Sao Paulo Stock Exchange

Unbridled capitalism kills. No, I’m not being dramatic.

Think of some of atrocities that have happened under our capitalist system. Child labor. Children dying in coal mines. Factory workers locked inside their workplace and killed by a fire. We might still be worrying about things like this if not for workers exerting their power in the workplace beginning in the 1920s and 1930s, and exerting power as well in society, in the halls of Congress, and in communities nationwide to change things for the better. It actually produced one of the most prosperous times for the American middle class throughout the 1950s and into the 1960s.

GIF from Crises of Capitalism, by The RSA.

But then, as the pendulum swung back in the 1980s and 1990s, the political powers that be trampled on the rights of labor unions here, and corporations began moving jobs to other countries such as India and China. With those job, the very same exploitative conditions that unions in the United States helped eradicate decades ago came right back again in those far-flung parts of the world.

There are other, less obvious deaths that capitalism causes, too.

People working themselves to a frazzle just to keep afloat and dying early because of it. People literally starving to death in one of the wealthiest countries in the world. People even killing themselves because they can’t financially take care of their families, or because they lost their house, or racked up massive debt from having an unfortunate illnesse that just wipes out their bank account.

But it also kills dreams, and creativity, and joy.

There are alternatives to capitalism, and it’s time to look more closely at them.

Democratic socialism is one that has received more attention as of late, with Sen. Bernie Sanders (I-Vermont) vying for the Democratic nomination for president, and stating for the record that he is a democratic socialist.

The idea isn’t so radical. We’ve already got some of those things in place with Medicare, Medicaid, Social Security, unemployment insurance, and minimum wage. They didn’t exist during the heyday of capitalism in the United States, when the robber barons owned everything from the factories to the towns to the houses where workers lived to the shops they bought food in.

A new economic system such as democratic socialism could be an answer, since the goal of that would be to create an economy that isn’t skewed to make the wealthy wealthier but, instead, spread that wealth around to everyone.

Sanders explained his ideology in a November 2015 speech:

“My view of democratic socialism builds on the success of many other countries around the world that have done a far better job than we have in protecting the needs of their working families, their elderly citizens, the children, the sick and the poor. Democratic socialism means that we must reform a political system that is corrupt, that we must create an economy that works for all, not just the very wealthy.”

Democratic socialism presents an interesting alternative to our present course, with the 1% gaining more every year and the last remnants of the middle class disappearing in front of our eyes.

If you’d like to dig in a bit more, this excellent animated RSA production from 2010 — just after the Great Recession — talks more about what happened to capitalism, some possible “Why?” scenarios, and what can be done about it to maybe, possibly, please please please save us from another one like it again in our future.

But, as the final minute of the video below talks about, just electing a candidate who claims they can fix it all is “crap.” It will take a lot more folks understanding that it’s broken and starting conversations to get more people talking about it, and it will take some hammering out of new ideas to fix it.

If nothing else, watching the concepts that the narrator digs into get illustrated with a sharpie is pretty fascinating:



Is it time to look beyond capitalism towards a new social order that would allow us to live within a system that could be responsible, just & humane?

Dave Harvey: Okay so we’ve been through this crisis and there are all sorts of explanatory formats out there and it’s interesting to look at the genres.

One genre is that it’s all about human frailty. I mean, Alan Greenspan took refuge in the fact, “It’s human nature,” he said, “you can’t do anything about that.” But there’s a whole world of explanations that kind of say, it’s the predatory instincts. It’s the instincts for mastery. It’s the delusions of investors, and the greed and all the rest of it. There’s a whole range of discussion of that. Of course, the more we learn about the daily practices on Wall Street, we kind of figure there’s a great deal of truth in all of that.

The second genre is that there’s institutional failures. Regulators who are asleep at the switch, the shadow banking system innovated outside of their purview, etc., etc., etc. Therefore, institutions have to be reconfigured, and it has to be a global effort by the G-20, something of that kind. So we look at the institutional levels and say that has failed and that has to be reconfigured.

The third genre is to say that everybody was obsessed with a false theory. They read too much high ec and believed in the efficiency of markets, and it’s time we actually got back to something like Keynes or we took seriously Hyman Minsky’s theory about the inherent disability of financial activities.

The next genre is that it has cultural origins. Now, we don’t hear that much in the United States, but if you are in Germany and France, there are many people there who say, “This is an Anglo-Saxon disease, and it’s nothing to do with us.” And I happened to be in Brazil when it was going on, and Lula was kind of saying, well, first off, he was saying, “Oh, thank God, the United States is being disciplined by the equivalent of the IMF. We’ve been through it 8 times for the last 25 years and now it’s their turn. Fantastic,” said Lula and all of the Latin Americans I knew, until it hit them, which it does, and then they kind of change their tune a little bit. So there’s kind of a way in which it become cultural. And you can see that by the way in which this whole Greek thing is being handled. The way the German press is saying, “Well, it’s the Greek character. It’s defects in the Greek character.” And there’s lot of rather nasty stuff going on around that.

But actually there are some cultural features which have led unto it. For instance, the U.S. fascination with home ownership, which is supposedly a deep cultural value, so 67, 68% of U.S. households are homeowners. It’s only 22% in Switzerland. Of course, it’s a cultural value in the United States that is being supported by the mortgage interest, tax deduction which is a huge subsidy. It’s been promoted since the 1930s. Very explicitly in the 1930s, it was built up because the theory was that debt incumbent homeowners don’t go on strikes.

Then there’s a notion that it’s a failure of policy and the policy has actually intervened. And there’s a funny kind of alliance emerging between the Glenn Beck wing of Fox News and the World Bank, both of whom say the problem is too much regulation of the wrong sort.

So there are all of these ways and all of them have a certain truth. And skilled writers will take one or the other of those perspectives to build a story and actually write a very plausible kind of story written around this. And I thought to myself, “What kind of plausible story can I write which is none of the above?” which is one of the things I always think to myself. And it’s not hard to do, particularly if you are coming from a Marxist perspective, because there aren’t many people who try to do this analysis from a Marxist perspective.

And I was really clued into this by this thing that happened at the London School of Economics about a year and half ago, when Her Majesty the Queen asked the economists, “How come you guys didn’t see this thing coming?” She didn’t say it exactly that way, but you know, it’s just the sentiment. And they got very upset, and then she actually called the Governor of the Bank of England and said, “How come you didn’t see it coming?” And then the British academy put forward, got together all these economists and they came up with this fabulous letter to Her Majesty. And it was actually astonishing.

It said, “Many dedicated people — intelligent, smart — spent their lives working on aspects of this thing very, very seriously, but the one thing we missed — the systemic risk.” You said, “What?” And then it went on to talk about the politics of denial and all the rest of it. And so I thought, systemic risk, I can translate it into the Marxist thing. You are talking about the internal contradictions of capital accumulation.

Maybe I should write a thing about the internal contradictions of capital accumulation and try to figure out the rule of crisis in the whole history of capitalism, and what’s specific and special about the crisis this time around. And there were two ways in which I would do that. One was to look at what’s happened since 1970s to now. And the thesis there is that in many ways, the form of this current crisis is dictated very much by the way we came out of the last one.

The problem back in the 1970s was excessive power of labour in relationship to capital, that therefore, the way out of the crisis last time was to discipline labour. And we know how it was done. It was done by offshoring. It was done by Thatcher and Reagan. It was done by a near Liberal doctrine. It was done all kinds of different ways.

But by 1985 or ’86, the labour question had essentially been solved. The capitalists had access to all of the world’s labour supplies. Nobody in this particular instance has said that the greedy unions is the root to the crisis. Nobody in this instance is saying it has anything to do with excessive power of labour. If anything, it’s the excessive power of capital, and in particularly, the excessive power of finance capital which is the root to the problem.

Now how did that happen? Well, we’d been, since the 1970s, in a phase of what we call wage repression, that wages are being remained stagnant, the share of wages in national income, right throughout the OECD countries is steadily falling. It’s even steadily falling in China, of all places. So that there are less and less being paid out in wages. Wages turn out to be also the money which buys goods. So if you diminish wages, then you’ve got a problem of where’s your demand going to come from? And the answer was get out your credit cards. We’ll give everybody credit cards. So, we will overcome, if you like, the problem of effective demand by actually pumping up the credit economy. And American households, British households will roughly triple their debt over the last 20, 30 years. And a vast amount of that debt, of course, has been within the housing market.

And out of this comes a theory which is very, very important that capitalism never solves its crises problems. It moves them around geographically. And what we’re seeing now is a geographical movement of that. Everybody says, “Everything is beginning to recover in the United States,” and then Greece goes bang, and everybody says, “What about the pigs, you know?” It’s interesting. You had a finance crisis, which was in the financial system, you sort of half solved that, but at the expense of a sovereign debt crisis.

Actually, if you look at the accumulation process of capital, you see a number of limits and a number of barriers. There’s a wonderful language that Marx uses in the Grundrisse, in which he talks about the way in which capital cannot abide a limit. It has to turn it into a barrier which it then circumvents or transcends. And then when you look at the accumulation process, you look at where the barriers and limits might lie. And the simple way to look at it to say, “Look, a typical circulation process of accumulation goes like this. You start with some money, you go into the market and you buy labour, power, means of production. Then you put them to work with the given technology and organizational form. You create a commodity which you then sell for the original money plus a profit. You then take part of the profit and you recapitalize it into an expansion for very interesting reasons.”

Now, two things about this. One, there are a number of barrier points in here. How is the money got together in the right place, at the right time, in the right volume? That takes financial ingenuity. The whole history of capitalism has been about financial innovation. And financial innovation has the effect of also empowering the financiers. And the excessive power of the financiers can sometimes…they do get they get greedy, no question about it! If you look at financial profits in the United States, they were soaring after 1990s. They were going up like this. Profits in manufacturing were coming down like this. And you could see the imbalance in this country.

I think the way in which this country has sided with the city of London against British manufacturing since 1950s onwards has had very serious implications for the economy in this country. You’ve actually screwed the industry in order to keep the financiers happy. Any sensible person right now would join an anti-capitalist organization. And you have to, because otherwise, we’re going to have the continuation. And notice, it’s a continuation of all sorts of negative aspects, for instance, the racking up of wealth. You would have thought the crisis would have stopped that. Actually, more billionaires emerged in India last year than ever. They doubled last year.

The wealth of the rich, I just read something this morning, in this country has accelerated just last year. What happened was the leading hedge fund owners got personal remunerations of $3 billion each in one year. Now I thought it was obscene and insane a few years ago when they got $250 million. But they’re now hauling in $3 billion. That’s not a world I want to live in. If you want to live in it, be my guest.

I don’t see us debating this or discussing this. I don’t have the solutions. I think I know what the nature of the problem is. Unless we are prepared to have a very broad-based discussion that gets away from the normal [problem] you get in the political campaign and “Everything is going to be OK here next year if you vote for me.” Well, it’s crap. You should know it’s crap, and say it is. We have a duty, it seems to me, those of us who are academics and seriously involved in the world to actually change our mode of thinking.

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